<PAGE>
As filed with the Securities and Exchange Commission on
July 29, 1998
File Nos. 333-
811-00134
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No.
______________________________
ALLIANCE BALANCED SHARES, INC.
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (800) 221-5672
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
______________________________
EDMUND P. BERGAN, JR.
Alliance Capital Management Corporation
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Copies of communications to:
Thomas G. MacDonald
Seward & Kissel
One Battery Park Plaza
New York, New York 10004
______________________________
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective
date of this Registration Statement.
<PAGE>
It is proposed that this filing will become effective on
August 28, 1998 pursuant to Rule 488 under the Securities Act of
1933.
<PAGE>
CROSS REFERENCE SHEET
Item of Part A Location in
of Form N-14 Prospectus
______________ ___________
1. .............. Cross Reference Sheet; Front Cover Page.
2. .............. Back Cover Page.
3. .............. Fee Table; Synopsis; Risk Factors.
4. .............. Reasons for the Transactions; Information
About the Transactions.
5. .............. Management's Discussion of Performance of
Balanced Shares; Comparison of Investment
Objectives and Policies; Certain
Comparative Information; Additional
Information About the Funds.
6. .............. Comparison of Investment Objectives and
Policies; Certain Comparative Information;
Additional Information About the Funds.
7. .............. Voting Information.
8. .............. Inapplicable.
9. .............. Inapplicable.
Item of Part B Location in Statement
of Form N-14 of Additional Information
______________ _________________________
10. .............. Cover Page.
11. .............. Cover Page.
12. .............. Statement of Additional Information of
Alliance Balanced Shares, Inc. ("Balanced
Shares") dated October 31, 1997; See Item
14 below.
13. .............. Statements of Additional Information of
Alliance Strategic Balanced Fund, a series
of The Alliance Portfolios ("Strategic"),
and Alliance Income Builder Fund, Inc.
("Income Builder") dated October 31, 1997
<PAGE>
and March 2, 1998, respectively; See Item
14 below.
14. .............. Report of Independent Accountants and
financial statements of Balanced Shares as
of and for the fiscal year ended July 31,
1997; unaudited financial statements of
Balanced Shares as of and for the six
months ended January 31, 1998; Report of
Independent Accountants and financial
statements of Strategic as of and for the
fiscal year ended July 31, 1997; unaudited
financial statements of Strategic as of and
for the six months ended January 31, 1998;
Report of Independent Auditors and
financial statements of Income Builder as
of and for the fiscal year ended October
31, 1997; unaudited financial statements of
Income Builder as of and for the six months
ended April 30, 1998; unaudited pro forma
combined financial information as of and
for the twelve months ended June 30, 1998.
<PAGE>
[LOGO OF ALLIANCE CAPITAL] ALLIANCE STRATEGIC BALANCED FUND
ALLIANCE INCOME BUILDER FUND, INC.
____________________________________________________________
1345 Avenue of the Americas
New York, New York 10105
August [ ], 1998
____________________________________________________________
To the Shareholders of
Alliance Strategic Balanced Fund ("Strategic") and
Alliance Income Builder Fund, Inc. ("Income Builder"):
The accompanying Notice of Special Meetings of
Shareholders and Prospectus/Proxy Statement present to the
shareholders of each of Strategic and Income Builder a proposal,
to be considered at the Special Meetings of Shareholders of
Strategic on October 12, 1998 and of Income Builder on
October 12, 1998, for the assets of each of Strategic and Income
Builder to be acquired by Alliance Balanced Shares, Inc.
("Balanced Shares"), an open-end investment company also managed
by Alliance Capital Management L.P. ("Alliance"). As the
Prospectus/Proxy Statement is long and detailed, the Board of
Trustees of The Alliance Portfolios ("TAP"), on behalf of
Strategic, and the Board of Directors of Income Builder thought
it desirable to summarize the proposal that the Trustees and
Directors are recommending for your approval.
It is anticipated that the proposed transactions will
result in substantial benefits to the shareholders of Strategic
and Income Builder in that they will enable them to acquire an
investment in a fund with an investment objective that is similar
and that has a lower expense ratio and better historical
performance than either Strategic or Income Builder. The Board
of Trustees of TAP and the Board of Directors of Income Builder
have given full and careful consideration to the proposed
acquisitions and have concluded that the acquisitions are in the
best interests of the funds and their shareholders. The Boards
urge the shareholders of each fund to approve the appropriate
proposed transaction.
If the acquisitions of the assets of Strategic and
Income Builder by Balanced Shares are approved by the
shareholders of the respective funds at the October 12, 1998
meetings, the acquisitions are expected to occur shortly
thereafter. At that time, each shareholder will receive, in
exchange for his or her Class A, Class B, Class C or Advisor
Class shares of Strategic and Income Builder, shares of the same
class of Balanced Shares equal in net asset value at the close of
<PAGE>
business on the date of the exchange to the total net asset value
of the shareholder's shares of Strategic or Income Builder.
Shareholders will not be assessed any sales charge or
other fee in connection with the proposed acquisitions. No gain
or loss will be recognized by shareholders of Strategic or Income
Builder as a result of the transfer of assets to Balanced Shares
and the subsequent distribution of shares of Balanced Shares to
shareholders in exchange for their shares of the respective
funds. The closing of one acquisition is not contingent upon the
closing of the other acquisition.
We welcome your attendance at the Special Meetings of
Shareholders. If you are unable to attend, please sign, date and
return the enclosed proxy card promptly in order to spare
additional proxy solicitation expenses.
Sincerely,
2
<PAGE>
[LOGO OF ALLIANCE CAPITAL] ALLIANCE STRATEGIC BALANCED FUND, a
Series of THE ALLIANCE PORTFOLIOS,
ALLIANCE INCOME BUILDER FUND, INC.
____________________________________________________________
1345 Avenue of the Americas
New York, New York 10105
Toll Free (800) 733-8481
____________________________________________________________
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
OF ALLIANCE STRATEGIC BALANCED FUND AND
ALLIANCE INCOME BUILDER FUND, INC.
OCTOBER 12, 1998
To the Shareholders of
Alliance Strategic Balanced Fund ("Strategic"), a series of
The Alliance Portfolios, and Alliance Income Builder Fund,
Inc. ("Income Builder"):
Special Meetings of the Shareholders of Strategic and
Income Builder (individually, a "Fund" and collectively, the
"Funds") will be held at 1345 Avenue of the Americas, 33rd Floor,
New York, New York 10105 on October 12, 1998 at [ ] Eastern
time (the "Meetings"), for the following purposes:
1. To approve, as to each Fund, an Agreement and Plan of
Reorganization and Liquidation providing for the transfer of all
the assets and all the liabilities of the Fund, in exchange for
shares of Alliance Balanced Shares, Inc., the distribution of
such shares to shareholders of the Funds in liquidation of the
Funds and the subsequent termination of Strategic as a series of
The Alliance Portfolios ("TAP") and the dissolution of Income
Builder; and
2. To transact such other business as may properly come
before the Meetings or any adjournments thereof.
The Board of Trustees of TAP, on behalf of Strategic,
and the Board of Directors of Income Builder have fixed the close
of business on August 14, 1998 as the record date for
determination of those shareholders entitled to notice of, and to
vote at, the Meetings or any adjournments thereof. The enclosed
proxy is being solicited on behalf of the Board of Trustees or
the Board of Directors of the relevant Fund. Each shareholder
who does not expect to attend in person is requested to complete,
date, sign and promptly return the enclosed proxy card.
By Order of the Board of Trustees and the
Board of Directors,
<PAGE>
Edmund P. Bergan, Jr.
Secretary
New York, New York
August [ ], 1998
THE BOARD OF TRUSTEES OF TAP, ON BEHALF OF STRATEGIC,
AND THE BOARD OF DIRECTORS OF INCOME BUILDER
RECOMMEND APPROVAL OF THE RELEVANT AGREEMENT AND
PLAN OF REORGANIZATION AND LIQUIDATION
____________________________________________________________
YOUR VOTE IS IMPORTANT
Please indicate your voting instructions on the enclosed
Proxy Card, sign and date it, and return it in the envelope
provided, which needs no postage if mailed in the United States.
In order to save any additional expense of further solicitation,
please mail your proxy promptly.
____________________________________________________________
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
PROSPECTUS/PROXY STATEMENT
ACQUISITION OF THE ASSETS
OF ALLIANCE STRATEGIC BALANCED FUND, a Series
of THE ALLIANCE PORTFOLIOS, and
ALLIANCE INCOME BUILDER FUND, INC.
1345 Avenue of the Americas,
New York, New York 10105,
1-800-733-8481
__________________
BY AND IN EXCHANGE FOR SHARES
OF ALLIANCE BALANCED SHARES, INC.
1345 Avenue of the Americas,
New York, New York 10105,
1-800-221-5672
August [ ], 1998
__________________
INTRODUCTION
This Prospectus/Proxy Statement relates to the
solicitation of separate shareholder approvals for: the proposed
transfer of all the assets and all the liabilities of Alliance
Strategic Balanced Fund ("Strategic"), a series of The Alliance
Portfolios ("TAP"), and Alliance Income Builder Fund, Inc.
("Income Builder") to Alliance Balanced Shares, Inc. ("Balanced
Shares") (individually, a "Fund" and collectively, the "Funds")
in exchange for shares of Class A, Class B, Class C and Advisor
Class Common Stock of Balanced Shares. Following each exchange,
Class A, Class B, Class C and Advisor Class shares of Balanced
Shares will be distributed to the shareholders of Strategic and
Income Builder in liquidation of those Funds. The closing of one
transaction is not contingent upon the closing of the other
transaction. As a result of the proposed transactions, each
holder of Class A, Class B, Class C or Advisor Class shares of
Strategic or Income Builder will receive that number of full and
fractional shares of the corresponding class (i.e., Class A,
Class B, Class C and Advisor Class, as the case may be) of
Balanced Shares equal in net asset value at the close of business
on the date of the exchange to the net asset value of the
holder's Class A, Class B, Class C or Advisor Class shares of
Strategic or Income Builder. Shareholder approval of one
acquisition is independent of shareholder approval of the other
<PAGE>
acquisition. Accordingly, the closing of one acquisition is not
contingent upon the closing of the other acquisition.
It is anticipated that the proposed transactions will
result in substantial benefits to the shareholders of each Fund
in that the transactions will enable them to acquire an
investment in a fund with an investment objective that is similar
and that has a lower expense ratio. Moreover, Balanced Shares
has a better historical performance than either Strategic or
Income Builder. Like the Class A shares of Strategic and Income
Builder, the Class A shares of Balanced Shares are sold subject
to an initial sales charge and, in some cases, a contingent
deferred sales charge upon redemption. The Class B shares of the
Funds are sold subject to a contingent deferred sales charge upon
most redemptions within four years of purchase. The Class C
shares of the Funds are sold 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. The Advisor
Class shares of the Funds are sold without any initial or
deferred sales charges and without ongoing distribution expenses.
The proposed transactions will be effected at net asset value
without the imposition of any sales charges or other fees.
Class B shares of Balanced Shares distributed in a transaction
will automatically convert to Class A shares of Balanced Shares
in accordance with the conversion schedule applicable at the time
of the original purchase of the Class B shares surrendered in the
transaction. In addition, the contingent deferred sales charge
schedule applicable to the original purchases of the Class A,
Class B and Class C shares surrendered in the transactions would
be applied to the shares of Balanced Shares distributed.
Because shareholders of Strategic and Balanced Shares
are being asked to approve transactions that will result in their
receiving shares of Balanced Shares, the Proxy Statement also
serves as a Prospectus for Balanced Shares. Balanced Shares is
an open-end management investment company organized as a Maryland
corporation. The investment objective of Balanced Shares, which
is similar to the investment objectives of Strategic and Income
Builder, is to seek a high return through a combination of
current income and capital appreciation. Balanced Shares pursues
its investment objective by investing 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.
Strategic and Income Builder intend to sell securities
prior to the proposed acquisitions to the extent desirable from
the perspective of Balanced Shares' portfolio. Consequently, it
is expected that the portfolio turnover rate for Strategic and
Income Builder will increase approximately 40% to 50% and, in
addition, Strategic and Income Builder are expected to realize
2
<PAGE>
significant capital gains and to incur related transaction costs.
Purchases of portfolio securities by each of Strategic and Income
Builder prior to the proposed acquisitions will be consistent
with the investment objectives and policies of Strategic or
Income Builder and of Balanced Shares.
THE BOARD OF TRUSTEES OF TAP, ON BEHALF
OF STRATEGIC, AND THE BOARD OF DIRECTORS OF INCOME
BUILDER RECOMMEND APPROVAL OF THE RELEVANT AGREEMENT AND
PLAN OF REORGANIZATION AND LIQUIDATION
This Prospectus/Proxy Statement, which should be
retained for future reference, sets forth concisely the
information about Balanced Shares that a prospective investor
should know before returning the enclosed proxy card. The
Prospectus of The Alliance Stock Funds dated February 2, 1998
(the "Stock Funds Prospectus"), which includes information
concerning Balanced Shares, Strategic and Income Builder, may be
obtained without charge by writing to Alliance Fund Services,
Inc., the transfer agent of each of the Funds, at P.O. Box 1520,
Secaucus, New Jersey 07096, or by calling the transfer agent
toll-free at 1-800-221-5672. The information in the Stock Funds
Prospectus pertaining to Balanced Shares, Strategic and Income
Builder is incorporated herein by reference. A Statement of
Additional Information dated August [ ], 1998 (the
"Supplementary Information"), which contains Statements of
Additional Information of Balanced Shares and Strategic, each
dated October 31, 1997, and a Statement of Additional Information
of Income Builder dated March 2, 1998, and other information, has
been filed with the Securities and Exchange Commission
("Commission") as part of the Supplementary Information and is
incorporated by reference herein. Copies of the Supplementary
Information may be obtained without charge as provided above in
this paragraph.
[For bottom of cover page: 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/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.]
3
<PAGE>
FEE TABLE
The tables below set forth information with respect to
shares of the Funds and pro forma information for shares of
Balanced Shares after giving effect to the proposed transactions.
The tables were prepared by Alliance Capital Management L.P.
("Alliance"), each Fund's investment adviser, based on the net
asset, fee and expense levels of the Funds as of June 30, 1998.
Because certain of the expenses of Balanced Shares are relatively
fixed, the percentage amounts of "Other Expenses" and "Total Fund
Operating Expenses" for Balanced Shares following the
transactions would be greater than those shown below to the
extent its assets were less than those shown under "Information
About the Transactions - Capitalization" below.
<TABLE>
<CAPTION>
Shares of
Pro Forma
Combined Fund
(Balanced Shares
Shares of Shares of Following Either
Balanced Shares of Income One or Both of
Shares Strategic Builder the Transactions)
<S> <C> <C> <C> <C>
Shareholder transaction expenses
Maximum sales charge imposed on purchases (as a
percentage of offering price)
Class A................................ 4.25%(a) 4.25%(a) 4.25%(a) 4.25%(a)
Class B and Class C.................... None None None None
Advisor Class.......................... None None None None
Sales charge imposed on
dividend reinvestment.................... None None None None
Deferred sales charge (as
percentage of original purchase
price or redemption proceeds,
whichever is lower)
Class A................................ None(a) None(a) None(a) None(a)
Class B................................ 4.0% 4.0% 4.0% 4.0%
during the during the during the during the
first year, first year, first year, first year,
decreasing decreasing decreasing decreasing
1.0% 1.0% 1.0% 1.0%
annually to annually to annually to annually to
0% after 0% after 0% after 0% after
the fourth the fourth the fourth the fourth
year (b) year (b) year (b) year (b)
Class C................................ 1.0% during 1.0% during 1.0% during 1.0% during
4
<PAGE>
the first the first the first the first
year, 0% year, 0% year, 0% year, 0%
thereafter thereafter thereafter thereafter
Advisor Class.......................... None None None None
Redemption fees (as percentage of
amount redeemed)....................... None None None None
Exchange fee........................... None None None None
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Combined Fund
(Balanced Shares Following
Transactions With)
Actual
Strategic
Balanced Income Income and Income
Shares Strategic Builder Strategic Builder Builder
<S> <C> <C> <C> <C> <C> <C>
Annual Fund Operating Expenses
Management Fees
Class A................ .63% .75%(c) .75% .60%(d) .60%(d) .59%(d)
Class B................ .63% .75%(c) .75% .60%(d) .60%(d) .59%(d)
Class C................ .63% .75%(c) .75% .60%(d) .60%(d) .59%(d)
Advisor Class.......... .63% .75%(c) .75% .60%(d) .60%(d) .59%(d)
12b-1 Fees
Class A................ .25% .30%(e) .30% .25% .25% .25%
Class B................ 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Class C................ 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Advisor Class.......... None None None None None None
Other Expenses (f)
Class A................ .40% .85% .91% .39% .35% .33%
Class B................ .40% .85% .91% .39% .35% .33%
Class C................ .40% .85% .91% .39% .35% .33%
Advisor Class.......... .40% .85% .91% .39% .35% .33%
Total Fund Operating Expenses
Class A................ 1.28% 1.90%(c) 1.96% 1.24% 1.20% 1.17%
Class B................ 2.03% 2.60%(c) 2.66% 1.99% 1.95% 1.92%
Class C................ 2.03% 2.60%(c) 2.66% 1.99% 1.95% 1.92%
Advisor Class.......... 1.03% 1.60%(c) 1.66% .99% .95% .92%
</TABLE>
5
<PAGE>
(a) Purchases of Class A shares 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 made within one year
of purchase. See "Purchase and Sale of Shares - How to Buy
Shares" in the Stock Funds Prospectus.
(b) Class B shares automatically convert to Class A shares after
eight years. Class B shares of Balanced Shares distributed
in the Transactions will automatically convert to Class A
shares eight years following the respective dates of the
original purchases of the Class B shares of each Fund
exchanged in the Transactions.
(c) As stated in the "Synopsis" below, pursuant to a voluntary
waiver, Alliance has agreed to waive its fees and to bear
certain expenses of Strategic to the extent that expenses
exceed an annual rate of 1.40% for Class A shares, 2.10% for
Class B and Class C shares and 1.10% for Advisor Class
shares. For the fiscal year ended July 31, 1997 the
management fee paid by each Class of shares of Strategic was
.09%, and total fund operating expenses after waivers were
1.41%, 2.12%, 2.12% and 1.10%, respectively.
(d) This fee assumes that, as a result of the relevant
Transactions(s), the combined assets will cause Balanced
Shares to reach a breakpoint in the management fee, thereby
reducing the management fee to the amount shown in the
table.
6
<PAGE>
(e) As stated in the "Synopsis" below, under the terms of
Strategic's Rule 12b-1 plan, the Fund may pay to the Fund's
distributor a distribution services fee of up to .50% and a
service fee of up to .25% of the aggregate average daily net
assets of Class A shares, provided that the aggregate
distribution services fee and service fee shall not exceed
the annual rate of .50%. The Distribution Services
Agreement for TAP currently provides for payment to AFD of a
service fee and a distribution services fee at the annual
rates of .25% and .05%, respectively, of aggregate average
daily net assets attributable to the Class A shares.
(f) These expenses include a transfer agency fee payable to
Alliance Fund Services, Inc., an affiliate of Alliance. The
expenses shown do not reflect the application of credits
that reduce Fund expenses.
EXAMPLES
The Examples below show the cumulative expenses
attributable to a $1,000 investment in shares of Balanced Shares,
shares of Strategic, shares of Income Builder and shares of the
pro forma combined fund for the periods specified.
1 year 3 years 5 years 10 years
Balanced Shares (Actual)
Class A...................... $55 $81 $110 $190
Class B(a)................... $61 $84 $109 $217(b)
Class B(c)................... $21 $64 $109 $217(b)
Class C(a)................... $31 $64 $109 $236
Class C(c)................... $21 $64 $109 $236
Advisor Class................ $11 $33 $ 57 $126
Strategic (Actual)
Class A...................... $61 $100 $141 $255
Class B(a)................... $66 $101 $138 $276(b)
Class B(c)................... $26 $ 81 $138 $276(b)
Class C(a)................... $36 $ 81 $138 $293
Class C(c)................... $26 $ 81 $138 $293
Advisor Class................ $16 $ 50 $ 87 $190
Income Builder (Actual)
Class A.................... $62 $101 $144 $261
Class B(a)................. $67 $103 $141 $282(b)
Class B(c)................. $27 $ 83 $141 $282(b)
Class C(a)................. $37 $ 83 $141 $299
Class C(c)................. $27 $ 83 $141 $299
Advisor Class.............. $17 $ 52 $ 90 $197
7
<PAGE>
Pro Forma Combined Fund
(Balanced Shares Following
Transaction with Strategic)
Class A...................... $55 $80 $108 $186
Class B(a)................... $60 $82 $107 $212(b)
Class B(c)................... $20 $62 $107 $212(b)
Class C(a)................... $30 $62 $107 $232
Class C(c)................... $20 $62 $107 $232
Advisor Class................ $10 $32 $ 55 $121
Pro Forma Combined Fund
(Balanced Shares Following
Transaction with Income Builder)
Class A...................... $54 $79 $106 $182
Class B(a)................... $60 $81 $105 $208(b)
Class B(c)................... $20 $61 $105 $208(b)
Class C(a)................... $30 $61 $105 $227
Class C(c)................... $20 $61 $105 $227
Advisor Class................ $10 $30 $ 53 $117
Pro Forma Combined Fund
(Balanced Shares Following
Both Transactions)
Class A...................... $54 $78 $104 $179
Class B(a)................... $59 $80 $104 $205(b)
Class B(c)................... $19 $60 $104 $205(b)
Class C(a)................... $29 $60 $104 $224
Class C(c)................... $19 $60 $104 $224
Advisor Class................ $9 $29 $ 51 $113
______________________________________
(a) Assumes redemption at end of period.
(b) Assumes Class B shares convert to Class A shares
after eight years.
(c) Assumes no redemption at end of period.
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
holders of shares may pay aggregate sales charges totaling more
than the economic equivalent of the maximum initial sales charges
permitted by the Conduct Rules of the National Association of
Securities Dealers, Inc. The Examples above assume reinvestment
of all dividends and distributions and utilize a 5% annual rate
of return as mandated by Commission regulations. THE EXAMPLES
ARE NOT TO BE CONSIDERED REPRESENTATIVE OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. Except as noted in the Examples, the cumulative expenses
attributable to the hypothetical investment are the same whether
or not redemption at the end of the respective periods is
assumed.
8
<PAGE>
SYNOPSIS
This synopsis is qualified by reference to the more
complete information contained elsewhere in this Prospectus/Proxy
Statement, the Stock Funds Prospectus and the form of Agreement
and Plan of Reorganization and Liquidation attached hereto as
Exhibit A.
Proposed Transactions. At regular meetings held on
July 16 and 15, 1998, respectively, each of the Board of Trustees
of TAP, on behalf of Strategic, and the Board of Directors of
Income Builder, including the Trustees or Directors who are not
"interested persons" of the Funds (the "Independent Trustees" or
"Independent Directors," respectively) within the meaning of the
Investment Company Act of 1940 (the "1940 Act"), approved an
Agreement and Plan of Reorganization and Liquidation
(individually, a "Plan," and collectively, the "Plans") between
the relevant Fund and Balanced Shares providing for the transfer
of all the assets of the relevant Fund to Balanced Shares and the
assumption by Balanced Shares of all the liabilities of the
relevant Fund in exchange for Class A, Class B, Class C and
Advisor Class shares of Balanced Shares, and the distribution of
such shares to shareholders of the relevant Fund in liquidation
of the Fund (individually, a "Transaction" and collectively, the
"Transactions").
As a result of each Transaction, each holder of Class A,
Class B, Class C or Advisor Class shares of Strategic or Income
Builder will receive that number of full and fractional Class A,
Class B, Class C or Advisor Class shares of Balanced Shares equal
in net asset value at the close of business on the date of the
exchange to the net asset value of such holder's Class A, Class
B, Class C or Advisor Class shares of Strategic or Income
Builder. Each Transaction will be effected at net asset value
without the imposition of any sales charges or other fees.
The Board of Trustees of TAP, on behalf of Strategic,
and the Board of Directors of Income Builder have determined that
the interests of existing shareholders of the relevant Fund would
not be diluted as a result of the relevant Transaction, concluded
that the relevant Transaction would be in the best interests of
such Fund and its shareholders and recommend approval of the
relevant Transaction. Approval of the relevant Plan will require
the affirmative vote of the holders of a majority of the
outstanding shares of Income Builder and two-thirds of the
outstanding shares of beneficial interest of Strategic.
Shareholder approval of one Transaction is independent
of shareholder approval of the other Transaction, and the closing
of one Transaction is not contingent upon the closing of the
other Transaction.
9
<PAGE>
The expenses incurred in connection with the
Transactions, other than the expenses incurred by Strategic and
Income Builder through the time of the closing of the
Transactions as a result of the portfolio realignment to be made
in anticipation of the Transactions, will be borne by Alliance.
With respect to each Fund, the Transaction is expected
to occur shortly following shareholder approval thereof.
However, each Plan may be terminated at any time prior to the
closing of the Transaction by either party thereto, whether or
not shareholder approval has been obtained, if the conditions
precedent to the obligations of either party under the Plan have
not been satisfied or if the Trustees of TAP, on behalf of
Strategic, or the Directors of Income Builder or Balanced Shares,
as the case may be, determine that proceeding with the
Transaction would not be in the best interests of that Fund's
shareholders. As each Plan is separate from the other,
termination of one Plan would not automatically result in the
termination of the other Plan. Unless the parties agree in
writing, the Plans will terminate, without liability to any
party, as of the close of business on October 31, 1999 if the
closing of the Transactions is not held on or prior to such date.
Tax Consequences of the Transactions. No gain or loss
will be recognized by Balanced Shares or the shareholders of
Strategic or Income Builder as a result of the Transactions. The
aggregate tax basis of the shares of each class of Balanced
Shares received by a shareholder of Strategic or Income Builder
will be the same as the aggregate tax basis of the shareholder's
shares of the corresponding class of Strategic or Income Builder.
The holding period of the shares of each class of Balanced Shares
received by a shareholder of either Fund will include the holding
period of the shares of the corresponding class of Strategic or
Income Builder held by the shareholder, provided that such shares
are held as capital assets by the shareholder of Strategic or
Income Builder at the time of the Transactions. The holding
period and tax basis of each asset of a Fund in the hands of
Balanced Shares as a result of the Transactions will be the same
as the holding period and tax basis of each such asset in the
hands of that Fund prior to the Transactions. The foregoing tax
information is based on the advice of [ ]. It is a
condition to the closing of each Transaction that such advice be
confirmed in a written opinion of [ ]. An opinion
of counsel is not binding on the Internal Revenue Service. See
"Information about the Transactions - Federal Income Tax
Consequences of the Transactions" below.
Prior to the Transactions, Strategic and Income Builder
intend to sell portfolio securities to the extent desirable from
the perspective of the portfolio of Balanced Shares. It is
expected that this will result in the realization of substantial
10
<PAGE>
capital gains. Each Fund also intends, prior to the
Transactions, to declare and pay a dividend and/or capital gains
distribution to its shareholders of record as of a date prior
thereto.
Investment Objectives and Policies. While the
investment objectives of the Funds are similar in that they are
each classified as total return funds that seek a combination of
current income and capital appreciation, and both Balanced Shares
and Strategic are so-called "balanced funds," because they always
have at least 25% of their assets invested in fixed-income
securities, the investment objectives of each Fund are stated
somewhat differently, reflecting a difference in investment
emphasis. Balanced Shares seeks a high return through a
combination of current income and capital appreciation.
Strategic seeks a high long-term total return by investing in a
combination of equity and debt securities. Income Builder seeks
both an attractive level of current income and long-term growth
of income and capital.
The investment policies of Balanced Shares differ from
those of Strategic and Income Builder; these policies are
discussed in detail below under "Comparison of Investment
Objectives and Policies."
Comparative Investment Performance Data. Set forth
below for the periods indicated is certain investment performance
data for the Class A shares of the Funds.
Average Annual Total Returns
at Net Asset Value
Periods Ended June 30, 1998
Year to Date One Three Five Since
(unannualized) Year Years Years Inception*
Balanced Shares 9.02% 24.99% 18.46% 13.51% 9.76%
Strategic 11.30% 16.46% 14.64% 10.89% 13.03%
Income Builder 8.33% 16.45% 17.99% 14.61%** --
___________________
* September 30, 1998 in the case of Balanced Shares;
September 4, 1990 in the case of Strategic.
** Inception of Class A Shares (March 25, 1994).
INVESTORS ARE CAUTIONED THAT PAST PERFORMANCE IS NOT INDICATIVE
OF FUTURE RESULTS.
11
<PAGE>
Advisory and Distribution Fees. Under an investment
advisory agreement with Alliance, Balanced Shares pays
monthly to Alliance a fee at the annualized rate of .625 of
1% of the first $200 million, .50 of 1% of the excess over
$200 million up to $400 million and .45 of 1% of the excess
over $400 million of the average daily value of the net
assets of Balanced Shares. Under an investment advisory
agreement with Alliance, Strategic pays monthly to Alliance a
fee at the annualized rate of .75 of 1% of the average daily
value of the net assets of Strategic. Alliance has
voluntarily undertaken to waive its fees and has agreed to
bear certain expenses of Strategic to the extent that
expenses would otherwise exceed an annual rate of 1.40% for
Class A shares, 2.10% for Class B and Class C shares and
1.10% for Advisor Class shares. Under an investment advisory
agreement with Alliance, Income Builder pays monthly to
Alliance a fee at the annualized rate of .75 of 1% of the
average daily value of the net assets of Income Builder.
Balanced Shares has entered into a Distribution Services
Agreement that incorporates a distribution plan adopted
pursuant to Rule 12b-1 under the 1940 Act (a "Rule 12b-1
plan") with Alliance Fund Distributors, Inc. ("AFD"). AFD is
the principal underwriter of shares of Balanced Shares and an
indirect wholly-owned subsidiary of Alliance. Pursuant to a
Rule 12b-1 plan, Balanced Shares pays AFD a distribution
services fee at an annual rate that may not exceed, on an
annualized basis, .30 of 1% of the aggregate average daily
net assets of Balanced Shares attributable to Class A shares
and 1.00% of the aggregate average daily net assets of
Balanced Shares attributable to each of the Class B and Class
C shares for distribution services. Each of Strategic and
Income Builder has also entered into a Distribution Services
Agreement that incorporates a Rule 12b-1 plan with AFD, each
Fund's principal underwriter. Pursuant to each Rule 12b-1
plan, Strategic and Income Builder pay to AFD a distribution
services fee at an annual rate that may not exceed .50 of 1%
and .30 of 1%, respectively, of that Fund's aggregate average
daily net assets attributable to Class A shares and 1.00% of
the aggregate average daily net assets of that Fund
attributable to each of the Class B and Class C shares for
distribution services. The Board of Trustees of TAP
currently limits payments under the Class A plan for
Strategic to .30 of 1% of that Fund's aggregate average daily
net assets attributable to the Class A shares. Each Rule
12b-1 plan provides that a portion of the distribution
services fee in an amount not to exceed .25 of 1% of the
aggregate average daily net assets of that Fund attributable
to each class of shares constitutes a service fee used for
personal service and/or the maintenance of shareholder
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<PAGE>
accounts. The Advisor Class shares of the Funds do not pay
distribution fees.
Alliance Fund Services, Inc., an affiliate of Alliance,
provides transfer agency and shareholder services to the
Funds.
Dividends and Distributions. The dividend and
distribution policies of the Funds are the same. The Funds
have no fixed dividend rates. It is the intention of each
Fund to distribute each fiscal year all of its net investment
income and net realized capital gains, if any, for such year.
There is no sales or other charge in connection with the
reinvestment of dividends and capital gains distributions of
the Funds. Each Fund permits its shareholders to make an
election to receive dividends and distributions in cash or in
full and fractional shares of that Fund.
Purchase Procedures and Exchange Privileges. The
purchase procedures and exchange privileges of each of the
Funds are the same. Under a multiple pricing structure, each
Fund offers investors the choice of purchasing its shares
subject to a front-end sales charge, as Class A shares, a
contingent deferred sales charge, as Class B shares, without
any initial or contingent deferred sales charge, as long as
the shares are held for one year or more, as Class C shares
or, and to certain qualified purchasers, without any sales
charge and without any distribution fee, as Advisor Class
shares. The respective sales charges on the Class A, Class B
and Class C shares of the Funds are identical. No sales
charges or other fees will be assessed to shareholders of
Strategic or Income Builder in connection with either
Transaction.
As indicated above, Class B shares of each Fund are
subject to a contingent deferred sales charge imposed on most
redemptions made within four years of purchase. Class B
shares convert into Class A shares eight years after
purchase. Class B shares of Balanced Shares distributed in a
Transaction will automatically convert to Class A shares of
Balanced Shares in accordance with the conversion schedule
applicable at the time of the original purchase of the Class
B shares surrendered in the Transaction.
The minimum initial investment in each Fund is $250 and
the minimum for subsequent investments is $50, except in
certain instances as described in the Stock Funds Prospectus.
See "Purchase and Sale of Shares - How to Buy Shares" in the
Stock Funds Prospectus.
13
<PAGE>
Shares of each Fund may be exchanged for shares of the
same class of certain other open-end investment companies
managed by Alliance, including AFD Exchange Reserves, a money
market fund managed by Alliance. See "Purchase and Sale of
Shares - How to Exchange Shares" in the Stock Funds
Prospectus. Exchanges of shares are made at the relative net
asset values next determined, without sales or service
charges.
Redemption Procedures. The redemption procedures of the
Funds are the same. Shares of each Fund may be redeemed,
either directly or through a broker-dealer, bank or other
financial intermediary, on any day the New York Stock
Exchange is open for trading. Shares are redeemed at net
asset value next calculated after a Fund receives a
redemption request in proper form, subject to any applicable
contingent deferred sales charges. Proceeds of a redemption
generally are sent within seven days. See "Purchase and Sale
of Shares - How to Sell Shares" in the Stock Funds
Prospectus.
14
<PAGE>
RISK FACTORS
The principal risk factors of investing in the Funds are
substantially similar. The price of the shares of each Fund
will fluctuate as the daily prices of the individual
securities in which they invest fluctuate.
Certain differences between the principal risk factors
of investing in the Funds are discussed below. While each of
the Funds may invest in debt securities, Balanced Shares and
Strategic generally invest only in investment grade debt
securities whereas Income Builder may invest up to 35% of its
net assets in lower-rated securities. Accordingly, Income
Builder may be subject to the greater risks associated with
investing in lower-rated securities. Strategic may invest in
mortgage-backed securities, adjustable rate securities,
asset-backed securities, zero coupon bonds and payment-in-
kind bonds, whereas Balanced Shares and Income Builder do not
invest in such instruments and are not, therefore, subject to
the risks associated with such investments.
In addition, each of the Funds may invest in foreign
securities and they are, therefore, subject to the same
general risks associated with international investing. These
risks include: risks related to adverse currency
fluctuations, potential political and economic instability of
certain countries, limited liquidity and greater volatility
of prices as compared to U.S. securities, investment and
repatriation restrictions, and foreign taxation.
In addition, as discussed below, Income Builder is a
non-diversified investment company, whereas Balanced Shares
and Strategic are diversified investment companies. As a
result, Income Builder may invest a higher percentage of its
assets in a more limited number of issuers than Balanced
Shares and Strategic.
REASONS FOR THE TRANSACTIONS
At regular meetings of the Board of Trustees of TAP and
the Board of Directors of Income Builder held on July 16 and
15, 1998, respectively, Alliance recommended that the
Trustees and the Directors approve and recommend to the
shareholders of Strategic and Income Builder for their
approval a combination of each Fund with Balanced Shares by
means of a tax-free acquisition of the assets and assumption
of the liabilities of each Fund by Balanced Shares in
exchange for shares of Balanced Shares, which shares would
then be distributed to the shareholders of the Fund in
liquidation of the Fund. After careful consideration, the
Trustees and the Board of Directors accepted Alliance's
15
<PAGE>
recommendation, concluded that the relevant Transaction and
Plan would be in the best interests of the relevant Fund and
its shareholders and recommended that the shareholders of the
Fund approve the proposed Transaction.
Alliance made its recommendations to the Trustees and
the Directors in the context of a general discussion of the
current investment climate, which has corresponded with
changes in investors' preferences and needs and has
contributed to the tremendous growth of the Alliance Mutual
Funds in recent years. This growth has been accompanied by
an expansion and diversification of Alliance's mutual fund
product line. Total Alliance Mutual Fund assets, which
recently crossed the $100 billion level, are invested in well
over 100 operating portfolios affording investors served by a
broad range of selling channels a highly diversified range of
choices among asset classes, investment disciplines and
pricing alternatives. As the number and types of funds have
increased and investor preferences and needs have changed, it
has become increasingly important that Alliance and AFD
remain alert to instances of particular funds competing with
each other to the point that their consolidation would both
benefit their respective shareholders and represent a logical
step from the marketing and sales standpoints. After
considerable study, Alliance and AFD concluded that the three
Funds sponsored by Alliance that have a generally balanced
orientation, Balanced Shares, Strategic and Income Builder,
are no longer sufficiently distinguishable from a retail
marketing perspective to warrant their continued operation as
separate investment vehicles.
Alliance noted that Balanced Shares is the most viable
of the three Funds. It has over the longer term out-
performed Strategic and Income Builder and this superiority
has become particularly pronounced during the past year.
Balanced Shares has also become a leading performer among
balanced funds and, although balanced funds remain out of
favor, in calendar 1998 Balanced Shares has moved to a net
sales position.
In formulating its recommendation to the Board of
Trustees and the Board of Directors, Alliance proposed the
acquisition of all of the assets and liabilities of each of
Strategic and Income Builder by Balanced Shares which,
Alliance noted, has a lower expense ratio, a better
performance record and a greater asset level than either
Strategic or Income Builder. Alliance took note of the
similarity of investment objectives of the Funds, the fact
that they share a number of similar investment policies, and
the fact that there is a substantial degree of similarity
16
<PAGE>
between portions of the investment portfolios of Balanced
Shares and Strategic and Income Builder.
In reaching their decisions to recommend shareholder
approval of the Transactions, the Trustees and the Directors
considered the foregoing and a number of other factors. The
Trustees considered certain comparative investment
performance data of Balanced Shares and Strategic and the
Directors considered certain comparative investment
performance data of Balanced Shares and Income Builder.
(Certain comparative investment performance information
regarding the Funds is set forth above in the "Synopsis" and
certain additional information concerning the performance of
Balanced Shares is set forth in the next section of this
Prospectus/Proxy Statement, "Management's Discussion of
Performance of Balanced Shares.")
The Trustees and the Directors reviewed the annualized
expense ratios of the Class A shares of Balanced Shares,
Strategic and Income Builder as of May 31, 1998. Those
ratios were 1.33%, 1.93% (before waivers) and 1.97%,
respectively. The Trustees noted that the Balanced Shares
expense ratio is lower than the actual Strategic expense
ratio and considerably lower than the expense ratio that
Strategic would have experienced absent the fee waiver by
Alliance referred to above. The expense ratio for Balanced
Shares was also considerably lower than for Income Builder.
The Trustees and the Directors also reviewed a summary of
preliminary pro forma operating expenses annualized as of
May 31, 1998 for the Class A shares of the combined entity
resulting from the Transactions. That summary indicated
that, at asset levels on May 31, 1998, the acquisitions would
result in projected annualized expense ratio reductions to a
holder of Class A shares of Strategic of .63%, if only
Strategic combines with Balanced Shares, and of .72%, if both
Strategic and Income Builder combine with Balanced Shares.
The summary indicated that the corresponding expense ratio
reductions for Income Builder Class A shares would be .72%,
if only Income Builder combines with Balanced Shares, and
.76%, if both Strategic and Income Builder combine with
Balanced Shares. Alliance indicated that Class B, Class C
and Advisor Class shareholders would realize similar expense
ratio reductions from consummation of the Transactions.
The Board of Trustees and the Board of Directors
reviewed the asset levels of the Funds. At its largest in
1993, Balanced Shares had total assets of $185 million.
There have been net redemptions for three of the last five
years and in 1993 and 1994 there were, and in calendar 1998
there have been, modest net sales. As of June 30, 1998 the
total net assets of Balanced Shares were $181 million. At
17
<PAGE>
its largest in 1994 Strategic had total assets of only $58
million. There have been net redemptions for three of the
last four calendar years and its total net assets stood at
$52 million as of May 26, 1998. At its largest in 1993,
Income Builder had assets of only $105 million. There have
been net redemptions for four of the last five years and, in
1997, the Fund's net assets remained essentially unchanged.
As of June 30, 1998 the total net assets of Income Builder
were $59 million.
The Board of Trustees and the Board of Directors also
considered, for the relevant Fund, that consummation of one
or both Transactions was projected to result in economies of
scale that could benefit shareholders of that Fund by
spreading fixed expenses over a larger asset base, thereby
reducing the expense ratio indirectly borne by that Fund's
shareholders. They considered that this is particularly true
in light of the fact that the management fee for Balanced
Shares has breakpoints, which reduce the effective rate of
the fee as the size of the Fund increases.
The Trustees and Directors also took into account the
capital loss carryforwards for the Funds, and the unrealized
capital appreciation in the Funds. As of May 31, 1998, none
of the Funds had any capital loss carryforwards. As of that
date, the respective amounts of unrealized capital
appreciation in Balanced Shares, Strategic and Income Builder
were $17,760,545, $6,563,471 and $9,210,058, respectively.
The Board of Trustees and the Board of Directors also
considered, among other things: (i) the form of the relevant
Plan and the terms and conditions of the Transactions; (ii)
whether the relevant Transaction would result in the dilution
of shareholders' interests; (iii) the investment objectives,
policies and strategies, and portfolio management personnel,
of each of the Funds; (iv) the effect of the anticipated
realignment of the investment holdings of the relevant Fund,
including the associated brokerage costs and the resulting
tax consequences in connection with disposing of certain
portfolio holdings prior to the closing of the relevant
Transaction; (v) the benefits of the relevant Transaction to
persons other than the relevant Fund; (vi) the fact that
Balanced Shares will assume all the liabilities of each Fund;
(vii) the expected federal income tax consequences of the
relevant Transaction; (viii) the historical and pro forma
information, including the information set forth above and
information regarding realized and unrealized gains and
losses of the Funds; (ix) whether the acquisition of
Strategic and Income Builder by Balanced Shares would be
preferable to an acquisition by other potential acquirers,
including funds that are not sponsored by Alliance; (x) the
18
<PAGE>
fact that Alliance has agreed to pay all the expenses of the
Transactions other than portfolio realignment costs and has
agreed to indemnify Balanced Shares for a three-year period
against undisclosed liabilities of each Fund to the extent
such liabilities are known by Alliance's senior management at
the time of the Transactions; (xi) the fact that the relevant
Transaction might or might not be effected together with the
other Transaction; (xii) the proposed treatment of
unreimbursed distribution expenses of AFD under the Balanced
Shares 12b-1 plan; and (xiii) the respective average account
sizes of the Funds.
During their consideration of the relevant Transaction,
the Independent Trustees and the Independent Directors met
separately with their independent legal counsel. Based on
the factors described above, the Board of Trustees and the
Board of Directors each determined that the relevant
Transaction would be in the best interests of the relevant
Fund and its shareholders and would not result in dilution of
those shareholders' interests, and recommended that the
shareholders of the Fund approve the proposed Transaction.
MANAGEMENT'S DISCUSSION OF PERFORMANCE
OF BALANCED SHARES
This discussion was written for the shareholders of
Balanced Shares and contained in that Fund's annual report to
shareholders for the fiscal year ended October 31, 1997. It
relates to Balanced Shares' performance and market activity
for the period ended July 31, 1997.
The Fund added a new benchmark which more closely
resembles the composition of the Fund. The new benchmark
represents a blended composite of the S&P 500 Stock Index
(60%), the Lehman Brothers Government/Corporate Bond Index
(25%) and the Salomon Brothers 1-Year Treasury Index (15%).
Market Overview. During the six month period ended July
31, 1997, the investment environment continued to reflect a
"best of all worlds" situation: moderate economic growth, low
inflation, a relatively stable interest rate environment and
expanding corporate earnings. During the period under
review, bond prices rose as interest rates fell modestly,
which led to good fixed-income returns, and the stock market
continued to perform well, resulting in unusually strong
equity returns.
Investment Results. Balanced Shares' Class A shares
posted a 15.47% and 33.46% return at net asset value for the
six- and twelve-month periods ended July 31, 1997. Balanced
19
<PAGE>
Shares significantly outperformed both of its fixed income
benchmarks, but underperformed its equity benchmark in both
the six- and twelve-month periods ended July 31, 1997.
However, if comparing the Fund's performance is compared to
the blended index, which most closely resembles the
composition of the Fund, the Fund outperformed the composite
for the six-month period and slightly underperformed the
composite during the twelve-month period.
INVESTMENT RESULTS*
Period Ended July 31, 1997
TOTAL RETURN
6 MONTHS 12 MONTHS
-------- ---------
BALANCED SHARES
Class A 15.47% 33.46%
Class B 15.02% 32.34%
Class C 15.07% 32.37%
S&P 500 STOCK INDEX 22.54% 52.11%
LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND INDEX 5.76% 10.79%
SALOMON BROTHERS
1-YEAR TREASURY BOND INDEX 3.22% 6.64%
COMPOSITE:
60% S&P 500/25% LB Gov't./Corp.
Bond Index/15% SB Treasury
Bond Index 15.44% 34.97%
* THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS
FOR THE PERIOD AND ARE BASED ON THE NET ASSET VALUE OF EACH
CLASS OF SHARES AS OF JULY 31, 1997. ALL FEES AND EXPENSES
RELATED TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT
NO ADJUSTMENT HAS BEEN MADE FOR SALES CHARGES THAT MAY APPLY
WHEN SHARES ARE PURCHASED OR REDEEMED. RETURNS FOR THE FUND
AND ITS COMPARATIVE INDICES INCLUDE THE REINVESTMENT OF ANY
DISTRIBUTIONS PAID DURING THE PERIOD. ALL COMPARATIVE
INDICES ARE UNMANAGED AND REFLECT NO FEES OR EXPENSES. AN
INVESTOR CANNOT INVEST DIRECTLY IN THE INDICES.
THE S&P 500 STOCK INDEX INCLUDES 500 U.S. STOCKS AND IS A
COMMON MEASURE OF THE PERFORMANCE OF THE OVERALL U.S. STOCK
MARKET. THE LEHMAN BROTHERS GOVERNMENT/ CORPORATE BOND INDEX
REPRESENTS A COMBINATION OF THE GOVERNMENT BOND INDEX AND THE
CORPORATE BOND INDEX. THE SALOMON BROTHERS TREASURY INDEX
REPRESENTS PERFORMANCE OF TREASURY BILLS WITH 1-YEAR
20
<PAGE>
MATURITIES. THE COMPOSITE REPRESENTS A BLENDED INDEX AS
INDICATED.
The Fund's Class A shares outperformed the Lipper Average for
Balanced Funds during the six- and twelve-month periods ended
July 31, 1997.
TOTAL RETURNS FOR THE PERIODS
ENDED JULY 31, 1997*
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
-------- ------- ------- --------
BALANCED SHARES
Class A Shares 15.47% 33.46% 12.30% 9.66%
LIPPER AVERAGE FOR
BALANCED FUNDS 13.31% 29.47% 13.52% 11.34%
* THE 6 MONTH AND 1 YEAR RETURNS ARE BASED ON CUMULATIVE TOTAL
RETURNS WHILE THE 5 AND 10 YEAR RETURNS ARE BASED ON ANNUAL
TOTAL RETURNS FOR THE PERIOD ENDED JULY 31, 1997. LIPPER
RETURNS ARE BASED ON TOTAL RETURNS AT NET ASSET VALUE,
WITHOUT THE IMPOSITION OF THE MAXIMUM 4.25% SALES CHARGE,
WHICH WOULD REDUCE TOTAL RETURN FIGURES. THE TOTAL NUMBER OF
FUNDS IN THE LIPPER BALANCED FUNDS CATEGORY FOR EACH
TIMEFRAME LISTED ABOVE ARE: 6 MONTHS, 351 FUNDS; 1 YEAR, 319
FUNDS; 5 YEARS, 90 FUNDS; AND 10 YEARS, 41 FUNDS. PAST
PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
Portfolio Positioning. During the six-month period
ended July 31, 1997, Balanced Shares held little cash and was
fully invested in the equity and fixed income markets. The
composition of the Fund's portfolio as of July 31, 1997 was 61.7%
stocks, 21.3% U.S. governments and mortgages, 13.9% corporate
bonds and 3.1% cash.
The U.S. stock market continued to post solid returns.
These returns were fueled by large capitalization stocks which
comprise a majority of the broader market averages such as the
S&P 500. Many of these large public companies performed well
fundamentally, the valuations placed on their earnings expanded,
and their stock prices increased, resulting in a strong
performance for the market. While management continually
searches for large companies with good risk/return potential,
management will also seek small- and medium-sized growth
companies which represent attractively priced investment
opportunities.
21
<PAGE>
BALANCED SHARES
GROWTH OF A $10,000 INVESTMENT
7/31/87 TO 7/31/97
$40,000
$36,000
$32,000
$28,000
$24,000
$20,000
$16,000
$12,000
$10,000
$8,000
S&P 500: $40,248
BALANCED SHARES CLASS A: $24,071
LB GOVERNMENT/CORPORATE BOND INDEX: $23,831
SB 1-YEAR TREASURY INDEX: $18,809
7/31/87 7/31/88 7/31/89 7/31/90 7/31/91 7/31/92
7/31/93 7/31/94 7/31/95 7/31/96 7/31/97
This chart illustrates the total value of an assumed
$10,000 investment in Balanced Shares Class A shares (from
7/31/87 to 7/31/97) as compared to the performance of an
appropriate broad-based index. The chart reflects the deduction
of the maximum 4.25% sales charge from the initial $10,000
investment in the Fund and assumes the reinvestment of dividends
and capital gains. Performance for Class B, Class C and Advisor
Class shares will vary from the results shown above due to
differences in expenses charged to those classes. Past
performance is not indicative of future results, and is not
representative of future gain or loss in capital value or
dividend income.
The unmanaged Standard & Poor's 500 Stock Index includes
500 U.S. stocks and is a common measure of the performance of the
overall U.S. stock market.
The unmanaged Lehman Brothers Government/Corporate Bond
Index represents a combination of the Government Bond Index and
the Corporate Bond Index.
The Salomon Brothers 1-Year Treasury Index represents
performance of Treasury bills with 1-year maturities. Of course,
Treasury bills are guaranteed as to principal and interest if
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<PAGE>
held to maturity whereas the net asset value of the Fund will
fluctuate.
When comparing Balanced Shares to the indices shown
above, you should note that no charges or expenses are reflected
in the performance of the indices.
Balanced Shares
S&P 500
LB Government/Corporate Bond Index
SB 1-Year Treasury Index
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Funds are similar in
that all three Funds seek a high level of return from a
combination of current income and capital appreciation. All
three Funds invest principally in a mix of fixed-income and
equity securities. Balanced Shares pursues its objective by
investing 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. Strategic invests principally in a diversified
portfolio of dividend-paying common stocks and fixed-income
securities, and also in equity-type securities such as warrants,
preferred stocks and convertible debt instruments. Income
Builder pursues its objective by investing principally in a non-
diversified portfolio of fixed-income securities and dividend-
paying common stocks. There can be no assurance that any Fund
will achieve its investment objective. The value of each Fund's
shares will fluctuate with the value of the underlying securities
in its portfolio.
While each Fund invests in many of the same types of
securities, the investment strategies of each Fund differ in
certain respects. The investment policies of each of Balanced
Shares, Income Builder and Strategic are described more fully
below. Detailed descriptions of the Funds' investment policies
and restrictions and the risks associated with investments in the
Funds are contained in the Stock Funds Prospectus and in each
Fund's Statement of Additional Information.
Balanced Shares
While the investment objective of Balanced Shares is not
fundamental, the Fund is a "balanced fund" as a matter of
fundamental policy. Accordingly, Balanced Shares 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
23
<PAGE>
the extent that their values are attributable to their fixed-
income characteristics). 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.
Subject to these restrictions, the percentage of the
assets of Balanced Shares invested in each type of security will
vary, but will be 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.
Strategic
The portion of the assets of Strategic invested in each
type of security varies in accordance with economic conditions,
the general level of common stock prices, interest rates and
other relevant considerations, including the risks associated
with each investment medium. The equity securities in which
Strategic invests generally consist of dividend-paying common
stocks and other equity securities of companies with favorable
earnings outlooks and long-term growth rates that Alliance
expects will exceed that of the U.S. economy. The Fund's debt
securities may include U.S. Government securities and securities
issued by private corporations. The Fund may also invest in
mortgage-backed securities, adjustable rate securities, asset-
backed securities and so-called "zero-coupon" bonds and "payment-
in-kind" bonds.
As a fundamental policy, Strategic invests at least 25%
of its total assets in fixed-income securities, which for this
purpose include debt securities, preferred stocks and that
portion of the value of convertible securities that is
attributable to the fixed-income characteristics of those
securities. The debt securities in which Strategic invests are
generally investment grade although Strategic reserves the right
to invest in lower-rated securities which may be speculative with
respect to an issuer's ability to pay interest and repay
principal.
Income Builder
Income Builder's investments in equity securities
emphasize common stocks of companies with a historical or
projected pattern of paying rising dividends. Normally, at least
65% of the Fund's total assets are invested in income-producing
securities. The Fund may vary the percentage of assets invested
in any one type of security based upon Alliance's evaluation as
to the appropriate portfolio structure for achieving the Fund's
investment objective. Income Builder may invest in fixed-income
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securities of domestic and foreign issuers, including U.S.
Government securities and repurchase agreements pertaining
thereto, corporate fixed-income securities of U.S. issuers,
qualifying bank deposits and prime commercial paper. Income
Builder may maintain up to 35% of its net assets in lower-rated
securities. The Fund will not retain a non-convertible security
that is downgraded below CCC or determined by Alliance to have
undergone similar credit quality deterioration following
purchase.
Additional Investment Policies
For additional information regarding the use, risks and
costs associated with the investment practices and policies
identified below, see "Description of the Funds - Additional
Investment Practices" in the Stock Funds Prospectus.
Diversification
Although Income Builder is a non-diversified investment
company, it intends to comply with the investment diversification
standards of the Internal Revenue Code of 1986, as amended, in
order to qualify to be taxed as a "regulated investment company."
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. An investment in a non-
diversified investment company may, under certain circumstances,
present greater risk to an investor than an investment in a
diversified investment company.
In contrast, Balanced Shares and Strategic are
diversified investment companies. As a fundamental policy,
neither Balanced Shares nor Strategic may 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. Strategic's investment policies provide,
however, that up to 25% of the value of its total assets may be
invested without regard to such 5% limitation. Balanced Shares,
as a fundamental investment policy, may not own more than 10% of
the outstanding voting securities of any one issuer.
Borrowing. Each of the Funds' fundamental investment
policies with respect to borrowing are similar. Each Fund has a
fundamental investment policy prohibiting the borrowing of money
except for temporary or emergency purposes. Balanced Shares and
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Strategic may borrow in an amount not exceeding 10% of their
total assets at the time the borrowing is made. With respect to
Balanced Shares, the Fund may borrow to meet redemption requests
and for the clearance of purchases and sales of portfolio
securities. Income Builder may borrow in the aggregate an amount
not exceeding 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.
Illiquid and Restricted Securities. Each Fund's
investment policy with respect to investments in illiquid
securities is the same. Each Fund may invest no more than 15% of
its net assets in illiquid securities. In addition, Income
Builder may invest up to 5% of its net assets in restricted
securities issued under Section 4(2) of the Securities Act of
1933, which exempts from registration transactions by an issuer
not involving any public offering. Strategic limits investment
in securities that are not publicly traded to 5% of total assets
(excluding, to the extent permitted by applicable law, Rule 144A
securities), subject also to the 15% restriction on investments
in illiquid securities; whereas Balanced Shares is not subject to
such additional restriction.
Options. All three Funds may use options; however,
Balanced Shares is most limited in that it can only write covered
call options that are listed on a domestic exchange. Strategic
may write covered call and put options on securities it owns or
in which it may invest and Income Builder may 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. In addition, Strategic may buy and sell combinations of
put and call options on the same underlying securities and Income
Builder may purchase and sell exchange-traded index options on
any securities index composed of the types of securities in which
the Fund may invest.
Futures Contracts and Options on Futures Contracts. The
Funds may enter into futures contracts and options on futures
contracts; Strategic is limited to stock index futures and
futures on U.S. Treasury securities and related options. The
policy of Income Builder and Balanced Shares requires that
immediately after entering such a contract the market values of
the outstanding futures contracts of those Funds and the
currencies and futures contracts subject to outstanding options
written by those Funds would not exceed 50% of its total assets.
Income Builder also requires that such instruments only be used
as a hedge and not for speculation.
Balanced Shares and Strategic may also enter into
contracts for the purchase or sale for future delivery of foreign
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currencies (and related options) and also purchase and write put
and call options on foreign currencies. Strategic may buy and
sell stock index futures contracts and options on such contracts
and stock indices. Income Builder may purchase and sell
exchange-traded index options on any securities index composed of
the types of securities in which the Fund may invest.
Rights and Warrants. Each of the Funds may invest up to
5% of its net assets in rights or warrants.
Foreign Securities. Each of the Funds may invest in
foreign securities subject to the following limitations: Balanced
Shares may not, and Strategic generally will not, invest more
than 15% of the value of its total assets in foreign securities
and may invest without limit in Eurodollar CDs. Income Builder
may not invest more than 10% of its net assets in equity
securities of foreign issuers nor more than 15% of its total
assets in issuers of any one foreign country.
Foreign Currencies and Forward Foreign Currency Exchange
Contracts. Each of the Funds may purchase or sell forward
foreign currency exchange contracts, enter into contracts for the
purchase or sale for future delivery of foreign currencies and
purchase and write put and call options on foreign currencies.
Strategic may also buy or sell foreign currency on a spot basis,
purchase or sell foreign currency forward contracts and options
on foreign currency futures contracts.
Forward Commitments. Strategic and Income Builder may
purchase and sell securities on a forward commitment basis
whereas Balanced Shares does not have an investment policy with
respect to, and therefore does not currently intend to enter
into, forward commitments for the purchase or sale of securities.
Repurchase Agreements. Strategic and Income Builder may
invest in repurchase agreements. Income Builder, however, is
limited to investing in repurchase agreements pertaining to the
U.S. Government with member banks of the of the Federal Reserve
System or primary dealers in such securities and Strategic's
investment in repurchase agreements is limited to 25% of its
total assets. Balanced Shares does not have an investment policy
with respect to, and therefore does not currently intend to enter
into, repurchase agreements.
Other Instruments
Strategic and Income Builder may both invest in
certificates of deposit, banker's acceptances, convertible
securities and commercial paper. Balanced Shares does not have
an investment policy with respect to, and therefore does not
currently intend to invest in, these instruments.
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Income Builder may additionally invest in depository
receipts, interest rate swaps and purchase and sell interest rate
caps and floors, standby commitment agreements and convertible
securities. Neither Balanced Shares nor Strategic has an
investment policy with respect to, and therefore does not
currently intend to invest in, these instruments.
Strategic can also invest in time deposits, variable
amount master notes, secured and unsecured asset backed
securities (but, generally, only up to 10% of total assets in
such securities, to the extent they are considered by the SEC to
be investment companies) and loan securities (but only up to 25%
of total assets). Neither Balanced Shares nor Income Builder has
an investment policy with respect to, and therefore does not
currently intend to invest in, these instruments.
Investment Restrictions
The investment restrictions adopted by each of the Funds
are substantially similar. The differences between the
restrictions adopted by Balanced Shares and those adopted by
Strategic and Income Builder are set forth below:
Balanced Shares may not make loans to other persons
except certain call loans upon collateral security; however the
Fund does not intend to make such call loans. Neither Strategic
nor Income Builder may make loans to other persons except (a)
Strategic may do so by the purchase of obligations in which it
may invest consistent with its investment policies, by entering
into repurchase agreements, or by lending its portfolio
securities representing not more than 25% of its total assets and
(b) Income Builder may do so through (i) the purchase of debt
obligations in accordance with its investment objectives and
policies; (ii) the lending of portfolio securities; (iii) the use
of repurchase agreements; or (iv) certain call loans upon
collateral security; however, the Fund does not intend to make
such call loans.
None of the three Funds may make short sales of
securities or maintain a short position, but Income Builder and
Strategic (as a non-fundamental policy) may make short sales-
against-the-box as long as, in the case of Income Builder, not
more than 10% of its net assets is held as collateral for such
sales at any one time or, in the case of Strategic, such short
sales are not made with respect to securities having a value in
excess of 5% of its total assets.
None of the Funds will purchase the securities of other
registered investment companies, except under certain
circumstances which are unique to each Fund.
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None of the Funds may purchase or sell commodities or
commodity contracts except to the extent that they may enter into
certain futures contracts consistent with their investment
objectives and policies.
None of the Funds may purchase securities on margin,
except Income Builder and Strategic may do so for such short-term
credits as may be necessary for the clearance of transactions.
Strategic may make margin payments in connection with futures
contracts, options on futures contracts, options, forward
contracts or options on foreign currencies.
Although none of the Funds invest in interests in oil,
gas or other mineral exploration or development programs,
Strategic may purchase securities which are secured by such
interests and may purchase securities or issuers which invest in
or deal in oil, gas or other mineral exploration or development
programs.
INFORMATION ABOUT THE TRANSACTIONS
Agreements and Plans of Reorganization and Liquidation.
Each Plan provides that upon the closing of the relevant
Transaction, Balanced Shares will acquire all of the assets of
Strategic and Income Builder and assume all the liabilities of
Strategic and Income Builder (whether absolute, accrued,
contingent or otherwise, and whether or not determinable at the
time of the closing of the Transactions) in exchange for Class A,
Class B, Class C and Advisor Class shares of Balanced Shares (the
"Closing"). The number of full and fractional Class A, Class B,
Class C and Advisor Class shares of Balanced Shares to be issued
to Class A, Class B, Class C or Advisor Class shareholders of
Strategic and Income Builder is to be determined on the basis of
the relative net asset values per share of those classes of
shares, such values in each case to be computed as of the close
of regular trading on the New York Stock Exchange next preceding
the Closing. The net asset value per share for each class of
shares of each Fund will be determined by dividing the assets
attributable to that class, less liabilities, by the total number
of the outstanding shares of that class.
The Board of Trustees of TAP and the Board of Directors
of Income Builder have determined that the interests of the
shareholders of Strategic and Income Builder, respectively, will
not be diluted as a result of the relevant Transaction.
At the Closing, each of Strategic and Income Builder
will liquidate and will distribute pro rata to its shareholders
of record the Class A, Class B, Class C and Advisor Class shares
of Balanced Shares received by it in the Transactions. Such
liquidation and distribution will be accomplished by the
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establishment of an open account on the share records of Balanced
Shares in the name of each shareholder of Strategic and Income
Builder, representing the respective number of full and
fractional shares of Balanced Shares due such shareholder.
Fractional Class A, Class B, Class C and Advisor Class shares of
Balanced Shares will be carried to the third decimal place.
Simultaneously with crediting Class A, Class B, Class C and
Advisor Class shares of Balanced Shares to the respective
shareholders of Strategic and Income Builder, shares of Strategic
and Income Builder held by such shareholders will be canceled.
New certificates for shares of Balanced Shares will be issued
only upon written shareholder request, and any certificate
representing shares of Balanced Shares to be issued in
replacement of a certificate representing shares of Balanced
Shares will be issued only upon the surrender of such latter
certificate.
Consummation of each Plan is subject to the conditions
set forth therein. Either Plan may be terminated and the related
Transaction abandoned at any time prior to the Closing, whether
or not shareholder approval has been obtained, by either Fund
that is a party thereto if that Fund's Trustees or Directors, as
the case may be, determine that proceeding with the Plan is not
in the best interests of that Fund's shareholders, or by either
party if a condition set forth in the Plan has not been fulfilled
or waived by the party entitled to its benefits or if there has
been a material default or breach of the Plan by the other party.
Description of Shares of Balanced Shares. Full and
fractional Class A, Class B, Class C and Advisor Class shares of
Balanced Shares will be issued without the imposition of a sales
load or other fee to the shareholders of Strategic and Income
Builder in accordance with the procedures described above. The
Class A, Class B, Class C and Advisor Class shares of Balanced
Shares to be issued in the Transactions will be fully paid and
nonassessable when issued and will have no preemptive or
conversion rights, except that the Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable at the time of the original
purchases of the Class B shares surrendered in the Transactions.
See "Synopsis - Purchase Procedures and Exchange Privileges."
Portfolio Transactions by Strategic and Income Builder.
Prior to the Closing, Strategic and Income Builder intend to sell
their portfolio securities to the extent desirable from the
perspective of the portfolio of Balanced Shares. It is expected
that, as a consequence of such transactions, Strategic and Income
Builder will experience a portfolio turnover of approximately 40%
to 50% and incur related transaction costs. Purchases of
portfolio securities by each of Strategic and Income Builder
prior to the acquisitions will be consistent with the investment
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<PAGE>
objectives and policies of Strategic or Income Builder and of
Balanced Shares. Each of Strategic and Income Builder also
intends, prior to the Closing, to declare and pay a dividend
and/or capital gains distribution to its shareholders of record
as of a date prior thereto.
Federal Income Tax Consequences of the Transactions. At
the Closing, Balanced Shares, Strategic and Income Builder will
each receive an opinion from [ ] to the effect
that, on the basis of then current law and certain
representations and assumptions, and subject to certain
limitations, for federal income tax purposes: (i) the Transaction
will constitute a reorganization within the meaning of section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended
(the "Code"), and each Fund will be "a party to a reorganization"
within the meaning of section 368(b) of the Code; (ii) neither
Strategic or Income Builder pursuant to sections 361(a) and
357(a) of the Code, nor Balanced Shares pursuant to section 1032
of the Code, will recognize any gain or loss upon the transfer of
assets of Strategic and Income Builder to Balanced Shares in
exchange for Class A, Class B, Class C and Advisor Class shares
of Balanced Shares and the assumption by Balanced Shares of the
liabilities of Strategic and Income Builder pursuant to the
Transactions and upon distribution (whether actual or
constructive) of shares of Balanced Shares to Strategic and
Income Builder shareholders in exchange for their shares of
Strategic and Income Builder; (iii) the shareholders of Strategic
and Income Builder who receive shares of Balanced Shares pursuant
to the Transactions will not recognize any gain or loss upon the
exchange (whether actual or constructive) of their shares of
Strategic and Income Builder for shares of Balanced Shares
pursuant to section 354 of the Code; (iv) the aggregate tax basis
of the shares of Balanced Shares received (whether actually or
constructively) by each shareholder of Strategic and Income
Builder will be the same as the aggregate tax basis of the shares
of Strategic and Income Builder surrendered in the exchange
pursuant to section 358 of the Code; (v) the holding period of
shares of Balanced Shares received (whether actually or
constructively) by each shareholder of Strategic and Income
Builder will include the holding period of the shares of
Strategic and Income Builder which are surrendered in exchange
therefor, provided that the shares of Strategic and Income
Builder constitute capital assets of such shareholder at the
Closing pursuant to section 1223(1) of the Code; (vi) the holding
period and tax basis of each asset of Strategic and Income
Builder acquired by Balanced Shares will be the same as the
holding period and tax basis which Strategic and Income Builder
had in each such asset immediately prior to the Transactions,
pursuant to sections 362(b) and 1223(2) of the Code; and (vii)
Balanced Shares will succeed to the capital loss carryovers of
Strategic and Income Builder, if any, pursuant to section 381 of
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the Code, but the use by Balanced Shares of any such capital loss
carryovers may be subject to limitation under section 383 of the
Code. There is no intention to consult the Internal Revenue
Service as to the foregoing matters.
Capitalization. The following tables show the
capitalization and net asset values per share of each class of
Balanced Shares, Strategic and Income Builder as of June 30, 1998
and on a pro forma basis as of that date after giving effect to
the proposed Transactions.
Actual
Balanced Income
Shares Strategic Builder
Net assets................ $180,934,462 $52,993,398 $59,593,893
Net asset value per share
Class A shares.......... $ 16.07 $ 19.70 $ 12.59
Class B shares.......... $ 15.65 $ 16.20 $ 12.54
Class C shares.......... $ 15.67 $ 16.20 $ 12.50
Advisor Class shares.... $ 16.07 $ 19.60 $ 12.58
Shares outstanding
Class A shares.......... 7,716,831 1,283,235 251,034
Class B shares.......... 2,852,858 1,519,680 906,041
Class C shares.......... 650,928 190,869 3,598,409
Advisor Class shares.... 131,958 19 7,924
Pro Forma Combined Fund
(Balanced Shares Following
Transactions With)
Strategic and
Income Income
Strategic Builder Builder
Net assets................ $233,927,860 $240,528,355 $293,521,753
Net asset value per share
Class A shares.......... $16.07 $16.07 $16.07
Class B shares.......... $15.65 $15.65 $15.65
Class C shares.......... $15.67 $15.67 $15.67
Advisor Class shares.... $16.07 $16.07 $16.07
Shares outstanding
Class A shares.......... 9,289,625 7,913,433 9,486,227
Class B shares.......... 4,426,378 3,578,935 5,152,453
Class C shares.......... 848,289 3,520,851 3,718,212
Advisor Class shares.... 131,982 138,161 138,185
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Unreimbursed Distribution Expenses. As of April 30,
1998, AFD had incurred $2,112,548 with respect to Class B shares
and $564,185 with respect to Class C shares in distribution
expenses under Balanced Shares' Rule 12b-1 plan that had not been
reimbursed pursuant to that plan or recovered through contingent
deferred sales charges or otherwise. As of May 31, 1998, AFD had
incurred $1,442,901 with respect to Class B shares and $451,161
with respect to Class C shares in distribution expenses under
Strategic's Rule 12b-1 plan in excess of the payments received by
AFD pursuant to that plan or recovered through contingent
deferred sales charges or otherwise. As of April 30, 1998, AFD
had incurred $1,358,381 with respect to Class B shares and
$1,964,822 with respect to Class C shares in distribution
expenses under Income Builder's Rule 12b-1 plan that had not been
reimbursed pursuant to that plan or recovered through contingent
deferred sales charges or otherwise. The Board of Directors of
Balanced Shares has adopted a resolution providing that, in
connection with the Transactions, the amount of those
distribution expenses existing on the day the Transaction occurs
may be defrayed from future fees paid to AFD pursuant to the Rule
12b-1 plan with respect to Class B and Class C shares of Balanced
Shares, subject to the receipt of appropriate assurances that
this treatment is consistent with applicable law. While in the
past the staff of the Commission has suggested that such payments
by an acquiring fund would be inappropriate, more recently the
staff of the Commission has indicated that it would not object to
such a "carry-forward" arrangement if it is implemented in
accordance with Rule 12b-1 requirements. No final determination
has been made as to whether or when to seek these assurances,
and, if sought, there can be no guarantee that they would be
obtained.
Realized and Unrealized Capital Gains and Distributions.
As of June 30, 1998, Balanced Shares, Strategic and Income
Builder had undistributed realized capital gains of
$16,338,730, $1,263,637 and $5,565,667,respectively, and
unrealized capital appreciation of $18,931,855, $7,459,555 and
$7,585,735, respectively. As of June 30, 1998, none of the Funds
had a capital loss carryforward.
CERTAIN COMPARATIVE INFORMATION
The following information provides only a summary of the
major differences between the organizational structure and
governing documents of the Funds. Balanced Shares and Income
Builder are both organized as Maryland corporations.
Accordingly, unless noted below, there are no significant
differences between those two Funds in terms of their respective
corporate organizational structure. However, Strategic is a
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portfolio of TAP, which is organized as a Massachusetts business
trust. Accordingly, this information provides a summary of the
major differences between Balanced Shares, its Charter and By-
Laws and Maryland law and TAP's Agreement and Declaration of
Trust and By-Laws and Massachusetts law. Copies of the Charters
and By-Laws for Balanced Shares and Income Builder and copies of
the Agreement and Declaration of Trust and By-Laws of TAP are a
part of each Fund's respective Registration Statement filed with
the Commission and may be obtained as provided below. See
"Information About the Funds."
General. Balanced Shares and Income Builder are
organized as Maryland corporations and are governed by their
Charter, By-Laws and Maryland law. TAP is organized as a
Massachusetts business trust and is governed by an Agreement and
Declaration of Trust, By-Laws and Massachusetts law. The Funds
are not required to hold annual meetings of shareholders and each
will do so only under certain specified circumstances or when
required under federal law. Each Fund has procedures available
to its respective shareholders for calling shareholders meetings
for the removal of Trustees or Directors.
Pursuant to Maryland Law, any Director of Balanced
Shares or Income Builder may be removed, either with or without
cause, at any meeting of shareholders duly called and at which a
quorum is present by the affirmative vote of a majority of the
votes entitled to be cast. Pursuant to the By-Laws of TAP,
Trustees may be removed from office by the holders of shares
representing at least two-thirds of the outstanding shares by
declaration in writing filed with the Fund's custodian or by
votes cast in person or by proxy at a meeting called for that
purpose.
The Directors of Balanced Shares and Income Builder and
the Trustees of TAP, as applicable, are required to promptly call
a meeting of shareholders for the purpose of voting upon the
question of removal when requested to do so in writing by the
record holders of not less than 10% of the outstanding shares.
In addition, in the case of each of Balanced Shares and Income
Builder, special meetings of shareholders for any other purpose
shall be called by its Secretary upon the written request of
holders of shares entitled to cast not less than 25% of all the
votes entitled to be cast at the meeting.
Except as otherwise required by law, the presence in
person or by proxy of the holders of one-third of the shares
entitled to be cast constitutes a quorum at any meeting of
shareholders of Balanced Shares or Income Builder. Pursuant to
the Charters of Balanced Shares and Income Builder, in instances
involving extraordinary corporate action, such as in a merger or
in making amendments to its Charter, the vote of a majority of
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the aggregate number of votes entitled to be cast on a matter is
required in order to take or authorize any such action for which
approval of the shareholders of Balanced Shares or Income Builder
is sought. With respect to other matters, for Balanced Shares
and Income Builder Maryland law provides that when a quorum is
present at any meeting, the affirmative vote of a majority of the
votes (or with respect to the election of Directors, a plurality
of votes cast) cast shall decide any question brought before such
meeting. Thirty percent of the shares entitled to vote on a
matter constitutes a quorum for the transaction of business at a
meeting of the shareholders of Strategic, but any lesser number
is sufficient for adjournments. In general, a majority of all
shares of Strategic entitled to vote on a matter at a meeting of
shareholders at which a quorum is present shall decide any
question, except when a different vote is required by law, the
Agreement and Declaration of Trust (such as with respect to the
Transaction), the By-Laws or when the Trustees in their
discretion require a larger vote.
Shares. Balanced Shares has authorized capital stock of
3,000,000,000 shares of Class A Common Stock, 3,000,000,000
shares of Class B Common Stock, 3,000,000,000 shares of Class C
Common Stock and 3,000,000,000 shares of Advisor Class Common
Stock, each having a par value of $.01 per share. Income Builder
has authorized capital stock of 2,000,000,000 shares of Class A
Common Stock, 2,000,000,000 shares of Class B Common Stock,
2,000,000,000 shares of Class C Common Stock and 2,000,000,000
shares of Advisor Class Common Stock, each having a par value of
$.001 per share. With respect to Strategic, TAP has designated
an unlimited number of Class A, Class B, Class C and Advisor
Class shares of beneficial interest, each having a par value
$.00001 per share.
Liability of Directors, Trustees and Officers. Each of
Balanced Shares, Strategic and Income Builder indemnifies its
officers and Directors or Trustees, as applicable, to the full
extent permitted by law. This indemnification does not protect
any such person against any liability to a Fund or any
shareholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
satisfaction of such person's office.
Liability of Shareholders. Under Massachusetts law,
shareholders of Strategic could, under certain circumstances, be
held personally liable for the obligations of Strategic.
However, the Agreement and Declaration of Trust disclaims
shareholder liability for acts or obligations of Strategic and
requires that Trustees use their best efforts to ensure that each
note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or officers of TAP, on behalf of
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Strategic, contains notice of such disclaimer. The Agreement and
Declaration of Trust provides for indemnification out of the
assets of Strategic for all loss and expense of any shareholder
of Strategic held personally liable for the obligations of
Strategic. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to
circumstances in which Strategic would be unable to meet its
obligations. In the view of Alliance, such risk is remote and is
not material. Under Maryland law, shareholders of Balanced
Shares and Income Builder have no personal liability for acts or
obligations of either Fund.
ADDITIONAL INFORMATION ABOUT THE FUNDS
A copy of the Stock Funds Prospectus, a Fund's most
recent annual report to shareholders and any subsequent semi-
annual report to shareholders, and the Supplementary Information
may be obtained without charge by writing to Alliance Fund
Services, Inc., P.O. Box 1520, Secaucus, New Jersey 07096, or by
calling Alliance Fund Services, Inc. toll-free at 1-800-221-5672.
The Funds file registration statements, reports, proxy statements
and other information with the Commission. These documents and
other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of such material may
also be obtained from the Public Reference Branch, Office of
Filings and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549 at prescribed rates.
VOTING INFORMATION
Proxies of the shareholders of Strategic and Income
Builder are being solicited by the Trustees and Directors of each
Fund, respectively, for the Special Meetings of Shareholders to
be held on October 12, 1998, at 1345 Avenue of the Americas, 33rd
Floor, New York, New York 10105 at [ ] Eastern time and at
all adjournments thereof. A proxy may be revoked at any time at
or before the relevant Meeting by giving notice to the Secretary
of Strategic or Income Builder, as appropriate, 1345 Avenue of
the Americas, New York, New York 10105, by signing another proxy
of a later date or by personally voting at that Meeting. Unless
revoked, all valid proxies will be voted in accordance with the
specification thereon, or in the absence of a specification, for
approval of the relevant Plan. Approval of a Plan by the
shareholders of Strategic or Income Builder will be deemed to
constitute approval by the shareholders of such Fund of a
temporary amendment to any investment objective, policy or
restriction that would otherwise be inconsistent with or violated
upon the consummation of the relevant Transaction.
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Approval of the relevant Plan requires the affirmative
vote of the holders of and a majority of the outstanding shares
of the Funds. The approval and closing of one Transaction is not
contingent upon the approval and closing of the other
Transaction.
Shareholders of record of each Fund at the close of
business on August 14, 1998 (the "Record Date") will be entitled
to vote at the relevant Meeting or any adjournments thereof. The
holders of thirty percent of the shares of Strategic, and one-
third of the shares of Income Builder, outstanding at the close
of business on the Record Date present in person or represented
by proxy will constitute a quorum for the respective Meetings.
Votes cast by proxy or in person at the Meetings will be counted
by the election inspectors for the Meetings. The election
inspectors will count the total number of votes cast "for"
approval of a proposal for purposes of determining whether
sufficient affirmative votes have been cast. The election
inspectors will count shares represented by proxies that reflect
abstentions as shares that are present and entitled to vote on
the matter for purposes of determining the presence of a quorum.
However, an abstention has the effect of a negative vote on the
proposal. Shares that are not voted and for which no proxy has
been given will not be counted as present at the relevant
Meeting. Dissenting shareholders do not have any appraisal
rights in connection with the Transactions.
Shareholders are entitled to one vote for each share
held, and each fractional share is entitled to a proportionate
fractional vote. As of August 14, 1998, as shown on the books of
Strategic, there were issued and outstanding [ ] shares of
beneficial interest. As of August 14, 1998, as shown on the
books of Income Builder, there were issued and outstanding [ ]
shares of common stock.
In the event that sufficient votes in favor of the
proposal set forth in the Notice of Special Meetings are not
received by the time scheduled for the Meetings for a Fund, the
persons named as proxies may authorize one or more adjournments
of the relevant Meeting with no other notice than announcement at
such Meeting for a period or periods not extending past December
12, 1998 to permit further solicitation of proxies with respect
to the proposal. Any such adjournment will require the
affirmative vote of a majority of the votes cast on the question
in person or by proxy at the session of the Meeting(s) to be
adjourned. The persons named as proxies will vote in favor of
the adjournment those proxies which they are entitled to vote in
favor of the Transaction. They will vote against any such
adjournment those proxies required to be voted against the
Transaction.
37
<PAGE>
Votes of the shareholders of Balanced Shares are not
being solicited in connection with the Transactions, since their
approval or consent is not necessary for the consummation of the
Transactions.
In addition to the solicitation of proxies by mail or
expedited delivery service, Trustees of TAP, Directors of Income
Builder and employees and agents of Alliance may solicit proxies
in person or by telephone. Persons holding shares as nominees
will upon request be reimbursed for their reasonable expenses in
sending soliciting material to their principals. Each Fund has
engaged the proxy solicitation firm of Shareholder Communications
Corporation, 17 State Street, New York, New York 10004, to assist
the Fund in soliciting proxies for the Meetings. Shareholder
Communications Corporation will receive a fee from Alliance
estimated at $[ ] and reimbursement of out-of-pocket expenses.
Share Ownership. As of August 14, 1998, the officers
and Directors of Balanced Shares as a group beneficially owned
less than 1% of the outstanding shares of each class of common
stock of Balanced Shares and, to the knowledge of Balanced
Shares, the following persons owned of record, and no person
owned beneficially, 5% or more of the outstanding shares of each
class of Balanced Shares:
% Ownership
Name and Address of Holder
of Record of Shares of Class Class Class Advisor
Balanced Shares A B C Class
As of August 14, 1998, the officers and Trustees of
Strategic as a group beneficially owned less than 1% of the
outstanding shares of each class of beneficial interest of
Strategic and, to the knowledge of Strategic, the following
persons owned of record, and no person owned beneficially,
5% or more of the outstanding shares of each class of
Strategic:
Name and Address of Holder
of Record of Shares of
Strategic % Ownership
38
<PAGE>
As of August 14, 1998, the officers and Directors
of Income Builder as a group beneficially owned less than 1%
of the outstanding shares of each class of common stock of
Income Builder and to the knowledge of Income Builder, the
following persons owned of record, and no person owned
beneficially, 5% or more of the outstanding shares of each
class of Income Builder:
Name and Address of Holder
of Record of Shares of
Income Builder % Ownership
THE BOARD OF TRUSTEES OF TAP, ON BEHALF OF STRATEGIC,
AND THE BOARD OF DIRECTORS OF INCOME
BUILDER RECOMMEND APPROVAL OF THE RELEVANT PLAN
39
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND
LIQUIDATION dated as of [ ], 1998 between
Alliance Balanced Shares, Inc., a Maryland corporation
("Balanced Shares") and The Alliance Portfolios1 , a
Massachusetts business trust ("TAP"), on behalf of its
series, Alliance Strategic
Balanced Fund ("Strategic").
In consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. Shareholder Approval
A meeting of the shareholders of Strategic shall be
called and held for the purpose of acting upon this
Agreement and the transactions contemplated herein.
Balanced Shares shall furnish to Strategic such data and
information relating to Balanced Shares as shall be
reasonably requested by Strategic for inclusion in the
information to be furnished to shareholders of Strategic in
connection with the meeting for the purpose of acting upon
this Agreement and the transactions contemplated herein.
Approval by the shareholders of Strategic of this Agreement
and the transactions contemplated herein shall, to the
extent necessary to permit the consummation of the
transactions contemplated herein without violating any
investment objective, policy or restriction of Strategic, be
deemed to constitute approval by the shareholders of a
temporary amendment of any investment objective, policy or
restriction that would otherwise be inconsistent with or
violated upon the consummation of such transactions solely
for the purpose of consummating such transactions.
____________________
1. The terms and provisions of the Agreement and Plan of
Reorganization and Liquidation between Balanced Shares
and Alliance Income Builder Fund, Inc. ("Income
Builder") are substantially identical to the terms and
provisions of this agreement and plan except as regards
the matters set forth in the paragraph following the
signature lines on page A-17 below.
<PAGE>
2. Reorganization
The transactions described in this section are
hereinafter collectively referred to as the
"Reorganization."
(a) Plan of Reorganization and Liquidation.
(i) Strategic agrees to and will grant,
bargain, sell, convey, assign, transfer and deliver to
Balanced Shares at the closing provided for in Section 2(b)
(the "Closing") all of the assets, rights, claims and
businesses of every kind, character and description (whether
tangible or intangible, whether real, personal or mixed,
whether absolute, accrued, contingent or otherwise, whether
or not determinable at the time of the Closing, and wherever
located) of Strategic to the extent they exist on or after
the Closing. In consideration thereof, at the Closing,
Balanced Shares agrees to and will (A) assume and pay, to
the extent that they exist on the Closing, all liabilities
of Strategic and (B) deliver to Strategic the number of full
and fractional Class A shares, Class B shares, Class C
shares and Advisor Class shares of Balanced Shares, par
value $.01 per share (the "Balanced Shares shares"), equal
to the number of full and fractional Class A shares, Class B
shares, Class C shares and Advisor Class shares of Strategic
(the "Strategic shares") determined by multiplying the
number of Strategic shares of that class by the exchange
ratio as computed as set forth below, the product of such
multiplication to be carried to the third decimal place.
For purposes of this section, Class A, Class B, Class C and
Advisor Class Strategic shares will correspond to Class A,
Class B, Class C and Advisor Class shares, respectively, of
Balanced Shares. The exchange ratio for each class of
Strategic shares shall be the number determined by dividing
the net asset value per share of that class of Strategic
shares by the net asset value per share of the corresponding
class of the Balanced Shares shares. In each case, such net
asset values are to be determined on a consistent basis by
the appropriate officers of TAP or Balanced Shares, as the
case may be, as of the close of regular trading on the New
York Stock Exchange, Inc. (the "Exchange") next preceding
the Closing. The exchange ratio shall be carried to the
fourth decimal place.
(ii) At the Closing, Strategic will liquidate
and distribute pro rata to the holders of record of each
class of Strategic shares as of the Closing the Balanced
Shares shares of the corresponding class received by
Strategic pursuant to this Section 2(a). Such liquidation
and distribution will be accompanied by the establishment of
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<PAGE>
an open account on the share records of Balanced Shares in
the name of each holder of a class of Strategic shares and
representing the number of Balanced Shares shares of the
corresponding class due such shareholder. Fractional
Balanced Shares shares will be carried to the third decimal
place. Simultaneously with such crediting of the Balanced
Shares shares to the shareholders, the Strategic shares held
by such shareholders shall be canceled. Certificates
representing Balanced Shares shares will be issued in
accordance with the then-current Balanced Shares prospectus;
provided, however, that any certificate representing
Balanced Shares shares to be issued in replacement of a
certificate representing the Strategic shares shall be
issued only upon the surrender of such latter certificate.
(iii) Following the Closing, Strategic will
be terminated as a series of TAP.
(b) Closing. The Closing shall occur at the later of
(i) the final adjournment of the meeting of the holders of
Strategic shares at which this Agreement and the transactions
contemplated hereby will be considered and (ii) such later time
as the parties hereto may mutually agree.
3. Articles of Incorporation; By-Laws; Board of Directors;
Officers
Balanced Shares hereby covenants and agrees as follows:
(a) Charter. The Charter of Balanced Shares in effect
at the Closing shall continue to be the Charter of Balanced
Shares until altered, amended or repealed as provided by law.
(b) By-Laws. The By-laws of Balanced Shares in effect
at the Closing shall continue to be the By-laws of Balanced
Shares until the same shall thereafter be altered, amended or
repealed in accordance with the Articles of Incorporation or
By-laws of Balanced Shares.
(c) Directors. The directors of Balanced Shares at the
Closing shall continue to be the directors of Balanced Shares
until they resign or their successors shall have been elected and
qualified.
(d) Officers. Subject to the provisions of the By-laws
of Balanced Shares, the officers of Balanced Shares at the
Closing shall continue to be the officers of Balanced Share until
they resign or their successors shall have been elected and
qualified.
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<PAGE>
(e) Vacancies. If at the Closing a vacancy shall exist
on the Board of Directors or in any of the offices of Balanced
Shares, such vacancy may thereafter be filled in the manner
provided by the By-laws of Balanced Shares, consistent with the
provisions of Section 16 of the Investment Company Act of 1940,
as amended (the "Act").
4. Representations, Warranties and Covenants of
Balanced Shares
Balanced Shares represents and warrants to, and
covenants with, TAP on behalf of Strategic, as follows:
(a) Organization, Existence, Etc. Balanced Shares is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Maryland and has the power to
carry on its business as it is now being conducted and as
described in its currently effective Registration Statement on
Form N-1A. Balanced Shares is qualified to do business under the
laws of every jurisdiction in which such qualification is
required, except where the failure to so qualify would not have a
material adverse effect on Balanced Shares. Balanced Shares has
all necessary federal, state and local authorizations to own all
of its properties and assets and to carry on its business as now
being conducted and as described in its currently effective
Registration Statement on Form N-1A.
(b) Registration as Investment Company. Balanced
Shares is registered under the Act as an open-end investment
company of the management type; such registration has not been
revoked or rescinded and is in full force and effect.
(c) Capitalization. The authorized capital stock of
Balanced Shares consists of 3,000,000,000 shares of Class A
Common Stock, 3,000,000,000 shares of Class B Common Stock,
3,000,000,000 shares of Class C Common Stock, and 3,000,000,000
shares of Advisor Class Common Stock, each having a par value
$.01 per share. As of [ ], 1998, there were outstanding
[ ] shares of Class A Common Stock, [ ] shares of
Class B Common Stock, [ ] shares of Class C Common Stock
and [ ] shares of Advisor Class common stock. All of the
outstanding shares of common stock of Balanced Shares have been
duly authorized and are validly issued, fully paid and
nonassessable. Because Balanced Shares is an open-end investment
company engaged in the continuous offering and redemption of its
shares, the number of outstanding Balanced Shares shares may
change prior to the Closing.
(d) Financial Statements. The financial statements of
Balanced Shares for the year ended July 31, 1997, which are
audited, and for the six months ended January 31, 1998, which are
A-4
<PAGE>
unaudited (the "Balanced Shares Financial Statements"),
previously delivered to Strategic, fairly present the financial
position of Balanced Shares as of the dates thereof and the
results of its operations and changes in its net assets for the
periods indicated.
(e) Shares to be Issued Upon Reorganization. The
Balanced Shares shares to be issued in connection with the
Reorganization have been duly authorized and upon consummation of
the Reorganization will be validly issued, fully paid and
nonassessable, and no shareholder of Balanced Shares has any
preemptive right to subscribe or purchase in respect thereof.
(f) Authority Relative to this Agreement. Balanced
Shares has the power to enter into this Agreement and to carry
out its obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by Balanced Shares'
Board of Directors and no other action by Balanced Shares is
necessary to authorize its officers to effectuate this Agreement
and the transactions contemplated hereby. Balanced Shares is not
subject to any provision of its Charter or By-laws, nor is
Balanced Shares a party to or obligated under any charter,
by-law, indenture or contract provision or any other commitment
or obligation, or subject to any order or decree, that would be
violated by its executing and carrying out this Agreement and the
transactions contemplated hereby.
(g) Liabilities. There are no liabilities of Balanced
Shares, whether or not determined or determinable, other than
liabilities disclosed or provided for in the Balanced Shares
Financial Statements and liabilities incurred in the ordinary
course of business or otherwise previously disclosed in writing
to Strategic.
(h) Litigation. To the knowledge of Balanced Shares,
there are no claims, actions, suits or proceedings pending
against Balanced Shares. In addition, to the knowledge of
Balanced Shares, there are no claims, actions, suits or
proceedings threatened against Balanced Shares that would
materially adversely affect Balanced Shares or its assets or
business or which would prevent or hinder consummation of the
transactions contemplated hereby.
(i) Contracts. Except for contracts, agreements,
franchises, licenses or permits entered into or granted in the
ordinary course of its business or disclosed in its current
Registration Statement on Form N-1A filed under the Act, in each
case under which no default exists, Balanced Shares is not a
party to or subject to any material contract, debt instrument,
A-5
<PAGE>
employee benefit plan, lease, franchise, license or permit of any
kind or nature whatsoever.
(j) Taxes. The federal income tax returns of Balanced
Shares have been filed for all taxable years to and including the
taxable year ended July 31, 1997 and all taxes payable pursuant
to such returns have been paid. The federal income tax return of
Balanced Shares for the taxable year ending July 31, 1998 will be
filed, and any taxes payable pursuant thereto will be paid, prior
to their due date. Balanced Shares has qualified as a regulated
investment company under the Internal Revenue Code of 1986, as
amended (the "Code"), in respect of each taxable year since the
commencement of its operations and has no reason to believe that
it will not so qualify in respect of its current fiscal year.
(k) Registration Statement. Balanced Shares shall file
with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form N-14 (the "Registration
Statement") under the Securities Act of 1933 (the "Securities
Act") relating to the Balanced Shares shares issuable hereunder.
At the time it becomes effective, the Registration Statement
(i) will comply in all material respects with the provisions of
the Securities Act and the rules and regulations of the
Commission thereunder (the "Regulations") and (ii) will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading; and at the time the
Registration Statement becomes effective, at the time of the
shareholders' meeting referred to in Section 1 hereof and at the
Closing, the prospectus (the "Prospectus") and statement of
additional information included therein (the "Statement of
Additional Information"), as amended or supplemented by any
amendments or supplements filed with the Commission by Balanced
Shares and delivered to Strategic, will not contain an untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided, however, that none of the representations and
warranties in this subsection (k) shall apply to statements in or
omissions from the Registration Statement, Prospectus or
Statement of Additional Information made in reliance upon and in
conformity with information furnished by Strategic for use in the
Registration Statement, Prospectus or Statement of Additional
Information as provided in Section 5(k).
(l) No Material Adverse Change. Since July 31, 1997,
there has been no material adverse change in the financial
condition, results of operations, business, properties or assets
of Balanced Shares.
A-6
<PAGE>
(m) Operations in the Ordinary Course. Except as
otherwise contemplated by this Agreement, Balanced Shares will
conduct its business in the ordinary course.
5. Representations, Warranties and Covenants of
TAP, on behalf of Strategic
TAP, on behalf of Strategic, represents and warrants to,
and covenants with, Balanced Shares as follows:
(a) Organization, Existence, Etc. TAP is a business
trust duly organized and validly existing under the laws of the
Commonwealth of Massachusetts and has the power to carry on its
business as it is now being conducted and as described in its
current effective Registration Statement on Form N-1A. TAP is
qualified to do business under the laws of every jurisdiction in
which such qualification is required, except where the failure to
so qualify would not have a material adverse effect on TAP. TAP
has all necessary federal, state and local authorizations to own
all of its properties and assets and to carry on its business as
now being conducted and as described in its current effective
Registration Statement on Form N-1A.
(b) Registration as Investment Company. TAP is
registered under the Act as an open-end investment company of the
management type; such registration has not been revoked or
rescinded and is in full force and effect.
(c) Capitalization. TAP has unlimited number of
authorized Class A, Class B, Class C and Advisor Class shares of
beneficial interest, par value $.00001 per share. The shares are
currently designated among five series, including Strategic. As
of [ ], 1998, there were outstanding [ ] Class A
shares of beneficial interest, [ ] Class B shares of
beneficial interest, [ ] Class C shares of beneficial
interest and [ ] Advisor Class shares of beneficial
interest. All of the outstanding shares of Strategic have been
duly authorized and are validly issued, fully paid and
nonassessable. Because TAP is an open-end investment company
engaged in the continuous offering and redemption of its shares,
the number of outstanding shares of Strategic may change prior to
the Closing.
(d) Financial Statements. The financial statements of
Strategic for the year ended July 31, 1997, which are audited and
for the six months ended January 31, 1998, which are unaudited
(the "Strategic Financial Statements"), and were previously
delivered to Balanced Shares, fairly present the financial
position of Strategic as of the date thereof and the results of
its operations and changes in its net assets for the periods
indicated.
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<PAGE>
(e) Authority Relative to this Agreement. TAP, on
behalf of Strategic, has the power to enter into this Agreement
and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by
TAP's Trustees and, except for approval by the shareholders of
Strategic, no other action by TAP is necessary to authorize its
officers to effectuate this Agreement and the transactions
contemplated hereby. TAP is not subject to any provision of its
Declaration of Trust or its By-laws, nor is TAP a party to or
obligated under any charter, by-law, indenture or contract
provision or any other commitment or obligation, or subject to
any order or decree, that would be violated by its executing and
carrying out this Agreement and the transactions contemplated
hereby.
(f) Liabilities. There are no liabilities of
Strategic, whether or not determined or determinable, other than
liabilities disclosed or provided for in the Strategic Financial
Statements and liabilities incurred in the ordinary course of
business subsequent to January 31, 1998 or otherwise previously
disclosed in writing to Balanced Shares.
(g) Litigation. To the knowledge of Strategic there
are no claims, actions, suits or proceedings pending against
Strategic. In addition, to the knowledge of Strategic, there are
no claims, actions, suits or proceedings threatened against
Strategic that would materially adversely affect Strategic or its
assets or business or which would prevent or hinder consummation
of the transactions contemplated hereby.
(h) Contracts. Except for contracts, agreements,
franchises, licenses or permits entered into or granted in the
ordinary course of its business, in each case under which no
default exists, TAP, on behalf of Strategic, is not a party to or
subject to any material contract, debt instrument, employee
benefit plan, lease, franchise, license or permit of any kind or
nature whatsoever.
(i) Taxes. The federal income tax returns of
Strategic, previously delivered to Balanced Shares, have been
filed for all taxable years to and including the taxable year
ended July 31, 1997 and all taxes payable pursuant to such
returns have been paid. The federal income tax return of
Strategic for the taxable year ending July 31, 1998 will be
filed, and any taxes payable pursuant thereto will be paid, prior
to their due date. Strategic has qualified as a regulated
investment company under the Code in respect of each taxable year
since the commencement of its operations and has no reason to
A-8
<PAGE>
believe that it will not so qualify in respect of its current
fiscal year.
(j) Portfolio Securities. TAP, on behalf of Strategic,
will prepare and deliver to Balanced Shares at the Closing a
Schedule of Investments (the "Schedule") listing all the assets
owned by Strategic as of the Closing. All assets to be listed on
the Schedule as of the Closing will be owned by Strategic free
and clear of any liens, claims, charges, options and
encumbrances, except as indicated in the Schedule, and, except as
so indicated, none of such assets is or, after the Reorganization
as contemplated hereby, will be subject to any restrictions,
legal or contractual, on the disposition thereof (including
restrictions as to the public offering or sale thereof under the
Securities Act) and, except as so indicated, all such assets are
or will be readily marketable.
(k) Registration Statement. In connection with the
Registration Statement, Strategic will cooperate with Balanced
Shares and will furnish to Balanced Shares, as reasonably
requested by Balanced Shares, the information relating to
Strategic required by the Securities Act and the Regulations to
be set forth in the Registration Statement (including the
Prospectus and Statement of Additional Information). At the time
the Registration Statement becomes effective, the Registration
Statement, insofar as it relates to Strategic, (i) will comply in
all material respects with the provisions of the Securities Act
and the Regulations and (ii) will not contain an untrue statement
of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; and at the time the Registration Statement becomes
effective, at the time of the shareholders' meeting referred to
in Section 1 hereof and at the Closing, the Prospectus and
Statement of Additional Information, as amended or supplemented
by any amendments or supplements filed with the Commission by
Balanced Shares and delivered to Strategic, insofar as they
relate to Strategic, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
representations and warranties in this subsection (k) shall apply
only to statements in or omissions from the Registration
Statement, Prospectus or Statement of Additional Information made
in reliance upon and in conformity with information furnished by
Strategic for use in the Registration Statement, Prospectus or
Statement of Additional Information as provided in this
subsection (k).
(l) No Material Adverse Change. Since July 31, 1997
there has been no material adverse change in the financial
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<PAGE>
condition, results of operations, business, properties or assets
of Strategic.
(m) Operations in the Ordinary Course. Except as
otherwise contemplated by this Agreement, Strategic will conduct
its business in the ordinary course.
6. Conditions to Obligations of TAP, on behalf of Strategic
The obligations of TAP hereunder with respect to the
consummation of the Reorganization as it relates to Strategic are
subject to the satisfaction of the following conditions:
(a) Approval by Shareholders. This Agreement and the
transactions contemplated by the Reorganization shall have been
approved by the affirmative vote of two-thirds of the outstanding
shares of Strategic entitled to be voted with respect thereto.
(b) Covenants, Warranties and Representations.
Balanced Shares shall have complied with each of its covenants
contained herein. Each of the representations and warranties of
Balanced Shares contained herein shall be true in all material
respects as of the Closing, there shall have been no material
adverse change in the financial condition, results of operations,
business, properties or assets of Balanced Shares since July 31,
1997, and Strategic shall have received a certificate of the
President of Balanced Shares satisfactory in form and substance
to Strategic so stating.
(c) Regulatory Approval. The Registration Statement
shall have been declared effective by the Commission and no stop
order under the Securities Act pertaining thereto shall have been
issued; all necessary orders or exemptions under the Act with
respect to the transactions contemplated hereby shall have been
granted by the Commission; and all necessary approvals,
registrations, and exemptions under federal and state laws shall
have been obtained.
(d) Tax Opinion. TAP shall have received the opinion
of Seward & Kissel, dated as of the Closing, addressed to it and
in form and substance satisfactory to TAP, as to certain of the
federal income tax consequences of the Reorganization under the
Code to Balanced Shares, Strategic and the shareholders of
Strategic. For purposes of rendering the opinion, Seward &
Kissel may rely exclusively and without independent verification
as to factual matters upon the statements made in this Agreement
and the Registration Statement, and upon such other written
representations as to matters of fact as an executive officer of
each of TAP and Balanced Shares will have verified as of the
Closing. The opinion of Seward & Kissel will be to the effect
that, based on the facts and assumptions stated therein, for
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<PAGE>
federal income tax purposes: (i) the Reorganization will
constitute a reorganization within the meaning of section
368(a)(1)(C) of the Code and that TAP, on behalf of Strategic,
and Balanced Shares will each be "a party to a reorganization"
within the meaning of section 368(b) of the Code; (ii) Strategic
or Balanced Shares will not recognize any gain or loss upon the
transfer of all the assets of Strategic to Balanced Shares in
exchange for Balanced Shares shares and the assumption by
Balanced Shares of the liabilities of Strategic pursuant to this
Agreement and upon distribution (whether actual or constructive)
of Balanced Shares shares to shareholders of Strategic in
exchange for their Strategic shares; (iii) the shareholders of
Strategic who receive Balanced Shares shares pursuant to the
Reorganization will not recognize any gain or loss upon the
exchange (whether actual or constructive) of their Strategic
shares for Balanced Shares shares (including any fractional share
interests they are deemed to have received) in the
Reorganization; (iv) the aggregate tax basis of the Balanced
Shares shares received (whether actually or constructively) by
each shareholder of Strategic will be the same as the aggregate
tax basis of the Strategic shares surrendered in the exchange;
(v) the holding period of Balanced Shares shares received
(whether actually or constructively) by each shareholder of
Strategic will include the holding period of the Strategic shares
that are surrendered in exchange therefor, provided that the
Strategic shares constitute capital assets of such shareholder at
the Closing; (vi) the holding period and tax basis of the assets
of Strategic acquired by Balanced Shares will be the same as the
holding period and tax basis that Strategic had in such assets
immediately prior to the Reorganization; and (vii) Balanced
Shares will succeed to the capital loss carryovers of Strategic,
if any, pursuant to section 381 of the Code, but the use by
Balanced Shares of any such capital loss carryovers may be
subject to limitation under section 383 of the Code.
(e) Opinion of Counsel. Strategic shall have received
the opinion of Seward & Kissel, as counsel for Balanced Shares,
dated as of the Closing, addressed to and in form and substance
satisfactory to Strategic, to the effect that: (i) Balanced
Shares is a corporation duly organized and validly existing under
the laws of the State of Maryland; (ii) Balanced Shares is a
non-diversified, open-end investment company of the management
type registered under the Act; (iii) this Agreement and the
Reorganization provided for herein and the execution of this
Agreement have been duly authorized and approved by requisite
action of Balanced Share, and this Agreement has been duly
executed and delivered by Balanced Shares and is a valid and
binding obligation of Balanced Shares, subject to applicable
bankruptcy, insolvency, fraudulent conveyance and similar laws or
court decisions regarding enforcement of creditors' rights
generally, and to general principles of equity (regardless of
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whether enforceability is considered in a proceeding at law or in
equity); (iv) the Registration Statement has been declared
effective under the Securities Act and to Seward & Kissel's
knowledge no stop order has been issued or threatened suspending
its effectiveness; (v) to Seward & Kissel's knowledge, no
consent, approval, order or other authorization of any federal or
state court or administrative or regulatory agency, other than
the acceptance of Articles of Transfer by the Maryland State
Department of Assessments and Taxation, is required for Balanced
Shares to enter into this Agreement or carry out its terms that
will not have been obtained by the Closing, other than as may be
required under the securities or "blue sky" laws of any state and
other than where the failure to obtain any such consent,
approval, order or authorization would not have a material
adverse effect on the operations of Balanced Shares; and (vi) the
Class A, Class B, Class C and Advisor Class shares of Balanced
Shares to be issued in the Reorganization have been duly
authorized and upon issuance thereof in accordance with this
Agreement will be validly issued, fully paid and nonassessable,
and no shareholder of Balanced Shares has any preemptive right to
subscribe or purchase in respect thereof.
(f) Non-Termination. The parties shall not have
terminated this Agreement pursuant to Section 8(c) hereof.
(g) Further Assurances. Strategic shall have received
such further assurances, including, but not limited to, further
assurances from Balanced Shares or any other person, concerning
the performance of its obligations hereunder and the consummation
of the Reorganization as it shall deem necessary, advisable or
appropriate.
7. Conditions to Obligations of Balanced Shares
The obligations of Balanced Shares hereunder with
respect to the consummation of the Reorganization are subject to
the satisfaction of the following conditions:
(a) Approval by Shareholders. This Agreement and the
transactions contemplated by the Reorganization shall have been
approved by the affirmative vote of two-thirds of the outstanding
shares of Strategic entitled to be voted with respect thereto.
(b) Covenants, Warranties and Representations. TAP, on
behalf of Strategic, shall have complied with each of its
covenants contained herein. Each of the representations and
warranties of TAP, on behalf of Strategic, contained herein shall
be true in all material respects as of the Closing, there shall
have been no material adverse change in the financial condition,
results of operations, business, properties or assets of
Strategic since July 31, 1997, and Balanced Shares shall have
A-12
<PAGE>
received a certificate of the President of TAP satisfactory in
form and substance to Balanced Shares so stating.
(c) Portfolio Securities. All securities and other
assets to be acquired by Balanced Shares in the Reorganization
shall have been approved for acquisition by the investment
adviser of Balanced Shares as consistent with the investment
policies of Balanced Shares, and all such securities and other
assets on the books of Strategic that are not readily marketable
shall be valued on the basis of an evaluation acceptable to
Strategic and Balanced Shares at the expense of Strategic.
(d) Regulatory Approval. The Registration Statement
shall have been declared effective by the Commission and no stop
order under the Securities Act pertaining thereto shall have been
issued; all necessary orders of exemption under the Act with
respect to the transactions contemplated hereby shall have been
granted by the Commission, and all necessary approvals,
registrations, and exemptions under federal and state laws shall
have been obtained.
(e) Tax Opinion. Balanced Shares shall have received
the opinion of [ ], counsel to Strategic, dated as
of the Closing, addressed to and in form and substance
satisfactory to Balanced Shares, as to certain of the federal
income tax consequences of the Reorganization under the Code to
Balanced Shares, Strategic and the shareholders of Strategic.
For purposes of rendering the opinion, [ ] may rely
exclusively and without independent verification as to factual
matters upon the statements made in this Agreement and the
Registration Statement, and upon such other written
representations as to matters of fact as an executive officer of
each of TAP and Balanced Shares will have verified as of the
Closing. The opinion of Ropes & Gray will be to the effect that,
based on the facts and assumptions stated therein, for federal
income tax purposes: (i) the Reorganization will constitute a
reorganization within the meaning of section 368(a)(1)(C) of the
Code and that TAP, on behalf of Strategic, and Balanced Shares
will each be "a party to a reorganization" within the meaning of
section 368(b) of the Code; (ii) neither Strategic nor Balanced
Shares recognize any gain or loss upon the transfer of all the
assets of Strategic to Balanced Shares in exchange for Balanced
Shares shares and the assumption by Balanced Shares of the
liabilities of Strategic pursuant to this Agreement and upon the
distribution (whether actual or constructive) of Balanced Shares
shares to shareholders of Strategic in exchange for their
respective Strategic shares; (iii) the holding period and tax
basis of the assets of Strategic acquired by Balanced Shares will
be the same as the holding period and tax basis that Strategic
had in such assets immediately prior to the Reorganization; and
(iv) Balanced Shares will succeed to the capital loss carryovers
A-13
<PAGE>
of Strategic, if any, pursuant to section 381 of the Code, but
the use by Balanced of any such capital loss carryovers may be
subject to limitation under section 383 of the Code.
(f) Opinion of Counsel. Balanced Shares shall have
received the opinion of Ropes & Gray, as counsel for Strategic,
dated as of the Closing, addressed to and in form and substance
satisfactory to Balanced Shares, to the effect that (i) TAP is a
business trust duly organized and validly existing under the laws
of the Commonwealth of Massachusetts; (ii) TAP is a diversified,
open-end investment company of the management type registered
under the Act; (iii) this Agreement and the Reorganization
provided for herein and the execution of this Agreement have been
duly authorized and approved by requisite action of TAP, on
behalf of Strategic, and this Agreement has been duly executed
and delivered by TAP, on behalf of Strategic, and is a valid and
binding obligation of TAP, on behalf of Strategic, subject to
applicable bankruptcy, insolvency, fraudulent conveyance and
similar laws or court decisions regarding enforcement of
creditors' rights generally, and to general principles of equity
(regardless of whether enforceability is considered in a
proceeding at law or in equity); (iv) the Reorganization has been
approved by the requisite vote of the shareholders of Strategic;
and (v) to Ropes & Gray's knowledge, no consent, approval, order
or other authorization of any federal or state court or
administrative or regulatory agency, other than the acceptance of
Articles of Transfer by the Maryland State Department of
Assessments and Taxation, is required for TAP, on behalf of
Strategic, to enter into this Agreement or carry out its terms
that will not have been obtained by the Closing other than where
the failure to obtain any such consent, approval, order or
authorization would not have a material adverse effect on the
operations of Strategic.
(g) Non-Termination. The parties shall not have
terminated this Agreement pursuant to Section 8(c) hereof.
(h) Further Assurances. Balanced Shares shall have
received such further assurances, including, but not limited to,
further assurances from Strategic or any other person, concerning
the performance of their obligations hereunder and the
consummation of the Reorganization as it shall deem necessary,
advisable or appropriate.
8. Amendments; Waivers; Termination; Survival; Cooperation
(a) Amendments. TAP and Balanced Shares may, by
agreement in writing authorized by their respective Boards of
Trustees or Directors, amend this Agreement at any time before or
after approval hereof by the shareholders of Strategic, but after
A-14
<PAGE>
such approval, no amendment shall be made that materially alters
the obligations of any party hereto.
(b) Waivers. At any time prior to the Closing, any
party may by written instrument signed by it (i) waive the effect
of any inaccuracies in the representations and warranties made to
it contained herein and (ii) waive compliance with any of the
covenants or conditions made for its benefit contained herein.
(c) Termination. Each party may terminate this
Agreement at any time prior to the Closing by notice to the other
party if (i) a material condition to its performance hereunder or
a material covenant of the other party contained herein shall not
be fulfilled on or before the date specified for the fulfillment
thereof or (ii) a material default or material breach of this
Agreement shall be made by the other party. This Agreement may
be terminated at any time prior to the Closing, whether before or
after approval by the shareholders of Strategic, without
liability on the part of either party hereto or its respective
Board of Directors or Trustees, officers or shareholders, by any
party on notice to the other party in the event that the Board of
Directors or Trustees of the party giving such notice determines
that proceeding with this Agreement is not in the best interest
of that party's shareholders. Unless the parties hereto shall
otherwise agree in writing, this Agreement shall terminate,
without liability to any party, as of the close of business on
October 31, 1999 if the Closing is not held on or prior to such
date.
(d) Survival. No representations, warranties or
covenants in or pursuant to this Agreement (including
certificates of officers) shall survive the Reorganization.
(e) Cooperation. Each of the parties hereto will
cooperate with the other in fulfilling its obligations under this
Agreement and will provide such information and documentation as
is reasonably requested by the other in carrying out the terms
hereof.
9. Expenses
Alliance Capital Management L.P., the investment adviser
to each party hereto, will bear all expenses incurred in
connection with this Agreement, and all transactions contemplated
hereby, whether or not the Reorganization is consummated;
provided, however, that TAP shall bear any cost or expense
incurred through the time of the Closing for purposes of
satisfying the conditions set forth in Section 7(c) above.
A-15
<PAGE>
10. General
This Agreement supersedes all prior agreements between
the parties (written or oral), is intended as a complete and
exclusive statement of the terms of the Agreement between the
parties and may not be changed or terminated orally. This
Agreement may be executed in counterparts, which shall be
considered one and the same agreement, and shall become effective
when the counterparts have been executed by TAP and Balanced
Shares and delivered to each of the parties hereto. The headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement. Nothing in this Agreement, expressed or implied, is
intended to confer upon any other person any rights or remedies
under or by reason of this Agreement. This Agreement shall be
governed by and construed in accordance with the law of the State
of New York applicable to agreements made and to be performed in
New York.
A-16
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
THE ALLIANCE PORTFOLIOS, on behalf
of Alliance Strategic Balanced
Shares
By________________________
ALLIANCE BALANCED SHARES, INC.
By________________________
Accepted and agreed to as to Section 9:
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management
Corporation, Its General Partner
By______________________________
Copies of the Agreement and Declaration of Trust, as amended,
establishing TAP are on file with the Secretary of State of The
Commonwealth of Massachusetts and with the City Clerk for the
City of Boston, and notice is hereby given that this Agreement
and Plan of Reorganization and Liquidation is executed on behalf
of TAP by officers of TAP as officers and not individually and
that the obligations of or arising out of this Agreement are not
binding upon any of the Trustees, officers, shareholders,
employees or agents of TAP or Strategic individually but are
binding only upon the assets and property of Strategic.
A-17
<PAGE>
TABLE OF CONTENTS Page
Introduction...........................
Fee Table..............................
Synopsis...............................
Risk Factors...........................
Reasons for the Transactions...........
Management's Discussion of Performance
of Balanced Shares...................
Comparison of Investment Objectives and
Policies.............................
Information about the Transactions.....
Certain Comparative Information........
Additional Information about
the Funds............................
Voting Information.....................
Exhibit A: Form of Agreement and Plan of
Reorganization and Liquidation....... A-1
00250236.AA7
<PAGE>
THE ALLIANCE PORTFOLIOS-
STRATEGIC BALANCED FUND
Proxy for the Special Meeting of Shareholders
October 12, 1998
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. THE
TRUSTEES RECOMMEND VOTING "FOR" THE PROPOSAL.
The undersigned hereby appoints each of Domenick Pugliese and
Carol H. Rappa as proxies, each with the power to appoint his or
her substitute, and authorizes each of them to represent and to
vote, as designated on the reverse hereof all the Shares of
Beneficial Interest of Strategic Balanced Fund, a series of The
Alliance Portfolios, (the "Fund") held of record by the
undersigned on August 14, 1998 at the Special Meeting of
Shareholders of the Fund to be held at [ ], Eastern Standard
Time, on October 12, 1998 at the offices of the Fund, 1345 Avenue
of the Americas, 33rd Floor, New York, New York 10105, and at all
adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL.
(Continued and to be signed on the reverse side)
The Alliance Portfolios
P.O. Box [ ]
New York, N.Y. 10203-0389
<PAGE>
1. To approve an Agreement and Plan of Reorganization and
Liquidation providing for the transfer of all of the assets
and liabilities of the Fund to Alliance Balanced Shares, Inc.
in exchange for Class A, Class B, Class C and Advisor Class
shares of Alliance Balanced Shares, Inc., the distribution of
such Class A, Class B, Class C and Advisor Class shares to
shareholders of the Fund in liquidation of the Fund and the
subsequent dissolution of the Fund.
FOR AGAINST ABSTAIN
/ / / / / /
Change of Address or
Comments Mark Here / /
Please sign and date this proxy in the space provided below.
Execution by shareholders who are not individuals must be made by
an authorized signatory.
Dated: , 1998
____________________________________
Name of Shareholder
____________________________________
Signature
Votes must be indicated (x) in black or blue ink.
Please Sign, Date and Return Promptly in the Enclosed Envelope -
No Postage is Required.
2
<PAGE>
ALLIANCE INCOME BUILDER FUND, INC.
Proxy for the Special Meeting of Shareholders
October 12, 1998
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE
DIRECTORS RECOMMEND VOTING "FOR" THE PROPOSAL.
The undersigned hereby appoints each of Domenick Pugliese and
Carol H. Rappa as proxies, each with the power to appoint his or
her substitute, and authorizes each of them to represent and to
vote, as designated on the reverse hereof all the Common Stock of
Alliance Income Builder Fund, Inc. (the "Fund") held of record by
the undersigned on August 14, 1998 at the Special Meeting of
Shareholders of the Fund to be held at [ ], Eastern
Standard Time, on October 12, 1998 at the offices of the Fund,
1345 Avenue of the Americas, 33rd Floor, New York, New York
10105, and at all adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL.
(Continued and to be signed on the reverse side)
Alliance Income Builder Fund, Inc.
P.O. Box [ ]
New York, N.Y. 10203-0389
<PAGE>
1. To approve an Agreement and Plan of Reorganization and
Liquidation providing for the transfer of all of the assets
and liabilities of the Fund to Alliance Balanced Shares, Inc.
in exchange for Class A, Class B, Class C and Advisor Class
shares of Alliance Balanced Shares, Inc., the distribution of
such Class A, Class B, Class C and Advisor Class shares to
shareholders of the Fund in liquidation of the Fund and the
subsequent dissolution of the Fund.
FOR AGAINST ABSTAIN
/ / / / / /
Change of Address or
Comments Mark Here / /
Please sign and date this proxy in the space provided below.
Execution by shareholders who are not individuals must be made by
an authorized signatory.
Dated: , 1998
____________________________________
Name of Shareholder
____________________________________
Signature
Votes must be indicated (x) in black or blue ink.
Please Sign, Date and Return Promptly in the Enclosed Envelope -
No Postage is Required.
2
<PAGE>
This is filed pursuant to Rule 497(e).
ALLIANCE CAPITAL [Logo] THE ALLIANCE STOCK FUNDS
_________________________________________________________________
Supplement dated July 16, 1998 to Prospectus dated
February 2, 1998 of The Alliance Stock Funds
Alliance Income Builder Fund, Inc. ("Income Builder
Fund") and Strategic Balanced Fund, a series of The Alliance
Portfolios ("Strategic Balanced Fund"), have suspended sales of
shares other than sales to shareholders as of the close of
business on July 15, 1998 in the case of Income Builder Fund and
July 16, 1998 in the case of Strategic Balanced Fund. This
action is being taken in conjunction with approval by the Board
of Directors of Income Builder Fund and the Board of Trustees of
The Alliance Portfolios of separate Agreements and Plans of
Reorganization and Liquidation ("Plans") pursuant to which the
assets and liabilities of Income Builder Fund and Strategic
Balanced Fund will be exchanged for shares of Alliance Balanced
Shares, Inc. ("Balanced Shares"), a non-diversified open-end
investment company sponsored by Alliance.
The Board of Directors of Income Builder Fund and the
Board of Trustees of The Alliance Portfolios have called meetings
of the shareholders of Income Builder Fund and Strategic Balanced
Fund to vote on the Plans to be held on October 12, 1998. Proxy
materials describing Balanced Shares and the terms of the
proposed acquisitions will be mailed prior to the meetings to
shareholders of record of Income Builder Fund and Strategic
Balanced Fund as of the close of business on August 14, 1998. If
approved at the meetings, it is expected that the acquisitions
will occur shortly thereafter. Shareholder approval of one
acquisition is independent of shareholder approval of the other
acquisition. Accordingly, the closing of one acquisition is not
contingent upon the closing of the other acquisition.
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
<PAGE>
THE ALLIANCE
- --------------------------------------------------------------------------------
STOCK FUNDS
- --------------------------------------------------------------------------------
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
February 2, 1998
Domestic Stock Funds Global Stock Funds
- -The Alliance Fund -Alliance International Fund
- -Alliance Growth Fund -Alliance Worldwide Privatization Fund
- -Alliance Premier Growth Fund -Alliance New Europe Fund
- -Alliance Technology Fund -Alliance All-Asia Investment Fund
- -Alliance Quasar Fund -Alliance Global Small Cap Fund
-Alliance Global Environment Fund
Total Return Funds
-Alliance Strategic Balanced Fund
-Alliance Balanced Shares
-Alliance Income Builder Fund
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
-Alliance Real Estate Investment Fund
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Funds at a Glance ..................................................... 2
Expense Information ....................................................... 4
Financial Highlights ...................................................... 7
Glossary .................................................................. 19
Description of the Funds .................................................. 20
Investment Objectives and Policies ..................................... 20
Additional Investment Practices ........................................ 31
Certain Fundamental Investment Policies ................................ 38
Risk Considerations .................................................... 41
Purchase and Sale of Shares ............................................... 46
Management of the Funds ................................................... 49
Dividends, Distributions and Taxes ........................................ 53
General Information ....................................................... 55
</TABLE>
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
Each Fund offers three classes of shares through this Prospectus. These shares
may be purchased, at the investor's choice, at a price equal to their net asset
value (i) plus an initial sales charge imposed at the time of purchase (the
"Class A shares"), (ii) with a contingent deferred sales charge imposed on most
redemptions made within four years of purchase (the "Class B shares"), or (iii)
without any initial or contingent deferred sales charge, as long as the shares
are held for one year or more (the "Class C shares"). See "Purchase and Sale of
Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO]Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $217
billion in assets under management as of September 30, 1997. Alliance provides
investment management services to employee benefit plans for 28 of the FORTUNE
100 companies.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
Global Environment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
companies expected to benefit from advances or improvements in products,
processes or services intended to foster the protection of the environment.
Total Return Funds
Strategic Balanced Fund
Seeks . . . A high long-term total return by investing in a combination of
equity and debt securities.
2
<PAGE>
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks and fixed-income securities, and also in equity-type securities such as
warrants, preferred stocks and convertible debt instruments.
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Income Builder Fund
Seeks . . . Both an attractive level of current income and long-term growth of
income and capital.
Invests Principally in . . . A non-diversified portfolio of fixed-income
securities and dividend-paying common stocks. Alliance currently expects to
continue to maintain approximately 60% of the Fund's net assets in fixed-income
securities and 40% in equity securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
Real Estate Investment Fund
Seeks . . . Total return on its assets from long-term growth of capital and from
income.
Invests Principally in . . . A diversified portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Distributions . . .
Balanced Shares, Income Builder Fund, Utility Income Fund, Growth and Income
Fund and Real Estate Investment Fund intend to make distributions quarterly to
shareholders. These distributions may include ordinary income and capital gain
(each of which is taxable) and a return of capital (which is generally
non-taxable). See "Dividends, Distributions and Taxes."
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. An investment in the Real Estate
Investment Fund is subject to certain risks associated with the direct ownership
of real estate in general, including possible declines in the value of real
estate, general and local economic conditions, environmental problems and
changes in interest rates. These risks are fully discussed in this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative and most
banks, insurance companies and brokerage firms nationwide. Shares can be
purchased for a minimum initial investment of $250, and subsequent investments
can be made for as little as $50. For detailed information about purchasing and
selling shares, see "Purchase and Sale of Shares." In addition, the Funds offer
several time and money saving services to investors. Be sure to ask your
financial representative about:
- --------------------------------------------------------------------------------
AUTOMATIC REINVESTMENT
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
RETIREMENT PLANS
- --------------------------------------------------------------------------------
SHAREHOLDER COMMUNICATIONS
- --------------------------------------------------------------------------------
DIVIDEND DIRECTION PLANS
- --------------------------------------------------------------------------------
AUTO EXCHANGE
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
- --------------------------------------------------------------------------------
A CHOICE OF PURCHASE PLANS
- --------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
24-HOUR INFORMATION
- --------------------------------------------------------------------------------
[LOGO]Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in a Fund and annual expenses for each class of shares of each
Fund. For each Fund, the "Examples" to the right of the table below show the
cumulative expenses attributable to a hypothetical $1,000 investment in each
class for the periods specified.
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum sales charge imposed on purchases (as a percentage of
offering price) ................................................. 4.25%(a) None None
Sales charge imposed on dividend reinvestments .................. None None None
Deferred sales charge (as a
percentage of original purchase
price or redemption proceeds,
whichever is lower) ............................................. None(a) 4.0% 1.0%
during the during the
first year, first year,
decreasing 1.0% 0% thereafter
annually to 0%
after the
fourth year (b)
Exchange fee .................................................... None None None
</TABLE>
- --------------------------------------------------------------------------------
(a) Reduced for larger purchases. Purchases of $1,000,000 or more are not
subject to an initial sales charge but may be subject to a 1% deferred
sales charge on redemptions within one year of purchase. See "Purchase and
Sale of Shares--How to Buy Shares" -page 46.
(b) Class B shares of each Fund other than Premier Growth Fund automatically
convert to Class A shares after eight years and the Class B shares of
Premier Growth Fund convert to Class A shares after six years. See
"Purchase and Sale of Shares--How to Buy Shares" -page 46.
<TABLE>
<CAPTION>
Operating Expenses Examples
- --------------------------------------------------------- -------------------------------------------------------------
Alliance Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .68% .68% .68% After 1 year $ 53 $ 59 $ 19 $ 29 $ 19
12b-1 fees .20% 1.00% 1.00% After 3 years $ 74 $ 78 $ 58 $ 58 $ 58
Other expenses (a) .15% .17% .15% After 5 years $ 97 $100 $100 $ 99 $ 99
---- ---- ---- After 10 years $163 $195(b) $195(b) $215 $215
Total fund
operating expenses 1.03% 1.85% 1.83%
==== ==== ====
<CAPTION>
Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .74% .74% .74% After 1 year $ 55 $ 60 $ 20 $ 30 $ 20
12b-1 fees .30% 1.00% 1.00% After 3 years $ 81 $ 82 $ 62 $ 62 $ 62
Other expenses (a) .22% .22% .23% After 5 years $109 $106 $106 $106 $106
---- ---- ---- After 10 years $188 $210(b) $210(b) $230 $230
Total fund
operating expenses 1.26% 1.96% 1.97%
==== ==== ====
<CAPTION>
Premier Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 58 $ 63 $ 23 $ 33 $ 23
12b-1 fees .33% 1.00% 1.00% After 3 years $ 90 $ 90 $ 70 $ 70 $ 70
Other expenses (a) .24% .25% .24% After 5 years $124 $120 $120 $120 $120
---- ---- ---- After 10 years $221 $241(b) $241(b) $257 $257
Total fund
operating expenses 1.57% 2.25% 2.24%
==== ==== ====
<CAPTION>
Technology Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (g) 1.04% 1.04% 1.04% After 1 year $ 59 $ 64 $ 24 $ 34 $ 24
12b-1 fees .30% 1.00% 1.00% After 3 years $ 93 $ 94 $ 74 $ 74 $ 74
Other expenses (a) .33% .34% .34% After 5 years $129 $127 $127 $127 $127
---- ---- ---- After 10 years $232 $254(b) $254(b) $272 $272
Total fund
operating expenses 1.67% 2.38% 2.38%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 6.
4
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- --------------------------------------------------------- -------------------------------------------------------------
Quasar Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (g) 1.16% 1.16% 1.16% After 1 year $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .22% 1.00% 1.00% After 3 years $ 93 $ 98 $ 78 $ 78 $ 78
Other expenses (a) .29% .35% .34% After 5 years $129 $134 $134 $133 $133
---- ---- ---- After 10 years $232 $264(b) $264(b) $284 $284
Total fund
operating expenses 1.67% 2.51% 2.50%
==== ==== ====
<CAPTION>
International Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees
(after waiver) (c) .85% .85% .85% After 1 year $ 58 $ 65 $ 25 $ 35 $ 25
12b-1 fees .17% 1.00% 1.00% After 3 years $ 90 $ 96 $ 76 $ 75 $ 75
Other expenses (a) .56% .58% .57% After 5 years $125 $130 $130 $129 $129
---- ---- ---- After 10 years $222 $256(b) $256(b) $276 $276
Total fund
operating expenses (d) 1.58% 2.43% 2.42%
==== ==== ====
<CAPTION>
Worldwide Privatization Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 94 $ 96 $ 76 $ 75 $ 75
Other expenses (a) .42% .43% .42% After 5 years $132 $130 $130 $129 $129
---- ---- ---- After 10 years $237 $259(b) $259(b) $276 $276
Total fund
operating expenses 1.72% 2.43% 2.42%
==== ==== ====
<CAPTION>
New Europe Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.06% 1.06% 1.06% After 1 year $ 62 $ 68 $ 28 $ 38 $ 28
12b-1 fees .30% 1.00% 1.00% After 3 years $104 $105 $ 85 $ 85 $ 85
Other expenses (a) .69% .69% .68% After 5 years $148 $145 $145 $145 $145
---- ---- ---- After 10 years $270 $291(b) $291(b) $307 $307
Total fund
operating expenses 2.05% 2.75% 2.74%
==== ==== ====
<CAPTION>
All-Asia Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees After 1 year $ 63 $ 68 $ 28 $ 38 $ 28
(after waiver) (c) .65% .65% .65% After 3 years $104 $106 $ 86 $ 86 $ 86
12b-1 fees .30% 1.00% 1.00% After 5 years $149 $146 $146 $146 $146
Other expenses After 10 years $271 $293(b) $293(b) $310 $310
Administration fees
(after waiver) (f) .00% .00% .00%
Other operating
expenses (a) 1.11% 1.12% 1.12%
---- ---- ----
Total fund
operating expenses (d) 2.06% 2.77% 2.77%
==== ==== ====
<CAPTION>
Global Small Cap Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 66 $ 71 $ 31 $ 41 $ 31
12b-1 fees .30% 1.00% 1.00% After 3 years $114 $116 $ 96 $ 96 $ 96
Other expenses (a) 1.11% 1.11% 1.10% After 5 years $166 $163 $163 $163 $163
---- ---- ---- After 10 years $305 $326(b) $326(b) $341 $341
Total fund
operating expenses 2.41% 3.11% 3.10%
==== ==== ====
<CAPTION>
Global Environment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.10% 1.10% 1.10% After 1 year $ 69 $ 74 $ 34 $ 44 $ 34
12b-1 fees .30% 1.00% 1.00% After 3 years $122 $123 $103 $104 $104
Other expenses (a) 1.29% 1.26% 1.29% After 5 years $179 $175 $175 $176 $176
---- ---- ---- After 10 years $332 $350(b) $350(b) $368 $368
Total fund
operating expenses 2.69% 3.36% 3.39%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 6.
5
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- --------------------------------------------------------- -------------------------------------------------------------
Strategic Balanced Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees
(after waiver) (c) .09% .09% .09% After 1 year $ 56 $ 62 $ 22 $ 32 $ 22
12b-1 fees .30% 1.00% 1.00% After 3 years $ 85 $ 86 $ 66 $ 66 $ 66
Other expenses (a) 1.02% 1.03% 1.03% After 5 years $116 $114 $114 $114 $114
---- ---- ---- After 10 years $204 $227(b) $227(b) $245 $245
Total fund
operating expenses (d) 1.41% 2.12% 2.12%
==== ==== ====
<CAPTION>
Balanced Shares Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .63% .63% .63% After 1 year $ 57 $ 63 $ 23 $ 33 $ 23
12b-1 fees .24% 1.00% 1.00% After 3 years $ 87 $ 90 $ 70 $ 70 $ 70
Other expenses (a) .60% .62% .60% After 5 years $119 $120 $120 $119 $119
---- ---- ---- After 10 years $211 $239(b) $239(b) $256 $256
Total fund
operating expenses 1.47% 2.25% 2.23%
==== ==== ====
<CAPTION>
Income Builder Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .75% .75% .75% After 1 year $ 63 $ 68 $ 28 $ 38 $ 28
12b-1 fees .30% 1.00% 1.00% After 3 years $105 $107 $ 87 $ 87 $ 87
Other expenses (a) 1.04% 1.05% 1.05% After 5 years $150 $148 $148 $148 $148
---- ---- ---- After 10 years $274 $296(b) $296(b) $313 $313
Total fund
operating expenses 2.09% 2.80% 2.80%
==== ==== ====
<CAPTION>
Utility Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.00% 0.00% 0.00% After 1 year $ 57 $ 62 $ 22 $ 32 $ 22
(after waiver) (c) After 3 years $ 88 $ 89 $ 69 $ 69 $ 69
12b-1 fees .30% 1.00% 1.00% After 5 years $121 $118 $118 $118 $118
Other expenses (a) 1.20% 1.20% 1.20% After 10 years $214 $236(b) $236(b) $253 $253
---- ---- ----
Total fund
operating expenses (e) 1.50% 2.20% 2.20%
==== ==== ====
<CAPTION>
Growth and Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .49% .49% .49% After 1 year $ 51 $ 57 $ 17 $ 27 $ 17
12b-1 fees .22% 1.00% 1.00% After 3 years $ 71 $ 74 $ 54 $ 54 $ 54
Other expenses (a) .21% .23% .22% After 5 years $ 91 $ 93 $ 93 $ 93 $ 93
---- ---- ---- After 10 years $151 $182(b) $182(b) $202 $202
Total fund
operating expenses .92% 1.72% 1.71%
==== ==== ====
<CAPTION>
Real Estate Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .90% .90% .90% After 1 year $ 60 $ 65 $ 25 $ 35 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 96 $ 96 $ 76 $ 76 $ 76
Other expenses (a) .57% .54% .53% After 5 years $134 $130 $130 $130 $130
---- ---- ---- After 10 years $242 $261(b) $261(b) $277 $277
Total fund
operating expenses 1.77% 2.44% 2.43%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period.
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance. The expenses shown do not reflect
the application of credits that reduce Fund expenses.
(b) Assumes Class B shares converted to Class A shares after eight years, or
six years with respect to Premier Growth Fund.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be .75% for Strategic Balanced Fund and Utility Income Fund, 1.00%
for All-Asia Investment Fund and 1.01% for International Fund.
International Fund's fee, absent the voluntary fee waiver, is calculated
based on average daily net assets. Maximum contractual rate, based on
quarter-end net assets, is 1.00%.
(d) Net of voluntary fee waivers and expense reimbursements. Absent such
waivers and reimbursements, total fund operating expenses for Strategic
Balanced Fund would have been 2.06%, 2.76% and 2.76%, respectively, for
Class A, Class B and Class C shares, total fund operating expenses for
All-Asia Investment Fund would have been 2.56%, 3.27% and 3.27%,
respectively, for Class A, Class B and Class C shares annualized and total
fund operating expenses for International Fund would have been 1.74%, 2.59%
and 2.58%, respectively, for Class A, Class B and Class C annualized.
(e) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 3.55%, 4.28%, 4.28%,
respectively, for Class A, Class B and Class C shares.
(f) Net of voluntary fee waiver. Absent such fee waiver, administration fees
would have been .15% for the Fund's Class A, Class B and Class C shares.
Reflects the fees payable by All-Asia Investment Fund to Alliance pursuant
to an adminstration agreement.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund and Technology
Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. Long-term shareholders of a Fund may pay aggregate sales charges
totaling more than the economic equivalent of the maximum initial sales charges
permitted by the Conduct Rules of the National Association of Securities
Dealers, Inc. See "Management of the Funds--Distribution Services Agreements."
The Rule 12b-1 fee for each class comprises a
6
<PAGE>
service fee not exceeding .25% of the aggregate average daily net assets of the
Fund attributable to the class and an asset-based sales charge equal to the
remaining portion of the Rule 12b-1 fee. "Management fees" for International
Fund and All-Asia Investment Fund and "Administration fees" for All-Asia
Investment Fund have been restated to reflect current voluntary fee waivers.
"Other Expenses" for Global Environment Fund are based on estimated amounts for
its current fiscal year. The Examples set forth above assume reinvestment of all
dividends and distributions and utilize a 5% annual rate of return as mandated
by Commission regulations. The Examples should not be considered representative
of past or future expenses; actual expenses may be greater or less than those
shown.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables on the following pages present, for each Fund, per share income and
capital changes for a share outstanding throughout each period indicated. Except
as otherwise indicated, the information in the tables for Alliance Fund, Growth
Fund, Premier Growth Fund, Strategic Balanced Fund, Balanced Shares, Utility
Income Fund, Worldwide Privatization Fund and Growth and Income Fund has been
audited by Price Waterhouse LLP, the independent accountants for each Fund, and
for All-Asia Investment Fund, Technology Fund, Quasar Fund, International Fund,
New Europe Fund, Global Small Cap Fund, Global Environment Fund, Real Estate
Investment Fund and Income Builder Fund by Ernst & Young LLP, the independent
auditors for each Fund. A report of Price Waterhouse LLP or Ernst & Young LLP,
as the case may be, on the information with respect to each Fund, appears in the
Fund's Statement of Additional Information. The following information for each
Fund should be read in conjunction with the financial statements and related
notes which are included in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting
Alliance Fund Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Prospectus.
7
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Fund
Class A
Year ended 11/30/97 ............ $7.71 $(.02)(b) $2.09 $2.07 $(.02) $(1.06)
Year ended 11/30/96 ............ 7.72 .02 1.06 1.08 (.02) (1.07)
Year ended 11/30/95 ............ 6.63 .02 2.08 2.10 (.01) (1.00)
1/1/94 to 11/30/94** ........... 6.85 .01 (.23) (.22) 0.00 0.00
Year ended 12/31/93 ............ 6.68 .02 .93 .95 (.02) (.76)
Year ended 12/31/92 ............ 6.29 .05 .87 .92 (.05) (.48)
Year ended 12/31/91 ............ 5.22 .07 1.70 1.77 (.07) (.63)
Year ended 12/31/90 ............ 6.87 .09 (.32) (.23) (.18) (1.24)
Year ended 12/31/89 ............ 5.60 .12 1.19 1.31 (.04) 0.00
Year ended 12/31/88 ............ 5.15 .08 .80 .88 (.08) (.35)
Class B
Year ended 11/30/97 ............ $7.40 $(.08)(b) $1.99 $1.91 $0.00 $(1.06)
Year ended 11/30/96 ............ 7.49 (.01) .99 .98 0.00 (1.07)
Year ended 11/30/95 ............ 6.50 (.03) 2.02 1.99 0.00 (1.00)
1/1/94 to 11/30/94** ........... 6.76 (.03) (.23) (.26) 0.00 0.00
Year ended 12/31/93 ............ 6.64 (.03) .91 .88 0.00 (.76)
Year ended 12/31/92 ............ 6.27 (.01)(b) .87 .86 (.01) (.48)
3/4/91++ to 12/31/91 ........... 6.14 .01(b) .79 .80 (.04) (.63)
Class C
Year ended 11/30/97 ............ $7.41 $(.08)(b) $1.99 $1.91 $0.00 $(1.06)
Year ended 11/30/96 ............ 7.50 (.02) 1.00 .98 0.00 (1.07)
Year ended 11/30/95 ............ 6.50 (.03) 2.03 2.00 0.00 (1.00)
1/1/94 to 11/30/94** ........... 6.77 (.03) (.24) (.27) 0.00 0.00
5/3/93++ to 12/31/93 ........... 6.67 (.02) .88 .86 0.00 (.76)
Growth Fund (i)
Class A
Year ended 10/31/97 ............ $34.91 $(.10)(b) $10.17 $10.07 $0.00 $(1.03)
Year ended 10/31/96 ............ 29.48 .05 6.20 6.25 (.19) (.63)
Year ended 10/31/95 ............ 25.08 .12 4.80 4.92 (.11) (.41)
5/1/94 to 10/31/94** ........... 23.89 .09 1.10 1.19 0.00 0.00
Year ended 4/30/94 ............. 22.67 (.01)(c) 3.55 3.54 0.00 (2.32)
Year ended 4/30/93 ............. 20.31 .05(c) 3.68 3.73 (.14) (1.23)
Year ended 4/30/92 ............. 17.94 .29(c) 3.95 4.24 (.26) (1.61)
9/4/90++ to 4/30/91 ............ 13.61 .17(c) 4.22 4.39 (.06) 0.00
Class B
Year ended 10/31/97 ............ $29.21 $(.31)(b) $8.44 $8.13 $0.00 $(1.03)
Year ended 10/31/96 ............ 24.78 (.12) 5.18 5.06 0.00 (.63)
Year ended 10/31/95 ............ 21.21 (.02) 4.01 3.99 (.01) (.41)
5/1/94 to 10/31/94** ........... 20.27 .01 .93 .94 0.00 0.00
Year ended 4/30/94 ............. 19.68 (.07)(c) 2.98 2.91 0.00 (2.32)
Year ended 4/30/93 ............. 18.16 (.06)(c) 3.23 3.17 (.03) (1.62)
Year ended 4/30/92 ............. 16.88 .17(c) 3.67 3.84 (.21) (2.35)
Year ended 4/30/91 ............. 14.38 .08(c) 3.22 3.30 (.09) (.71)
Year ended 4/30/90 ............. 14.13 .01(b)(c) 1.26 1.27 0.00 (1.02)
Year ended 4/30/89 ............. 12.76 (.01)(c) 2.44 2.43 0.00 (1.06)
10/23/87+ to 4/30/88 ........... 10.00 (.02)(c) 2.78 2.76 0.00 0.00
Class C
Year ended 10/31/97 ............ $29.22 $(.31)(b) $8.45 $8.14 $0.00 $(1.03)
Year ended 10/31/96 ............ 24.79 (.12) 5.18 5.06 0.00 (.63)
Year ended 10/31/95 ............ 21.22 (.03) 4.02 3.99 (.01) (.41)
5/1/94 to 10/31/94** ........... 20.28 .01 .93 .94 0.00 0.00
8/2/93++ to 4/30/94 ............ 21.47 (.02)(c) 1.15 1.13 0.00 (2.32)
Premier Growth Fund
Class A
Year ended 11/30/97 ............ $17.98 $(.10)(b) $5.20 $5.10 $0.00 $(1.08)
Year ended 11/30/96 ............ 16.09 (.04)(b) 3.20 3.16 0.00 (1.27)
Year ended 11/30/95 ............ 11.41 (.03) 5.38 5.35 0.00 (.67)
Year ended 11/30/94 ............ 11.78 (.09) (.28) (.37) 0.00 0.00
Year ended 11/30/93 ............ 10.79 (.05) 1.05 1.00 (.01) 0.00
9/28/92+ to 11/30/92 ........... 10.00 .01 .78 .79 0.00 0.00
Class B
Year ended 11/30/97 ............ $17.52 $(.23)(b) $5.05 $4.82 $0.00 $(1.08)
Year ended 11/30/96 ............ 15.81 (.14)(b) 3.12 2.98 0.00 (1.27)
Year ended 11/30/95 ............ 11.29 (.11) 5.30 5.19 0.00 (.67)
Year ended 11/30/94 ............ 11.72 (.15) (.28) (.43) 0.00 0.00
Year ended 11/30/93 ............ 10.79 (.10) 1.03 .93 0.00 0.00
9/28/92+ to 11/30/92 ........... 10.00 0.00 .79 .79 0.00 0.00
Class C
Year ended 11/30/97 ............ $17.54 $(.24)(b) $5.07 $4.83 $0.00 $(1.08)
Year ended 11/30/96 ............ 15.82 (.14)(b) 3.13 2.99 0.00 (1.27)
Year ended 11/30/95 ............ 11.30 (.08) 5.27 5.19 0.00 (.67)
Year ended 11/30/94 ............ 11.72 (.09) (.33) (.42) 0.00 0.00
5/3/93++ to 11/30/93 ........... 10.48 (.05) 1.29 1.24 0.00 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
8
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Dividends Value Return Based Period
And End Of on Net Asset (000's
Fiscal Year or Period Distributions Period Value (a) omitted)
------------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Alliance Fund
Class A
Year ended 11/30/97 ............ $(1.08) $8.70 31.82% $1,201,435
Year ended 11/30/96 ............ (1.09) 7.71 16.49 999,067
Year ended 11/30/95 ............ (1.01) 7.72 37.87 945,309
1/1/94 to 11/30/94** ........... 0.00 6.63 (3.21) 760,679
Year ended 12/31/93 ............ (.78) 6.85 14.26 831,814
Year ended 12/31/92 ............ (.53) 6.68 14.70 794,733
Year ended 12/31/91 ............ (.70) 6.29 33.91 748,226
Year ended 12/31/90 ............ (1.42) 5.22 (4.36) 620,374
Year ended 12/31/89 ............ (.04) 6.87 23.42 837,429
Year ended 12/31/88 ............ (.43) 5.60 17.10 760,619
Class B
Year ended 11/30/97 ............ $(1.06) $8.25 30.74% $ 70,461
Year ended 11/30/96 ............ (1.07) 7.40 15.47 44,450
Year ended 11/30/95 ............ (1.00) 7.49 36.61 31,738
1/1/94 to 11/30/94** ........... 0.00 6.50 (3.85) 18,138
Year ended 12/31/93 ............ (.76) 6.76 13.28 12,402
Year ended 12/31/92 ............ (.49) 6.64 13.75 3,825
3/4/91++ to 12/31/91 ........... (.67) 6.27 13.10 852
Class C
Year ended 11/30/97 ............ $(1.06) $8.26 30.72% $ 18,871
Year ended 11/30/96 ............ (1.07) 7.41 15.48 13,899
Year ended 11/30/95 ............ (1.00) 7.50 36.79 10,078
1/1/94 to 11/30/94** ........... 0.00 6.50 (3.99) 6,230
5/3/93++ to 12/31/93 ........... (.76) 6.77 13.95 4,006
Growth Fund (i)
Class A
Year ended 10/31/97 ............ $(1.03) $43.95 29.54% $ 783,110
Year ended 10/31/96 ............ (.82) 34.91 21.65 499,459
Year ended 10/31/95 ............ (.52) 29.48 20.18 285,161
5/1/94 to 10/31/94** ........... 0.00 25.08 4.98 167,800
Year ended 4/30/94 ............. (2.32) 23.89 15.66 102,406
Year ended 4/30/93 ............. (1.37) 22.67 18.89 13,889
Year ended 4/30/92 ............. (1.87) 20.31 23.61 8,228
9/4/90++ to 4/30/91 ............ (.06) 17.94 32.40 713
Class B
Year ended 10/31/97 ............ $(1.03) $36.31 28.64% $3,578,806
Year ended 10/31/96 ............ (.63) 29.21 20.82 2,498,097
Year ended 10/31/95 ............ (.42) 24.78 19.33 1,052,020
5/1/94 to 10/31/94** ........... 0.00 21.21 4.64 751,521
Year ended 4/30/94 ............. (2.32) 20.27 14.79 394,227
Year ended 4/30/93 ............. (1.65) 19.68 18.16 56,704
Year ended 4/30/92 ............. (2.56) 18.16 22.75 37,845
Year ended 4/30/91 ............. (.80) 16.88 24.72 22,710
Year ended 4/30/90 ............. (1.02) 14.38 8.81 15,800
Year ended 4/30/89 ............. (1.06) 14.13 20.31 7,672
10/23/87+ to 4/30/88 ........... 0.00 12.76 27.60 1,938
Class C
Year ended 10/31/97 ............ $(1.03) $36.33 28.66% $ 599,449
Year ended 10/31/96 ............ (.63) 29.22 20.81 403,478
Year ended 10/31/95 ............ (.42) 24.79 19.32 226,662
5/1/94 to 10/31/94** ........... 0.00 21.22 4.64 114,455
8/2/93++ to 4/30/94 ............ (2.32) 20.28 5.27 64,030
Premier Growth Fund
Class A
Year ended 11/30/97 ............ $(1.08) $22.00 30.46% $ 373,099
Year ended 11/30/96 ............ (1.27) 17.98 21.52 172,870
Year ended 11/30/95 ............ (.67) 16.09 49.95 72,366
Year ended 11/30/94 ............ 0.00 11.41 (3.14) 35,146
Year ended 11/30/93 ............ (.01) 11.78 9.26 40,415
9/28/92+ to 11/30/92 ........... 0.00 10.79 7.90 4,893
Class B
Year ended 11/30/97 ............ $(1.08) $21.26 29.62% $ 858,449
Year ended 11/30/96 ............ (1.27) 17.52 20.70 404,137
Year ended 11/30/95 ............ (.67) 15.81 49.01 238,088
Year ended 11/30/94 ............ 0.00 11.29 (3.67) 139,988
Year ended 11/30/93 ............ 0.00 11.72 8.64 151,600
9/28/92+ to 11/30/92 ........... 0.00 10.79 7.90 19,941
Class C
Year ended 11/30/97 ............ $(1.08) $21.29 29.64% $ 177,923
Year ended 11/30/96 ............ (1.27) 17.54 20.76 60,194
Year ended 11/30/95 ............ (.67) 15.82 48.96 20,679
Year ended 11/30/94 ............ 0.00 11.30 (3.58) 7,332
5/3/93++ to 11/30/93 ........... 0.00 11.72 11.83 3,899
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss) Average
To Average To Average Portfolio Commission
Fiscal Year or Period Net Assets Net Assets Turnover Rate Rate (k)
------------------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Alliance Fund
Class A
Year ended 11/30/97 ........... 1.03% (.29)% 158% $0.0571
Year ended 11/30/96 ........... 1.04 .30 80 0.0646
Year ended 11/30/95 ........... 1.08 .31 81 --
1/1/94 to 11/30/94** .......... 1.05* .21* 63 --
Year ended 12/31/93 ........... 1.01 .27 66 --
Year ended 12/31/92 ........... .81 .79 58 --
Year ended 12/31/91 ........... .83 1.03 74 --
Year ended 12/31/90 ........... .81 1.56 71 --
Year ended 12/31/89 ........... .75 1.79 81 --
Year ended 12/31/88 ........... .82 1.38 65 --
Class B
Year ended 11/30/97 ........... 1.85% (1.12)% 158% $0.0571
Year ended 11/30/96 ........... 1.87 (.53) 80 0.0646
Year ended 11/30/95 ........... 1.90 (.53) 81 --
1/1/94 to 11/30/94** .......... 1.89* (.60)* 63 --
Year ended 12/31/93 ........... 1.90 (.64) 66 --
Year ended 12/31/92 ........... 1.64 (.04) 58 --
3/4/91++ to 12/31/91 .......... 1.64* .10* 74 --
Class C
Year ended 11/30/97 ........... 1.83% (1.10)% 158% $0.0571
Year ended 11/30/96 ........... 1.86 (.51) 80 0.0646
Year ended 11/30/95 ........... 1.89 (.51) 81 --
1/1/94 to 11/30/94** .......... 1.87* (.59)* 63 --
5/3/93++ to 12/31/93 .......... 1.94* (.74)* 66 --
Growth Fund (i)
Class A
Year ended 10/31/97 ........... 1.26%(l) (.25)% 48% $0.0562
Year ended 10/31/96 ........... 1.30 .15 46 0.0584
Year ended 10/31/95 ........... 1.35 .56 61 --
5/1/94 to 10/31/94** .......... 1.35* .86* 24 --
Year ended 4/30/94 ............ 1.40(f) .32 87 --
Year ended 4/30/93 ............ 1.40(f) .20 124 --
Year ended 4/30/92 ............ 1.40 1.44 137 --
9/4/90++ to 4/30/91 ........... 1.40* 1.99* 130 --
Class B
Year ended 10/31/97 ........... 1.96%(l) (.94)% 48% $0.0562
Year ended 10/31/96 ........... 1.99 (.54) 46 0.0584
Year ended 10/31/95 ........... 2.05 (.15) 61 --
5/1/94 to 10/31/94** .......... 2.05* .16* 24 --
Year ended 4/30/94 ............ 2.10(f) (.36) 87 --
Year ended 4/30/93 ............ 2.15(f) (.53) 124 --
Year ended 4/30/92 ............ 2.15 .78 137 --
Year ended 4/30/91 ............ 2.10 .56 130 --
Year ended 4/30/90 ............ 2.00 .07 165 --
Year ended 4/30/89 ............ 2.00 (.03) 139 --
10/23/87+ to 4/30/88 .......... 2.00* (.40)* 52 --
Class C
Year ended 10/31/97 ........... 1.97%(l) (.95)% 48% $0.0562
Year ended 10/31/96 ........... 2.00 (.55) 46 0.0584
Year ended 10/31/95 ........... 2.05 (.15) 61 --
5/1/94 to 10/31/94** .......... 2.05* .16* 24 --
8/2/93++ to 4/30/94 ........... 2.10*(f) (.31)* 87 --
Premier Growth Fund
Class A
Year ended 11/30/97 ........... 1.57% (.52)% 76% $0.0594
Year ended 11/30/96 ........... 1.65 (.27) 95 0.0651
Year ended 11/30/95 ........... 1.75 (.28) 114 --
Year ended 11/30/94 ........... 1.96 (.67) 98 --
Year ended 11/30/93 ........... 2.18 (.61) 68 --
9/28/92+ to 11/30/92 .......... 2.17* .91* 0 --
Class B
Year ended 11/30/97 ........... 2.25% (1.20)% 76% $0.0594
Year ended 11/30/96 ........... 2.32 (.94) 95 0.0651
Year ended 11/30/95 ........... 2.43 (.95) 114 --
Year ended 11/30/94 ........... 2.47 (1.19) 98 --
Year ended 11/30/93 ........... 2.70 (1.14) 68 --
9/28/92+ to 11/30/92 .......... 2.68* .35* 0 --
Class C
Year ended 11/30/97 ........... 2.24% (1.22)% 76% $0.0594
Year ended 11/30/96 ........... 2.32 (.94) 95 0.0651
Year ended 11/30/95 ........... 2.42 (.97) 114 --
Year ended 11/30/94 ........... 2.47 (1.16) 98 --
5/3/93++ to 11/30/93 .......... 2.79* (1.35)* 68 --
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Technology Fund
Class A
Year ended 11/30/97 ............ $51.15 $(.51)(b) $4.22 $3.71 $0.00 $(.42)
Year ended 11/30/96 ............ 46.64 (.39)(b) 7.28 6.89 0.00 (2.38)
Year ended 11/30/95 ............ 31.98 (.30) 18.13 17.83 0.00 (3.17)
1/1/94 to 11/30/94** ........... 26.12 (.32) 6.18 5.86 0.00 0.00
Year ended 12/31/93 ............ 28.20 (.29) 6.39 6.10 0.00 (8.18)
Year ended 12/31/92 ............ 26.38 (.22)(b) 4.31 4.09 0.00 (2.27)
Year ended 12/31/91 ............ 19.44 (.02) 10.57 10.55 0.00 (3.61)
Year ended 12/31/90 ............ 21.57 (.03) (.56) (.59) 0.00 (1.54)
Year ended 12/31/89 ............ 20.35 0.00 1.22 1.22 0.00 0.00
Year ended 12/31/88 ............ 20.22 (.03)(c) .16 .13 0.00 0.00
Class B
Year ended 11/30/97 ............ $49.76 $(.88)(b) $4.12 $3.24 $0.00 $(.42)
Year ended 11/30/96 ............ 45.76 (.70)(b) 7.08 6.38 0.00 (2.38)
Year ended 11/30/95 ............ 31.61 (.60)(b) 17.92 17.32 0.00 (3.17)
1/1/94 to 11/30/94** ........... 25.98 (.23) 5.86 5.63 0.00 0.00
5/3/93++ to 12/31/93 ........... 27.44 (.12) 6.84 6.72 0.00 (8.18)
Class C
Year ended 11/30/97 ............ $49.76 $(.88)(b) $4.11 $3.23 $0.00 $(.42)
Year ended 11/30/96 ............ 45.77 (.70)(b) 7.07 6.37 0.00 (2.38)
Year ended 11/30/95 ............ 31.61 (.58)(b) 17.91 17.33 0.00 (3.17)
1/1/94 to 11/30/94** ........... 25.98 (.24) 5.87 5.63 0.00 0.00
5/3/93++ to 12/31/93 ........... 27.44 (.13) 6.85 6.72 0.00 (8.18)
Quasar Fund
Class A
Year ended 9/30/97 ............. $27.92 $(.24)(b) $6.80 $6.56 $0.00 $(4.11)
Year ended 9/30/96 ............. 24.16 (.25) 8.82 8.57 0.00 (4.81)
Year ended 9/30/95 ............. 22.65 (.22)(b) 5.59 5.37 0.00 (3.86)
Year ended 9/30/94 ............. 24.43 (.60) (.36) (.96) 0.00 (.82)
Year ended 9/30/93 ............. 19.34 (.41) 6.38 5.97 0.00 (.88)
Year ended 9/30/92 ............. 21.27 (.24) (1.53) (1.77) 0.00 (.16)
Year ended 9/30/91 ............. 15.67 (.05) 5.71 5.66 (.06) 0.00
Year ended 9/30/90 ............. 24.84 .03(b) (7.18) (7.15) 0.00 (2.02)
Year ended 9/30/89 ............. 17.60 .02(b) 7.40 7.42 0.00 (.18)
Year ended 9/30/88 ............. 24.47 (.08)(c) (2.08) (2.16) 0.00 (4.71)
Class B
Year ended 9/30/97 ............. $26.13 $(.42)(b) $(6.23) $5.81 $0.00 $(4.11)
Year ended 9/30/96 ............. 23.03 (.20) 8.11 7.91 0.00 (4.81)
Year ended 9/30/95 ............. 21.92 (.37)(b) 5.34 4.97 0.00 (3.86)
Year ended 9/30/94 ............. 23.88 (.53) (.61) (1.14) 0.00 (.82)
Year ended 9/30/93 ............. 19.07 (.18) 5.87 5.69 0.00 (.88)
Year ended 9/30/92 ............. 21.14 (.39) (1.52) (1.91) 0.00 (.16)
Year ended 9/30/91 ............. 15.66 (.13) 5.67 5.54 (.06) 0.00
9/17/90++ to 9/30/90 ........... 17.17 (.01) (1.50) (1.51) 0.00 0.00
Class C
Year ended 9/30/97 ............. $26.14 $(.42)(b) $6.24 $5.82 $0.00 $(4.11)
Year ended 9/30/96 ............. 23.05 (.20) 8.10 7.90 0.00 (4.81)
Year ended 9/30/95 ............. 21.92 (.37)(b) 5.36 4.99 0.00 (3.86)
Year ended 9/30/94 ............. 23.88 (.36) (.78) (1.14) 0.00 (.82)
5/3/93++ to 9/30/93 ............ 20.33 (.10) 3.65 3.55 0.00 0.00
International Fund
Class A
Year ended 6/30/97 ............. $18.32 $.06(b) $1.51 $1.57 $(.12) $(1.08)
Year ended 6/30/96 ............. 16.81 .05(b) 2.51 2.56 0.00 (1.05)
Year ended 6/30/95 ............. 18.38 .04 .01 .05 0.00 (1.62)
Year ended 6/30/94 ............. 16.01 (.09) 3.02 2.93 0.00 (.56)
Year ended 6/30/93 ............. 14.98 (.01) 1.17 1.16 (.04) (.09)
Year ended 6/30/92 ............. 14.00 .01(b) 1.04 1.05 (.07) 0.00
Year ended 6/30/91 ............. 17.99 .05 (3.54) (3.49) (.03) (.47)
Year ended 6/30/90 ............. 17.24 .03 2.87 2.90 (.04) (2.11)
Year ended 6/30/89 ............. 16.09 .05 3.73 3.78 (.13) (2.50)
Year ended 6/30/88 ............. 23.70 .17 (1.22) (1.05) (.21) (6.35)
Class B
Year ended 6/30/97 ............. $17.45 $(.09)(b) $1.43 $1.34 $0.00 $(1.08)
Year ended 6/30/96 ............. 16.19 (.07)(b) 2.38 2.31 0.00 (1.05)
Year ended 6/30/95 ............. 17.90 (.01) (.08) (.09) 0.00 (1.62)
Year ended 6/30/94 ............. 15.74 (.19)(b) 2.91 2.72 0.00 (.56)
Year ended 6/30/93 ............. 14.81 (.12) 1.14 1.02 0.00 (.09)
Year ended 6/30/92 ............. 13.93 (.11)(b) 1.02 .91 (.03) 0.00
9/17/90++ to 6/30/91 ........... 15.52 .03 (1.12) (1.09) (.03) (.47)
Class C
Year ended 6/30/97 ............. $17.46 $(.09)(b) $1.44 $1.35 $0.00 $(1.08)
Year ended 6/30/96 ............. 16.20 (.07)(b) 2.38 2.31 0.00 (1.05)
Year ended 6/30/95 ............. 17.91 (.14) .05 (.09) 0.00 (1.62)
Year ended 6/30/94 ............. 15.74 (.11) 2.84 2.73 0.00 (.56)
5/3/93++ to 6/30/93 ............ 15.93 0.00 (.19) (.19) 0.00 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
10
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Dividends Value Return Based Period
And End Of on Net Asset (000's
Fiscal Year or Period Distributions Period Value (a) omitted)
------------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Technology Fund
Class A
Year ended 11/30/97 ............ $(.42) $54.44 7.32% $ 624,716
Year ended 11/30/96 ............ (2.38) 51.15 16.05 594,861
Year ended 11/30/95 ............ (3.17) 46.64 61.93 398,262
1/1/94 to 11/30/94** ........... 0.00 31.98 22.43 202,929
Year ended 12/31/93 ............ (8.18) 26.12 21.63 173,732
Year ended 12/31/92 ............ (2.27) 28.20 15.50 173,566
Year ended 12/31/91 ............ (3.61) 26.38 54.24 191,693
Year ended 12/31/90 ............ (1.54) 19.44 (3.08) 131,843
Year ended 12/31/89 ............ 0.00 21.57 6.00 141,730
Year ended 12/31/88 ............ 0.00 20.35 0.64 169,856
Class B
Year ended 11/30/97 ............ $(.42) $52.58 6.57% $1,053,436
Year ended 11/30/96 ............ (2.38) 49.76 15.20 660,921
Year ended 11/30/95 ............ (3.17) 45.76 60.95 277,111
1/1/94 to 11/30/94** ........... 0.00 31.61 21.67 18,397
5/3/93++ to 12/31/93 ........... (8.18) 25.98 24.49 1,645
Class C
Year ended 11/30/97 ............ $(.42) $52.57 6.55% $ 184,194
Year ended 11/30/96 ............ (2.38) 49.76 15.17 108,488
Year ended 11/30/95 ............ (3.17) 45.77 60.98 43,161
1/1/94 to 11/30/94** ........... 0.00 31.61 21.67 7,470
5/3/93++ to 12/31/93 ........... (8.18) 25.98 24.49 1,096
Quasar Fund
Class A
Year ended 9/30/97 ............. $(4.11) $30.37 27.81% $ 402,081
Year ended 9/30/96 ............. (4.81) 27.92 42.42 229,798
Year ended 9/30/95 ............. (3.86) 24.16 30.73 146,663
Year ended 9/30/94 ............. (.82) 22.65 (4.05) 155,470
Year ended 9/30/93 ............. (.88) 24.43 31.58 228,874
Year ended 9/30/92 ............. (.16) 19.34 (8.34) 252,140
Year ended 9/30/91 ............. (.06) 21.27 36.28 333,806
Year ended 9/30/90 ............. (2.02) 15.67 (30.81) 251,102
Year ended 9/30/89 ............. (.18) 24.84 42.68 263,099
Year ended 9/30/88 ............. (4.71) 17.60 (8.61) 90,713
Class B
Year ended 9/30/97 ............. $(4.11) $27.83 26.70% $ 503,037
Year ended 9/30/96 ............. (4.81) 26.13 41.48 112,490
Year ended 9/30/95 ............. (3.86) 23.03 29.78 16,604
Year ended 9/30/94 ............. (.82) 21.92 (4.92) 13,901
Year ended 9/30/93 ............. (.88) 23.88 30.53 16,779
Year ended 9/30/92 ............. (.16) 19.07 (9.05) 9,454
Year ended 9/30/91 ............. (.06) 21.14 35.54 7,346
9/17/90++ to 9/30/90 ........... 0.00 15.66 (8.79) 71
Class C
Year ended 9/30/97 ............. $(4.11) $27.85 26.74% $ 145,494
Year ended 9/30/96 ............. (4.81) 26.14 41.46 28,541
Year ended 9/30/95 ............. (3.86) 23.05 29.87 1,611
Year ended 9/30/94 ............. (.82) 21.92 (4.92) 1,220
5/3/93++ to 9/30/93 ............ 0.00 23.88 17.46 118
International Fund
Class A
Year ended 6/30/97 ............. $(1.20) $18.69 9.30% $ 190,173
Year ended 6/30/96 ............. (1.05) 18.32 15.83 196,261
Year ended 6/30/95 ............. (1.62) 16.81 .59 165,584
Year ended 6/30/94 ............. (.56) 18.38 18.68 201,916
Year ended 6/30/93 ............. (.13) 16.01 7.86 161,048
Year ended 6/30/92 ............. (.07) 14.98 7.52 179,807
Year ended 6/30/91 ............. (.50) 14.00 (19.34) 214,442
Year ended 6/30/90 ............. (2.15) 17.99 16.98 265,999
Year ended 6/30/89 ............. (2.63) 17.24 27.65 166,003
Year ended 6/30/88 ............. (6.56) 16.09 (4.20) 132,319
Class B
Year ended 6/30/97 ............. $(1.08) $17.71 8.37% $ 77,725
Year ended 6/30/96 ............. (1.05) 17.45 14.87 72,470
Year ended 6/30/95 ............. (1.62) 16.19 (.22) 48,998
Year ended 6/30/94 ............. (.56) 17.90 17.65 29,943
Year ended 6/30/93 ............. (.09) 15.74 6.98 6,363
Year ended 6/30/92 ............. (.03) 14.81 6.54 5,585
9/17/90++ to 6/30/91 ........... (.50) 13.93 (6.97) 3,515
Class C
Year ended 6/30/97 ............. $(1.08) $17.73 8.42% $ 23,268
Year ended 6/30/96 ............. (1.05) 17.46 14.85 26,965
Year ended 6/30/95 ............. (1.62) 16.20 (.22) 19,395
Year ended 6/30/94 ............. (.56) 17.91 17.72 13,503
5/3/93++ to 6/30/93 ............ 0.00 15.74 (1.19) 229
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss) Average
To Average To Average Portfolio Commission
Fiscal Year or Period Net Assets Net Assets Turnover Rate Rate (k)
------------------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Technology Fund
Class A
Year ended 11/30/97 ............ 1.67%(l) (.97)% 51% $0.0564
Year ended 11/30/96 ............ 1.74 (.87) 30 0.0612
Year ended 11/30/95 ............ 1.75 (.77) 55 --
1/1/94 to 11/30/94** ........... 1.66* (1.22)* 55 --
Year ended 12/31/93 ............ 1.73 (1.32) 64 --
Year ended 12/31/92 ............ 1.61 (.90) 73 --
Year ended 12/31/91 ............ 1.71 (.20) 134 --
Year ended 12/31/90 ............ 1.77 (.18) 147 --
Year ended 12/31/89 ............ 1.66 .02 139 --
Year ended 12/31/88 ............ 1.42 (.16) 139 --
Class B
Year ended 11/30/97 ............ 2.38%(l) (1.70)% 51% $0.0564
Year ended 11/30/96 ............ 2.44 (1.61) 30 0.0612
Year ended 11/30/95 ............ 2.48 (1.47) 55 --
1/1/94 to 11/30/94** ........... 2.43* (1.95)* 55 --
5/3/93++ to 12/31/93 ........... 2.57* (2.30)* 64 --
Class C
Year ended 11/30/97 ............ 2.38%(l) (1.70)% 51% $0.0564
Year ended 11/30/96 ............ 2.44 (1.60) 30 0.0612
Year ended 11/30/95 ............ 2.48 (1.47) 55 --
1/1/94 to 11/30/94** ........... 2.41* (1.94)* 55 --
5/3/93++ to 12/31/93 ........... 2.52* (2.25)* 64 --
Quasar Fund
Class A
Year ended 9/30/97 ............. 1.67% (.91)% 135% $0.0536
Year ended 9/30/96 ............. 1.79 (1.11) 168 0.0596
Year ended 9/30/95 ............. 1.83 (1.06) 160 --
Year ended 9/30/94 ............. 1.67 (1.15) 110 --
Year ended 9/30/93 ............. 1.65 (1.00) 102 --
Year ended 9/30/92 ............. 1.62 (.89) 128 --
Year ended 9/30/91 ............. 1.64 (.22) 118 --
Year ended 9/30/90 ............. 1.66 .16 90 --
Year ended 9/30/89 ............. 1.73 .10 90 --
Year ended 9/30/88 ............. 1.28 (.40) 58 --
Class B
Year ended 9/30/97 ............. 2.51% (1.73)% 135% $0.0536
Year ended 9/30/96 ............. 2.62 (1.96) 168 0.0596
Year ended 9/30/95 ............. 2.65 (1.88) 160 --
Year ended 9/30/94 ............. 2.50 (1.98) 110 --
Year ended 9/30/93 ............. 2.46 (1.81) 102 --
Year ended 9/30/92 ............. 2.42 (1.67) 128 --
Year ended 9/30/91 ............. 2.41 (1.28) 118 --
9/17/90++ to 9/30/90 ........... 2.09* (.26)* 90 --
Class C
Year ended 9/30/97 ............. 2.50% (1.72)% 135% $0.0536
Year ended 9/30/96 ............. 2.61 (1.94) 168 0.0596
Year ended 9/30/95 ............. 2.64* (1.76)* 160 --
Year ended 9/30/94 ............. 2.48 (1.96) 110 --
5/3/93++ to 9/30/93 ............ 2.49* (1.90)* 102 --
International Fund
Class A
Year ended 6/30/97 ............. 1.74%(l) .31% 94% $0.0363
Year ended 6/30/96 ............. 1.72 .31 78 --
Year ended 6/30/95 ............. 1.73 .26 119 --
Year ended 6/30/94 ............. 1.90 (.50) 97 --
Year ended 6/30/93 ............. 1.88 (.14) 94 --
Year ended 6/30/92 ............. 1.82 .07 72 --
Year ended 6/30/91 ............. 1.73 .37 71 --
Year ended 6/30/90 ............. 1.45 .33 37 --
Year ended 6/30/89 ............. 1.41 .39 87 --
Year ended 6/30/88 ............. 1.41 .84 55 --
Class B
Year ended 6/30/97 ............. 2.59%(l) (.51)% 94% $0.0363
Year ended 6/30/96 ............. 2.55 (.46) 78 --
Year ended 6/30/95 ............. 2.57 (.62) 119 --
Year ended 6/30/94 ............. 2.78 (1.15) 97 --
Year ended 6/30/93 ............. 2.70 (.96) 94 --
Year ended 6/30/92 ............. 2.68 (.70) 72 --
9/17/90++ to 6/30/91 ........... 3.39* .84* 71 --
Class C
Year ended 6/30/97 ............. 2.58%(l) (.51)% 94% $0.0363
Year ended 6/30/96 ............. 2.53 (.47) 78 --
Year ended 6/30/95 ............. 2.54 (.88) 119 --
Year ended 6/30/94 ............. 2.78 (1.12) 97 --
5/3/93++ to 6/30/93 ............ 2.57* .08* 94 --
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income
------------------- ------------ -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/97........ $12.13 $ .15(b) $2.55 $2.70 $ (.15)
Year ended 6/30/96........ 10.18 .10(b) 1.85 1.95 0.00
Year ended 6/30/95........ 9.75 .06 .37 .43 0.00
6/2/94+ to 6/30/94........ 10.00 .01 (.26) (.25) 0.00
Class B
Year ended 6/30/97........ $11.96 $ .08(b) $2.50 $2.58 $ (.08)
Year ended 6/30/96........ 10.10 (.02) 1.88 1.86 0.00
Year ended 6/30/95........ 9.74 .02 .34 .36 0.00
6/2/94+ to 6/30/94........ 10.00 .00 (.26) (.26) 0.00
Class C
Year ended 6/30/97........ $11.96 $ .12(b) $2.46 $2.58 $ (.08)
Year ended 6/30/96........ 10.10 .03 1.83 1.86 0.00
2/8/95++ to 6/30/95....... 9.53 .05 .52 .57 0.00
New Europe Fund
Class A
Year ended 7/31/97........ $15.84 $ .07(b) $4.20 $4.27 $ (.15)
Year ended 7/31/96........ 15.11 .18 1.02 1.20 0.00
Year ended 7/31/95........ 12.66 .04 2.50 2.54 (.09)
Period ended 7/31/94**.... 12.53 .09 .04 .13 0.00
Year ended 2/28/94........ 9.37 .02(b) 3.14 3.16 0.00
Year ended 2/28/93........ 9.81 .04 (.33) (.29) (.15)
Year ended 2/29/92........ 9.76 .02(b) .05 .07 (.02)
4/2/90+ to 2/28/91........ 11.11(e) .26 (.91) (.65) (.26)
Class B
Year ended 7/31/97........ $15.31 $(.04)(b) $4.02 $3.98 $0.00
Year ended 7/31/96........ 14.71 .08 .99 1.07 0.00
Year ended 7/31/95........ 12.41 (.05) 2.44 2.39 (.09)
Period ended 7/31/94**.... 12.32 .07 .02 .09 0.00
Year ended 2/28/94........ 9.28 (.05)(b) 3.09 3.04 0.00
Year ended 2/28/93........ 9.74 (.02) (.33) (.35) (.11)
3/5/91++ to 2/29/92....... 9.84 (.04)(b) (.04) (.08) (.02)
Class C
Year ended 7/31/97........ $15.33 $(.04)(b) $4.02 $3.98 $0.00
Year ended 7/31/96........ 14.72 .08 1.00 1.08 0.00
Year ended 7/31/95........ 12.42 (.07) 2.46 2.39 (.09)
Period ended 7/31/94**.... 12.33 .06 .03 .09 0.00
5/3/93++ to 2/28/94....... 10.21 (.04)(b) 2.16 2.12 0.00
All-Asia Investment Fund
Class A
Year ended 10/31/97....... $11.04 $(.21)(b)(c) $(2.95) $(3.16) $0.00
Year ended 10/31/96....... 10.45 (.21)(b)(c) .88 .67 0.00
11/28/94+ to 10/31/95..... 10.00 (.19)(c) .64 .45 0.00
Class B
Year ended 10/31/97....... $10.90 $(.28)(b)(c) $(2.89) $(3.17) $0.00
Year ended 10/31/96....... 10.41 (.28)(b)(c) .85 .57 0.00
11/28/94+ to 10/31/95..... 10.00 (.25)(c) .66 .41 0.00
Class C
Year ended 10/31/97....... $10.91 $(.27)(b)(c) $(2.90) $(3.17) $0.00
Year ended 10/31/96....... 10.41 (.28)(b)(c) .86 .58 0.00
11/28/94+ to 10/31/95..... 10.00 (.35)(c) .76 .41 0.00
Global Small Cap Fund
Class A
Year ended 7/31/97........ $11.61 $(.15)(b) $2.97 $2.82 $0.00
Year ended 7/31/96........ 10.38 (.14)(b) 1.90 1.76 0.00
Year ended 7/31/95........ 11.08 (.09) 1.50 1.41 0.00
Period ended 7/31/94**.... 11.24 (.15)(b) (.01) (.16) 0.00
Year ended 9/30/93........ 9.33 (.15) 2.49 2.34 0.00
Year ended 9/30/92........ 10.55 (.16) (1.03) (1.19) 0.00
Year ended 9/30/91........ 8.26 (.06) 2.35 2.29 0.00
Year ended 9/30/90........ 15.54 (.05)(b) (4.12) (4.17) 0.00
Year ended 9/30/89........ 11.41 (.03) 4.25 4.22 0.00
Year ended 9/30/88........ 15.07 (.05) (1.83) (1.88) 0.00
Class B
Year ended 7/31/97........ $11.03 $(.21)(b) $2.77 $2.56 $0.00
Year ended 7/31/96........ 9.95 (.20)(b) 1.81 1.61 0.00
Year ended 7/31/95........ 10.78 (.12) 1.40 1.28 0.00
Period ended 7/31/94**.... 11.00 (.17)(b) (.05) (.22) 0.00
Year ended 9/30/93........ 9.20 (.15) 2.38 2.23 0.00
Year ended 9/30/92........ 10.49 (.20) (1.06) (1.26) 0.00
Year ended 9/30/91........ 8.26 (.07) 2.30 2.23 0.00
9/17/90++ to 9/30/90...... 9.12 (.01) (.85) (.86) 0.00
Class C
Year ended 7/31/97........ $11.05 $(.22)(b) $2.78 $2.56 $0.00
Year ended 7/31/96........ 9.96 (.20)(b) 1.82 1.62 0.00
Year ended 7/31/95........ 10.79 (.17) 1.45 1.28 0.00
Period ended 7/31/94**.... 11.00 (.17)(b) (.04) (.21) 0.00
5/3/93++ to 9/30/93....... 9.86 (.05) 1.19 1.14 0.00
<CAPTION>
Distributions
In Excess Of Distributions
Net Investment From Net
Fiscal Year or Period Income Realized Gains
------------------- -------------- --------------
<S> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/97........ $0.00 $(1.42)
Year ended 6/30/96........ 0.00 0.00
Year ended 6/30/95........ 0.00 0.00
6/2/94+ to 6/30/94........ 0.00 0.00
Class B
Year ended 6/30/97........ $0.00 $(1.42)
Year ended 6/30/96........ 0.00 0.00
Year ended 6/30/95........ 0.00 0.00
6/2/94+ to 6/30/94........ 0.00 0.00
Class C
Year ended 6/30/97........ $0.00 $(1.42
Year ended 6/30/96........ 0.00 0.00
2/8/95++ to 6/30/95....... 0.00 0.00
New Europe Fund
Class A
Year ended 7/31/97........ $ (.03) $ (1.32)
Year ended 7/31/96........ 0.00 (.47)
Year ended 7/31/95........ 0.00 0.00
Period ended 7/31/94**.... 0.00 0.00
Year ended 2/28/94........ 0.00 0.00
Year ended 2/28/93........ 0.00 0.00
Year ended 2/29/92........ 0.00 0.00
4/2/90+ to 2/28/91........ 0.00 (.44)
Class B
Year ended 7/31/97........ $ (.10) $(1.32)
Year ended 7/31/96........ 0.00 (.47)
Year ended 7/31/95........ 0.00 0.00
Period ended 7/31/94**.... 0.00 0.00
Year ended 2/28/94........ 0.00 0.00
Year ended 2/28/93........ 0.00 0.00
3/5/91++ to 2/29/92....... 0.00 0.00
Class C
Year ended 7/31/97........ $ (.10) $(1.32)
Year ended 7/31/96........ 0.00 (.47)
Year ended 7/31/95........ 0.00 0.00
Period ended 7/31/94**.... 0.00 0.00
5/3/93++ to 2/28/94....... 0.00 0.00
All-Asia Investment Fund
Class A
Year ended 10/31/97....... $0.00 $ (.34)
Year ended 10/31/96....... 0.00 (.08)
11/28/94+ to 10/31/95..... 0.00 0.00
Class B
Year ended 10/31/97....... $0.00 $ (.34)
Year ended 10/31/96....... 0.00 (.08)
11/28/94+ to 10/31/95..... 0.00 0.00
Class C
Year ended 10/31/97....... $0.00 $ (.34)
Year ended 10/31/96....... 0.00 (.08)
11/28/94+ to 10/31/95..... 0.00 0.00
Global Small Cap Fund
Class A
Year ended 7/31/97........ $0.00 $ (1.56)
Year ended 7/31/96........ 0.00 (.53)
Year ended 7/31/95........ 0.00 (2.11)(j)
Period ended 7/31/94**.... 0.00 0.00
Year ended 9/30/93........ 0.00 (.43)
Year ended 9/30/92........ 0.00 (.03)
Year ended 9/30/91........ 0.00 0.00
Year ended 9/30/90........ 0.00 (3.11)
Year ended 9/30/89........ 0.00 (.09)
Year ended 9/30/88........ 0.00 (1.78)
Class B
Year ended 7/31/97........ $0.00 $ (1.56)
Year ended 7/31/96........ 0.00 (.53)
Year ended 7/31/95........ 0.00 (2.11)(j)
Period ended 7/31/94**.... 0.00 0.00
Year ended 9/30/93........ 0.00 (.43)
Year ended 9/30/92........ 0.00 (.03)
Year ended 9/30/91........ 0.00 0.00
9/17/90++ to 9/30/90...... 0.00 0.00
Class C
Year ended 7/31/97........ $0.00 $ (1.56)
Year ended 7/31/96........ 0.00 (.53)
Year ended 7/31/95........ 0.00 (2.11)(j)
Period ended 7/31/94**.... 0.00 0.00
5/3/93++ to 9/30/93....... 0.00 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to footnotes on page 18.
12
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Dividends Value Return Based Period
And End Of on Net Asset (000's
Fiscal Year or Period Distributions Period Value (a) omitted)
--------------------- ------------- --------- ------------ ----------
<S> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/97........ $(1.57) $13.26 25.16% $561,793
Year ended 6/30/96........ 0.00 12.13 19.16 672,732
Year ended 6/30/95........ 0.00 10.18 4.41 13,535
6/2/94+ to 6/30/94........ 0.00 9.75 (2.50) 4,990
Class B
Year ended 6/30/97........ $(1.50) $13.04 24.34% $121,173
Year ended 6/30/96........ 0.00 11.96 18.42 83,050
Year ended 6/30/95........ 0.00 10.10 3.70 79,359
6/2/94+ to 6/30/94........ 0.00 9.74 (2.60) 22,859
Class C
Year ended 6/30/97........ $(1.50) $13.04 24.33% $ 12,929
Year ended 6/30/96........ 0.00 11.96 18.42 2,383
2/8/95++ to 6/30/95....... 0.00 10.10 5.98 338
New Europe Fund
Class A
Year ended 7/31/97........ $(1.50) $18.61 28.78% $ 78,578
Year ended 7/31/96........ (.47) 15.84 8.20 74,026
Year ended 7/31/95........ (.09) 15.11 20.22 86,112
Period ended 7/31/94**.... 0.00 12.66 1.04 86,739
Year ended 2/28/94........ 0.00 12.53 33.73 90,372
Year ended 2/28/93........ (.15) 9.37 (2.82) 79,285
Year ended 2/29/92........ (.02) 9.81 .74 108,510
4/2/90+ to 2/28/91........ (.70) 9.76 (5.63) 188,016
Class B
Year ended 7/31/97........ $(1.42) $17.87 27.76% $ 66,032
Year ended 7/31/96........ (.47) 15.31 7.53 42,662
Year ended 7/31/95........ (.09) 14.71 19.42 34,527
Period ended 7/31/94**.... 0.00 12.41 .73 31,404
Year ended 2/28/94........ 0.00 12.32 32.76 20,729
Year ended 2/28/93........ (.11) 9.28 (3.49) 1,732
3/5/91++ to 2/29/92....... (.02) 9.74 .03 1,423
Class C
Year ended 7/31/97........ $(1.42) $17.89 27.73% $ 16,907
Year ended 7/31/96........ (.47) 15.33 7.59 10,141
Year ended 7/31/95........ (.09) 14.72 19.40 7,802
Period ended 7/31/94**.... 0.00 12.42 .73 11,875
5/3/93++ to 2/28/94....... 0.00 12.33 20.77 10,886
All-Asia Investment Fund
Class A
Year ended 10/31/97....... $ (.34) $ 7.54 (29.61)% $ 5,916
Year ended 10/31/96....... (.08) 11.04 6.43 12,284
11/28/94+ to 10/31/95..... 0.00 10.45 4.50 2,870
Class B
Year ended 10/31/97....... $ (.34) $ 7.39 (30.09)% $ 11,439
Year ended 10/31/96....... (.08) 10.90 5.49 23,784
11/28/94+ to 10/31/95..... 0.00 10.41 4.10 5,170
Class C
Year ended 10/31/97....... $ (.34) $ 7.40 (30.06)% $ 1,859
Year ended 10/31/96....... (.08) 10.91 5.59 4,228
11/28/94+ to 10/31/95..... 0.00 10.41 4.10 597
Global Small Cap Fund
Class A
Year ended 7/31/97........ $(1.56) $12.87 26.47% $ 85,217
Year ended 7/31/96........ (.53) 11.61 17.46 68,623
Year ended 7/31/95........ (2.11) 10.38 16.62 60,057
Period ended 7/31/94**.... 0.00 11.08 (1.42) 61,372
Year ended 9/30/93........ (.43) 11.24 25.83 65,713
Year ended 9/30/92........ (.03) 9.33 (11.30) 58,491
Year ended 9/30/91........ 0.00 10.55 27.72 84,370
Year ended 9/30/90........ (3.11) 8.26 (31.90) 68,316
Year ended 9/30/89........ (.09) 15.54 37.34 113,583
Year ended 9/30/88........ (1.78) 11.41 (8.11) 90,071
Class B
Year ended 7/31/97........ $(1.56) $12.03 25.42% $ 31,946
Year ended 7/31/96........ (.53) 11.03 16.69 14,247
Year ended 7/31/95........ (2.11) 9.95 15.77 5,164
Period ended 7/31/94**.... 0.00 10.78 (2.00) 3,889
Year ended 9/30/93........ (.43) 11.00 24.97 1,150
Year ended 9/30/92........ (.03) 9.20 (12.03) 819
Year ended 9/30/91........ 0.00 10.49 27.00 121
9/17/90++ to 9/30/90...... 0.00 8.26 (9.43) 183
Class C
Year ended 7/31/97........ $(1.56) $12.05 25.37% $ 8,718
Year ended 7/31/96........ (.53) 11.05 16.77 4,119
Year ended 7/31/95........ (2.11) 9.96 15.75 1,407
Period ended 7/31/94**.... 0.00 10.79 (1.91) 1,330
5/3/93++ to 9/30/93....... 0.00 11.00 11.56 261
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss) Average
To Average To Average Portfolio Commission
Fiscal Year or Period Net Assets Net Assets Turnover Rate Rate (k)
--------------------- ---------- ---------- ------------- --------
<S> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/97........ 1.72% 1.27% 48% $0.0132
Year ended 6/30/96........ 1.87 .95 28 --
Year ended 6/30/95........ 2.56 .66 36 --
6/2/94+ to 6/30/94........ 2.75* 1.03* 0 --
Class B
Year ended 6/30/97........ 2.43% .66% 48% $0.0132
Year ended 6/30/96........ 2.83 (.20) 28 --
Year ended 6/30/95........ 3.27 .01 36 --
6/2/94+ to 6/30/94........ 3.45* .33* 0 --
Class C
Year ended 6/30/97........ 2.42% 1.06% 48% $0.0132
Year ended 6/30/96........ 2.57 .63 28 --
2/8/95++ to 6/30/95....... 3.27* 2.65* 36 --
New Europe Fund
Class A
Year ended 7/31/97........ 2.05%(l) .40% 89% $0.0569
Year ended 7/31/96........ 2.14 1.10 69 --
Year ended 7/31/95........ 2.09 .37 74 --
Period ended 7/31/94**.... 2.06* 1.85* 35 --
Year ended 2/28/94........ 2.30 .17 94 --
Year ended 2/28/93........ 2.25 .47 125 --
Year ended 2/29/92........ 2.24 .16 34 --
4/2/90+ to 2/28/91........ 1.52* 2.71* 48 --
Class B
Year ended 7/31/97........ 2.75%(l) (.23)% 89% $0.0569
Year ended 7/31/96........ 2.86 .59 69 --
Year ended 7/31/95........ 2.79 (.33) 74 --
Period ended 7/31/94**.... 2.76* 1.15* 35 --
Year ended 2/28/94........ 3.02 (.52) 94 --
Year ended 2/28/93........ 3.00 (.50) 125 --
3/5/91++ to 2/29/92....... 3.02* (.71)* 34 --
Class C
Year ended 7/31/97........ 2.74%(l) (.23)% 89% $0.0569
Year ended 7/31/96........ 2.87 .58 69 --
Year ended 7/31/95........ 2.78 (.33) 74 --
Period ended 7/31/94**.... 2.76* 1.15* 35 --
5/3/93++ to 2/28/94....... 3.00* (.52)* 94 --
All-Asia Investment Fund
Class A
Year ended 10/31/97....... 3.45%(f) (1.97)% 70% $0.0248
Year ended 10/31/96....... 3.37*(f) (1.75) 66 0.0280
11/28/94+ to 10/31/95..... 4.42*(f) (1.87)* 90 --
Class B
Year ended 10/31/97....... 4.15%(f) (2.67)% 70% $0.0248
Year ended 10/31/96....... 4.07(f) (2.44) 66 0.0280
11/28/94+ to 10/31/95..... 5.20*(f) (2.64)* 90 --
Class C
Year ended 10/31/97....... 4.15%(f) (2.66)% 70% $0.0248
Year ended 10/31/96....... 4.07(f) (2.42) 66 0.0280
11/28/94+ to 10/31/95..... 5.84*(f) (3.41) 90 --
Global Small Cap Fund
Class A
Year ended 7/31/97........ 2.41%(l) (1.25)% 129% $0.0364
Year ended 7/31/96........ 2.51 (1.22) 139 --
Year ended 7/31/95........ 2.54(f) (1.17) 128 --
Period ended 7/31/94**.... 2.42* (1.26)* 78 --
Year ended 9/30/93........ 2.53 (1.13) 97 --
Year ended 9/30/92........ 2.34 (.85) 108 --
Year ended 9/30/91........ 2.29 (.55) 104 --
Year ended 9/30/90........ 1.73 (.46) 89 --
Year ended 9/30/89........ 1.56 (.17) 106 --
Year ended 9/30/88........ 1.54 (.50) 74 --
Class B
Year ended 7/31/97........ 3.11%(l) (1.92)% 129% $0.0364
Year ended 7/31/96........ 3.21 (1.88) 139 --
Year ended 7/31/95........ 3.20(f) (1.92) 128 --
Period ended 7/31/94**.... 3.15* (1.93)* 78 --
Year ended 9/30/93........ 3.26 (1.85) 97 --
Year ended 9/30/92........ 3.11 (1.31) 108 --
Year ended 9/30/91........ 2.98 (1.39) 104 --
9/17/90++ to 9/30/90...... 2.61* (1.30)* 89 --
Class C
Year ended 7/31/97........ 3.10%(l) (1.93)% 129% $0.0364
Year ended 7/31/96........ 3.19 (1.85) 139 --
Year ended 7/31/95........ 3.25 (f) (2.10) 128 --
Period ended 7/31/94**.... 3.13* (1.92)* 78 --
5/3/93++ to 9/30/93....... 3.75* (2.51)* 97 --
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Global Environment Fund (n)
Class A
Year ended 10/31/97 ............ $16.48 $(.23)(b) $3.65 $3.42 $0.00 $(1.13)
Year ended 10/31/96 ............ 12.37 (.13) 4.26 4.13 (.02) 0.00
Year ended 10/31/95 ............ 11.74 .03 .60 .63 0.00 0.00
Year ended 10/31/94 ............ 10.97 0.00 .77 .77 0.00 0.00
Year ended 10/31/93 ............ 10.78 .01 .18 .19 0.00 0.00
Year ended 10/31/92 ............ 13.12 .01 (2.17) (2.16) (.10) (.08)
Year ended 10/31/91 ............ 12.46 .13 .87 1.00 (.25) (.09)
6/1/90+ to 10/31/90 ............ 13.83 .20 (1.57) (1.37) 0.00 0.00
Class B
10/3/97++ to 10/31/97 .......... 19.92 $(.20)(b) $(.96) $(1.16) $0.00 $0.00
Strategic Balanced Fund (i)
Class A
Year ended 7/31/97 ............. $18.48 $.47(b)(c) $3.56 $4.03 $(.39) $(2.33)
Year ended 7/31/96 ............. 17.98 .35 (b)(c) 1.08 1.43 (.32) (.61)
Year ended 7/31/95 ............. 16.26 .34(c) 1.64 1.98 (.22) (.04)
Period ended 7/31/94** ......... 16.46 .07(c) (.27) (.20) 0.00 0.00
Year ended 4/30/94 ............. 16.97 .16(c) .74 .90 (.24) (1.17)
Year ended 4/30/93 ............. 17.06 .39(c) .59 .98 (.42) (.65)
Year ended 4/30/92 ............. 14.48 .27(c) 2.80 3.07 (.17) (.32)
9/4/90++ to 4/30/91 ............ 12.51 .34(c) 1.66 2.00 (.03) 0.00
Class B
Year ended 7/31/97 ............. $15.89 $.28(b)(c) $3.02 $3.30 $(.27) $(2.33)
Year ended 7/31/96 ............. 15.56 .16(b)(c) .98 1.14 (.20) (.61)
Year ended 7/31/95 ............. 14.10 .22(c) 1.40 1.62 (.12) (.04)
Period ended 7/31/94** ......... 14.30 .03(c) (.23) (.20) 0.00 0.00
Year ended 4/30/94 ............. 14.92 .06(c) .63 .69 (.14) (1.17)
Year ended 4/30/93 ............. 15.51 .23(c) .53 .76 (.25) (1.10)
Year ended 4/30/92 ............. 13.96 .22(c) 2.70 2.92 (.29) (1.08)
Year ended 4/30/91 ............. 12.40 .43(c) 1.60 2.03 (.47) 0.00
Year ended 4/30/90 ............. 11.97 .50(b)(c) .60 1.10 (.25) (.42)
Year ended 4/30/89 ............. 11.45 .48(c) 1.11 1.59 (.30) (.77)
10/23/87+ to 4/30/88 ........... 10.00 .13(c) 1.38 1.51 (.06) 0.00
Class C
Year ended 7/31/97 ............. $15.89 $.28(b)(c) $3.02 $3.30 $(.27) $(2.33)
Year ended 7/31/96 ............. 15.57 .14(b)(c) .99 1.13 (.20) (.61)
Year ended 7/31/95 ............. 14.11 .16(c) 1.46 1.62 (.12) (.04)
Period ended 7/31/94** ......... 14.31 .03(c) (.23) (.20) 0.00 0.00
8/2/93++ to 4/30/94 ............ 15.64 .15(c) (.17) (.02) (.14) (1.17)
Balanced Shares
Class A
Year ended 7/31/97 ............. $14.01 $.31(b) $3.97 $4.28 $(.32) $(1.80)
Year ended 7/31/96 ............. 15.08 .37 .45 .82 (.41) (1.48)
Year ended 7/31/95 ............. 13.38 .46 1.62 2.08 (.36) (.02)
Period ended 7/31/94** ......... 14.40 .29 (.74) (.45) (.28) (.29)
Year ended 9/30/93 ............. 13.20 .34 1.29 1.63 (.43) 0.00
Year ended 9/30/92 ............. 12.64 .44 .57 1.01 (.45) 0.00
Year ended 9/30/91 ............. 10.41 .46 2.17 2.63 (.40) 0.00
Year ended 9/30/90 ............. 14.13 .45 (2.14) (1.69) (.40) (1.63)
Year ended 9/30/89 ............. 12.53 .42 2.18 2.60 (.46) (.54)
Year ended 9/30/88 ............. 16.33 .46 (1.07) (.61) (.44) (2.75)
Class B
Year ended 7/31/97 ............. $13.79 $.19(b) $3.89 $4.08 $(.24) $(1.80)
Year ended 7/31/96 ............. 14.88 .28 .42 .70 (.31) (1.48)
Year ended 7/31/95 ............. 13.23 .30 1.65 1.95 (.28) (.02)
Period ended 7/31/94** ......... 14.27 .22 (.75) (.53) (.22) (.29)
Year ended 9/30/93 ............. 13.13 .29 1.22 1.51 (.37) 0.00
Year ended 9/30/92 ............. 12.61 .37 .54 .91 (.39) 0.00
2/4/91++ to 9/30/91 ............ 11.84 .25 .80 1.05 (.28) 0.00
Class C
Year ended 7/31/97 ............. $13.81 $.20(b) $3.89 $4.09 $(.24) $(1.80)
Year ended 7/31/96 ............. 14.89 .26 .45 .71 (.31) (1.48)
Year ended 7/31/95 ............. 13.24 .30 1.65 1.95 (.28) (.02)
Period ended 7/31/94** ......... 14.28 .24 (.77) (.53) (.22) (.29)
5/3/93++ to 9/30/93 ............ 13.63 .11 .71 .82 (.17) 0.00
Income Builder Fund (h)
Class A
Year ended 10/31/97 ............ $11.57 $.50(b) $1.62 $2.12 $(.51) $(.61)
Year ended 10/31/96 ............ 10.70 .56(b) .98 1.54 (.55) (.12)
Year ended 10/31/95 ............ 9.69 .93(b) .59 1.52 (.51) 0.00
3/25/94++ to 10/31/94 .......... 10.00 .96 (1.02) (.06) (.05)(g) (.20)
Class B
Year ended 10/31/97 ............ $11.55 $.42(b) $1.61 $2.03 $(.44) $(.61)
Year ended 10/31/96 ............ 10.70 .47(b) .98 1.45 (.48) (.12)
Year ended 10/31/95 ............ 9.68 .63(b) .83 1.46 (.44) 0.00
3/25/94++ to 10/31/94 .......... 10.00 .88 (.98) (.10) (.06)(g) (.16)
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Dividends Value Return Based Period
And End Of on Net Asset (000's
Fiscal Year or Period Distributions Period Value (a) omitted)
------------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Global Environment Fund (h)
Class A
Year ended 10/31/97 ............ $(1.13) $18.77 23.51% $ 52,378
Year ended 10/31/96 ............ (.02) 16.48 33.48 100,271
Year ended 10/31/95 ............ 0.00 12.37 5.37 85,416
Year ended 10/31/94 ............ 0.00 11.74 7.02 81,102
Year ended 10/31/93 ............ 0.00 10.97 1.76 75,805
Year ended 10/31/92 ............ (.18) 10.78 (16.59) 74,442
Year ended 10/31/91 ............ (.34) 13.12 8.66 90,612
6/1/90+ to 10/31/90 ............ 0.00 12.46 (10.68) 86,041
Class B
10/3/97++ to 10/31/97 .......... $0.00 $18.76 (5.82)% $ 235
Strategic Balanced Fund (i)
Class A
Year ended 7/31/97 ............. $(2.72) $19.79 23.90% $ 20,312
Year ended 7/31/96 ............. (.93) 18.48 8.05 18,329
Year ended 7/31/95 ............. (.26) 17.98 12.40 10,952
Period ended 7/31/94** ......... 0.00 16.26 (1.22) 9,640
Year ended 4/30/94 ............. (1.41) 16.46 5.06 9,822
Year ended 4/30/93 ............. (1.07) 16.97 5.85 8,637
Year ended 4/30/92 ............. (.49) 17.06 20.96 6,843
9/4/90++ to 4/30/91 ............ (.03) 14.48 16.00 443
Class B
Year ended 7/31/97 ............. $(2.60) $16.59 23.01% $ 28,037
Year ended 7/31/96 ............. (.81) 15.89 7.41 28,492
Year ended 7/31/95 ............. (.16) 15.56 11.63 37,301
Period ended 7/31/94** ......... 0.00 14.10 (1.40) 43,578
Year ended 4/30/94 ............. (1.31) 14.30 4.29 43,616
Year ended 4/30/93 ............. (1.35) 14.92 4.96 36,155
Year ended 4/30/92 ............. (1.37) 15.51 20.14 31,842
Year ended 4/30/91 ............. (.47) 13.96 16.73 22,552
Year ended 4/30/90 ............. (.67) 12.40 8.85 19,523
Year ended 4/30/89 ............. (1.07) 11.97 14.66 5,128
10/23/87+ to 4/30/88 ........... (.06) 11.45 15.10 2,344
Class C
Year ended 7/31/97 ............. $(2.60) $16.59 23.01% $ 3,045
Year ended 7/31/96 ............. (.81) 15.89 7.34 3,157
Year ended 7/31/95 ............. (.16) 15.57 11.62 4,113
Period ended 7/31/94** ......... 0.00 14.11 (1.40) 4,317
8/2/93++ to 4/30/94 ............ (1.31) 14.31 .45 4,289
Balanced Shares
Class A
Year ended 7/31/97 ............. $(2.12) $16.17 33.46% $ 115,500
Year ended 7/31/96 ............. (1.89) 14.01 5.23 102,567
Year ended 7/31/95 ............. (.38) 15.08 15.99 122,033
Period ended 7/31/94** ......... (.57) 13.38 (3.21) 157,637
Year ended 9/30/93 ............. (.43) 14.40 12.52 172,484
Year ended 9/30/92 ............. (.45) 13.20 8.14 143,883
Year ended 9/30/91 ............. (.40) 12.64 25.52 154,230
Year ended 9/30/90 ............. (2.03) 10.41 (13.12) 140,913
Year ended 9/30/89 ............. (1.00) 14.13 22.27 159,290
Year ended 9/30/88 ............. (3.19) 12.53 (1.10) 111,515
Class B
Year ended 7/31/97 ............. $(2.04) $15.83 32.34% $ 24,192
Year ended 7/31/96 ............. (1.79) 13.79 4.45 18,393
Year ended 7/31/95 ............. (.30) 14.88 15.07 15,080
Period ended 7/31/94** ......... (.51) 13.23 (3.80) 14,347
Year ended 9/30/93 ............. (.37) 14.27 11.65 12,789
Year ended 9/30/92 ............. (.39) 13.13 7.32 6,499
2/4/91++ to 9/30/91 ............ (.28) 12.61 8.96 1,830
Class C
Year ended 7/31/97 ............. $(2.04) $15.86 32.37% $ 5,510
Year ended 7/31/96 ............. (1.79) 13.81 4.52 6,096
Year ended 7/31/95 ............. (.30) 14.89 15.06 5,108
Period ended 7/31/94** ......... (.51) 13.24 (3.80) 6,254
5/3/93++ to 9/30/93 ............ (.17) 14.28 6.01 1,487
Income Builder Fund (h)
Class A
Year ended 10/31/97 ............ $(1.12) $12.57 19.36% $ 2,367
Year ended 10/31/96 ............ (.67) 11.57 14.82 2,056
Year ended 10/31/95 ............ (.51) 10.70 16.22 1,398
3/25/94++ to 10/31/94 .......... (.25) 9.69 (.54) 600
Class B
Year ended 10/31/97 ............ $(1.05) $12.53 18.53% $ 8,713
Year ended 10/31/96 ............ (.60) 11.55 13.92 5,775
Year ended 10/31/95 ............ (.44) 10.70 15.55 3,769
3/25/94++ to 10/31/94 .......... (.22) 9.68 (.99) 1,998
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss) Average
To Average To Average Portfolio Commission
Fiscal Year or Period Net Assets Net Assets Turnover Rate Rate (k)
------------------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Global Environment Fund (h)
Class A
Year ended 10/31/97 ............ 2.39% (1.35)% 145% $0.0506
Year ended 10/31/96 ............ 1.60 (.85) 268 0.0313
Year ended 10/31/95 ............ 1.57 .21 109 --
Year ended 10/31/94 ............ 1.67 (.04) 42 --
Year ended 10/31/93 ............ 1.62 .15 25 --
Year ended 10/31/92 ............ 1.63 .10 41 --
Year ended 10/31/91 ............ 1.49 .95 32 --
6/1/90+ to 10/31/90 ............ 1.72* 3.95* 4 --
Class B
10/3/97++ to 10/31/97 .......... 20.84% (1.03)% 145% $0.0506
Strategic Balanced Fund (i)
Class A
Year ended 7/31/97 ............. 1.41%(f)(l) 2.50%(c) 170% $0.0395
Year ended 7/31/96 ............. 1.40(f) 1.78 173 --
Year ended 7/31/95 ............. 1.40(f) 2.07 172 --
Period ended 7/31/94** ......... 1.40(f) 1.63* 21 --
Year ended 4/30/94 ............. 1.40*(f) 1.67 139 --
Year ended 4/30/93 ............. 1.40(f) 2.29 98 --
Year ended 4/30/92 ............. 1.40 1.92 103 --
9/4/90++ to 4/30/91 ............ 1.40* 3.54* 137 --
Class B
Year ended 7/31/97 ............. 2.12%(f)(l) 1.78% 170% $0.0395
Year ended 7/31/96 ............. 2.10(f) .99 173 --
Year ended 7/31/95 ............. 2.10(f) 1.38 172 --
Period ended 7/31/94** ......... 2.10*(f) .92* 21 --
Year ended 4/30/94 ............. 2.10(f) .93 139 --
Year ended 4/30/93 ............. 2.15(f) 1.55 98 --
Year ended 4/30/92 ............. 2.15 1.34 103 --
Year ended 4/30/91 ............. 2.10 3.23 137 --
Year ended 4/30/90 ............. 2.00 3.85 120 --
Year ended 4/30/89 ............. 2.00 4.31 103 --
10/23/87+ to 4/30/88 ........... 2.00* 2.44* 72 --
Class C
Year ended 7/31/97 ............. 2.12%(f)(l) 1.78% 170% $0.0395
Year ended 7/31/96 ............. 2.10(f) .99 173 --
Year ended 7/31/95 ............. 2.10(f) 1.38 172 --
Period ended 7/31/94** ......... 2.10*(f) .93* 21 --
8/2/93++ to 4/30/94 ............ 2.10*(f) .69* 139 --
Balanced Shares
Class A
Year ended 7/31/97 ............. 1.47%(l) 2.11% 207% $0.0552
Year ended 7/31/96 ............. 1.38 2.41 227 --
Year ended 7/31/95 ............. 1.32 3.12 179 --
Period ended 7/31/94** ......... 1.27* 2.50* 116 --
Year ended 9/30/93 ............. 1.35 2.50 188 --
Year ended 9/30/92 ............. 1.40 3.26 204 --
Year ended 9/30/91 ............. 1.44 3.75 70 --
Year ended 9/30/90 ............. 1.36 4.01 169 --
Year ended 9/30/89 ............. 1.42 3.29 132 --
Year ended 9/30/88 ............. 1.42 3.74 190 --
Class B
Year ended 7/31/97 ............. 2.25%(l) 1.32% 207% $0.0552
Year ended 7/31/96 ............. 2.16 1.61 227 --
Year ended 7/31/95 ............. 2.11 2.30 179 --
Period ended 7/31/94** ......... 2.05* 1.73* 116 --
Year ended 9/30/93 ............. 2.13 1.72 188 --
Year ended 9/30/92 ............. 2.16 2.46 204 --
2/4/91++ to 9/30/91 ............ 2.13* 3.19* 70 --
Class C
Year ended 7/31/97 ............. 2.23%(l) 1.37% 207% $0.0552
Year ended 7/31/96 ............. 2.15 1.63 227 --
Year ended 7/31/95 ............. 2.09 2.32 179 --
Period ended 7/31/94** ......... 2.03* 1.81* 116 --
5/3/93++ to 9/30/93 ............ 2.29* 1.47* 188 --
Income Builder Fund (h)
Class A
Year ended 10/31/97 ............ 2.09% 4.18% 159% $0.0513
Year ended 10/31/96 ............ 2.20 4.92 108 0.0600
Year ended 10/31/95 ............ 2.38 5.44 92 --
3/25/94++ to 10/31/94 .......... 2.52* 6.11* 126 --
Class B
Year ended 10/31/97 ............ 2.80% 3.48% 159% $0.0513
Year ended 10/31/96 ............ 2.92 4.19 108 0.0600
Year ended 10/31/95 ............ 3.09 4.73 92 --
3/25/94++ to 10/31/94 .......... 3.09* 5.07* 126 --
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income
------------------- ------------ -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Income Builder Fund (continued)
Class C
Year ended 10/31/97 ............ $11.52 $.42(b) $1.60 $2.02 $(.44)
Year ended 10/31/96 ............ 10.67 .46(b) .99 1.45 (.48)
Year ended 10/31/95 ............ 9.66 .40(b) 1.05 1.45 (.44)
Year ended 10/31/94 ............ 10.47 .50 (.85) (.35) (.11)(g)
Year ended 10/31/93 ............ 9.80 .52 .51 1.03 (.36)
Year ended 10/31/92 ............ 10.00 .55 (.28) .27 (.47)
10/25/91+ to 10/31/91 .......... 10.00 .01 0.00 .01 (.01)
Utility Income Fund
Class A
Year ended 11/30/97 ............ $10.59 $.32(b)(c) $2.04 $2.36 $(.34)
Year ended 11/30/96 ............ 10.22 .18(b)(c) .65 .83 (.46)
Year ended 11/30/95 ............ 8.97 .27(c) 1.43 1 .70 (.45)
Year ended 11/30/94 ............ 9.92 .42(c) (.89) (.47) (.48)
10/18/93+ to 11/30/93 .......... 10.00 .02(c) (.10) (.08) 0.00
Class B
Year ended 11/30/97 ............ $10.57 $.25(b)(c) $2.04 $2.29 $(.27)
Year ended 11/30/96 ............ 10.20 .10(b)(c) .67 .77 (.40)
Year ended 11/30/95 ............ 8.96 .18(c) 1.45 1.63 (.39)
Year ended 11/30/94 ............ 9.91 .37(c) (.91) (.54) (.41)
10/18/93+ 11/30/93 ............. 10.00 .01(c) (.10) (.09) 0.00
Class C
Year ended 11/30/97 ............ $10.59 $.25(b)(c) $2.03 $2.28 $(.27)
Year ended 11/30/96 ............ 10.22 .11(b)(c) .66 .77 (.40)
Year ended 11/30/95 ............ 8.97 .18(c) 1.46 1.64 (.39)
Year ended 11/30/94 ............ 9.92 .39(c) (.93) (.54) (.41)
10/27/93+ to 11/30/93 .......... 10.00 .01(c) (.09) (.08) 0.00
Growth and Income Fund
Class A
Year ended 10/31/97 ............ $3.00 $.04(b) $ .87 $ .91 $(.05)
Year ended 10/31/96 ............ 2.71 .05 .50 .55 (.05)
Year ended 10/31/95 ............ 2.35 .02 .52 .54 (.06)
Year ended 10/31/94 ............ 2.61 .06 (.08) (.02) (.06)
Year ended 10/31/93 ............ 2.48 .06 .29 .35 (.06)
Year ended 10/31/92 ............ 2.52 .06 .11 .17 (.06)
Year ended 10/31/91 ............ 2.28 .07 .56 .63 (.09)
Year ended 10/31/90 ............ 3.02 .09 (.30) (.21) (.10)
Year ended 10/31/89 ............ 3.05 .10 .43 .53 (.08)
Year ended 10/31/88 ............ 3.48 .10 .33 .43 (.08)
Class B
Year ended 10/31/97 ............ $2.99 $.02(b) $ .85 $ .87 $(.03)
Year ended 10/31/96 ............ 2.69 .03 .51 .54 (.03)
Year ended 10/31/95 ............ 2.34 .01 .49 .50 (.03)
Year ended 10/31/94 ............ 2.60 .04 (.08) (.04) (.04)
Year ended 10/31/93 ............ 2.47 .05 .28 .33 (.04)
Year ended 10/31/92 ............ 2.52 .04 .11 .15 (.05)
2/8/91++ to 10/31/91 ........... 2.40 .04 .12 .16 (.04)
Class C
Year ended 10/31/97 ............ $2.99 $.02(b) $ .85 $ .87 $(.03)
Year ended 10/31/96 ............ 2.70 .03 .50 .53 (.03)
Year ended 10/31/95 ............ 2.34 .01 .50 .51 (.03)
Year ended 10/31/94 ............ 2.60 .04 (.08) (.04) (.04)
5/3/93 ++ to 10/31/93 .......... 2.43 .02 .17 .19 (.02)
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 ............ $10.00 $.30(b) $2.88 $3.18 $(.38)(m)
Class B
10/1/96+ to 8/31/97 ............ $10.00 $.23(b) $2.89 $3.12 $(.33)(m)
Class C
10/1/96+ to 8/31/97 ............ $10.00 $.23(b) $2.89 $3.12 $(.33)(m)
<CAPTION>
Distributions
From Net
Fiscal Year or Period Realized Gains
------------------- --------------
<S> <C>
Income Builder Fund (continued)
Class C
Year ended 10/31/97 ............ $(.61)
Year ended 10/31/96 ............ (.12)
Year ended 10/31/95 ............ 0.00
Year ended 10/31/94 ............ (.35)
Year ended 10/31/93 ............ 0.00
Year ended 10/31/92 ............ 0.00
10/25/91+ to 10/31/91 .......... 0.00
Utility Income Fund
Class A
Year ended 11/30/97 ............ $(.13)
Year ended 11/30/96 ............ 0.00
Year ended 11/30/95 ............ 0.00
Year ended 11/30/94 ............ 0.00
10/18/93+ to 11/30/93 .......... 0.00
Class B
Year ended 11/30/97 ............ $(.13)
Year ended 11/30/96 ............ 0.00
Year ended 11/30/95 ............ 0.00
Year ended 11/30/94 ............ 0.00
10/18/93+ 11/30/93 ............. 0.00
Class C
Year ended 11/30/97 ............ $(.13)
Year ended 11/30/96 ............ 0.00
Year ended 11/30/95 ............ 0.00
Year ended 11/30/94 ............ 0.00
10/27/93+ to 11/30/93 .......... 0.00
Growth and Income Fund
Class A
Year ended 10/31/97 ............ $(.38)
Year ended 10/31/96 ............ (.21)
Year ended 10/31/95 ............ (.12)
Year ended 10/31/94 ............ (.18)
Year ended 10/31/93 ............ (.16)
Year ended 10/31/92 ............ (.15)
Year ended 10/31/91 ............ (.30)
Year ended 10/31/90 ............ (.43)
Year ended 10/31/89 ............ (.48)
Year ended 10/31/88 ............ (.78)
Class B
Year ended 10/31/97 ............ $(.38)
Year ended 10/31/96 ............ (.21)
Year ended 10/31/95 ............ (.12)
Year ended 10/31/94 ............ (.18)
Year ended 10/31/93 ............ (.16)
Year ended 10/31/92 ............ (.15)
2/8/91++ to 10/31/91 ........... 0.00
Class C
Year ended 10/31/97 ............ $(.38)
Year ended 10/31/96 ............ (.21)
Year ended 10/31/95 ............ (.12)
Year ended 10/31/94 ............ (.18)
5/3/93 ++ to 10/31/93 .......... 0.00
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 ............ $0.00
Class B
10/1/96+ to 8/31/97 ............ $0.00
Class C
10/1/96+ to 8/31/97 ............ $0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
16
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Dividends Value Return Based Period
And End Of on Net Asset (000's
Fiscal Year or Period Distributions Period Value (a) omitted)
------------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Income Builder Fund (continued)
Class C
Year ended 10/31/97 ............ $(1.05) $12.49 18.50% $ 45,765
Year ended 10/31/96 ............ (.60) 11.52 13.96 44,441
Year ended 10/31/95 ............ (.44) 10.67 15.47 49,107
Year ended 10/31/94 ............ (.46) 9.66 (3.44) 64,027
Year ended 10/31/93 ............ (.36) 10.47 10.65 106,034
Year ended 10/31/92 ............ (.47) 9.80 2.70 152,617
10/25/91+ to 10/31/91 .......... (.01) 10.00 .11 41,813
Utility Income Fund
Class A
Year ended 11/30/97 ............ $(.47) $12.48 23.10% $ 4,117
Year ended 11/30/96 ............ (.46) 10.59 8.47 3,294
Year ended 11/30/95 ............ (.45) 10.22 19.58 2,748
Year ended 11/30/94 ............ (.48) 8.97 (4.86) 1,068
10/18/93+ to 11/30/93 .......... 0.00 9.92 (.80) 229
Class B
Year ended 11/30/97 ............ $(.40) $12.46 22.35% $ 14,782
Year ended 11/30/96 ............ (.40) 10.57 7.82 13,561
Year ended 11/30/95 ............ (.39) 10.20 18.66 10,988
Year ended 11/30/94 ............ (.41) 8.96 (5.59) 2,353
10/18/93+ 11/30/93 ............. 0.00 9.91 (.90) 244
Class C
Year ended 11/30/97 ............ $(.40) $12.47 22.21% $ 3,413
Year ended 11/30/96 ............ (.40) 10.59 7.81 3,376
Year ended 11/30/95 ............ (.39) 10.22 18.76 3,500
Year ended 11/30/94 ............ (.41) 8.97 (5.58) 2,651
10/27/93+ to 11/30/93 .......... 0.00 9.92 (.80) 18
Growth and Income Fund
Class A
Year ended 10/31/97 ............ $(.43) $3.48 33.28% $ 787,566
Year ended 10/31/96 ............ (.26) 3.00 21.51 553,151
Year ended 10/31/95 ............ (.18) 2.71 24.21 458,158
Year ended 10/31/94 ............ (.24) 2.35 (.67) 414,386
Year ended 10/31/93 ............ (.22) 2.61 14.98 459,372
Year ended 10/31/92 ............ (.21) 2.48 7.23 417,018
Year ended 10/31/91 ............ (.39) 2.52 31.03 409,597
Year ended 10/31/90 ............ (.53) 2.28 (8.55) 314,670
Year ended 10/31/89 ............ (.56) 3.02 21.59 377,168
Year ended 10/31/88 ............ (.86) 3.05 16.45 350,510
Class B
Year ended 10/31/97 ............ $(.41) $3.45 31.83% $ 456,399
Year ended 10/31/96 ............ (.24) 2.99 21.20 235,263
Year ended 10/31/95 ............ (.15) 2.69 22.84 136,758
Year ended 10/31/94 ............ (.22) 2.34 (1.50) 102,546
Year ended 10/31/93 ............ (.20) 2.60 14.22 76,633
Year ended 10/31/92 ............ (.20) 2.47 6.22 29,656
2/8/91++ to 10/31/91 ........... (.04) 2.52 6.83 10,221
Class C
Year ended 10/31/97 ............ $(.41) $3.45 31.83% $ 106,526
Year ended 10/31/96 ............ (.24) 2.99 20.72 61,356
Year ended 10/31/95 ............ (.15) 2.70 23.30 35,835
Year ended 10/31/94 ............ (.22) 2.34 (1.50) 19,395
5/3/93 ++ to 10/31/93 .......... (.02) 2.60 7.85 7,774
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 ............ $(.38) $12.80 32.24% $ 37,638
Class B
10/1/96+ to 8/31/97 ............ $(.33) $12.79 31.49% $ 186,802
Class C
10/1/96+ to 8/31/97 ............ $(.33) $12.79 31.49% $ 42,719
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss) Average
To Average To Average Portfolio Commission
Fiscal Year or Period Net Assets Net Assets Turnover Rate Rate (k)
------------------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Income Builder Fund (continued)
Class C
Year ended 10/31/97 ............ 2.80% 3.49% 159% $0.0513
Year ended 10/31/96 ............ 2.93 4.13 108 0.0600
Year ended 10/31/95 ............ 3.02 4.81 92 --
Year ended 10/31/94 ............ 2.67 3.82 126 --
Year ended 10/31/93 ............ 2.32 6.85 101 --
Year ended 10/31/92 ............ 2.33 5.47 108 --
10/25/91+ to 10/31/91 .......... 0.00* .94* 0 --
Utility Income Fund
Class A
Year ended 11/30/97 ............ 1.50%(f) 2.89% 37% $0.0442
Year ended 11/30/96 ............ 1.50(f) 1.67 98 0.0536
Year ended 11/30/95 ............ 1.50(f) 2.48 162 --
Year ended 11/30/94 ............ 1.50(f) 4.13 30 --
10/18/93+ to 11/30/93 .......... 1.50*(f) 2.35* 11 --
Class B
Year ended 11/30/97 ............ 2.20%(f) 2.27% 37% $0.0442
Year ended 11/30/96 ............ 2.20(f) .95 98 0.0536
Year ended 11/30/95 ............ 2.20(f) 1.60 162 --
Year ended 11/30/94 ............ 2.20(f) 3.53 30 --
10/18/93+ 11/30/93 ............. 2.20*(f) 2.84* 11 --
Class C
Year ended 11/30/97 ............ 2.20%(f) 2.27% 37% $0.0442
Year ended 11/30/96 ............ 2.20(f) .94 98 0.0536
Year ended 11/30/95 ............ 2.20(f) 1.88 162 --
Year ended 11/30/94 ............ 2.20(f) 3.60 30 --
10/27/93+ to 11/30/93 .......... 2.20*(f) 3.08* 11 --
Growth and Income Fund
Class A
Year ended 10/31/97 ............ .92%(l) 1.39%* 88% $0.0589
Year ended 10/31/96 ............ .97 1.73 88 0.0625
Year ended 10/31/95 ............ 1.05 1.88 142 --
Year ended 10/31/94 ............ 1.03 2.36 68 --
Year ended 10/31/93 ............ 1.07 2.38 91 --
Year ended 10/31/92 ............ 1.09 2.63 104 --
Year ended 10/31/91 ............ 1.14 2.74 84 --
Year ended 10/31/90 ............ 1.09 3.40 76 --
Year ended 10/31/89 ............ 1.08 3.49 79 --
Year ended 10/31/88 ............ 1.09 3.09 66 --
Class B
Year ended 10/31/97 ............ 1.72%(l) .56% 88% $0.0589
Year ended 10/31/96 ............ 1.78 .91 88 0.0625
Year ended 10/31/95 ............ 1.86 1.05 142 --
Year ended 10/31/94 ............ 1.85 1.56 68 --
Year ended 10/31/93 ............ 1.90 1.58 91 --
Year ended 10/31/92 ............ 1.90 1.69 104 --
2/8/91++ to 10/31/91 ........... 1.99* 1.67* 84 --
Class C
Year ended 10/31/97 ............ 1.71%(l) .58% 88% $0.0589
Year ended 10/31/96 ............ 1.76 .93 88 0.0625
Year ended 10/31/95 ............ 1.84 1.04 142 --
Year ended 10/31/94 ............ 1.84 1.61 68 --
5/3/93 ++ to 10/31/93 .......... 1.96* 1.45* 91 --
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 ............ 1.77%*(l) 2.73%* 20% $0.0518
Class B
10/1/96+ to 8/31/97 ............ 2.44%*(l) 2.08%* 20% $0.0518
Class C
10/1/96+ to 8/31/97 ............ 2.43%*(l) 2.06%* 20% $0.0518
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
- ----------
+ Commencement of operations.
++ Commencement of distribution.
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment returns calculated for periods of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and expense reimbursement.
(d) Adjusted for a 200% stock dividend paid to shareholders of record on
January 15, 1988.
(e) Net of offering costs of ($.05).
(f) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, without giving effect to the expense offset arrangement
described in (l) below, would have been as follows:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
All-Asia Investment Fund
<S> <C> <C> <C> <C> <C>
Class A -- -- 10.57%# 3.61% 3.57%
Class B -- -- 11.32%# 4.33% 4.27%
Class C -- -- 11.38%# 4.30% 4.27%
Growth Fund
Class A 1.84% 1.46% -- -- --
Class B 2.52% 2.13% -- -- --
Class C -- 2.13%# --
Global Small Cap Fund
Class A -- -- 2.61% -- --
Class B -- -- 3.27% -- --
Class C -- -- 3.31% -- --
Strategic Balanced Fund
Class A 1.85% 1.70%1 1.81% 1.76% 2.06%
1.94%#2
Class B 2.56% 2.42%1 2.49% 2.47% 2.76%
2.64%#2
Class C -- 2.07%#1 2.50% 2.48% 2.76%
2.64%#2
Utility Income Fund
Class A 145.63%# 13.72% 4.86%# 3.38% 3.55%
Class B 133.62%# 14.42% 5.34%# 4.08% 4.28%
Class C 148.03%# 14.42% 5.99%# 4.07% 4.28%
</TABLE>
- ----------
# annualized
1. For the period ended April 30, 1994
2. For the period ended July 31, 1994
For the expense ratios of the Funds in years prior to fiscal year 1993, assuming
the Funds had borne all expenses, please see the Financial Statements in each
Fund's Statement of Additional Information.
(g) "Dividends from Net Investment Income" includes a return of capital. Income
Builder Fund had a return of capital with respect to Class A shares, for
the period ended October 31, 1994, of $(.01); with respect to Class B
shares, $(.01); and with respect to Class C shares, for the year ended
October 31, 1994, $(.02).
(h) On March 25, 1994, all existing shares of Income Builder Fund, previously
known as Alliance Multi-Market Income and Growth Trust, were converted into
Class C shares.
(i) Prior to July 22, 1993, Equitable Capital Management Corporation
("Equitable Capital") served as the investment adviser to the predecessor
to The Alliance Portfolios, of which Growth Fund and Strategic Balanced
Fund are series. On July 22, 1993, Alliance acquired the business and
substantially all assets of Equitable Capital and became investment adviser
to the Funds.
(j) "Distributions from Net Realized Gains" includes a return of capital of
$(.12).
(k) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
(l) Amounts do not reflect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offset arrangements, the
ratio of expenses to average net assets, assumng the assumption and/or
waiver/reimbursement of expenses described in (f) above, would have been as
follows:
<TABLE>
<CAPTION>
Balanced Shares 1997 International Fund 1997 Strategic Balanced 1997
<S> <C> <C> <C> <C> <C>
Class A 1.46% Class A 1.73% Class A 1.40%
Class B 2.24% Class B 2.58% Class B 2.10%
Class C 2.22% Class C 2.56% Class C 2.10%
Real Estate 1997 Global Small Cap Fund 1997 New Europe 1997
Class A 1.77% Class A 2.38% Class A 2.04%
Class B 2.43% Class B 3.08% Class B 2.74%
Class C 2.42% Class C 3.08% Class C 2.73%
Growth Fund 1997 Technology 1997 Growth and Income 1997
Class A 1.25% Class A 1.66% Class A .91%
Class B 1.95% Class B 2.36% Class B 1.71%
Class C 1.95% Class C 2.37% Class C 1.70%
(m) Distributions from net investment income include a tax return of capital of
$.08, $.09 and $.08 for Class A, B and C shares, respectively.
(n) Global Environment Fund operated as a closed-end investment company
through October 3, 1997, when it converted to an open-end investment
company and all shares of its common stock then outstanding were
reclassified as Class A shares.
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus.
Equity securities, except as noted otherwise, are (i) common stocks, partnership
interests, business trust shares and other equity or ownership interests in
business enterprises, and (ii) securities convertible into, and rights and
warrants to subscribe for the purchase of, such stocks, shares and
interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Eligible Companies are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
Environmental Companies are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
Beneficiary Companies are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and healthier
environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous waste.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Exchange is the New York Stock Exchange.
19
<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 bonds. See "Risk Considerations--Securities
Ratings" and "--Investment in Lower-Rated Fixed-Income Securities." The Fund
generally will not invest in securities rated at the time of purchase below Caa-
by Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. If the credit rating of a
security held by the Fund falls below its rating at the time of purchase (or
Alliance determines that the quality of such security has so deteriorated), the
Fund may continue to hold the security if such investment is considered
appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements of up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40 companies will be represented in the Fund's
portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity securities of which are traded principally in the U.S.
20
<PAGE>
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more than
600 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options; (ii)
invest up to 10% of its total assets in warrants; (iii) invest in restricted
securities and in other assets having no ready market if as a result no more
than 10% of the Fund's net assets are invested in such securities and assets;
(iv) lend portfolio securities equal in value to not more than 30% of the Fund's
total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities,
Alliance considers the economic and political outlook, the values of specific
securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
21
<PAGE>
The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10% of its total assets may be
invested in such securities or assets; (ii) make short sales of securities
"against the box," but not more than 15% of its net assets may be deposited on
short sales; and (iii) write call options and purchase and sell put and call
options written by others. For additional information on the use, risks and
costs of these policies and practices see "Additional Investment Practices."
GLOBAL STOCK FUNDS
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. In this
regard, at December 31, 1997, approximately 20% of the Fund's assets were
invested in securities of Japanese issuers. The Fund may invest in companies,
wherever organized, that Alliance judges have their principal activities and
interests outside the U.S. These companies may be located in developing
countries, which involves exposure to economic structures that are generally
less diverse and mature, and to political systems which can be expected to have
less stability, than those of developed countries. The Fund currently does not
intend to invest more than 10% of its total assets in companies in, or
governments of, developing countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or
over-the-counter; (v) lend portfolio securities equal in value to not more than
30% of its total assets; and (vi) enter into repurchase agreements of up to
seven days' duration, provided that not more than 10% of the Fund's total assets
would be so invested. For additional information on the use, risks and costs of
these policies and practices see "Additional Investment Practices."
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government-or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy, and the
Fund will thus emphasize investments in such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through
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privatization a government or state divests or transfers all or a portion of its
interest in a state enterprise to some form of private ownership. Governments
and states with established economies, including France, Great Britain, Germany
and Italy, and those with developing economies, including Argentina, Mexico,
Chile, Indonesia, Malaysia, Poland and Hungary, are engaged in privatizations.
The Fund will invest in any country believed to present attractive investment
opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its investments in
any industry, it is permitted to invest more than 25% of its total assets in
issuers whose primary business activity is that of national commercial banking.
Prior to so concentrating, however, the Fund's Directors must determine that its
ability to achieve its investment objective would be adversely affected if it
were not permitted to concentrate. The staff of the Commission is of the view
that registered investment companies may not, absent shareholder approval,
change between concentration and non-concentration in a single industry. The
Fund disagrees with the staff's position but has undertaken that it will not
concentrate in the securities of national commercial banks until, if ever, the
issue is resolved. If the Fund were to invest more than 25% of its total assets
in national commercial banks, the Fund's performance could be significantly
influenced by events or conditions affecting this industry, which is subject to,
among other things, increases in interest rates and deteriorations in general
economic conditions, and the Fund's investments may be subject to greater risk
and market fluctuation than if its portfolio represented a broader range of
investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations--Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain
a non-convertible security that is downgraded below C or determined by Alliance
to have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter in forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund will invest in companies that Alliance
believes possess rapid growth potential. Thus, the Fund will emphasize
investments in larger, established companies, but will also invest in smaller,
emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although the Fund will not invest more than 20% of its total assets in
issuers based therein, or more than 10% of its total assets in issuers based in
any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest
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without limit in a single European country. While the Fund does not intend to
concentrate its investments in a single country, at times 25% or more of its
assets may be invested in issuers located in a single country. During such
times, the Fund would be subject to a correspondingly greater risk of loss due
to adverse political or regulatory developments, or an economic downturn, within
that country. In this regard, at December 31, 1997, approximately 24% of the
Fund's assets were invested in securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a
non-diversified investment company whose investment objective is to seek
long-term capital appreciation. In seeking to achieve its investment objective,
the Fund will invest at least 65% of its total assets in equity securities (for
the purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, but less than 50%, of its
assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and India have recently relaxed investment
restrictions and Vietnamese direct investments have recently become available to
U.S. investors. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings," "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of Additional Information for
a description of such ratings. The Fund will not retain a security that is
downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in
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the currency of any country, securities of multinational companies and
"semi-governmental securities;" (iv) invest up to 25% of its net assets in
equity-linked debt securities with the objective of realizing capital
appreciation; (v) invest up to 25% of its net assets in loans and other direct
debt instruments; (vi) write covered put and call options on securities of the
types in which it is permitted to invest and on exchange-traded index options;
(vii) enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, securities issued by
foreign government entities, or common stock and may purchase and write options
on future contracts; (viii) purchase and write put and call options on foreign
currencies for hedging purposes; (ix) purchase or sell forward contracts; (x)
enter into interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements; (xiii) enter into
currency swaps for hedging purposes; (xiv) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make short sales of
securities or maintain a short position, in each case only if "against the box;"
and (xvi) make secured loans of its portfolio securities not in excess of 30% of
its total assets to entities with which it can enter into repurchase agreements.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1.5 billion. Because
the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization issuers, and these issuers are located in at least
three countries, one of which may be the U.S. Up to 35% of the Fund's total
assets may be invested in securities of companies whose market capitalizations
exceed the Fund's size standard. The Fund's portfolio securities may be listed
on a U.S. or foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Alliance Global Environment Fund
Alliance Global Environment Fund, Inc. ("Global Environment Fund") is a
non-diversified investment company that seeks long-term capital appreciation
through investment in equity securities of Eligible Companies. For purposes of
the Fund's investment objective and investment policies, "equity securities" are
common stocks (but not preferred stocks), rights or warrants to subscribe for or
purchase common stocks, and preferred stocks or debt securities that are
convertible into common stocks without the payment of any further consideration.
Until October 3, 1997, the Fund operated as a closed-end investment company, and
its common stock (which then comprised a single class) was listed on the
Exchange.
The Fund invests in two categories of Eligible Companies--"Environmental
Companies" and "Beneficiary Companies." Environmental Companies are those that
have a principal business involving the sale of systems or services intended to
foster environmental protection, such as waste treatment and disposal,
remediation, air pollution control and recyclying. Under normal circumstances,
the Fund invests at least 65% of its total assets in equity securities of
Environmental Companies. Beneficiary Companies are those whose principal
businesses lie outside the environmental sector but nevertheless anticipate
environmental regulations or consumer preferences through the development of new
products, processes or services that are intended to contribute to a cleaner and
healthier environment. Examples of such companies could be companies that
anticipate the demand for plastic substitutes, aerosol substitutes, alternative
fuels and processes that generate less hazardous waste. In this regard,
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the Fund may invest in an issuer with a broadly diversified business only a part
of which provides such products, processes or services, when Alliance believes
that these products, processes or services will yield a competitive advantage
that significantly enhances the issuer's growth prospects. As a matter of
fundamental policy, the Fund will, under normal circumstances, invest
substantially all of its total assets in equity securities of Eligible
Companies.
A major premise of the Fund's investment approach is that environmental concerns
will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous waste treatment and disposal,
pulp and paper recycling, waste-to-energy alternatives, biodegradable cartons,
packages, plastics and other products, remedial projects and emergency cleanup
efforts, manufacture of environmental supplies and equipment, the achievement of
purer air, groundwater and foods and the detection, evaluation and treatment of
both existing and potential environmental problems including, among others, air
pollution and acid rain.
The environmental services industry is generally positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded substantial
opportunities for growth. Beneficiary Companies may also derive an advantage to
the extent that they have anticipated environmental regulation and are therefore
at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena that are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies which protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund spreads investment risk among the capital markets
of a number of countries and invests in equity securities of companies based in
at least three, and normally considerably more, such countries. The percentage
of the Fund's assets invested in securities of companies in a particular country
or denominated in a particular currency will vary in accordance with Alliance's
assessment of the appreciation potential of such securities and the strength of
that currency. As of December 31, 1997, approximately 86% of the Fund's net
assets were invested in equity securities of U.S. companies.
The Fund may also: (i) invest up to 20% of its total assets in warrants to
purchase equity securities to the extent consistent with its investment
objective: (ii) invest in depositary receipts; (iii) purchase and write put and
call options on foreign currencies for hedging purposes; (iv) enter into forward
foreign currency transactions for hedging purposes; (v) invest in currency
futures and options on such futures for hedging purposes; and (vi) make secured
loans of its portfolio securities not in excess of 30% of its total assets. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
TOTAL RETURN FUNDS
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current income.
Alliance Strategic Balanced Fund
Alliance Strategic Balanced Fund ("Strategic Balanced Fund") is a diversified
investment company that seeks a high long-term total return by investing in a
combination of equity and debt securities. The portion of the Fund's assets
invested in each type of security varies in accordance with economic conditions,
the general level of common stock prices, interest rates and other relevant
considerations, including the risks associated with each investment medium. The
Fund's investment objective is not fundamental.
The Fund's equity securities will generally consist of dividend-paying common
stocks and other equity securities of companies with favorable earnings outlooks
and long-term growth rates that Alliance expects will exceed that of the U.S.
economy. The Fund's debt securities may include U.S. Government securities and
securities issued by private corporations. The Fund may also invest in
mortgage-backed securities, adjustable rate securities, asset-backed securities
and so-called "zero-coupon" bonds and "payment-in-kind" bonds.
As a fundamental policy, the Fund will invest at least 25% of its total assets
in fixed-income securities, which for this purpose include debt securities,
preferred stocks and that portion of the value of convertible securities that is
attributable to the fixed-income characteristics of those securities.
The Fund's debt securities will generally be of investment grade. See "Risk
Considerations--Securities Ratings" and "Investment in Lower-Rated Fixed-Income
Securities." In the event that the rating of any debt securities held by the
Fund falls below investment grade, the Fund will not be obligated to dispose of
such obligations and may continue to hold them if considered appropriate under
the circumstances.
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The Fund may also: (i) invest in foreign securities, although the Fund will not
generally invest more than 15% of its total assets in foreign securities; (ii)
invest, without regard to this 15% limit, in Eurodollar CDs, which are
dollar-denominated certificates of deposit issued by foreign branches of U.S.
banks that are not insured by any agency or instrumentality of the U.S.
Government; (iii) write covered call and put options on securities it owns or in
which it may invest; (iv) buy and sell put and call options and buy and sell
combinations of put and call options on the same underlying securities; (v) lend
portfolio securities amounting to not more than 25% of its total assets; (vi)
enter into repurchase agreements on up to 25% of its total assets; (vii)
purchase and sell securities on a forward commitment basis; (viii) buy or sell
foreign currencies, options on foreign currencies, foreign currency futures
contracts (and related options) and deal in forward foreign exchange contracts;
(ix) buy and sell stock index futures contracts and buy and sell options on
those contracts and on stock indices; (x) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; and (xi)
invest in securities that are not publicly traded, including Rule 144A
securities. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds, senior debt
securities and preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market outlooks. The Fund
may invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above. See "Risk Considerations--Foreign Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Income Builder Fund
Alliance Income Builder Fund, Inc. ("Income Builder Fund") is a non-diversified
investment company that seeks an attractive level of current income and
long-term growth of income and capital by investing principally in fixed-income
securities and dividend-paying common stocks. Its investments in equity
securities emphasize common stocks of companies with a historical or projected
pattern of paying rising dividends. Normally, at least 65% of the Fund's total
assets are invested in income-producing securities. The Fund may vary the
percentage of assets invested in any one type of security based upon Alliance's
evaluation as to the appropriate portfolio structure for achieving the Fund's
investment objective, although Alliance currently maintains approximately 60% of
the Fund's net assets in fixed-income securities and 40% in equity securities.
The Fund may invest in fixed-income securities of domestic and foreign issuers,
including U.S. Government securities and repurchase agreements pertaining
thereto, corporate fixed-income securities of U.S. issuers, qualifying bank
deposits and prime commercial paper.
The Fund may maintain up to 35% of its net assets in lower-rated securities. See
"Risk Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a non-convertible security
that is downgraded below CCC or determined by Alliance to have undergone similar
credit quality deterioration following purchase.
Foreign securities in which the Fund invests may include fixed-income securities
of foreign corporate and governmental issuers, denominated in U.S. Dollars, and
equity securities of foreign corporate issuers, denominated in foreign
currencies or in U.S. Dollars. The Fund will not invest more than 10% of its net
assets in equity securities of foreign issuers nor more than 15% of its total
assets in issuers of any one foreign country. See "Risk Considerations--Foreign
Investment."
The Fund may also: (i) invest up to 5% of its net assets in rights or warrants;
(ii) invest in depositary receipts and U.S. Dollar denominated securities issued
by supranational entities; (iii) write covered put and call options and purchase
put and call options on securities of the types in which it is permitted to
invest that are exchange-traded; (iv) purchase and sell exchange-traded options
on any securities index composed of the types of securities in which it may
invest; (v) enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, foreign government
securities, corporate fixed income securities, or common stock, and purchase and
write options on future contracts; (vi) purchase and write put and call options
on foreign currencies and enter into forward contracts for hedging purposes;
(vii) enter into interest rate swaps and purchase or sell interest rate caps and
floors; (viii) enter into forward commitments for the purchase or sale of
securities; (ix) enter into standby commitment agreements;
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(x) enter into repurchase agreements pertaining to U.S. Government securities
with member banks of the Federal Reserve System or primary dealers in such
securities; (xi) make short sales of securities or maintain a short position as
described below under "Additional Investment Policies and Practices--Short
Sales;" and (xii) make secured loans of its portfolio securities not in excess
of 20% of its total assets to brokers, dealers and financial institutions. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. The Fund may invest in securities of both U.S. and foreign
issuers, although no more than 15% of the Fund's total assets will be invested
in issuers in any one foreign country. The utilities industry consists of
companies engaged in (i) the manufacture, production, generation, provision,
transmission, sale and distribution of gas and electric energy, and
communications equipment and services, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities for
the public, or (ii) the provision of other utility or utility-related goods and
services, including, but not limited to, entities engaged in water provision,
cogeneration, waste disposal system provision, solid waste electric generation,
independent power producers and non-utility generators. The Fund is designed to
take advantage of the characteristics and historical performance of securities
of utility companies, many of which pay regular dividends and increase their
common stock dividends over time. As a fundamental policy, the Fund normally
invests at least 65% of its total assets in securities of companies in the
utilities industry. The Fund considers a company to be in the utilities industry
if, during the most recent twelve-month period, at least 50% of the company's
gross revenues, on a consolidated basis, were derived from its utilities
activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a security that is downgraded
below B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition and regulatory
changes. There can also be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval for
rate increases. In addition, because many foreign utility companies use fuels
that cause more pollution than those used in the U.S., such utilities may yet be
required to invest in pollution control equipment. Foreign utility regulatory
systems vary from country to country and may
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evolve in ways different from regulation in the U.S. The percentage of the
Fund's assets invested in issuers of particular countries will vary. See "Risk
Considerations--Foreign Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate
fixed-income securities of domestic issuers, corporate fixed-income securities
of foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter in forward commitments for the purchase
or sale of securities; (xi) enter into standby commitment agreements; (xii)
enter into repurchase agreements pertaining to U.S. Government securities with
member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices--Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund has restricted its investments in securities in this category to
issues of high quality. The Fund may also purchase and sell financial forward
and futures contracts and options thereon for hedging purposes. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund, Inc. ("Real Estate Investment Fund") is a
diversified investment company that seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of real estate investment trusts ("REITs") and
other real estate industry companies. A "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or interests therein. The
equity securities in which the Fund will invest for this purpose consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock or convertible securities ("Real
Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These instruments are
described below. The risks associated with the Fund's transactions in REMICs,
CMOs and other types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk. See "Risk Considerations" for a description of these and other
risks.
As to any investment in Real Estate Equity Securities, Alliance's analysis will
focus on determining the degree to which the company involved can achieve
sustainable growth in cash flow and dividend paying capability. Alliance
believes that the primary determinant of this capability is the economic
viability of property markets in which the company operates and that the
secondary determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will purchase
Real Estate Equity Securities when, in the judgment of Alliance, their market
price does not adequately reflect this potential. In making this
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determination, Alliance will take into account fundamental trends in underlying
property markets as determined by proprietary models, site visits conducted by
individuals knowledgeable in local real estate markets, price-earnings ratios
(as defined for real estate companies), cash flow growth and stability, the
relationship between asset value and market price of the securities, dividend
payment history, and such other factors which Alliance may determine from time
to time to be relevant. Alliance will attempt to purchase for the Fund Real
Estate Equity Securities of companies whose underlying portfolios are
diversified geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
Investment Process for Real Estate Equity Securities. The Fund's investment
strategy with respect to Real Estate Equity Securities is based on the premise
that property market fundamentals are the primary determinant of growth
underlying the performance of Real Estate Equity Securities. Value added
management further distinguishes the most attractive Real Estate Equity
Securities. The Fund's research and investment process is designed to identify
those companies with strong property fundamentals and strong management teams.
This process is comprised of real estate market research, specific property
inspection and securities analysis. Alliance believes that this process will
result in a portfolio that will consist of Real Estate Equity Securities of
companies that own assets in the most desirable markets across the country,
diversified geographically and by property type.
In implementing the Fund's research and investment process, Alliance will avail
itself of the consulting services of CB Commercial Real Estate Group, Inc.
("CBC"), a publicly held company and the largest real estate services company in
the United States, comprised of real estate brokerage, property and facilities
management, and real estate finance and investment advisory activities (CBC in
August of 1997 acquired Koll Management Services ("Koll"), which previously
provided these consulting services to Alliance). In 1996, CBC (and Koll, on a
combined basis) completed 25,000 sale and lease transactions, managed over 4,100
client properties, created over $3.5 billion in mortgage originations, and
completed over 2,600 appraisal and consulting assignments. In addition, they
advised and managed for institutions over $4 billion in real estate investments.
As consultant to Alliance, CBC provides access to its proprietary model, REIT o
Score, that analyzes the approximately 12,000 properties owned by these 130
companies. Using proprietary databases and algorithms, CBC analyzes local market
rent, expense, and occupancy trends, market specific transaction pricing,
demographic and economic trends, and leading indicators of real estate supply
such as building permits. Over 650 asset-type specific geographic markets are
analyzed and ranked on a relative scale by CBC in compiling its REIT o Score
database. The relative attractiveness of these real estate industry companies is
similarly ranked based on the composite rankings of the properties they own. See
"Management of the Funds--Consultant to Adviser" for more information about CBC.
The universe of property-owning real estate industry firms consists of
approximately 130 companies of sufficient size and quality to merit
consideration for investment by the Fund. Once the universe of real estate
industry companies has been distilled through the market research process, CBC's
local market presence provides the capability to perform site specific
inspections of key properties. This analysis examines specific location,
condition, and sub-market trends. CBC's use of locally based real estate
professionals provides Alliance with a window on the operations of the portfolio
companies as information can immediately be put in the context of local market
events. Only those companies whose specific property portfolios reflect the
promise of their general markets will be considered for initial and continued
investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance will make extensive use of CBC's
network of industry analysts in order to assess trends in tenant industries.
This information is then used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
The short-term investments in which Real Estate Investment Fund may invest are:
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not so rated, of
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equivalent credit quality as determined by Alliance. The Fund expects that it
will not retain a debt security which is downgraded below BBB or Baa or, if
unrated, determined by Alliance to have undergone similar credit quality
deterioration, subsequent to purchase by the Fund.
The Fund may also engage in the following investment practices to the extent
indicated: (i) invest up to 10% of its net assets in rights or warrants; (ii)
invest up to 15% of its net assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund; (iii) lend portfolio
securities equal in value to not more than 25% of total assets; (iv) enter into
repurchase agreements of up to seven days' duration; (v) enter into forward
commitment transactions as long as the Fund's aggregate commitments under such
transactions are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of securities or maintain
a short position but only if at all times when a short position is open not more
than 25% of the Fund's net assets (taken at market value) is held as collateral
for such sales; and (viii) invest in illiquid securities unless, as a result,
more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which generally
provide a stable stream of income with yields that are generally higher than
those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying stock, although the higher yield tends to make the convertible
security less volatile than the underlying common stock. As with debt
securities, the market value of convertible securities tends to decrease as
interest rates rise and increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock. Convertible debt securities that are rated Baa or lower by Moody's or BBB
or lower by S&P, Duff & Phelps or Fitch and comparable unrated securities as
determined by Alliance may share some or all of the risks of non-convertible
debt securities with those ratings. For a description of these risks, see "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities."
Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to buy
equity securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination thereof. If the
market price of the underlying security is below the exercise price set forth in
the warrant on the expiration date, the warrant will expire worthless. Moreover,
a right or warrant ceases to have value if it is not exercised prior to the
expiration date.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by a U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities except with respect to Growth Fund, Strategic Balanced
Fund and Income Builder Fund, where investments in ADRs are deemed to be
investments in securities issued by U.S. issuers and those in GDRs and other
types of depositary receipts are deemed to be investments in the underlying
securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the securities. As a result of the pass-through of
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prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity would indicate. Prepayments occur when the mortgagor on a
mortgage prepays the remaining principal before the mortgage's scheduled
maturity date. Because the prepayment characteristics of the underlying
mortgages vary, it is impossible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayments are
important because of their effect on the yield and price of the mortgage-backed
securities. During periods of declining interest rates, prepayments can be
expected to accelerate and a Fund investing in such securities would be required
to reinvest the proceeds at the lower interest rates then available. Conversely,
during periods of rising interest rates, a reduction in prepayments may increase
the effective maturity of the securities, subjecting them to a greater risk of
decline in market value in response to rising interest rates. In addition,
prepayments of mortgages underlying securities purchased at a premium could
result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Some adjustable rate securities are backed by
pools of mortgage loans. Although the rate-adjustment feature may reduce sharp
changes in the value of adjustable rate securities, these securities can change
in value based on changes in market interest rates or the issuer's
creditworthiness. Changes in the interest rate on adjustable rate securities may
lag behind changes in prevailing market interest rates. Also, some adjustable
rate securities (or the underlying mortgages) are subject to caps or floors that
limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt securities, the
values of equity-linked debt securities will generally vary inversely with
changes in interest rates. The Fund's ability to dispose of equity-linked debt
securities will depend on the availability of liquid markets for such
securities. Investment in equity-linked debt securities may be considered to be
speculative. As with other securities, the Fund could lose its entire investment
in equity-linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to the Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate the
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If the Fund does not receive scheduled interest or principal payments
on such indebtedness, the Fund's share price and yield could be adversely
affected. Loans that are fully secured offer the
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Fund more protection than unsecured loans in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral can be liquidated. Indebtedness of borrowers
whose creditworthiness is poor may involve substantial risks, and may be highly
speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries will also involve a risk that the governmental
entities responsible for the repayment of the debt may be unable, or unwilling,
to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of the Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
the Fund to pay additional cash on demand. These commitments may have the effect
of requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Mortgage-Backed Securities and Associated Risks. Mortgage-Backed Securities
include mortgage pass-through certificates and multiple-class pass-through
securities, such as REMIC pass-through certificates, CMOs and stripped
mortgage-backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate Investment Fund may
invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private lenders. CMOs and
REMIC certificates are issued in multiple classes and the principal of and
interest on the mortgage assets may be allocated among the several classes of
CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC
certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Generally, interest is paid or accrues on all classes
of CMOs or REMIC certificates on a monthly basis. Real Estate Investment Fund
will not invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although the Fund does
not intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those generally associated with investing in the real estate
industry in general. These unique risks include the failure of a counterparty to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations--Mortgage-Backed
Securities" for a more complete description of the characteristics of
Mortgage-Backed Securities and associated risks.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case
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of unlisted securities, when market makers do not exist or will not entertain
bids or offers), including many individually negotiated currency swaps and any
assets used to cover currency swaps and most privately negotiated investments in
state enterprises that have not yet conducted an initial equity offering, (ii)
over-the-counter options and assets used to cover over-the-counter options, and
(iii) repurchase agreements not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent permitted by
applicable law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities meet liquidity
guidelines established by a Fund's Directors. Investment in non-publicly traded
securities by each of Growth Fund and Strategic Balanced Fund is restricted to
5% of its total assets (not including for these purposes Rule 144A securities,
to the extent permitted by applicable law) and is also subject to the 15%
restriction on investment in illiquid securities described above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resales of securities.
Options. An option gives the purchaser of the option, upon payment of a premium,
the right to deliver to (in the case of a put) or receive from (in the case of a
call) the writer a specified amount of a security on or before a fixed date at a
predetermined price. A call option written by a Fund is "covered" if the Fund
owns the underlying security, has an absolute and immediate right to acquire
that security upon conversion or exchange of another security it holds, or holds
a call option on the underlying security with an exercise price equal to or less
than that of the call option it has written. A put option written by a Fund is
covered if the Fund holds a put option on the underlying securities with an
exercise price equal to or greater than that of the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Income Builder Fund and
Utility Income Fund each may write call options for cross-hedging purposes. A
Fund would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write uncovered call options. Technology Fund and Global
Small Cap Fund will not write a call option if the premium to be received by the
Fund in doing so would not produce an annualized return of at least 15% of the
then current market value of the securities subject to the option (without
giving effect to commissions, stock transfer taxes and other expenses that are
deducted from premium receipts). Technology Fund, Quasar Fund and Global Small
Cap Fund will not write a call option if, as a result, the aggregate of the
Fund's portfolio securities subject to outstanding call options (valued at the
lower of the option price or market value of such securities) would exceed 15%
of the Fund's total assets or more than 10% of the Fund's assets would be
committed to call options that at the time of sale have a remaining term of more
than 100 days. The aggregate cost of all outstanding options purchased and held
by each of Premier Growth Fund, Technology Fund, Quasar Fund and Global Small
Cap Fund will at no time exceed 10% of the Fund's total assets. Neither
International Fund nor New Europe Fund will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than
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the right to take or make delivery of a security at a specified price, an option
on a securities index gives the holder the right to receive, upon exercise of
the option, an amount of cash if the closing level of the chosen index is
greater than (in the case of a call) or less than (in the case of a put) the
exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
Options on futures contracts written or purchased by a Fund will be traded on
U.S. or foreign exchanges or over-the-counter. These investment techniques will
be used only to hedge against anticipated future changes in market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, and Income Builder
Fund will also not do so if immediately thereafter the aggregate of initial
margin deposits on all the outstanding futures contracts of the Fund and
premiums paid on outstanding options on futures contracts would exceed 5% of the
market value of the total assets of the Fund. Premier Growth Fund and Growth and
Income Fund may not purchase or sell a stock index future if immediately
thereafter more than 30% of its total assets would be hedged by stock index
futures. Premier Growth Fund and Growth and Income Fund may not purchase or sell
a stock index future if, immediately thereafter, the sum of the amount of margin
deposits on the Fund's existing futures positions would exceed 5% of the market
value of the Fund's total assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event of
rate movements adverse to a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
contracts to minimize the risk to it from adverse changes in the relationship
between the U.S. dollar and other currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed price at a
future date, and is individually negotiated and privately traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions.
Growth Fund and Strategic Balanced Fund may also purchase and sell foreign
currency on a spot basis.
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Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds to be received, in determining its net
asset value. Any unrealized appreciation or depreciation reflected in such
valuation of a "when, as and if issued" security would be canceled in the event
that the required conditions did not occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if Alliance were to forecast incorrectly
the direction of interest rate movements, a Fund might be required to complete
such when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by New Europe Fund, All-Asia
Investment Fund, Worldwide Privatization Fund, Income Builder Fund, Real Estate
Investment Fund or Utility Income Fund if, as a result, the Fund's aggregate
commitments under such transactions would be more than 30% of the Fund's total
assets. In the event the other party to a forward commitment transaction were to
default, a Fund might lose the opportunity to invest money at favorable rates or
to dispose of securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
Income Builder Fund, will enter into a standby commitment with a remaining term
in excess of 45 days. Investments in standby commitments will be limited so that
the aggregate purchase price of the securities subject to the commitments will
not exceed 25% with respect to New Europe Fund and Real Estate Investment Fund,
50% with respect to Worldwide Privatization Fund and All-Asia Investment Fund,
and 20% with respect to Utility Income Fund, of the Fund's assets taken at the
time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each currency swap will
be accrued on a daily basis. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
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date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund and Utility Income Fund, the exchange
commitments can involve payments in the same currency or in different
currencies. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the party
selling such interest rate cap. The purchase of an interest rate floor entitles
the purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on an agreed principal amount
from the party selling the interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap, cap
and floor is accrued daily. A Fund will not enter into an interest rate swap,
cap or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is then rated in the highest rating category
of at least one nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Worldwide Privatization Fund, All-Asia
Investment Fund, Income Builder Fund and Utility Income Fund each may make short
sales of securities or maintain short positions only for the purpose of
deferring realization of gain or loss for U.S. federal income tax purposes,
provided that at all times when a short position is open the Fund owns an equal
amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund and Real Estate
Investment Fund may not make a short sale if as a result more than 25% of the
Fund's net assets would be held as collateral for short sales. If the price of
the security sold short increases between the time of the short sale and the
time a Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain. See
"Certain Fundamental Investment Policies." Certain special federal income tax
considerations may apply to short sales entered into by a Fund. See "Dividends,
Distributions and Taxes" in the relevant Fund's Statement of Additional
Information.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned thereon
and the Fund may invest any cash collateral in portfolio securities, thereby
earning additional
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income, or receive an agreed upon amount of income from a borrower who has
delivered equivalent collateral. Each Fund will have the right to regain record
ownership of loaned securities or equivalent securities in order to exercise
ownership rights such as voting rights, subscription rights and rights to
dividends, interest or distributions. A Fund may pay reasonable finders',
administrative and custodial fees in connection with a loan. A Fund will not
lend its portfolio securities to any officer, director, employee or affiliate of
the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to certain options and forward
contracts, and adverse market movements could therefore continue to an unlimited
extent over a period of time. In addition, the correlation between movements in
the prices of futures contracts, options and forward contracts and movements in
the prices of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option), with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations. See "Dividends, Distributions
and Taxes" in the Statement of Additional Information of each Fund that invests
in options and futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime commercial
paper and other types of short-term debt securities including notes and bonds.
For Funds that may invest in foreign countries, such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities each Fund
may invest in while in a temporary defensive position, please see such Fund's
Statement of Additional Information.
Portfolio Turnover. Portfolio turnover rates are set forth under "Financial
Highlights." These portfolio turnover rates are greater than those of most other
investment companies, including those which emphasize capital appreciation as a
basic policy. A high rate of portfolio turnover involves correspondingly greater
brokerage and other expenses than a lower rate, which must be borne by the Fund
and its shareholders. High portfolio turnover also may result in the realization
of substantial net short-term capital gains. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof; (iii)
in oil, gas or other mineral exploration or development programs; or (iv) more
than 5% of its gross assets in securities the disposition of which would be
subject to restrictions under the federal securities laws.
Growth Fund and Strategic Balanced Fund each may not: (i) invest more than 5% of
its total assets in the securities of any one issuer (other than U.S. Government
securities and repurchase agreements relating thereto), although up to 25% of
each Fund's total assets may be invested without regard to this restriction; or
(ii) invest 25% or more of its total assets in the securities of any one
industry.
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Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of(0) call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than:(a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase would cause 10% or more of its total assets to be invested in the
securities of such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings. The exception contained in clause (i)(b) above is subject
to the operating policy regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be deemed
to prohibit the Fund from purchasing the securities of
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any issuer pursuant to the exercise of rights distributed to the Fund by the
issuer, except that no such purchase may be made if as a result the Fund will
fail to meet the diversification requirements of the Code and any such
acquisition in excess of the foregoing 15% or 25% limits will be sold by the
Fund as soon as reasonably practicable (this restriction does not apply to U.S.
Government securities, but will apply to foreign government securities unless
the Commission permits their exclusion); (iii) borrow money except from banks
for temporary or emergency purposes, including the meeting of redemption
requests that might require the untimely disposition of securities; borrowing in
the aggregate may not exceed 15%, and borrowing for purposes other than meeting
redemptions may not exceed 5%, of the Fund's total assets (including the amount
borrowed) less liabilities (not including the amount borrowed) at the time the
borrowing is made; outstanding borrowings in excess of 5% of the Fund's total
assets will be repaid before any subsequent investments are made; or (iv)
purchase a security (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange) if, as a result, the Fund would own any
securities of an open-end investment company or more than 3% of the total
outstanding voting stock of any closed-end investment company, or more than 5%
of the value of the Fund's total assets would be invested in securities of any
closed-end investment company, or more than 10% of such value in closed-end
investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding 5% of the total assets of the Fund; or (iv) make short
sales of securities or maintain a short position, unless at all times when a
short position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short and unless not more than 5% of the Fund's net assets is
held as collateral for such sales at any one time.
Global Environment Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest more than 15% of the value of
its total assets in the securities of any one issuer or 25% or more of the value
of its total assets in the same industry, except that the Fund will invest more
than 25% of its total assets in Environmental Companies, provided that this
restriction does not apply to U.S. Government securities, but will apply to
foreign government obligations unless the Commission permits their exclusion;
(iii) borrow money or issue senior securities, except that the Fund may borrow
(a) from a bank if immediately after such borrowing there is asset coverage of
at least 300% as defined in the 1940 Act and (b) for temporary purposes in an
amount not exceeding 5% of the value of the total assets of the Fund; (iv)
pledge, hypothecate, mortgage or otherwise encumber its assets, except (a) to
secure permitted borrowings and (b) in connection with initial and variation
margin deposits relating to futures contracts; (v) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company or
more than 10% of such value in closed-end investment companies in the aggregate;
(vi) make short sales of securities or maintain a short position, unless at all
times when a short position is open it owns an equal amount of such securities
or securities convertible into or exchangeable for, without payment of any
further consideration, securities of the same issue as, and equal in amount to,
the securities sold short ("short sales against the box"), and unless not more
than 5% of the Fund's net assets (taken at market value) is held as collateral
for such sales at any one time; or (vii) buy or write (i.e., sell) put or call
options, except (a) the Fund may buy foreign currency options or write covered
foreign currency options and options on foreign currency futures and (b) the
Fund may purchase warrants.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Income Builder Fund may not: (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry, except that
this restriction does not apply to U.S. Government securities; (ii) borrow money
except from banks for temporary or emergency purposes, including the meeting of
redemption requests that might require the untimely disposition of securities;
borrowing in the aggregate may not exceed 15%, and borrowing for purposes other
than
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meeting redemptions may not exceed 5%, of the Fund's total assets (including the
amount borrowed) less liabilities (not including the amount borrowed) at the
time borrowing is made; securities will not be purchased while borrowings in
excess of 5% of the Fund's total assets are outstanding; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own any securities of an
open-end investment company or more than 3% of the total outstanding voting
stock of any closed-end investment company or more than 5% of the value of the
Fund's net assets would be invested in securities of any one or more closed-end
investment companies.
Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S. Government obligations or (ii) own more
than 10% of the outstanding voting securities of any issuer.
Real Estate Investment Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer (other than the
U.S. Government and its agencies or instrumentalities) not greater in value than
5% of the Fund's total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if as a result
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such issuer; (iii)
invest 25% or more of its total assets in the securities of issuers conducting
their principal business activities in any one industry, other than the real
estate industry in which the Fund will invest at least 25% or more of its total
assets, except that this restriction does not apply to U.S. Government
securities; (iv) purchase or sell real estate, except that it may purchase and
sell securities of companies which deal in real estate or interests therein,
including Real Estate Equity Securities; or (v) borrow money except for
temporary or emergency purposes or to meet redemption requests, in an amount not
exceeding 5% of the value of its total assets at the time the borrowing is made.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
New Europe Fund, All-Asia Investment Fund, and Worldwide Privatization Fund and
a substantial portion of the assets of Global Small Cap Fund and Global
Environment Fund will be invested in securities denominated in foreign
currencies, and a corresponding portion of these Funds' revenues will be
received in such currencies. Therefore, the dollar equivalent of their net
assets, distributions and income will be adversely affected by reductions in the
value of certain foreign currencies relative to the U.S. dollar. If the value of
the foreign currencies in which a Fund receives its
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income falls relative to the U.S. dollar between receipt of the income and the
making of Fund distributions, the Fund may be required to liquidate securities
in order to make distributions if it has insufficient cash in U.S. dollars to
meet distribution requirements that the Fund must satisfy to qualify as a
regulated investment company for federal income tax purposes. Similarly, if an
exchange rate declines between the time a Fund incurs expenses in U.S. dollars
and the time cash expenses are paid, the amount of the currency required to be
converted into U.S. dollars in order to pay expenses in U.S. dollars could be
greater than the equivalent amount of such expenses in the currency at the time
they were incurred. In light of these risks, a Fund may engage in certain
currency hedging transactions, which themselves involve certain special risks.
See "Additional Investment Practices" above.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous terms (including
price) than securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority,
and if a deterioration occurs in a country's balance of payments, the country
could impose temporary restrictions on foreign capital remittances.
A Fund could also be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor the effect of
any such factor or factors on a Fund's investments. Furthermore, transaction
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling--dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. dollar. The pound sterling continued to fall in early 1993,
but recovered due to interest rate cuts throughout Europe and an upturn in the
economy of the United Kingdom. The average exchange rate of the U.S. dollar to
the pound sterling was 1.50 in 1993 and 1.56 in 1996. On December 31, 1997 the
U.S. dollar-pound sterling exchange rate was 1.65.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
4118.5 at the end of 1996, up approximately 12% from the end
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of 1995. On December 31, 1997 the FT-SE 100 index closed at 5,135.5, up
approximately 25% from the end of 1996.
The public sector borrowing requirement ("PSBR"), a mandated measure of the
amount required to balance the budget, has been, over the last two fiscal years,
higher than forecast. The general government fiscal deficit has been in excess
of the eligibility limit prescribed by the European Union for countries that
intend to participate in the Economic and Monetary Union ("EMU"), which is
scheduled to take effect in January 1999. The government, however, expects that
the deficit will be below that limit in the 1997-98 and 1998-99 fiscal years.
Although the government has not yet made a formal announcement with respect to
the United Kingdom's participation in the EMU, remarks of the Chancellor of the
Exchequer made in mid-October 1997 suggest that the United Kingdom will not
participate in the EMU beginning in January 1999 but may do so thereafter.
From 1979 until 1997 the Conversative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar, but has since
fallen from its post-World War II high (in 1995) against the U.S. dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1993. In
1994, the TOPIX closed at 1,559.09, up approximately 8% from the end of 1993; in
1995, the TOPIX closed at 1,577.70, up approximately 1% from the end of 1994;
and in 1996, the TOPIX closed at 1,470.94, down approximately 7% from the end of
1995. In 1997, the TOPIX closed at 1,175.03, down 20.12% from the end of 1996.
Certain valuation measures, such as price-to-book value and price-to-cash flow
ratios, indicate that the Japanese stock market is near its lowest level in the
last twenty years relative to other world markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan has returned to a single-party government led by Prime Minister Ryutaro
Hashimoto. While Mr. Hashimoto's party does not control a majority of the seats
in the parliament, it is only three seats short of the 251 seats required to
attain a majority in the House of Representatives (down from a 12-seat shortfall
just after the October 1996 election). For the past several years, Japan's
banking industry has been weakened by a significant amount of problem loans.
Japan's banks also have significant exposure to the current financial turmoil in
other Asian markets. On December 17, 1997 the Japanese government proposed to
strengthen Japan's banks by means of an infusion of public funds and other
measures. It is unclear whether these proposals, which are under consideration
by Japan's parliament, would, if implemented, achieve their intended effect. For
further information regarding Japan, see the Statements of Additional
Information of All-Asia Investment Fund and International Fund.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund and Global Environment Fund may
emphasize investment in, smaller, emerging companies. Investment in such
companies involves greater risks than is customarily associated with securities
of more established companies. Companies in the earlier stages of their
development often have products and management personnel which have not been
thoroughly tested by time or the marketplace; their financial resources may not
be as substantial as those of more established companies. The securities of
smaller companies may have relatively limited marketability and may be subject
to more abrupt or erratic market movements than securities of larger companies
or broad market indices. The revenue flow of such companies may be erratic and
their results of operations may fluctuate widely and may also contribute to
stock price volatility.
Investing in Environmental Companies by Global Environment Fund. Governmental
regulations or other action can inhibit an Environmental Company's performance,
and it may take years to translate environmental legislation into sales and
profits. Environmental Companies generally face competition in fields
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often characterized by relatively short product cycles and competitive pricing
policies. Losses may result from large product development or expansion costs,
unprotected marketing or distribution systems, erratic revenue flows and low
profit margins. Additional risks that Environmental Companies may face include
difficulty in financing the high cost of technological development,
uncertainties due to changing governmental regulation or rapid technological
advances, potential liabilities associated with hazardous components and
operations, and difficulty in finding experienced employees.
The Real Estate Industry. Although Real Estate Investment Fund does not invest
directly in real estate, it does invest primarily in Real Estate Equity
Securities and does have a policy of concentration of its investments in the
real estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates. To the extent that assets underlying the Fund's
investments are concentrated geographically, by property type or in certain
other respects, the Fund may be subject to certain of the foregoing risks to a
greater extent.
In addition, if Real Estate Investment Fund receives rental income or income
from the disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Investments by the Fund in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common Stocks.
Mortgage-Backed Securities. As discussed above, investing in Mortgage-Backed
Securities involves certain unique risks in addition to those risks associated
with investment in the real estate industry in general. These risks include the
failure of a counterparty to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest rates
decline, the value of an investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of an investment in fixed
rate obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities.
44
<PAGE>
Thus, Mortgage-Backed Securities, and adjustable rate mortgage pass-through
securities in particular, may be less effective than other types of U.S.
Government securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes. Investors should review
carefully the information discussed under the heading "Dividends, Distributions
and Taxes" and should discuss with their tax advisers the specific tax
consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between eight and 15
years in the case of Income Builder Fund, between five and 25 years in the case
of Utility Income Fund and between one year or less and 30 years in the case of
all other Funds that invest in such securities. In periods of increasing
interest rates, each of the Funds may, to the extent it holds mortgage-backed
securities, be subject to the risk that the average dollar-weighted maturity of
the Fund's portfolio of debt or other fixed- income securities may be extended
as a result of lower than anticipated prepayment rates. See "Additional
Investment Practices--Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest
45
<PAGE>
rates and economic and political conditions. However, there can be no assurance
that losses will not occur. Since the risk of default is higher for lower-rated
securities, Alliance's research and credit analysis are a correspondingly more
important aspect of its program for managing a Fund's securities than would be
the case if a Fund did not invest in lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of Additional Information for each Fund that invests in lower-rated
securities for a description of the bond ratings of Moody's, S&P, Duff & Phelps
and Fitch.
Certain lower-rated securities in which Growth Fund, Income Builder Fund,
Strategic Balanced and Utility Income Fund may invest may contain call or
buy-back features that permit the issuers thereof to call or repurchase such
securities. Such securities may present risks based on prepayment expectations.
If an issuer exercises such a provision, a Fund may have to replace the called
security with a lower yielding security, resulting in a decreased rate of return
to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund, Global Environment Fund, and Income Builder Fund is a
"non-diversified" investment company, which means the Fund is not limited in the
proportion of its assets that may be invested in the securities of a single
issuer. However, each Fund intends to conduct its operations so as to qualify to
be taxed as a "regulated investment company" for purposes of the Code, which
will relieve the Fund of any liability for federal income tax to the extent its
earnings are distributed to shareholders. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information. To so qualify, among
other requirements, the Fund will limit its investments so that, at the close of
each quarter of the taxable year, (i) not more than 25% of the Fund's total
assets will be invested in the securities of a single issuer, and (ii) with
respect to 50% of its total assets, not more than 5% of its total assets will be
invested in the securities of a single issuer and the Fund will not own more
than 10% of the outstanding voting securities of a single issuer. A Fund's
investments in U.S. Government securities and other regulated investment
companies are not subject to these limitations. Because each of Worldwide
Privatization Fund, New Europe Fund, All-Asia Investment Fund and Income Builder
Fund is a non-diversified investment company, it may invest in a smaller number
of individual issuers than a diversified investment company, and an investment
in such Fund may, under certain circumstances, present greater risk to an
investor than an investment in a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
Year 2000. Many computer software systems in use today cannot properly process
date-related information from and after January 1, 2000. Should any of the
computer systems employed by the Funds' major service providers fail to process
this type of information properly, that could have a negative impact on the
Funds' operations and the services that are provided to the Funds' shareholders.
Alliance, each Fund's investment adviser, Alliance Fund Distributors, Inc.
("AFD"), each Fund's principal underwriter, and Alliance Fund Services, Inc.
("AFS"), each Fund's registrar, transfer agent and dividend disbursing agent,
have advised the Funds that they are reviewing all of their computer systems
with the goal of modifying or replacing such systems prior to January 1, 2000 to
the extent necessary to foreclose any such negative impact. In addition,
Alliance has been advised by each Fund's custodian that they is also in the
process of reviewing its systems with the same goal. As of the date of this
Prospectus, the Funds and Alliance have no reason to believe that these goals
will not be achieved.
- --------------------------------------------------------------------------------
PURCHASE AND SALE
- --------------------------------------------------------------------------------
OF SHARES
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You can purchase shares of any of the Funds at a price based on the next
calculation of their net asset value after receipt of a proper purchase order
either through broker-dealers, banks or other financial intermediaries, or
directly through AFD. The minimum initial investment in each Fund is $250. The
minimum for subsequent investments in each Fund is $50. Investments of $25 or
more are allowed under the automatic investment program of each Fund. Share
certificates are issued only upon request. See the Subscription Application and
Statements of Additional Information for more information.
Existing shareholders may make subsequent purchases by electronic funds transfer
if they have completed the appropriate section of the Subscription Application
or the Shareholder Options form obtained from AFS. Telephone purchase orders can
be made by calling 800-221-5672 and may not exceed $500,000.
Each Fund offers three classes of shares through this prospectus, Class A, Class
B and Class C. The Funds may refuse any order to purchase shares. In this
regard, the Funds reserve the right to restrict purchases of shares (including
through exchanges) when they appear to evidence a pattern of frequent purchases
and sales made in response to short-term considerations.
46
<PAGE>
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at net asset value plus an initial sales charge,
as follows:
<TABLE>
<CAPTION>
Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.44% 4.25% 4.00%
- --------------------------------------------------------------------------------------
$100,000 to
less than $250,000 3.36 3.25 3.00
- --------------------------------------------------------------------------------------
$250,000 to
less than $500,000 2.30 2.25 2.00
- --------------------------------------------------------------------------------------
$500,000 to
less than $1,000,000 1.78 1.75 1.50
- --------------------------------------------------------------------------------------
</TABLE>
On purchases of $1,000,000 or more, you pay no initial sales charge but may pay
a contingent deferred sales charge ("CDSC") equal to 1% of the lesser of net
asset value at the time of redemption or original cost if you redeem within one
year; Alliance may pay the dealer or agent a fee of up to 1% of the dollar
amount purchased. Certain purchases of Class A shares may qualify for reduced or
eliminated sales charges in accordance with a Fund's Combined Purchase
Privilege, Cumulative Quantity Discount, Statement of Intention, Privilege for
Certain Retirement Plans, Reinstatement Privilege and Sales at Net Asset Value
programs. Consult the Subscription Application and Statements of Additional
Information.
Class B Shares--Deferred Sales Charge Alternative
You can purchase Class B shares at net asset value without an initial sales
charge. A Fund will thus receive the full amount of your purchase. However, you
may pay a CDSC if you redeem shares within four years after purchase. The amount
of the CDSC (expressed as a percentage of the lesser of the current net asset
value or original cost) will vary according to the number of years from the
purchase of Class B shares until the redemption of those shares.
The amount of the CDSC for Class B shares for each Fund is as set forth below.
Class B shares of a Fund purchased prior to the date of this Prospectus may be
subject to a different CDSC schedule, which was disclosed in the Fund's
prospectus in use at the time of purchase and is set forth in the Fund's current
Statement of Additional Information.
<TABLE>
<CAPTION>
Year Since Purchase CDSC
--------------------------------------------
<S> <C>
First ................................ 4.0%
Second ............................... 3.0%
Third ................................ 2.0%
Fourth ............................... 1.0%
Fifth ................................ None
</TABLE>
Class B shares are subject to higher distribution fees than Class A shares for a
period (after which they convert to Class A shares) of eight years, or six years
with respect to Premier Growth Fund. The higher fees mean a higher expense
ratio, so Class B shares pay correspondingly lower dividends and may have a
lower net asset value than Class A shares.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase Class C shares at net asset value without any initial sales
charge. A Fund will thus receive the full amount of your purchase, and, if you
hold your shares for one year or more, you will receive the entire net asset
value of your shares upon redemption. Class C shares incur higher distribution
fees than Class A shares and do not convert to any other class of shares of the
Fund. The higher fees mean a higher expense ratio, so Class C shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares.
Class C shares redeemed within one year of purchase will be subject to a CDSC
equal to 1% of the lesser of their original cost or net asset value at the time
of redemption.
Application of the CDSC
Shares obtained from dividend or distribution reinvestment are not subject to
the CDSC. The CDSC is deducted from the amount of the redemption and is paid to
AFD. The CDSC will be waived on redemptions of shares following the death or
disability of a shareholder, to meet the requirements of certain qualified
retirement plans or pursuant to a monthly, bimonthly or quarterly systematic
withdrawal plan. See the Statements of Additional Information.
How the Funds Value Their Shares
The net asset value of each Class of shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to that Class by the outstanding
shares of that Class. Shares are valued each day the Exchange is open as of the
close of regular trading (currently 4:00 p.m. Eastern time). The securities in a
Fund are valued at their current market value determined on the basis of market
quotations or, if such quotations are not readily available, such other methods
as the Fund's Directors believe accurately reflects fair market value.
Employee Benefit Plans
Certain employee benefit plans, including employer-sponsored tax-qualified
401(k) plans and other defined contribution retirement plans ("Employee Benefit
Plans"), may establish requirements as to the purchase, sale or exchange of
shares, including maximum and minimum initial investment requirements, that are
different from those described in this Prospectus. Employee Benefit Plans may
also not offer all classes of shares of the Funds. In order to enable
participants investing through Employee Benefit Plans to purchase shares of the
Funds, the maximum and minimum investment amounts may be different for shares
purchased through Employee Benefit Plans from those described in this
Prospectus. In addition, the Class A, Class B and Class C CDSC may be waived for
investments made through Employee Benefit Plans.
General
The decision as to which class of shares is more beneficial to you depends on
the amount and intended length of your investment. If you are making a large
investment, thus qualifying for a reduced sales charge, you might consider Class
A shares. If you are making a smaller investment, you might consider Class B
shares because 100% of your purchase is invested immediately. If you are unsure
of the length of your investment, you might consider Class C shares because
there is no initial sales charge and no CDSC as long as the shares are held for
one year or more. Consult your
47
<PAGE>
financial agent. Dealers and agents may receive differing compensation for
selling Class A, Class B or Class C shares. There is no size limit on purchases
of Class A shares. The maximum purchase of Class B shares is $250,000. The
maximum purchase of Class C shares is $1,000,000.
Each Fund offers a fourth class of shares, Advisor Class shares, by means of
separate prospectus. Advisor Class shares may be purchased and held solely by
(i) accounts established under a fee-based program sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by AFD,
(ii) a self-directed defined contribution employee benefit plan (e.g., a 401(k)
plan) that has at least 1,000 participants or $25 million in assets and (iii)
certain other categories of investors described in the prospectus for the
Advisor Class, including investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or the Funds. Advisor Class
shares are offered without any initial sales charge or CDSC and without an
ongoing distribution fee and are expected, therefore, to have different
performance than Class A, Class B or Class C shares. You can obtain more
information about Advisor Class shares by contacting AFS at 800-221-5672 or by
contacting your financial representative.
A transaction, service, administrative or other similar fee may be charged by
your broker-dealer, agent, financial intermediary or other financial
representative with respect to the purchase, sale or exchange of Class A, Class
B or Class C shares made through such financial representative. Such financial
intermediaries may also impose requirements with respect to the purchase, sale
or exchange of shares that are different from, or in addition to, those imposed
by a Fund, including requirements as to the minimum initial and subsequent
investment amounts.
In addition to the discount or commission paid to dealers or agents, AFD from
time to time pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., an affiliate of AFD, in connection
with the sale of shares of the Funds. Such additional amounts may be utilized,
in whole or in part, in some cases together with other revenues of such dealers
or agents, to provide additional compensation to registered representatives who
sell shares of the Funds. On some occasions, such cash or other incentives will
be conditioned upon the sale of a specified minimum dollar amount of the shares
of a Fund and/or other Alliance Mutual Funds during a specific period of time.
Such incentives may take the form of payment for attendance at seminars, meals,
sporting events or theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel by persons associated with a
dealer or agent and their immediate family members to urban or resort locations
within or outside the United States. Such dealer or agent may elect to receive
cash incentives of equivalent amount in lieu of such payments.
HOW TO SELL SHARES
You may "redeem"(i.e., sell your shares in a Fund to the Fund) on any day the
Exchange is open, either directly or through your financial intermediary. The
price you will receive is the net asset value (less any applicable CDSC) next
calculated after the Fund receives your request in proper form. Proceeds
generally will be sent to you within seven days. However, for shares recently
purchased by check or electronic funds transfer, a Fund will not send proceeds
until it is reasonably satisfied that the check or electronic funds transfer has
been collected (which may take up to 15 days).
Selling Shares Through Your Broker
Your broker must receive your request before 4:00 p.m. Eastern time, and your
broker must transmit your request to the Fund by 5:00 p.m. Eastern time, for you
to receive that day's net asset value (less any applicable CDSC). Your broker is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Selling Shares Directly To A Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. Stock power forms are
available from your financial intermediary, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4:00 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and, for
redemptions made before March 1, 1998, may be made only once in any 30-day
period (except for certain omnibus accounts). A shareholder who has completed
the appropriate section of the Subscription Application, or the Shareholder
Options form obtained from AFS, can elect to have the proceeds of his or her
redemption sent to his or her bank via an electronic funds transfer. Proceeds of
telephone redemptions also may be sent by check to a shareholder's address of
record. Redemption requests by electronic funds transfer may not exceed $100,000
and redemption requests by check may not exceed $50,000 per day. Telephone
redemption is not available for shares held in nominee or "street name" accounts
or retirement plan accounts or shares held by a shareholder who has changed his
or her address of record within the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption
48
<PAGE>
has remained below $200 for 90 days. Shareholders will receive 60 days' written
notice to increase the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it fails to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672. Some
services are described in the attached Subscription Application. A shareholder's
manual explaining all available services will be provided upon request. To
request a shareholder manual, call 800-227-4618.
HOW TO EXCHANGE SHARES
You may exchange your shares of any Fund for shares of the same class of other
Alliance Mutual Funds (including AFD Exchange Reserves, a money market fund
managed by Alliance). Exchanges of shares are made at the net asset values next
determined, without sales or service charges. Exchanges may be made by telephone
or written request. Telephone exchange requests must be received by AFS by 4:00
p.m. Eastern time on a Fund business day in order to receive that day's net
asset value.
Shares will continue to age without regard to exchanges for purposes of
determining the CDSC, if any, upon redemption and, in the case of Class B
shares, for the purposes of conversion to Class A shares. After an exchange,
your Class B shares will automatically convert to Class A shares in accordance
with the conversion schedule applicable to the Class B shares of the Alliance
Mutual Fund you originally purchased for cash ("original shares"). When
redemption occurs, the CDSC applicable to the original shares is applied.
Please read carefully the Prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- -------------------------------------------------------------------------------------
<S> <C> <C>
Alliance Fund Alden M. Stewart since 1997-- Associated with
Executive Vice President of Alliance since
Alliance Capital Management 1993; prior
Corporation (ACMC*) thereto,
associated with
Equitable Capital
Management
Corporation
("Equitable
Capital")**
Randall E. Haase since 1997-- Associated with
Senior Vice President of ACMC Alliance since July
1993; prior
thereto,
associated with
Equitable Capital
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance since
July 1993; prior
thereto,
associated with
Equitable Capital
Premier Growth
Fund Alfred Harrison since inception-- Associated with
Vice Chairman of ACMC Alliance
Technology Fund Peter Anastos since 1992-- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992-- Associated with
Senior Vice President of ACMC Alliance since
1992; prior
thereto
associated with
College
Retirement
Equities Fund
Quasar Fund Alden M. Stewart since 1994-- (see above)
(see above)
Randall E. Haase since 1994-- (see above)
(see above)
International Fund A. Rama Krishna since 1993-- Associated with
Senior Vice President of ACMC Alliance since
and director of Asian Equity 1993; prior
research thereto,
Chief Investment
Strategist and
Director--Equity
Research for CS
First Boston
Worldwide
Privatization Fund Mark H. Breedon since inception-- Associated with
Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited ***
New Europe Fund Steven Beinhacker since 1997-- Associated with
Vice President of ACMC Alliance
All-Asia Investment A. Rama Krishna since inception-- (see above)
Fund (see above)
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- -------------------------------------------------------------------------------------
<S> <C> <C>
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
Global Environment Jeremy R. Kramer since 1995-- Associated with
Fund Vice President of ACMC Alliance since
1993; prior
thereto, securities
analyst with
Neuberger &
Berman
Strategic Balanced Nicholas D.P. Carn Associated with
Fund since 1997-- Alliance since
Vice President of ACMC 1997; prior
thereto, Chief
Investment
Officer and
Portfolio Manager
at Draycott
Partners
Balanced Shares Paul Rissman since 1997-- Associated with
Senior Vice President of ACMC Alliance
Income Builder Fund Andrew M. Aran since 1994-- Associated with
Senior Vice President of ACMC Alliance
Thomas M. Perkins since 1991-- Associated with
Senior Vice President of ACMC Alliance
Vita Marie Pike since 1997 Associated with
Vice President of ACMC Alliance
Corinne Molof Hill since 1997 Associated with
Vice Presidient of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- Associated with
(See above) Alliance
Growth & Income Paul Rissman since 1994-- Associated with
Fund (see above) Alliance
Real Estate Daniel G. Pine since 1996-- Associated with
Investment Fund Senior Vice President of ACMC Alliance since
1996; prior
thereto, Senior
Vice President of
Desai Capital
Management
David Kruth since 1997-- Associated with
Vice President of ACMC Alliance since
1997; prior
thereto Senior
Vice President of
the Yarmouth
Group
- -------------------------------------------------------------------------------------
</TABLE>
* The sole general partner of Alliance.
** Equitable Capital was, prior to Alliance's acquisition of it, a management
firm under common control with Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of September 30, 1997 totaling more than $217 billion
(of which approximately $81 billion represented the assets of investment
companies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations and
endowment funds. The 56 registered investment companies managed by Alliance
comprising 118 separate investment portfolios currently have over two million
shareholders. As of September 30, 1997, Alliance was an investment manager of
employee benefit plan assets for 28 of the Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States ("Equitable"), one of the largest
life insurance companies in the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding company controlled
by AXA-UAP, a French insurance holding company. Certain information concerning
the ownership and control of Equitable by AXA-UAP is set forth in each Fund's
Statement of Additional Information under "Management of the Funds."
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Premier Growth Fund, Mr. Harrison has ultimate responsibility for the
management of discretionary tax-exempt accounts of institutional clients managed
as described below without significant client-imposed restrictions ("Historical
Portfolios"). These accounts have substantially the same investment objectives
and policies and are managed in accordance with essentially the same investment
strategies and techniques as those for Premier Growth Fund, except for the
ability of Premier Growth Fund to use futures and options as hedging tools and
to invest in warrants. The Historical Portfolios are also not subject to certain
limitations, diversification requirements and other restrictions imposed under
the 1940 Act and the Code to which Premier Growth Fund, as a registered
investment company, is subject and which, if applicable to the Historical
Portfolios, may have adversely affected the performance results of the
Historical Portfolios. See "Investment Objective and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the nineteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios as an employee of Alliance
and cumulatively through December 31, 1997. As of December 31, 1997, the assets
in the Historical Portfolios totaled approximately $11.6 billion and the average
size of an institutional account in the Historical Portfolio was $341 million.
Each Historical Portfolio has a nearly identical composition of investment
holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be payable by Premier
Growth Fund, which are higher than the fees imposed on the Historical Portfolio
and will result in a higher expense ratio and lower returns for Premier Growth
Fund. Expenses associated with the distribution of Class A, Class B and Class C
shares of
50
<PAGE>
Premier Growth Fund in accordance with the plan adopted by Premier Growth Fund's
Board of Directors pursuant to Rule 12b-1 under the 1940 Act ("distribution
fees") are also excluded. See "Expense Information." The performance data has
also not been adjusted for corporate or individual taxes, if any, payable by the
account owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The total returns set forth below are
calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation. In contrast with
the securities in the Russell Price-Driven Indices, companies in the Growth
Index tend to exhibit higher price-to-book and price-earnings ratios, lower
dividend yield and higher forecasted growth values.
To the extent Premier Growth Fund does not invest in U.S. common stocks or
utilizes investment techniques such as futures or options, the S&P 500 Index and
Russell 1000 Growth Index may not be substantially comparable to Premier Growth
Fund. The S&P 500 Index and Russell 1000 Growth Index are included to illustrate
material economic and market factors that existed during the time period shown.
The S&P 500 Index and Russell 1000 Growth Index do not reflect the deduction of
any fees. If Premier Growth Fund were to purchase a portfolio of securities
substantially identical to the securities comprising the S&P 500 Index or the
Russell 1000 Growth Index, Premier Growth Fund's performance relative to the
index would be reduced by Premier Growth Fund's expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees, transfer agency
costs and other administrative expenses, as well as by the impact on Premier
Growth Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the Premier Growth Fund as
measured against certain broad based market indices and against the composite
performance of other open-end growth mutual funds. Investors should not rely on
the following performance data of the Historical Portfolios as an indication of
future performance of Premier Growth Fund. The composite investment performance
for the periods presented may not be indicative of future rates of return. Other
methods of computing investment performance may produce different results, and
the results for different periods may vary.
Schedule of Composite Investment PerformanceHistorical Portfolios*
<TABLE>
<CAPTION>
Russell Lipper
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
---- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended December:
1997*** 27.05% 34.90% 33.36% 30.49% 25.30%
1996*** 18.84 22.22 22.96 23.12 17.48
1995*** 40.66 40.12 37.58 37.19 32.65
1994 (9.78) (4.83) 1.32 2.66 (1.57)
1993 5.35 10.62 10.08 2.90 11.98
1992 -- 12.27 7.62 5.00 7.63
1991 -- 39.19 30.47 41.16 35.20
1990 -- (1.57) (3.10) (0.26) (5.00)
1989 -- 39.08 31.69 35.92 28.60
1988 -- 10.96 16.61 11.27 15.80
1987 -- 8.57 5.25 5.31 1.00
1986 -- 27.60 18.67 15.36 15.90
1985 -- 37.68 31.73 32.85 30.30
1984 -- (3.33) 6.27 (.95) (2.80)
1983 -- 20.95 22.56 15.98 22.30
1982 -- 28.23 21.55 20.46 20.20
1981 -- (1.10) (4.92) (11.31) (8.40)
1980 -- 51.10 32.50 39.57 37.30
1979 -- 30.99 18.61 23.91 27.40
Cumulative total
return for the
period
January 1,
1979 to
December 31,
1997 -- 3,689% 1,946% 1,683% 1,753%
- ----------------------------------------------------------------------------------------------
</TABLE>
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion. Total returns for Premier Growth Fund are for Class A
shares, with imposition of the maximum 4.25% sales charge.
51
<PAGE>
** Assumes imposition of the maximum advisory fee charged by Alliance for any
Historical Portfolio for the period involved, although not the impact of
the payment of that fee on a quarterly rather than an annual basis and the
compounding effect thereof over the periods for which return information is
provided in the table on page 50, which would correspondingly reduce the
returns presented.
*** During this period, the Historical Portfolios differed from Premier Growth
Fund in that Premier Growth Fund invested a portion of its net assets in
warrants on equity securities in which the Historical Portfolios were
unable, by their investment restrictions, to purchase. In lieu of warrants,
the Historical Portfolios acquired the common stock upon which the warrants
were based.
The average annual total returns presented below are based upon the cumulative
total return as of December 31, 1997 and, for more than one year, assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
<TABLE>
<CAPTION>
Average Annual Total Returns
-----------------------------------------------------------------------
Premier Russell Lipper
Growth Historical S&P 500 1000 Growth
Fund Portfolios** Index Growth Index Fund Index
---- ---------- ----- ------------ ----------
<S> <C> <C> <C> <C> <C>
One year ................ 27.05% 34.90% 33.36% 30.49% 25.30%
Three years ............. 32.32 32.20 31.15 30.14 25.11
Five years .............. 19.14 19.46 20.27 18.41 16.47
Ten years ............... 20.13+ 19.17 18.05 17.94 15.93
Since January 1,
1979 .................. -- 20.08 17.22 16.37 15.86
- ----------------------------------------------------------------------------------------------------
</TABLE>
+ Since inception on 9/28/92
ADMINISTRATOR TO ALL-ASIA INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
CONSULTANT TO ALLIANCE WITH RESPECT TO INVESTMENT IN REAL ESTATE SECURITIES
Alliance, with respect to investment in real estate securities, has retained as
a consultant CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held
company and the largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities management, and real
estate finance and investment advisory activities (CBC in August of 1997
acquired Koll, which previously provided these consulting services to Alliance).
In 1996, CBC (and Koll, on a combined basis) completed 25,000 sale and lease
transactions, managed over 4,100 client properties, created over $3.5 billion in
mortgage originations, and completed over 2,600 appraisal and consulting
assignments. In addition, they advised and managed for institutions over $4
billion in real estate investments. CBC will make available to Alliance the CBC
National Real Estate Index, which gathers, analyzes and publishes targeted
research data for the 65 largest U.S. markets, based on a variety of
public-sector and private-sector sources as well as CBC's proprietary database
of approximately 60,000 property transactions representing over $400 billion of
investment property. This information provides a substantial component of the
research and data used to create the REIToScore model. As a consultant, CBC
provides to Alliance, at Alliance's expense, such in-depth information regarding
the real estate market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-family properties
as Alliance shall from time to time request. CBC will not furnish advice or make
recommendations regarding the purchase or sale of securities by the Fund nor
will it be responsible for making investment decisions involving Fund assets.
CBC is one of the three largest fee-based property management firms in the
United States, the largest commercial real estate lease brokerage firm in the
country, the largest investment property brokerage firm in the country, as well
as one of the largest publishers of real estate research, with approximately
6,000 employees nationwide. CBC will provide Alliance with exclusive access to
its REIToScore model which ranks approximately 130 REITS based on the relative
attractiveness of the property markets in which they own real estate. This model
scores the approximately 12,000 individual properties owned by these companies.
REIToScore is in turn based on CBC's National Real Estate Index which gathers,
analyzes and publishes targeted research for the 65 largest U.S. real estate
markets based on a variety of public- and private-sector sources as well as
CBC's proprietary database of 60,000 commercial property transactions
representing over $400 billion of investment property and over 3,000 tracked
properties which report rent and expense data quarterly. CBC has previously
provided access to its REIToScore model results primarily to the institutional
market through subscriptions. The model is no longer provided to any research
publications and the Fund is currently the only mutual fund available to retail
investors that has access to CBC's REIT o Score model.
DISTRIBUTION SERVICES AGREEMENTS
Rule 12b-1 adopted by the Commission under the 1940 Act permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has adopted one or more "Rule
12b-1 plans" (for each Fund, a "Plan") and has entered into a Distribution
Services Agreement (the "Agreement") with AFD. Pursuant to its Plan, a Fund pays
to AFD a Rule 12b-1 distribution services fee, which may not exceed an annual
rate of .30% (.50% with respect to Growth Fund, Premier Growth Fund and
Strategic Balanced Fund) of the Fund's aggregate average daily net assets
attributable to the Class A shares, 1.00% of the Fund's aggregate average daily
net assets attributable to the Class B shares and 1.00% of the Fund's aggregate
average daily net assets attributable to the Class C shares, for distribution
expenses. The Directors of Growth Fund and Strategic Balanced Fund currently
limit payments with respect to Class A shares under the Plan to .30% of each
Fund's aggregate average daily net assets attributable to Class A shares. The
Directors of Premier Growth Fund currently limit payments under the Plan with
respect to sales of Class A shares made after November 1993 to .30% of the
Fund's aggregate average daily net assets. The Plans provide that a portion of
the distribution services fee in an amount not to exceed .25% of the
52
<PAGE>
aggregate average daily net assets of each Fund attributable to each of the
Class A, Class B and Class C shares constitutes a service fee used for personal
service and/or the maintenance of shareholder accounts.
The Plans provide that AFD will use the distribution services fee received from
a Fund in its entirety for payments (i) to compensate broker-dealers or other
persons for providing distribution assistance, (ii) to otherwise promote the
sale of shares of the Fund, and (iii) to compensate broker-dealers, depository
institutions and other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's shareholders. In this
regard, some payments under the Plans are used to compensate financial
intermediaries with trail or maintenance commissions in an amount equal to .25%,
annualized, with respect to Class A shares and Class B shares, and 1.00%,
annualized, with respect to Class C shares, of the assets maintained in a Fund
by their customers. Distribution services fees received from the Funds, except
Growth Fund and Strategic Balanced Fund, with respect to Class A shares will not
be used to pay any interest expenses, carrying charges or other financing costs
or allocation of overhead of AFD. Distribution services fees received from the
Funds, with respect to Class B and Class C shares, may be used for these
purposes. The Plans also provide that Alliance may use its own resources to
finance the distribution of each Fund's shares.
The Funds are not obligated under the Plans to pay any distribution services fee
in excess of the amounts set forth above. Except as noted below for Growth Fund
and Strategic Balanced Fund, with respect to Class A shares of each Fund,
distribution expenses accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent fiscal years.
Except as noted below for Growth Fund and Strategic Balanced Fund, AFD's
compensation with respect to Class B and Class C shares under the Plans of the
other Funds is directly tied to its expenses incurred. Actual distribution
expenses for such Class B and Class C shares for any given year, however, will
probably exceed the distribution services fees payable under the applicable Plan
with respect to the class involved and, in the case of Class B and Class C
shares, payments received from CDSCs. The excess will be carried forward by AFD
and reimbursed from distribution services fees payable under the Plan with
respect to the class involved and, in the case of Class B and Class C shares,
payments subsequently received through CDSCs, so long as the Plan and the
Agreement are in effect. Since AFD's compensation under the Plans of Growth Fund
and Strategic Balanced Fund is not directly tied to the expenses incurred by
AFD, the amount of compensation received by it under the applicable Plan during
any year may be more or less than its actual expenses.
Unreimbursed distribution expenses incurred as of the end of each Fund's most
recently completed fiscal period, and carried over for reimbursement in future
years in respect of the Class B and Class C shares for all Funds were, as of
that time, as follows:
<TABLE>
<CAPTION>
Amount of Unreimbursed Distribution Expenses
(as % of Net Assets of Class)
---------------------------------------------------------------------
Class B Class C
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Fund ...................................... $ 3,782,063 (5.37%) $ 1,025,156 (5.43%)
Premier Growth Fund ................................ $20,874,319 (2.43%) $ 1,413,557 (0.79%)
Technology Fund .................................... $32,259,341 (3.06%) $ 1,464,569 (0.80%)
Quasar Fund ........................................ $15,242,262 (3.03% $ 1,262,697 (0.90%)
International Fund ................................. $ 2,566,420 (3.30%) $ 807,347 (3.47%)
Worldwide Privatization Fund ....................... $ 5,013,479 (4.14%) $ 251,109 (1.94%)
New Europe Fund .................................... $ 2,535,456 (3.84%) $ 541,239 (3.20%)
All-Asia Investment Fund ........................... $ 1,690,408 (14.78%) $ 162,319 (8.73%)
Global Small Cap Fund .............................. $ 2,055,687 (6.43%) $ 586,919 (6.73%)
Balanced Shares .................................... $ 1,533,382 (6.34%) $ 463,860 (8.42%)
Income Builder Fund ................................ $ 1,096,845 (12.59%) $ 1,904,160 (4.16%)
Utility Income Fund ................................ $ 1,400,456 (9.47%) $ 456,135 (13.37%)
Growth and Income Fund ............................. $11,066,118 (2.42%) $ 1,326,535 (1.25%)
Real Estate Investment Fund ........................ $ 6,726,437 (3.60%) $ 366,120 (0.86%)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Plans are in compliance with rules of the National Association of Securities
Dealers, Inc. which effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to .75% and .25%,
respectively, of the average annual net assets attributable to that class. The
rules also limit the aggregate of all front-end, deferred and asset-based sales
charges imposed with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of shares of that
class, plus interest at the prime rate plus 1% per annum.
The Glass-Steagall Act and other applicable laws may limit the ability of a bank
or other depository institution to become an underwriter or distributor of
securities. However, in the opinion of the Funds' management, based on the
advice of counsel, these laws do not prohibit such depository institutions from
providing services for investment companies such as the administrative,
accounting and other services referred to in the Agreements. In the event that a
change in these laws prevented a bank from providing such services, it is
expected that other services arrangements would be made and that shareholders
would not be adversely affected. The State of Texas requires that shares of a
Fund may be sold in that state only by dealers or other financial institutions
that are registered there as broker-dealers.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
- --------------------------------------------------------------------------------
AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
53
<PAGE>
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund having an
aggregate net asset value as of the close of business on the day following the
declaration date of such dividend or distribution equal to the cash amount of
such income dividend or distribution. Election to receive dividends and
distributions in cash or shares is made at the time shares are initially
purchased and may be changed at any time prior to the record date for a
particular dividend or distribution. Cash dividends can be paid by check or, if
the shareholder so elects, electronically via the ACH network. There is no sales
or other charge in connection with the reinvestment of dividends and capital
gains distributions. Dividends paid by a Fund, if any, with respect to Class A,
Class B and Class C shares will be calculated in the same manner at the same
time on the same day and will be in the same amount, except that the higher
distribution services fees applicable to Class B and C shares, and any
incremental transfer agency costs relating to Class B and Class C shares, will
be borne exclusively by the class to which they relate.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains. Since REITs pay
distributions based on cash flow, without regard to depreciation and
amortization, it is likely that a portion of the distributions paid to Real
Estate Investment Fund and subsequently distributed to shareholders may be a
nontaxable return of capital. The final determination of the amount of a Fund's
return of capital distributions for the period will be made after the end of
each calendar year.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that a Fund distributes its taxable income and net
capital gain to its shareholders, qualification as a regulated investment
company relieves that Fund of federal income taxes on that part of its taxable
income, including net capital gains, which it pays out to its shareholders.
Dividends out of net ordinary income and distributions of net short-term capital
gains are taxable to the recipient shareholders as ordinary income. In the case
of corporate shareholders, such dividends may be eligible for the
dividends-received deduction, except that the amount eligible for the deduction
is limited to the amount of qualifying dividends received by the Fund.
Distributions received from a REIT generally do not constitute qualifying
dividends. A corporation's dividends-received deduction generally will be
disallowed unless the corporation holds shares in the Fund at least 46 days
during the 90-day period beginning 45 days before the date on which the
corporation becomes entitled to receive the dividend. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of a Fund is financed with indebtedness.
Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains--that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on capital assets held
for more than one year but not more than 18 months ("mid-term gains"), and a
second rate (generally 20%) applies to the balance of such net capital gains
("adjusted net capital gains"). Distributions of mid-term gains and adjusted net
capital gains will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund. Distributions of net capital gains are
not eligible for the dividends-received deduction referred to above.
Under the current federal tax law, the amount of an income dividend or capital
gains distribution declared by a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to him or her
as described above. If a shareholder held shares six months or less and during
that period received a distribution of net capital gains, any loss realized on
the sale of such shares during such six-month period would be a long-term
capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, generally
will not be taxable to the plan. Distributions from such plans will be taxable
to individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
54
<PAGE>
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant) any further returns of capital will be taxable as capital gain. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Shareholders will be advised annually as to the federal tax status of dividends
and capital gains and return of capital distributions made by a Fund for the
preceding year. Shareholders are urged to consult their tax advisers regarding
their own tax situation. Distributions by a Fund may be subject to state and
local taxes.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance Worldwide Privatization
Fund, Inc. (1994), Alliance New Europe Fund, Inc. (1990), Alliance All-Asia
Investment Fund, Inc. (1994), Alliance Global Small Cap Fund, Inc. (1966),
Alliance Global Environment Fund, Inc. (1990), Alliance Income Builder Fund,
Inc. (1991), Alliance Utility Income Fund, Inc. (1993), Alliance Growth and
Income Fund, Inc. (1932), and Alliance Real Estate Investment Fund, Inc. (1996).
Each of the following Funds is either a Massachusetts business trust or a series
of a Massachusetts business trust organized in the year indicated: Alliance
Growth Fund and Alliance Strategic Balanced Fund (each a series of The Alliance
Portfolios) (1987), and Alliance International Fund (1980). Prior to August 2,
1993, The Alliance Portfolios was known as The Equitable Funds, Growth Fund was
known as The Equitable Growth Fund and Strategic Balanced Fund was known as The
Equitable Balanced Fund. Prior to March 22, 1994, Income Builder Fund was known
as Alliance Multi-Market Income and Growth Trust, Inc.
It is anticipated that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal or state law. Shareholders
have available certain procedures for the removal of Directors.
A shareholder in a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares less any applicable CDSC. The
Funds are empowered to establish, without shareholder approval, additional
portfolios, which may have different investment objectives, and additional
classes of shares. If an additional portfolio or class were established in a
Fund, each share of the portfolio or class would normally be entitled to one
vote for all purposes. Generally, shares of each portfolio and class would vote
together as a single class on matters, such as the election of Directors, that
affect each portfolio and class in substantially the same manner. Class A, B, C
and Advisor Class shares have identical voting, dividend, liquidation and other
rights, except that each class bears its own transfer agency expenses, each of
Class A, Class B and Class C shares bears its own distribution expenses and
Class B shares and Advisor Class shares convert to Class A shares under certain
circumstances. Each class of shares votes separately with respect to a Fund's
Rule 12b-1 distribution plan and other matters for which separate class voting
is appropriate under applicable law. Shares are freely transferable, are
entitled to dividends as determined by the Directors and, in liquidation of a
Fund, are entitled to receive the net assets of the Fund. Since this Prospectus
sets forth information about all the Funds, it is theoretically possible that a
Fund might be liable for any materially inaccurate or incomplete disclosure in
this Prospectus concerning another Fund. Based on the advice of counsel,
however, the Funds believe that the potential liability of each Fund with
respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a Fund's
organization are discussed in its Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds. The transfer agency fee with respect to the
Class B shares will be higher than the transfer agency fee with respect to the
Class A shares or Class C shares.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for Class A, Class B and Class C shares. Such advertisements disclose
a Fund's average annual
55
<PAGE>
compounded total return for the periods prescribed by the Commission. A Fund's
total return for each such period is computed by finding, through the use of a
formula prescribed by the Commission, the average annual compounded rate of
return over the period that would equate an assumed initial amount invested to
the value of the investment at the end of the period. For purposes of computing
total return, income dividends and capital gains distributions paid on shares of
a Fund are assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases and redemptions of a Fund's shares are assumed
to have been paid.
Balanced Shares, Growth and Income Fund, Income Builder Fund, Real Estate
Investment Fund and Utility Income Fund may also advertise their "yield," which
is also computed separately for Class A, Class B and Class C shares. A Fund's
yield for any 30-day (or one-month) period is computed by dividing the net
investment income per share earned during such period by the maximum public
offering price per share on the last day of the period, and then annualizing
such 30-day (or one-month) yield in accordance with a formula prescribed by the
Commission which provides for compounding on a semi-annual basis.
Real Estate Investment Fund, Balanced Shares, Income Builder Fund, Utility
Income Fund and Growth and Income Fund may also state in sales literature an
"actual distribution rate" for each class which is computed in the same manner
as yield except that actual income dividends declared per share during the
period in question are substituted for net investment income per share. The
actual distribution rate is computed separately for Class A, Class B and Class C
shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
56
<PAGE>
================================================================================
ALLIANCE STOCK FUNDS
SUBSCRIPTION APPLICATION
================================================================================
The Alliance Fund
Growth Fund
Premier Growth Fund
Technology Fund
Quasar Fund
International Fund
Worldwide Privatization Fund
New Europe Fund
All-Asia Investment Fund
Global Small Cap Fund
Global Environment Fund
Strategic Balanced Fund
Balanced Shares
Income Builder Fund
Real Estate Investment Fund
Utility Income Fund
Growth & Income Fund
To Open Your New Alliance Account...
Please complete the application and mail
it to:
Alliance Fund Services, Inc.
P.o. Box 1520
Secaucus, New Jersey 07096-1520
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration (Required)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
-- Individuals, Joint Tenants, Transfer on Death and Gift/Transfer to a
Minor:
o Indicate your name(s) exactly as it appears on your social
security card.
-- Transfer on Death:
o Ensure that your state participates
-- Trust/Other:
o Indicate the name of the entity exactly as it appeared on the
notice you received from the IRS when your Employer
Identification number was assigned.
Section 2 Your Address (Required) Complete in full.
-- Non-Resident Alien:
o Indicate your permanent country of residence.
Section 3 Your Initial Investment (Required)
For each Fund in which you are investing: (1) Write the three digit Fund number
in the column titled 'Indicate three digit Fund number located below'. (2) Write
the dollar amount of your initial purchase in the column titled 'Indicate dollar
amount'.
(If you are eligible for a reduced sales charge, you must also complete Section
4F). (3) Check off a distribution
<PAGE>
option for your dividends. (4) Check off a distribution option for your capital
gains. All distributions (dividends and capital gains) will be reinvested into
your fund account unless you direct otherwise. If you want distributions sent
directly to your bank account, then you must complete Section 4D and attach a
preprinted, voided check for that account. If you want your distributions sent
to a third party you must complete Section 4E.
Section 4 Your Shareholder Options (Complete only those options you want)
A. Automatic Investment Plans (AIP) - You can make periodic investments into
any of your Alliance Funds in one of three ways. First, by a periodic
withdrawal ($25 minimum) directly from your bank account and invested into an
Alliance Fund. Second, you can direct your distributions (dividends and capital
gains) from one Alliance Fund into another Fund. Or third, you can
automatically exchange monthly ($25 minimum) shares of one Alliance Fund for
shares of another Fund. To elect one of these options, complete the appropriate
portion of Section 4A & 4D. If more than one dividend direction or monthly
exchange is desired, please call our Literature Center to obtain a Shareholder
Account Services Options Form for completion.
B. Telephone Transactions via EFT - Complete this option if you would like to
be able to transact via telephone between your fund account and your bank
account.
C. Systematic Withdrawal Plans (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be
made via Electronic Funds Transfer (EFT) to your bank account or by check.
D. Bank Information - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a preprinted, voided check of the account you wish to use to this
section of the application.
E. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person and/or
address other than those provided in section 1 or 2, complete this option.
Medallion Signature Guarantee is required if your account is not maintained by
a broker dealer.
F. Reduced Charges (Class A Only) - Complete if you would like to link fund
accounts that have combined balances that might exceed $100,000 so that future
purchases will receive discounts. Complete if you intend to purchase over
$100,000 within 13 months.
Section 5 Shareholder Authorization (Required)
All owners must sign. If it is a custodial, corporate, or trust account, the
custodian, an authorized officer, or the trustee respectively must sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At: (800)
221-5672.
================================================================================
For Literature Call: (800) 227-4618
================================================================================
<PAGE>
The Alliance Stock Funds Subscription Application
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print in Capital Letters and Mark Check Boxes Where Applicable)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
|_| Individual Account { |_| Male |_| Female } --or-- Joint Account --or--
|_| Transfer On Death { |_| Male |_| Female } --or-- Gift/Transfer to a Minor
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Owner or Custodian (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
(First Name) Joint Owner*, Transfer On Death Beneficiary or Minor's Name (MI) (Last Name)
|_|_|_|-|_|_|-|_|_|_|_| If Uniform Gift/Transfer
Social Security Number of Owner or Minor (required to open account) to Minor Account:
|_| |_| Minor's State of Residence
If Joint Tenants Account: *The Account will be registered
"Joint Tenants with right of Survivorship" unless you indicate
otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust --or-- |_| Corporation --or-- |_| Other_____________________________
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trustee if applicable (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity continued
|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|
Trust Dated (MM,DD,YYYY) Tax ID Number (required to open account)
|_| Employer ID Number --or-- |_| Social Security
Number
- --------------------------------------------------------------------------------------------------------------------------
2. YOUR ADDRESS
- --------------------------------------------------------------------------------------------------------------------------
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_| - |_|_|_| - |_|_|_|_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
</TABLE>
80000GEN-TASFApp-P1 Alliance Capital[LOGO](R)
1
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
3. Your Initial Investment The minimum investment is $250 per fund.
The maximum investment in Class B is $250,000; Class C is $1,000,000.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
I hereby subscribe for shares of the following Alliance Stock Fund(s) and elect distribution options as indicated.
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
- ------------------------------------------ -
Broker/Dealer Use Only: Wire Confirm # C Send my distributions in cash to the address I have provided in
|_|_|_|_|_|_|_|_| - Section 2. (Complete Section 4D for direct deposit to your bank
- ------------------------------------------ account. Complete Section 4E for payment to a third party)
D Direct my distributions to another Alliance Fund. Complete the
- appropriate portion of Section 4A to direct your distributions
(dividends and capital gains) to another Alliance Fund (the $250
minimum investment requirement applies to Funds into which
distributions are directed).
- ------------- ============== ======================== =============================
Indicate three Distributions Options
digit Fund "Check One"
number located Indicate Dollar Amount =============================
below Dividends Captital Gains
Make all ============== ======================== =============================
checks
payable to: |_|_|_| $ R C D R C D
Alliance
Funds |_|_|_| $ R C D R C D
- ------------- |_|_|_| $ R C D R C D
|_|_|_| $ R C D R C D
==========================
Total Investment $
==========================
- --------------------------------------------------------------------------------------------------------------------------
Alliance Stock Fund Names and Numbers
- --------------------------------------------------------------------------------------------------------------------------
============= ============== =================
Contingent
Initial Sales Deferred Sales Asset-Based Sales
Charge Charge Charge
A B C
============= ============== =================
Domestic The Alliance Fund 044 043 344
Growth Fund 031 001 331
Premier Growth Fund 078 079 378
Technology Fund 082 282 382
Quasar Fund 026 029 326
Global International Fund 040 041 340
Worldwide Privatization Fund 112 212 312
New Europe Fund 062 058 362
All-Asia Investment Fund 118 218 318
Global Small Cap Fund 045 048 345
Global Environment Fund 181 281 381
Total Return Balanced Shares 096 075 396
Strategic Balanced Fund 032 002 332
Income Builder Fund 111 211 311
Real Estate Investment Fund 110 210 310
Utility Income Fund 009 209 309
Growth & Income Fund 094 074 394
</TABLE>
80000GEN-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 fund transfer has been collected, normally 15
calendar days after the purchase date.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
80000GEN-TASFApp-P3
3
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. Your Shareholder Options (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
C. Systematic Withdrawal Plans (SWP)
In order to establish a SWP, you must reinvest all dividends and capital gains.
|_| I authorize Alliance to transact periodic redemptions from my fund account and send the proceeds to me as indicated
below.
1- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_| M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = Annually
3- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Please send my SWP proceeds to:
|_| My Address of Record (via check) |_| My checking account-via EFT (complete section 4D)
Your bank must be a member of the National
Automated Clearing House Association (NACHA) in
|_| The Payee and address specified in section 4E (via check) order for you to receive SWP proceeds directly
(Medallion Signature Guarantee required) into your bank account. Otherwise payment will be
made by check
D. Bank Information This bank account information will be used for:
|_| Distributions (Section 3) |_| Telephone Transactions (Section 4B)
|_| Automatic Investments (Section 4A) |_| Withdrawals (Section 4C)
- ---------------------------------------------------------------------------------------------------------------------------
Please Tape a Pre-printed Voided Check Here*
- ---------------------------------------------------------------------------------------------------------------------------
* The above services
cannot be established
[GRAPHIC OF BLANK CHECK WITH THE WORD VOID PRINTED ON IT.] without a pre-printed
voided check.
For EFT transactions,
the Fund requires
signatures of bank
account owners exactly
as they appear on bank
records. If the
registration at the
bank differs from that
on the Alliance mutual
fund, all parties must
sign in Section 5.
|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|
Your Bank's ABA Routing Number Your Bank Account Number
|_| Checking Account |_| Savings Account
</TABLE>
80000GEN-TASFApp-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>
80000GEN-TASFApp-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. This service can be enacted once
every 30 days.
|_| I do not elect the telephone exchange service.
|_| I do not elect the telephone redemption by check service.
By selecting any of the above telephone privileges, I agree that neither
the Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund
Services, Inc. or other Fund Agent will be liable for any loss, injury,
damage or expense as a result of acting upon telephone instructions
purporting to be on my behalf, that the Fund reasonably believes to be
genuine, and that neither the Fund nor any such party will be responsible
for the authenticity of such telephone instructions. I understand that any
or all of these privileges may be discontinued by me or the Fund at any
time. I understand and agree that the Fund reserves the right to refuse any
telephone instructions and that my investment dealer or agent reserves the
right to refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the
best of my knowledge and belief, I qualify as a foreign person as indicated
in Section 2.
I am of legal age and capacity and have received and read the Prospectus
and agree to its terms.
I CERTIFY UNDER PENALTY OF PERJURY THAT THE NUMBER SHOWN IN SECTION 1 OF
THIS FORM IS MY CORRECT TAX IDENTIFICATION NUMBER OR I AM WAITING FOR A
NUMBER TO BE ISSUED TO ME AND THAT I HAVE NOT BEEN NOTIFIED THAT THIS
ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION
OF THIS DOCUMENT OTHER THAN THE CERTIFICATE REQUIRED TO AVOID BACKUP
WITHHOLDING.
|__________________________________________________| |_______________________|
Signature Date
|__________________________________________________| |_______________________|
Signature Date
- ----------------------------------------------
Medallion Signautre Guarantee required if
completing Section 4E and your mutual fund is
not maintained by a broker dealer
800000GEN-TASFApp-P6 Alliance Capital [LOGO]
6
<PAGE>
<PAGE>
THE ALLIANCE
- --------------------------------------------------------------------------------
STOCK FUNDS
- --------------------------------------------------------------------------------
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
Advisor Class
February 2, 1998
Domestic Stock Funds Global Stock Funds
- -The Alliance Fund -Alliance International Fund
- -Alliance Growth Fund -Alliance Worldwide Privatization Fund
- -Alliance Premier Growth Fund -Alliance New Europe Fund
- -Alliance Technology Fund -Alliance All-Asia Investment Fund
- -Alliance Quasar Fund -Alliance Global Small Cap Fund
-Alliance Global Environment Fund
Total Return Funds
-Alliance Strategic Balanced Fund
-Alliance Balanced Shares
-Alliance Income Builder Fund
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
-Alliance Real Estate Investment Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Funds at a Glance ..................................................... 2
Expense Information ....................................................... 4
Financial Highlights ...................................................... 7
Glossary .................................................................. 10
Description of the Funds .................................................. 11
Investment Objectives and Policies ..................................... 11
Additional Investment Practices ........................................ 22
Certain Fundamental Investment Policies ................................ 29
Risk Considerations .................................................... 32
Purchase and Sale of Shares ............................................... 37
Management of the Funds ................................................... 39
Dividends, Distributions and Taxes ........................................ 42
Conversion Feature ........................................................ 44
General Information ....................................................... 54
</TABLE>
- --------------------------------------------------------------------------------
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
This Prospectus offers the Advisor Class shares of each Fund which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., each Fund's
principal underwriter, (ii) participants in self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that meet certain minimum standards
and (iii) certain other categories of investors described in the Prospectus,
including investment advisory clients of, and certain other persons associated
with, Alliance Capital Management L.P. and its affiliates or the Funds. See
"Purchase and Sale of Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO] Alliance (R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $217
billion in assets under management as of September 30, 1997. Alliance provides
investment management services to employee benefit plans for 28 of the FORTUNE
100 companies.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
Global Environment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
companies expected to benefit from advances or improvements in products,
processes or services intended to foster the protection of the environment.
Total Return Funds
Strategic Balanced Fund
Seeks . . . A high long-term total return by investing in a combination of
equity and debt securities.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks and fixed-income securities, and also in equity-type securities such as
warrants, preferred stocks and convertible debt instruments.
2
<PAGE>
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Income Builder Fund
Seeks . . . Both an attractive level of current income and long-term growth of
income and capital.
Invests Principally in . . . A non-diversified portfolio of fixed-income
securities and dividend-paying common stocks. Alliance currently expects to
continue to maintain approximately 60% of the Fund's net assets in fixed-income
securities and 40% in equity securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
Real Estate Investment Fund
Seeks . . . Total return on its assets from long-term growth of capital and from
income.
Invests Principally in . . . A diversified portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Distributions . . .
Balanced Shares, Income Builder Fund, Utility Income Fund, Growth and Income
Fund and Real Estate Investment Fund intend to make distributions quarterly to
shareholders. These distributions may include ordinary income and capital gain
(each of which is taxable) and a return of capital (which is generally
nontaxable). See "Dividends, Distributions and Taxes."
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives, such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. An investment in the Real Estate
Investment Fund is subject to certain risks associated with the direct ownership
of real estate in general, including possible declines in the value of real
estate, general and local economic conditions, environmental problems and
changes in interest rates. These risks are fully discussed in this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative. Each
Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares may be purchased at net asset
value without any initial or contingent deferred sales charges and are not
subject to ongoing distribution expenses. Advisor Class shares may be purchased
and held solely (i) through accounts established under a fee-based program,
sponsored and maintained by a registered broker-dealer or other financial
intermediary and approved by Alliance Fund Distributors, Inc. ("AFD"), each
Fund's principal underwriter, (ii) through a self-directed defined contribution
employee benefit plan (e.g., a 401(k) plan) that has at least 1,000 participants
or $25 million in assets, (iii) by investment advisory clients of, and certain
other persons associated with, Alliance and its affiliates or the Funds, and
(iv) through registered investment advisers or other financial intermediaries
who charge a management, consulting or other fee for their service and who
purchase shares through a broker or agent approved by AFD and clients of such
registered investment advisers or financial intermediaries whose accounts are
linked to the master account of such investment adviser or financial
intermediary on the books of such approved broker or agent. A shareholder's
Advisor Class shares will automatically convert to Class A shares of the same
Fund under certain circumstances. See "Conversion FeatureConversion to Class A
Shares." Generally, a fee-based program must charge an asset-based or other
similar fee and must invest at least $250,000 in Advisor Class shares of each
Fund in which the program invests in order to be approved by AFD for investment
in Advisor Class shares. For more detailed information about who may purchase
and hold Advisor Class shares see the Statement of Additional Information.
Fee-based and other programs through which Advisor Class shares may be purchased
may impose different requirements with respect to investment in Advisor Class
shares than described above. For detailed information about purchasing and
selling shares, see "Purchase and Sale of Shares."
[LOGO] Alliance (R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in the Advisor Class shares of each Fund and estimated annual
expenses for Advisor Class shares of each Fund. For each Fund, the "Examples" to
the right of the table below show the cumulative expenses attributable to a
hypothetical $1,000 investment in Advisor Class shares for the periods
specified.
<TABLE>
<CAPTION>
Advisor Class Shares
--------------------
<S> <C>
Maximum sales charge imposed on purchases ........... None
Sales charge imposed on dividend reinvestments ...... None
Deferred sales charge ............................... None
Exchange fee ........................................ None
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Examples
----------------------------------------- ------------------------------------------
Alliance Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .68% After 1 year $ 8
12b-1 fees None After 3 years $ 26
Other expenses (a) .15% After 5 years $ 46
---- After 10 years $103
Total fund
operating expenses (b) .83%
====
<CAPTION>
Growth Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .74% After 1 year $ 10
12b-1 fees None After 3 years $ 31
Other expenses (a) .24% After 5 years $ 54
---- After 10 years $120
Total fund
operating expenses (b) .98%
====
<CAPTION>
Premier Growth Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 13
12b-1 fees None After 3 years $ 40
Other expenses (a) .25% After 5 years $ 69
---- After 10 years $151
Total fund
operating expenses (b) 1.25%
====
<CAPTION>
Technology Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees (g) 1.04% After 1 year $ 14
12b-1 fees None After 3 years $ 44
Other expenses (a) .35% After 5 years $ 76
---- After 10 years $167
Total fund
operating expenses (b) 1.39%
====
<CAPTION>
Quasar Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees (g) 1.16% After 1 year $ 16
12b-1 fees None After 3 years $ 50
Other expenses (a) .42% After 5 years $ 86
---- After 10 years $188
Total fund
operating expenses (b) 1.58%
====
<CAPTION>
International Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .85% After 1 year $ 16
12b-1 fees None After 3 years $ 48
Other expenses (a) .68% After 5 years $ 83
---- After 10 years $182
Total fund
operating expenses (b) (e) 1.53%
====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes and the discussion following these tables on page
6.
4
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
------------------------------------------- ------------------------------------------
Worldwide Privatization Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 20
12b-1 fees None After 3 years $ 62
Other expenses (a) .96% After 5 years $106
---- After 10 years $229
Total fund
operating expenses (b) 1.96%
====
<CAPTION>
New Europe Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.06% After 1 year $ 17
12b-1 fees None After 3 years $ 54
Other expenses (a) .65% After 5 years $ 93
---- After 10 years $202
Total fund
operating expenses (b) 1.71%
====
<CAPTION>
All-Asia Investment Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .65% After 1 year $ 18
12b-1 fees None After 3 years $ 56
Other expenses After 5 years $ 96
Administration fees After 10 years $209
(after waiver) (d) .00%
Other operating expenses (a) 1.13%
----
Total fund
operating expenses (b) (e) 1.78%
====
<CAPTION>
Global Small Cap Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 21
12b-1 fees None After 3 years $ 64
Other expenses (a) 1.05% After 5 years $110
---- After 10 years $238
Total fund
operating expenses (b) 2.05%
====
<CAPTION>
Global Environment Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.10% After 1 year $ 24
12b-1 fees None After 3 years $ 75
Other expenses (a) 1.29% After 5 years $128
---- After 10 year $273
Total fund
operating expenses (b) 2.39%
====
<CAPTION>
Strategic Balanced Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .09% After 1 year $ 11
12b-1 fees None After 3 years $ 35
Other expenses (a) 1.01% After 5 years $ 61
---- After 10 years $134
Total fund
operating expenses (b) (e) 1.10%
====
<CAPTION>
Balanced Shares Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .63% After 1 year $ 13
12b-1 fees None After 3 years $ 41
Other expenses (a) .67% After 5 years $ 71
---- After 10 years $157
Total fund
operating expenses (b) 1.30%
====
<CAPTION>
Income Builder Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .75% After 1 year $ 17
12b-1 fees None After 3 years $ 52
Other expenses (a) .93% After 5 years $ 89
After 10 years $188
Total fund
operating expenses (b) 1.68%
====
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
------------------------------------------- ------------------------------------------
Utility Income Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .00% After 1 year $ 12
12b-1 fees None After 3 years $ 38
Other expenses (a) 1.20% After 5 years $ 66
---- After 10 years $145
Total fund
operating expenses (b) (f) 1.20%
====
<CAPTION>
Growth and Income Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .49% After 1 year $ 7
12b-1 fees None After 3 years $ 23
Other expenses (a) .22% After 5 years $ 40
---- After 10 years $ 88
Total fund
operating expenses (b) .71%
====
<CAPTION>
Real Estate Investment Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .90% After 1 year $ 15
12b-1 fees None After 3 years $ 46
Other expenses (a) .55% After 5 years $ 79
---- After 10 years $174
Total fund
operating expenses (b) 1.45%
====
</TABLE>
- --------------------------------------------------------------------------------
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance. The expenses shown do not include
the application of credits that reduce Fund expenses.
(b) The expense information does not reflect any charges or expenses imposed by
your financial representative or your employee benefit plan.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be 1.00% for All-Asia Investment Fund and .75% for Strategic Balanced
Fund and Utility Income Fund and 1.01% for International Fund.
International Fund's fee, absent the voluntary fee waiver, is calculated
based on average daily net assets. Maximum contractual rate, based on
quarter-end net assets, is 1.00%.
(d) Net of voluntary fee waiver. Absent such fee waiver, administration fees
would have been .15%. Reflects the fees payable by All-Asia Investment Fund
to Alliance pursuant to an administration agreement.
(e) Net of voluntary fee waivers and expense reimbursements. Absent such
waivers and reimbursements, total fund operating expenses for Strategic
Balanced Fund would have been 2.35%, total fund operating expenses for
All-Asia Investment Fund would have been 2.28% annualized and total fund
operating expenses for International Fund would have been 1.69%,
annualized.
(f) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 3.29%.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund and Technology
Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. For International Fund, Worldwide Privatization Fund, New Europe
Fund, Global Environment Fund, Global Small Cap Fund, Strategic Balanced Fund,
Balanced Shares and Real Estate Investment Fund, "Other Expenses" are based on
estimated amounts for those Funds' current fiscal year. "Management fees" for
International Fund and All-Asia Investment Fund and "Administration fees" for
All-Asia Investment Fund have been restated to reflect current voluntary fee
waivers. "Other Expenses" for Global Environment Fund are based on estimated
amounts for its current fiscal year. The Examples set forth above assume
reinvestment of all dividends and distributions and utilize a 5% annual rate of
return as mandated by Commission regulations. The Examples should not be
considered representative of future expenses; actual expenses may be greater or
less than those shown.
6
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables on the following pages present per share income and capital changes
for an Advisor Class share outstanding throughout each period indicated. Except
as otherwise indicated, information for Alliance Fund, Growth Fund, Premier
Growth Fund, Strategic Balanced Fund, Balanced Shares, Utility Income Fund,
Worldwide Privatization Fund and Growth and Income Fund has been audited by
Price Waterhouse LLP, the independent accountants for each such Fund, and for
All-Asia Investment Fund, Technology Fund, Quasar Fund, International Fund, New
Europe Fund, Global Small Cap Fund, Real Estate Investment Fund and Income
Builder Fund by Ernst & Young LLP, the independent auditors for each such Fund.
A report of Price Waterhouse LLP or Ernst & Young LLP, as the case may be, on
the information with respect to each Fund, appears in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
included in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting
Alliance Fund Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Prospectus.
7
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase Distributions
Value Unrealized (Decrease) In Dividends From In Excess Of
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Income
--------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Fund
Advisor Class
Year ended 11/30/97 $ 7.71 $ (.02)(b) $ 2.10 $ 2.08 $ (.04) $ 0.00
10/2/96+ to 11/30/96 6.99 0.00 .72 .72 0.00 0.00
Growth Fund
Advisor Class
Year ended 10/31/97 $ 34.91 $ (.05)(b) $ 10.25 $ 10.20 $ 0.00 $ 0.00
10/2/96+ to 10/31/96 34.14 0.00(b) .77 .77 0.00 0.00
Premier Growth Fund
Advisor Class
Year ended 11/30/97 $ 17.99 $ (.06)(b) $ 5.25 $ 5.19 $ 0.00 $ 0.00
10/2/96+ to 11/30/96 15.94 (.01)(b) 2.06 2.05 0.00 0.00
Technology Fund
Advisor Class
Year ended 11/30/97 $ 51.17 $ (.45)(b) $ 4.33 $ 3.88 $ 0.00 $ 0.00
10/2/96+ to 11/30/96 47.32 (.05)(b) 3.90 3.85 0.00 0.00
Quasar Fund
Advisor Class
10/2/96+ to 9/30/97 $ 27.82 $ (.17)(b) $ 6.88 $ 6.71 $ 0.00 $ 0.00
International Fund
Advisor Class
10/2/96+ to 6/30/97 $ 17.96 $ .16(b) $ 1.78 $ 1.94 $ (.15) $ 0.00
Worldwide Privatization Fund
Advisor Class
10/2/96+ to 6/30/97 $ 12.14 $ .18(b) $ 2.52 $ 2.70 $ (.19) $ 0.00
New Europe Fund
Advisor Class
10/2/96+ to 7/31/97 $ 16.25 $ .11(b) $ 3.76 $ 3.87 $ (.09) $ (.14)
All-Asia Investment Fund
Advisor Class
Year ended 10/31/97 $ 11.04 $ (.15)(b)(c) $ (2.99) $ (3.14) $ 0.00 $ 0.00
10/2/96+ to 10/31/96 11.65 0.00(c) (.61) (.61) 0.00 0.00
Global Small Cap Fund
Advisor Class
10/2/96+ to 7/31/97 $ 12.56 $ (.08)(b) $ 1.97 $ 1.89 $ 0.00 $ 0.00
Strategic Balanced Fund
Advisor Class
10/2/96+ to 7/31/97 $ 19.49 $ .42(b)(c) $ (.12) $ .30 $ 0.00 $ 0.00
Balanced Shares
Advisor Class
10/2/96+ to 7/31/97 $ 14.79 $ .23 $ 3.22 $ 3.45 $ (.27) $ 0.00
Income Builder Fund
Advisor Class
10/2/96+ to 10/31/97 $ 11.57 $ .61(b) $ 1.53 $ 2.14 $ (.54) $ 0.00
Utility Income Fund
Advisor Class
Year ended 11/30/97 $ 10.59 $ .36(b)(c) $ 2.04 $ 2.40 $ (.37) $ 0.00
10/2/96+ to 11/30/96 9.95 .03(b)(c) .61 .64 0.00 0.00
Growth and Income Fund
Advisor Class
Year ended 10/31/97 $ 3.00 $ .05(b) $ .87 $ .92 $ (0.06) $ 0.00
10/2/96+ to 10/31/96 2.97 0.00 .03 .03 0.00 0.00
Real Estate Investment Fund
Advisor Class
10/1/96+ to 8/31/97 $ 10.00 $ .35(b) $ 2.88 $ 3.23 $ (.41)(f) $ 0.00
</TABLE>
- --------------------------------------------------------------------------------
+ Commencement of distribution.
* Annualized.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment return calculated for a period of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and expense reimbursement.
(d) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent fiscal year, their expense
ratios, without giving effect to the expense offset arrangements described
in (e) below, would have been as follows:
<TABLE>
<CAPTION>
1996 1997 1997
<S> <C> <C> <C> <C>
All-Asia Investment Fund Strategic Balanced
Advisor Class 5.54%# 3.43 Advisor Class 2.35%#
Utility Income Fund
Advisor Class 3.48%# 3.29
Real Estate Investment Fund
Advisor Class -- 1.47%#
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Distributions Dividends Value Return Based Period Expenses Income (Loss) Average
From Net And End Of on Net Asset (000's To Average To Average Portfolio Commission
Realized Gains Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate
- -------------- ------------- --------- ------------ ---------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (1.06) $ (1.10) $ 8.69 32.00% $ 10,275 .83% (.21)% 158% $0.0571
0.00 0.00 7.71 10.30 1,083 .89* 0.38* 80 0.0646
$ (1.03) $ (1.03) $ 44.08 29.92% $101,205 .98%(e) (.12)% 48% $0.0562
0.00 0.00 34.91 2.26 946 1.26* 0.50* 46 0.0584
$ (1.08) $ (1.08) $ 22.10 30.98% $ 53,459 1.25% (.28)% 76% $0.0594
0.00 0.00 17.99 12.86 1,922 1.50* (.48)* 95 0.0651
$ (.42) $ (.42) $ 54.63 7.65% $167,120 1.39%(e) (.81)% 51% $0.0564
0.00 0.00 51.17 8.14 566 1.75* (1.21)* 30 0.0612
$ (4.11) $ (4.11) $ 30.42 28.47% $ 62,455 1.58% (.74)% 135% $0.0536
$ (1.08) $ (1.23) $ 18.67 11.57% $ 8,697 1.69%* 1.47%* 94% $0.0363
$ (1.42) $ (1.61) $ 13.23 25.24% $ 374 1.96%* 2.97%* 48% $0.0132
$ (1.32) $ (1.55) $ 18.57 25.76% $ 4,130 1.71%* .77%* 89% $0.0569
$ (.34) $ (.34) $ 7.56 (29.42)% $ 1,338 3.21%(d) (1.51)% 70% $0.0248
0.00 0.00 11.04 (5.24) 27 3.07*(d) 1.63* 66 0.0280
$ (1.56) $ (1.56) $ 12.89 17.08% $ 333 2.05%*(e) (.84)%* 129% $0.0364
$ 0.00 $ 0.00 $ 19.79 1.54% $ 50 1.10%(d)(e)* 3.40%* 170% $0.0395
$ (1.80) $ (2.07) $ 16.17 25.96% $ 1,565 1.30%*(e) 2.15%* 207% $0.0552
$ (.61) $ (1.15) $ 12.56 19.62% $ 80 1.68% 4.55% 159% $0.0513
$ (.13) $ (.50) $ 12.49 23.57% $ 42 1.20% 3.29% 37% $0.0442
0.00 0.00 10.59 6.33 33 1.20*(d) 4.02* 98 0.0536
$ (.38) $ (.44) $ 3.48 33.61% $ 3,207 .71%(e) 1.42% 88% $ .0589
0.00 0.00 3.00 1.01 87 0.37* 3.40* 88 0.0625
$ 0.00 $ (.41) $ 12.82 32.72% $ 2,313 1.45%*(d)(e) 3.07%* 20% $0.0518
</TABLE>
- --------------------------------------------------------------------------------
(e) Amounts do not affect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offsets arrangements the
rate of expense to average net assets assuming the assumption and/or waived
reimbursement of expenses described in note (d) above would have been as
follows:
<TABLE>
<CAPTION>
1997 1997 1997
---- ---- ----
<S> <C> <C> <C> <C> <C>
International Fund New Europe Fund Growth and Income Fund
Advisor Class 1.69%# Advisor Class 1.71%# Advisor Class .70%
Global Small Cap Fund Balanced Shares Fund Growth Fund
Advisor Class 2.04%# Advisor Class 1.29%# Advisor Class .96%
Strategic Balanced Fund Real Estate Fund Technology Fund
Advisor Class 1.10%# Advisor Class 1.44%# Advisor Class 1.38%
-------------
# annualized
</TABLE>
(f) Distributions from net investment income include a tax return of capital of
$.03.
9
<PAGE>
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus.
Equity securities, except as noted otherwise, are (i) common stocks, partnership
interests, business trust shares and other equity or ownership interests in
business enterprises, and (ii) securities convertible into, and rights and
warrants to subscribe for the purchase of, such stocks, shares and interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Eligible Companies are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
Environmental Companies are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
Beneficiary Companies are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and healthier
environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous waste.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Exchange is the New York Stock Exchange.
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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 securities. See "Risk ConsiderationsSecurities
Ratings" and "--Investment in Lower-Rated Fixed-Income Securities." The Fund
generally will not invest in securities rated at the time of purchase below Caa-
by Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. If the credit rating of a
security held by the Fund falls below its rating at the time of purchase (or
Alliance determines that the quality of such security has so deteriorated), the
Fund may continue to hold the security if such investment is considered
appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements of up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40 companies will be represented in the Fund's
portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity
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securities of which are traded principally in the U.S. Alliance's investment
strategy for the Fund emphasizes stock selection and investment in the
securities of a limited number of issuers. Alliance relies heavily upon the
fundamental analysis and research of its large internal research staff, which
generally follows a primary research universe of more than 600 companies that
have strong management, superior industry positions, excellent balance sheets
and superior earnings growth prospects. An emphasis is placed on identifying
companies whose substantially above average prospective earnings growth is not
fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options; (ii)
invest up to 10% of its total assets in warrants; (iii) invest in restricted
securities and in other assets having no ready market if as a result no more
than 10% of the Fund's net assets are invested in such securities and assets;
(iv) lend portfolio securities equal in value to not more than 30% of the Fund's
total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities,
Alliance considers the economic and political outlook, the values of specific
securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10%
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<PAGE>
of its total assets may be invested in such securities or assets; (ii) make
short sales of securities "against the box," but not more than 15% of its net
assets may be deposited on short sales; and (iii) write call options and
purchase and sell put and call options written by others. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
GLOBAL STOCK FUNDS
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. In this
regard, at December 31, 1997, approximately 20% of the Fund's assets were
invested in securities of Japanese issuers. The Fund may invest in companies,
wherever organized, that Alliance judges have their principal activities and
interests outside the U.S. These companies may be located in developing
countries, which involves exposure to economic structures that are generally
less diverse and mature, and to political systems which can be expected to have
less stability, than those of developed countries. The Fund currently does not
intend to invest more than 10% of its total assets in companies in, or
governments of, developing countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or
over-the-counter; (v) lend portfolio securities equal in value to not more than
30% of its total assets; and (vi) enter into repurchase agreements of up to
seven days' duration, provided that not more than 10% of the Fund's total assets
would be so invested. For additional information on the use, risks and costs of
these policies and practices see "Additional Investment Practices."
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy, and the
Fund will thus emphasize investments in such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through
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privatization a government or state divests or transfers all or a portion of its
interest in a state enterprise to some form of private ownership. Governments
and states with established economies, including France, Great Britain, Germany
and Italy, and those with developing economies, including Argentina, Mexico,
Chile, Indonesia, Malaysia, Poland and Hungary, are engaged in privatizations.
The Fund will invest in any country believed to present attractive investment
opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its investments in
any industry, it is permitted to invest more than 25% of its total assets in
issuers whose primary business activity is that of national commercial banking.
Prior to so concentrating, however, the Fund's Directors must determine that its
ability to achieve its investment objective would be adversely affected if it
were not permitted to concentrate. The staff of the Commission is of the view
that registered investment companies may not, absent shareholder approval,
change between concentration and non-concentration in a single industry. The
Fund disagrees with the staff's position but has undertaken that it will not
concentrate in the securities of national commercial banks until, if ever, the
issue is resolved. If the Fund were to invest more than 25% of its total assets
in national commercial banks, the Fund's performance could be significantly
influenced by events or conditions affecting this industry, which is subject to,
among other things, increases in interest rates and deteriorations in general
economic conditions, and the Fund's investments may be subject to greater risk
and market fluctuation than if its portfolio represented a broader range of
investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations--Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain
a non-convertible security that is downgraded below C or determined by Alliance
to have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter in forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund will invest in companies that Alliance
believes possess rapid growth potential. Thus, the Fund will emphasize
investments in larger, established companies, but will also invest in smaller,
emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although the Fund will not invest more than 20% of its total assets in
issuers based therein, or more than 10% of its total assets in issuers based in
any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country, at times 25% or more of its assets may be
invested in issuers located in a single country. During such times, the Fund
would
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be subject to a correspondingly greater risk of loss due to adverse political or
regulatory developments, or an economic downturn, within that country. In this
regard, at December 31, 1997, approximately 24% of the Fund's assets were
invested in securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a
non-diversified investment company whose investment objective is to seek
long-term capital appreciation. In seeking to achieve its investment objective,
the Fund will invest at least 65% of its total assets in equity securities (for
the purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, but less than 50%, of its
assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and India have recently relaxed investment
restrictions and Vietnamese direct investments have recently become available to
U.S. investors. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings," "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of Additional Information for
a description of such ratings. The Fund will not retain a security that is
downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and
"semi-governmental securities;" (iv) invest up to 25% of its net assets in
equity-linked debt securities with the objective of realizing capital
appreciation; (v) invest up to 25% of its net assets in loans and other direct
debt instruments; (vi) write
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covered put and call options on securities of the types in which it is permitted
to invest and on exchange-traded index options; (vii) enter into contracts for
the purchase or sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indices, including any index of U.S.
Government securities, securities issued by foreign government entities, or
common stock and may purchase and write options on future contracts; (viii)
purchase and write put and call options on foreign currencies for hedging
purposes; (ix) purchase or sell forward contracts; (x) enter into interest rate
swaps and purchase or sell interest rate caps and floors; (xi) enter into
forward commitments for the purchase or sale of securities; (xii) enter into
standby commitment agreements; (xiii) enter into currency swaps for hedging
purposes; (xiv) enter into repurchase agreements pertaining to U.S. Government
securities with member banks of the Federal Reserve System or primary dealers in
such securities; (xv) make short sales of securities or maintain a short
position, in each case only if "against the box;" and (xvi) make secured loans
of its portfolio securities not in excess of 30% of its total assets to entities
with which it can enter into repurchase agreements. For additional information
on the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1.5 billion. Because
the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization issuers, and these issuers are located in at least
three countries, one of which may be the U.S. Up to 35% of the Fund's total
assets may be invested in securities of companies whose market capitalizations
exceed the Fund's size standard. The Fund's portfolio securities may be listed
on a U.S. or foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Alliance Global Environment Fund
Alliance Global Environment Fund, Inc. ("Global Environment Fund") is a
non-diversified investment company that seeks long-term capital appreciation
through investment in equity securities of Eligible Companies. For purposes of
the Fund's investment objective and investment policies, "equity securities" are
common stocks (but not preferred stocks), rights or warrants to subscribe for or
purchase common stocks, and preferred stocks or debt securities that are
convertible into common stocks without the payment of any further consideration.
Until October 3, 1997, the Fund operated as a closed-end investment company, and
its common stock (which then comprised a single class) was listed on the
Exchange.
The Fund invests in two categories of Eligible Companies--"Environmental
Companies" and "Beneficiary Companies." Environmental Companies are those that
have a principal business involving the sale of systems or services intended to
foster environmental protection, such as waste treatment and disposal,
remediation, air pollution control and recycling. Under normal circumstances,
the Fund invests at least 65% of its total assets in equity securities of
Environmental Companies. Beneficiary Companies are those whose principal
businesses lie outside the environmental sector but nevertheless anticipate
environmental regulations or consumer preferences through the development of new
products, processes or services that are intended to contribute to a cleaner and
healthier environment. Examples of such companies could be companies that
anticipate the demand for plastic substitutes, aerosol substitutes, alternative
fuels and processes that generate less hazardous waste. In this regard, the Fund
may invest in an issuer with a broadly diversified business only a part of which
provides such products, processes or services, when Alliance believes that these
products, processes or services will yield a competitive advantage that
significantly enhances the issuer's growth prospects. As a matter of fundamental
policy, the Fund will, under normal circumstances,
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invest substantially all of its total assets in equity securities of Eligible
Companies.
A major premise of the Fund's investment approach is that environmental concerns
will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous waste treatment and disposal,
pulp and paper recycling, waste-to-energy alternatives, biodegradable cartons,
packages, plastics and other products, remedial projects and emergency cleanup
efforts, manufacture of environmental supplies and equipment, the achievement of
purer air, groundwater and foods and the detection, evaluation and treatment of
both existing and potential environmental problems including, among others, air
pollution and acid rain.
The environmental services industry is generally positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded substantial
opportunities for growth. Beneficiary Companies may also derive an advantage to
the extent that they have anticipated environmental regulation and are therefore
at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena that are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies which protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund spreads investment risk among the capital markets
of a number of countries and invests in equity securities of companies based in
at least three, and normally considerably more, such countries. The percentage
of the Fund's assets invested in securities of companies in a particular country
or denominated in a particular currency will vary in accordance with Alliance's
assessment of the appreciation potential of such securities and the strength of
that currency. As of December 31, 1997, approximately 86% of the Fund's net
assets were invested in equity securities of U.S. companies.
The Fund may also: (i) invest up to 20% of its total assets in warrants to
purchase equity securities to the extent consistent with its investment
objective; (ii) invest in depositary receipts; (iii) purchase and write put and
call options on foreign currencies for hedging purposes; (iv) enter into forward
foreign currency transactions for hedging purposes; (v) invest in currency
futures and options on such futures for hedging purposes; and (vi) make secured
loans of its portfolio securities not in excess of 30% of its total assets. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
TOTAL RETURN FUNDS
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current income.
Alliance Strategic Balanced Fund
Alliance Strategic Balanced Fund ("Strategic Balanced Fund") is a diversified
investment company that seeks a high long-term total return by investing in a
combination of equity and debt securities. The portion of the Fund's assets
invested in each type of security varies in accordance with economic conditions,
the general level of common stock prices, interest rates and other relevant
considerations, including the risks associated with each investment medium. The
Fund's investment objective is not fundamental.
The Fund's equity securities will generally consist of dividend-paying common
stocks and other equity securities of companies with favorable earnings outlooks
and long-term growth rates that Alliance expects will exceed that of the U.S.
economy. The Fund's debt securities may include U.S. Government securities and
securities issued by private corporations. The Fund may also invest in
mortgage-backed securities, adjustable rate securities, asset-backed securities
and so-called "zero-coupon" bonds and "payment-in-kind" bonds.
As a fundamental policy, the Fund will invest at least 25% of its total assets
in fixed-income securities, which for this purpose include debt securities,
preferred stocks and that portion of the value of convertible securities that is
attributable to the fixed-income characteristics of those securities.
The Fund's debt securities will generally be of investment grade. See "Risk
Considerations--Securities Ratings" and "Investment in Lower-Rated Fixed-Income
Securities." In the event that the rating of any debt securities held by the
Fund falls below investment grade, the Fund will not be obligated to dispose of
such obligations and may continue to hold them if considered appropriate under
the circumstances.
The Fund may also: (i) invest in foreign securities, although the Fund will not
generally invest more than 15% of its total assets in foreign securities; (ii)
invest, without regard to this 15% limit, in Eurodollar CDs, which are
dollar-denominated certificates of deposit issued by foreign branches of U.S.
banks that are not insured by any agency or instrumentality of the U.S.
Government; (iii) write covered call and put options on securities it owns or in
which it may invest; (iv) buy and sell put and call options and buy and sell
combinations of put and
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call options on the same underlying securities; (v) lend portfolio securities
amounting to not more than 25% of its total assets; (vi) enter into repurchase
agreements on up to 25% of its total assets; (vii) purchase and sell securities
on a forward commitment basis; (viii) buy or sell foreign currencies, options on
foreign currencies, foreign currency futures contracts (and related options) and
deal in forward foreign exchange contracts; (ix) buy and sell stock index
futures contracts and buy and sell options on those contracts and on stock
indices; (x) purchase and sell futures contracts, options thereon and options
with respect to U.S. Treasury securities; and (xi) invest in securities that are
not publicly traded, including Rule 144A securities. For additional information
on the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds, senior debt
securities and preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market outlooks. The Fund
may invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above. See "Risk Considerations--Foreign Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Income Builder Fund
Alliance Income Builder Fund, Inc. ("Income Builder Fund") is a non-diversified
investment company that seeks an attractive level of current income and
long-term growth of income and capital by investing principally in fixed-income
securities and dividend-paying common stocks. Its investments in equity
securities emphasize common stocks of companies with a historical or projected
pattern of paying rising dividends. Normally, at least 65% of the Fund's total
assets are invested in income-producing securities. The Fund may vary the
percentage of assets invested in any one type of security based upon Alliance's
evaluation as to the appropriate portfolio structure for achieving the Fund's
investment objective, although Alliance currently maintains approximately 60% of
the Fund's net assets in fixed-income securities and 40% in equity securities.
The Fund may invest in fixed-income securities of domestic and foreign issuers,
including U.S. Government securities and repurchase agreements pertaining
thereto, corporate fixed-income securities of U.S. issuers, qualifying bank
deposits and prime commercial paper.
The Fund may maintain up to 35% of its net assets in lower-rated securities. See
"Risk Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a non-convertible security
that is downgraded below CCC or determined by Alliance to have undergone similar
credit quality deterioration following purchase.
Foreign securities in which the Fund invests may include fixed-income securities
of foreign corporate and governmental issuers, denominated in U.S. Dollars, and
equity securities of foreign corporate issuers, denominated in foreign
currencies or in U.S. Dollars. The Fund will not invest more than 10% of its net
assets in equity securities of foreign issuers nor more than 15% of its total
assets in issuers of any one foreign country. See "Risk Considerations--Foreign
Investment."
The Fund may also: (i) invest up to 5% of its net assets in rights or warrants;
(ii) invest in depositary receipts and U.S. Dollar denominated securities issued
by supranational entities; (iii) write covered put and call options and purchase
put and call options on securities of the types in which it is permitted to
invest that are exchange-traded; (iv) purchase and sell exchange-traded options
on any securities index composed of the types of securities in which it may
invest; (v) enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, foreign government
securities, corporate fixed income securities, or common stock, and purchase and
write options on future contracts; (vi) purchase and write put and call options
on foreign currencies and enter into forward contracts for hedging purposes;
(vii) enter into interest rate swaps and purchase or sell interest rate caps and
floors; (viii) enter into forward commitments for the purchase or sale of
securities; (ix) enter into standby commitment agreements; (x) enter into
repurchase agreements pertaining to U.S. Government securities with member banks
of the Federal Reserve System or primary dealers in such securities; (xi) make
short sales of securities or maintain a short position as described below under
"Additional Investment Policies and PracticesShort Sales;" and (xii) make
secured loans of its portfolio securities not in excess of 20% of its total
assets to brokers, dealers and financial institutions. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and
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capital appreciation by investing primarily in equity and fixed-income
securities of companies in the utilities industry. The Fund may invest in
securities of both U.S. and foreign issuers, although no more than 15% of the
Fund's total assets will be invested in issuers in any one foreign country. The
utilities industry consists of companies engaged in (i) the manufacture,
production, generation, provision, transmission, sale and distribution of gas
and electric energy, and communications equipment and services, including
telephone, telegraph, satellite, microwave and other companies providing
communication facilities for the public, or (ii) the provision of other utility
or utility-related goods and services, including, but not limited to, entities
engaged in water provision, cogeneration, waste disposal system provision, solid
waste electric generation, independent power producers and non-utility
generators. The Fund is designed to take advantage of the characteristics and
historical performance of securities of utility companies, many of which pay
regular dividends and increase their common stock dividends over time. As a
fundamental policy, the Fund normally invests at least 65% of its total assets
in securities of companies in the utilities industry. The Fund considers a
company to be in the utilities industry if, during the most recent twelve-month
period, at least 50% of the company's gross revenues, on a consolidated basis,
were derived from its utilities activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a security that is downgraded
below B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition and regulatory
changes. There can also be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval for
rate increases. In addition, because many foreign utility companies use fuels
that cause more pollution than those used in the U.S., such utilities may yet be
required to invest in pollution control equipment. Foreign utility regulatory
systems vary from country to country and may evolve in ways different from
regulation in the U.S. The percentage of the Fund's assets invested in issuers
of particular countries will vary. See "Risk Considerations--Foreign
Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate
fixed-income securities of domestic issuers, corporate fixed-income securities
of foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
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The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter in forward commitments for the purchase
or sale of securities; (xi) enter into standby commitment agreements; (xii)
enter into repurchase agreements pertaining to U.S. Government securities with
member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices--Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund has restricted its investments in securities in this category to
issues of high quality. The Fund may also purchase and sell financial forward
and futures contracts and options thereon for hedging purposes. For additional
information on the use, rights and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund, Inc. ("Real Estate Investment Fund") is a
diversified investment company that seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of real estate investment trusts ("REITs") and
other real estate industry companies. A "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or interests therein. The
equity securities in which the Fund will invest for this purpose consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock or convertible securities ("Real
Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These instruments are
described below. The risks associated with the Fund's transactions in REMICs,
CMOs and other types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk. See "Risk Considerations" for a description of these and other
risks.
As to any investment in Real Estate Equity Securities, Alliance's analysis will
focus on determining the degree to which the company involved can achieve
sustainable growth in cash flow and dividend paying capability. Alliance
believes that the primary determinant of this capability is the economic
viability of property markets in which the company operates and that the
secondary determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will purchase
Real Estate Equity Securities when, in the judgment of Alliance, their market
price does not adequately reflect this potential. In making this determination,
Alliance will take into account fundamental trends in underlying property
markets as determined by proprietary models, site visits conducted by
individuals knowledgeable in local real estate markets, price-earnings ratios
(as defined for real estate companies), cash flow growth and stability, the
relationship between asset value and market price of the securities, dividend
payment history, and such other factors which Alliance may determine from time
to time to be relevant. Alliance will attempt to purchase for the Fund Real
Estate Equity Securities of companies whose underlying portfolios are
diversified geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly
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in real property and derive income primarily from the collection of rents.
Equity REITs can also realize capital gains by selling properties that have
appreciated in value. Mortgage REITs invest the majority of their assets in real
estate mortgages and derive income from the collection of interest payments.
Similar to investment companies such as the Fund, REITs are not taxed on income
distributed to shareholders provided they comply with several requirements of
the Code. The Fund will indirectly bear its proportionate share of expenses
incurred by REITs in which the Fund invests in addition to the expenses incurred
directly by the Fund.
Investment Process for Real Estate Equity Securities. The Fund's investment
strategy with respect to Real Estate Equity Securities is based on the premise
that property market fundamentals are the primary determinant of growth
underlying the performance of Real Estate Equity Securities. Value added
management further distinguishes the most attractive Real Estate Equity
Securities. The Fund's research and investment process is designed to identify
those companies with strong property fundamentals and strong management teams.
This process is comprised of real estate market research, specific property
inspection and securities analysis. Alliance believes that this process will
result in a portfolio that will consist of Real Estate Equity Securities of
companies that own assets in the most desirable markets across the country,
diversified geographically and by property type.
In implementing the Fund's research and investment process, Alliance will avail
itself of the consulting services of CB Commercial Real Estate Group, Inc.
("CBC"), a publicly held company and the largest real estate services company in
the United States, comprised of real estate brokerage, property and facilities
management, and real estate finance and investment advisory activities (CBC in
August of 1997 acquired Koll Management Services ("Koll"), which previously
provided these consulting services to Alliance). In 1996, CBC (and Koll, on a
combined basis) completed 25,000 sale and lease transactions, managed over 4,100
client properties, created over $3.5 billion in mortgage originations, and
completed over 2,600 appraisal and consulting assignments. In addition, they
advised and managed for institutions over $4 billion in real estate investments.
As consultant to Alliance, CBC provides access to its proprietary model,
REIToScore, that analyzes the approximately 12,000 properties owned by these 130
companies. Using proprietary databases and algorithms, CBC analyzes local market
rent, expense, and occupancy trends, market specific transaction pricing,
demographic and economic trends, and leading indicators of real estate supply
such as building permits. Over 650 asset-type specific geographic markets are
analyzed and ranked on a relative scale by CBC in compiling its REIToScore
database. The relative attractiveness of these real estate industry companies is
similarly ranked based on the composite rankings of the properties they own. See
"Management of the Funds--Consultant to Advisor" for more information about CBC.
The universe of property-owning real estate industry firms consists of
approximately 130 companies of sufficient size and quality to merit
consideration for investment by the Fund. Once the universe of real estate
industry companies has been distilled through the market research process, CBC's
local market presence provides the capability to perform site specific
inspections of key properties. This analysis examines specific location,
condition, and sub-market trends. CBC's use of locally based real estate
professionals provides Alliance with a window on the operations of the portfolio
companies as information can immediately be put in the context of local market
events. Only those companies whose specific property portfolios reflect the
promise of their general markets will be considered for initial and continued
investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance will make extensive use of CBC's
network of industry analysts in order to assess trends in tenant industries.
This information is then used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
The short-term investments in which Real Estate Investment Fund may invest are:
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not so rated, of equivalent credit quality as
determined by Alliance. The Fund expects that it will not retain a debt security
which is downgraded below BBB or Baa or, if unrated, determined by Alliance to
have undergone similar credit quality deterioration, subsequent to purchase by
the Fund.
The Fund may also engage in the following investment practices to the extent
indicated: (i) invest up to 10% of its net assets in rights or warrants; (ii)
invest up to 15% of its net assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund; (iii) lend portfolio
securities equal in value to not more than 25% of total assets; (iv) enter into
repurchase agreements of up to seven days' duration; (v) enter into forward
commitments transactions as long as the Fund's aggregate commitments under such
transactions are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of securities or maintain
a short position but only if at all times when a short position is open not more
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than 25% of the Fund's net assets (taken at market value) is held as collateral
for such sales; and (viii) invest in illiquid securities unless, as a result,
more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which generally
provide a stable stream of income with yields that are generally higher than
those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying stock, although the higher yield tends to make the convertible
security less volatile than the underlying common stock. As with debt
securities, the market value of convertible securities tends to decrease as
interest rates rise and increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock. Convertible debt securities that are rated Baa or lower by Moody's or BBB
or lower by S&P, Duff & Phelps or Fitch and comparable unrated securities as
determined by Alliance may share some or all of the risks of non-convertible
debt securities with those ratings. For a description of these risks, see "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities."
Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio.
Rights and warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Rights are similar to warrants except that
they have a substantially shorter duration. Rights and warrants may be
considered more speculative than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any rights in the assets of the
issuing company. The value of a right or warrant does not necessarily change
with the value of the underlying security, although the value of a right or
warrant may decline because of a decrease in the value of the underlying
security, the passage of time or a change in perception as to the potential of
the underlying security, or any combination thereof. If the market price of the
underlying security is below the exercise price set forth in the warrant on the
expiration date, the warrant will expire worthless. Moreover, a right or warrant
ceases to have value if it is not exercised prior to the expiration date.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by a U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities except with respect to Growth Fund, Strategic Balanced
Fund and Income Builder Fund, where investments in ADRs are deemed to be
investments in securities issued by U.S. issuers and those in GDRs and other
types of depositary receipts are deemed to be investments in the underlying
securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the securities. As a result of the pass-through of
prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity would indicate. Prepayments occur when the mortgagor on a
mortgage prepays the remaining principal before the mortgage's scheduled
maturity date. Because the prepayment characteristics of the underlying
mortgages vary, it is impossible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayments are
important because of their effect on the yield and price of the mortgage-backed
securities. During periods of declining interest rates, prepayments can be
expected to accelerate and a Fund investing in such securities would be required
to reinvest the proceeds at the lower interest rates then available. Conversely,
during periods of rising interest rates, a reduction in prepayments may increase
the effective maturity of the securities, subjecting them to a greater risk of
decline in market value in response to rising interest rates. In addition,
prepayments of mortgages underlying securities purchased at a premium could
result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by
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reference to some interest rate index or market interest rate. Some adjustable
rate securities are backed by pools of mortgage loans. Although the
rate-adjustment feature may reduce sharp changes in the value of adjustable rate
securities, these securities can change in value based on changes in market
interest rates or the issuer's creditworthiness. Changes in the interest rate on
adjustable rate securities may lag behind changes in prevailing market interest
rates. Also, some adjustable rate securities (or the underlying mortgages) are
subject to caps or floors that limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt securities, the
values of equity-linked debt securities will generally vary inversely with
changes in interest rates. The Fund's ability to dispose of equity-linked debt
securities will depend on the availability of liquid markets for such
securities. Investment in equity-linked debt securities may be considered to be
speculative. As with other securities, the Fund could lose its entire investment
in equity-linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to the Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate the
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If the Fund does not receive scheduled interest or principal payments
on such indebtedness, the Fund's share price and yield could be adversely
affected. Loans that are fully secured offer the Fund more protection than
unsecured loans in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a secured
loan would satisfy the borrower's obligation, or that the collateral can be
liquidated. Indebtedness of borrowers whose creditworthiness is poor may involve
substantial risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries will also involve a risk that the governmental
entities responsible for the repayment of the debt may be unable, or unwilling,
to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent
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administers the terms of the loan, as specified on the loan agreement. Unless,
under the terms of the loan or other indebtedness, the Fund has direct recourse
against the borrower, it may have to rely on the agent to apply appropriate
credit remedies against a borrower. If assets held by the agent for the benefit
of the Fund were determined to be subject to the claims of the agent's general
creditors, the Fund might incur certain costs and delays in realizing payment on
the loan or loan participation and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
the Fund to pay additional cash on demand. These commitments may have the effect
of requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Mortgage-Backed Securities and Associated Risks. Mortgage-Backed Securities
include mortgage pass-through certificates and multiple-class pass-through
securities, such as REMIC pass-through certificates, CMOs and stripped
mortgage-backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate Investment Fund may
invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private lenders. CMOs and
REMIC certificates are issued in multiple classes and the principal of and
interest on the mortgage assets may be allocated among the several classes of
CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC
certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Generally, interest is paid or accrues on all classes
of CMOs or REMIC certificates on a monthly basis. Real Estate Investment Fund
will not invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although the Fund does
not intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those generally associated with investing in the real estate
industry in general. These unique risks include the failure of a counterparty to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations--Mortgage-Backed
Securities" for a more complete description of the characteristics of
Mortgage-Backed Securities and associated risks.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps and any assets
used to cover currency swaps and most privately negotiated investments in state
enterprises that have not yet conducted an initial equity offering, (ii)
over-the-counter options and assets used to cover over-the-counter options, and
(iii) repurchase agreements not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent permitted by
applicable law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities meet liquidity
guidelines established by a Fund's Directors. Investment in non-publicly traded
securities by each of Growth Fund and Strategic Balanced Fund is restricted to
5% of its total assets (not including for these purposes Rule 144A securities,
to the extent permitted by applicable law) and is also subject to the 15%
restriction on investment in illiquid securities described above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental
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agency or imposing legal restrictions on resales of securities, either as to
length of time the securities may be held or manner of resale. However, there
may be contractual restrictions on resales of securities.
Options. An option gives the purchaser of the option, upon payment of a premium,
the right to deliver to (in the case of a put) or receive from (in the case of a
call) the writer a specified amount of a security on or before a fixed date at a
predetermined price. A call option written by a Fund is "covered" if the Fund
owns the underlying security, has an absolute and immediate right to acquire
that security upon conversion or exchange of another security it holds, or holds
a call option on the underlying security with an exercise price equal to or less
than that of the call option it has written. A put option written by a Fund is
covered if the Fund holds a put option on the underlying securities with an
exercise price equal to or greater than that of the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Income Builder Fund and
Utility Income Fund each may write call options for cross-hedging purposes. A
Fund would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write uncovered call options. Technology Fund and Global
Small Cap Fund will not write a call option if the premium to be received by the
Fund in doing so would not produce an annualized return of at least 15% of the
then current market value of the securities subject to the option (without
giving effect to commissions, stock transfer taxes and other expenses that are
deducted from premium receipts). Technology Fund, Quasar Fund and Global Small
Cap Fund will not write a call option if, as a result, the aggregate of the
Fund's portfolio securities subject to outstanding call options (valued at the
lower of the option price or market value of such securities) would exceed 15%
of the Fund's total assets or more than 10% of the Fund's assets would be
committed to call options that at the time of sale have a remaining term of more
than 100 days. The aggregate cost of all outstanding options purchased and held
by each of Premier Growth Fund, Technology Fund, Quasar Fund and Global Small
Cap Fund will at no time exceed 10% of the Fund's total assets. Neither
International Fund nor New Europe Fund will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
Options on futures contracts written or purchased by a Fund will be traded on
U.S. or foreign exchanges or over-the-counter. These investment techniques will
be used only to hedge against anticipated future changes in market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of
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the outstanding futures contracts of the Fund and the currencies and futures
contracts subject to outstanding options written by the Fund would exceed 50% of
its total assets, and Income Builder Fund will also not do so if immediately
thereafter the aggregate of initial margin deposits on all the outstanding
futures contracts of the Fund and premiums paid on outstanding options on
futures contracts would exceed 5% of the market value of the total assets of the
Fund. Premier Growth Fund and Growth and Income Fund may not purchase or sell a
stock index future if immediately thereafter more than 30% of its total assets
would be hedged by stock index futures. Premier Growth Fund and Growth and
Income Fund may not purchase or sell a stock index future if, immediately
thereafter, the sum of the amount of margin deposits on the Fund's existing
futures positions would exceed 5% of the market value of the Fund's total
assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event of
rate movements adverse to a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
contracts to minimize the risk to it from adverse changes in the relationship
between the U.S. dollar and other currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed price at a
future date, and is individually negotiated and privately traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions. Growth
Fund and Strategic Balanced Fund may also purchase and sell foreign currency on
a spot basis.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds to be received, in determining its net
asset value. Any unrealized appreciation or depreciation reflected in such
valuation of a "when, as and if issued" security would be canceled in the event
that the required conditions did not occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or
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a similar security on a when-issued or forward commitment basis, thereby
obtaining the benefit of currently higher cash yields. However, if Alliance were
to forecast incorrectly the direction of interest rate movements, a Fund might
be required to complete such when-issued or forward transactions at prices
inferior to the then current market values. When-issued securities and forward
commitments may be sold prior to the settlement date, but a Fund enters into
when-issued and forward commitments only with the intention of actually
receiving securities or delivering them, as the case may be. If a Fund chooses
to dispose of the right to acquire a when-issued security prior to its
acquisition or dispose of its right to deliver or receive against a forward
commitment, it may incur a gain or loss. Any significant commitment of Fund
assets to the purchase of securities on a "when, as and if issued" basis may
increase the volatility of the Fund's net asset value. No forward commitments
will be made by New Europe Fund, All-Asia Investment Fund, Worldwide
Privatization Fund, Income Builder Fund, Utility Income Fund or Real Estate
Investment Fund if, as a result, the Fund's aggregate commitments under such
transactions would be more than 30% of the Fund's total assets. In the event the
other party to a forward commitment transaction were to default, a Fund might
lose the opportunity to invest money at favorable rates or to dispose of
securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
Income Builder Fund, will enter into a standby commitment with a remaining term
in excess of 45 days. Investments in standby commitments will be limited so that
the aggregate purchase price of the securities subject to the commitments will
not exceed 25% with respect to New Europe Fund and Real Estate Investment Fund,
50% with respect to Worldwide Privatization Fund and All-Asia Investment Fund,
and 20% with respect to Utility Income Fund, of the Fund's assets taken at the
time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each currency swap will
be accrued on a daily basis. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund and Utility Income Fund, the exchange
commitments can involve payments in the same currency or in different
currencies. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the party
selling such interest rate cap. The purchase of an interest rate floor entitles
the purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on an agreed principal amount
from the party selling the interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap, cap
and floor is accrued daily. A Fund will not enter into an interest rate swap,
cap or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is then rated in the highest rating category
of at least one nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting
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both as principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid. Caps and floors are more
recent innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Worldwide Privatization Fund, All-Asia
Investment Fund, Income Builder Fund and Utility Income Fund each may make short
sales of securities or maintain short positions only for the purpose of
deferring realization of gain or loss for U.S. federal income tax purposes,
provided that at all times when a short position is open the Fund owns an equal
amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund and Real Estate
Investment Fund may not make a short sale if as a result more than 25% of the
Fund's net assets would be held as collateral for short sales. If the price of
the security sold short increases between the time of the short sale and the
time a Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain. See
"Certain Fundamental Investment Policies." Certain special federal income tax
considerations may apply to short sales entered into by a Fund. See "Dividends,
Distributions and Taxes" in the relevant Fund's Statement of Additional
Information.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned thereon
and the Fund may invest any cash collateral in portfolio securities, thereby
earning additional income, or receive an agreed upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest or distributions. A Fund may pay reasonable
finders', administrative and custodial fees in connection with a loan. A Fund
will not lend its portfolio securities to any officer, director, employee or
affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to certain options and forward
contracts, and adverse market movements could therefore continue to an unlimited
extent over a period of time. In addition, the correlation between movements in
the prices of futures contracts, options and forward contracts and movements in
the prices of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
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no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option), with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations. See "Dividends, Distributions
and Taxes" in the Statement of Additional Information of each Fund that invests
in options and futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime commercial
paper and other types of short-term debt securities including notes and bonds.
For Funds that may invest in foreign countries, such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities each Fund
may invest in while in a temporary defensive position, please see such Fund's
Statement of Additional Information.
Portfolio Turnover. Portfolio turnover rates for the existing classes of shares
of the Fund are set forth in the tables that begin on page 8. These portfolio
turnover rates are greater than those of most other investment companies,
including those which emphasize capital appreciation as a basic policy. A high
rate of portfolio turnover involves correspondingly greater brokerage and other
expenses than a lower rate, which must be borne by the Fund and its
shareholders. High portfolio turnover also may result in the realization of
substantial net short-term capital gains. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof; (iii)
in oil, gas or other mineral exploration or development programs; or (iv) more
than 5% of its gross assets in securities the disposition of which would be
subject to restrictions under the federal securities laws.
Growth Fund and Strategic Balanced Fund each may not: (i) invest more than 5% of
its total assets in the securities of any one issuer (other than U.S. Government
securities and repurchase agreements relating thereto), although up to 25% of
each Fund's total assets may be invested without regard to this restriction; or
(ii) invest 25% or more of its total assets in the securities of any one
industry.
Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than: (a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase
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would cause 10% or more of its total assets to be invested in the securities of
such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings. The exception contained in clause (i)(b) above is subject
to the operating policy regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be deemed
to prohibit the Fund from purchasing the securities of any issuer pursuant to
the exercise of rights distributed to the Fund by the issuer, except that no
such purchase may be made if as a result the Fund will fail to meet the
diversification requirements of the Code and any such acquisition in excess of
the foregoing 15% or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to U.S. Government securities, but
will apply to foreign government securities unless the Commission permits their
exclusion); (iii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the Fund's total assets will be repaid
before any subsequent investments are made; or (iv) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company, or
more than 10% of such value in closed-end investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not
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exceed 15%, and borrowing for purposes other than meeting redemptions may not
exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding 5% of the total assets of the Fund; or (iv) make short
sales of securities or maintain a short position, unless at all times when a
short position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short and unless not more than 5% of the Fund's net assets is
held as collateral for such sales at any one time.
Global Environment Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest more than 15% of the value of
its total assets in the securities of any one issuer or 25% or more of the value
of its total assets in the same industry, except that the Fund will invest more
than 25% of its total assets in Environmental Companies, provided that this
restriction does not apply to U.S. Government securities, but will apply to
foreign government obligations unless the Commission permits their exclusion;
(iii) borrow money or issue senior securities, except that the Fund may borrow
(a) from a bank if immediately after such borrowing there is asset coverage of
at least 300% as defined in the 1940 Act and (b) for temporary purposes in an
amount not exceeding 5% of the value of the total assets of the Fund; (iv)
pledge, hypothecate, mortgage or otherwise encumber its assets, except (a) to
secure permitted borrowings and (b) in connection with initial and variation
margin deposits relating to futures contracts; (v) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company or
more than 10% of such value in closed-end investment companies in the aggregate;
(vi) make short sales of securities or maintain a short position, unless at all
times when a short position is open it owns an equal amount of such securities
or securities convertible into or exchangeable for, without payment of any
further consideration, securities of the same issue as, and equal in amount to,
the securities sold short ("short sales against the box"), and unless not more
than 5% of the Fund's net assets (taken at market value) is held as collateral
for such sales at any onetime; or (vii) buy or write (i.e., sell) put or call
options, except (a) the Fund may buy foreign currency options or write covered
foreign currency options and options on foreign currency futures and (b) the
Fund may purchase warrants.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Income Builder Fund may not: (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry, except that
this restriction does not apply to U.S. Government securities; (ii) borrow money
except from banks for temporary or emergency purposes, including the meeting of
redemption requests that might require the untimely disposition of securities;
borrowing in the aggregate may not exceed 15%, and borrowing for purposes other
than meeting redemptions may not exceed 5%, of the Fund's total assets
(including the amount borrowed) less liabilities (not including the amount
borrowed) at the time borrowing is made; securities will not be purchased while
borrowings in excess of 5% of the Fund's total assets are outstanding; or (iii)
pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own any securities of an
open-end investment company or more than 3% of the total outstanding voting
stock of any closed-end investment company or more than 5% of the value of the
Fund's net assets would be invested in securities of any one or more closed-end
investment companies.
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Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S. Government obligations or (ii) own more
than 10% of the outstanding voting securities of any issuer.
Real Estate Investment Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer (other than the
U.S. Government and its agencies or instrumentalities) not greater in value than
5% of the Fund's total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if as a result
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such issuer; (iii)
invest 25% or more of its total assets in the securities of issuers conducting
their principal business activities in any one industry, other than the real
estate industry in which the Fund will invest at least 25% or more of its total
assets, except that this restriction does not apply to U.S. Government
securities; (iv) purchase or sell real estate, except that it may purchase and
sell securities of companies which deal in real estate or interests therein,
including Real Estate Equity securities; or (v) borrow money except for
temporary or emergency purposes or to meet redemption requests, in an amount not
exceeding 5% of the value of its total assets at the time the borrowing is made.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
New Europe Fund, All-Asia Investment Fund, and Worldwide Privatization Fund and
a substantial portion of the assets of Global Small Cap Fund and Global
Environment Fund will be invested in securities denominated in foreign
currencies, and a corresponding portion of these Funds' revenues will be
received in such currencies. Therefore, the dollar equivalent of their net
assets, distributions and income will be adversely affected by reductions in the
value of certain foreign currencies relative to the U.S. dollar. If the value of
the foreign currencies in which a Fund receives its income falls relative to the
U.S. dollar between receipt of the income and the making of Fund distributions,
the Fund may be required to liquidate securities in order to make distributions
if it has insufficient cash in U.S. dollars to meet distribution requirements
that the Fund must satisfy to qualify as a regulated investment company for
federal income tax purposes. Similarly, if an exchange rate declines between the
time a Fund incurs expenses in U.S. dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. dollars in order
to pay expenses in U.S. dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, a Fund may engage in certain currency hedging transactions, which
themselves involve certain special risks. See "Additional Investment Practices"
above.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage
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of an issuer's outstanding securities or a specific class of securities which
may have less advantageous terms (including price) than securities of the
company available for purchase by nationals. These restrictions or controls may
at times limit or preclude investment in certain securities and may increase the
costs and expenses of a Fund. In addition, the repatriation of investment
income, capital or the proceeds of sales of securities from certain countries is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
A Fund could also be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor the effect of
any such factor or factors on a Fund's investments. Furthermore, transaction
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling--dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. dollar. The pound sterling continued to fall in early 1993,
but recovered due to interest rate cuts throughout Europe and an upturn in the
economy of the United Kingdom. The average exchange rate of the U.S. dollar to
the pound sterling was 1.50 in 1993 and 1.56 in 1996. On December 31, 1997 the
U.S. dollar-pound sterling exchange rate was 1.65.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
4118.5 at the end of 1996, up approximately 12% from the end of 1995. On
December 31, 1997 the FT-SE 100 index closed at 5,135.5, up approximately 25%
from the end of 1996.
The public sector borrowing requirement, a mandated measure of the amount
required to balance the budget, has been, over the last two fiscal years, higher
than forecast. The general government fiscal deficit has been in excess of the
eligibility limit prescribed by the European Union for countries that intend to
participate in the Economic and Monetary Union ("EMU"), which is scheduled to
take effect in January 1999. The government, however, expects that the deficit
will be below that limit in the 1997-98 and 1998-99 fiscal years. Although the
government has not yet made a formal announcement with respect to the United
Kingdom's participation in the EMU, remarks of the Chancellor of the Exchequer
made in mid-October 1997 suggest that the United Kingdom will not participate in
the EMU beginning in January 1999 but may do so thereafter.
From 1979 until 1997 the Conservative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally
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appreciated against the U.S. dollar, but has since fallen from its post-World
War II high (in 1995) against the U.S. dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1993. In
1994, the TOPIX closed at 1,559.09, up approximately 8% from the end of 1993; in
1995, the TOPIX closed at 1,577.70, up approximately 1% from the end of 1994;
and in 1996, the TOPIX closed at 1,470.94, down approximately 7% from the end of
1995. In 1997, the TOPIX closed at 1,175.03, down 20.12% from the end of 1996.
Certain valuation measures, such as price-to-book value and price-to-cash flow
ratios, indicate that the Japanese stock market is near its lowest level in the
last twenty years relative to other world markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan has returned to a single-party government led by Prime Minister Ryutaro
Hashimoto. While Mr. Hashimoto's party does not control a majority of the seats
in the parliament, it is only three seats short of the 251 seats required to
attain a majority in the House of Representatives (down from a 12-seat shortfall
just after the October 1996 election).
For the past several years, Japan's banking industry has been weakened by a
significant amount of problem loans. Japan's banks also have significant
exposure to the current financial turmoil in other Asian markets. On December
17, 1997 the Japanese government proposed to strengthen Japan's banks by means
of an infusion of public funds and other measures. It is unclear whether these
proposals, which are under consideration by Japan's parliament, would, if
implemented, achieve their intended effect. For further information regarding
Japan, see the Statements of Additional Information for All-Asia Investment Fund
and International Fund.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund and Global Environment Fund may
emphasize investment in, smaller, emerging companies.
Investment in such companies involves greater risks than is customarily
associated with securities of more established companies. Companies in the
earlier stages of their development often have products and management personnel
which have not been thoroughly tested by time or the marketplace; their
financial resources may not be as substantial as those of more established
companies. The securities of smaller companies may have relatively limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger companies or broad market indices. The revenue flow of such
companies may be erratic and their results of operations may fluctuate widely
and may also contribute to stock price volatility.
Investing in Environmental Companies by Global Environment Fund. Governmental
regulations or other action can inhibit an Environmental Company's performance,
and it may take years to translate environmental legislation into sales and
profits. Environmental Companies generally face competition in fields often
characterized by relatively short product cycles and competitive pricing
policies. Losses may result from large product development or expansion costs,
unprotected marketing or distribution systems, erratic revenue flows and low
profit margins. Additional risks that Environmental Companies may face include
difficulty in financing the high cost of technological development,
uncertainties due to changing governmental regulation or rapid technological
advances, potential liabilities associated with hazardous components and
operations, and difficult in finding experienced employees.
The Real Estate Industry. Although Real Estate Investment Fund does not invest
directly in real estate, it does invest primarily in Real Estate Equity
Securities and does have a policy of concentration of its investments in the
real estate industry.
Therefore, an investment in the Fund is subject to certain risks associated with
the direct ownership of real estate and with the real estate industry in
general. These risks include, among others: possible declines in the value of
real estate; risks related to general and local economic conditions; possible
lack of availability of mortgage funds; overbuilding; extended vacancies of
properties; increases in competition, property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability to
third parties for damages resulting from, environmental problems; casualty or
condemnation losses; uninsured damages from floods, earthquakes or other natural
disasters; limitations on and variations in rents; and changes in interest
rates. To the extent that assets underlying the Fund's investments are
concentrated geographically, by property type or in certain other respects, the
Fund may be subject to certain of the foregoing risks to a greater extent.
In addition, if Real Estate Investment Fund receives rental income or income
from the disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Investments by the Fund
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in securities of companies providing mortgage servicing will be subject to the
risks associated with refinancings and their impact on servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common Stocks.
Mortgage-Backed Securities. As discussed above, investing in Mortgage-Backed
Securities involves certain unique risks in addition to those risks associated
with investment in the real estate industry in general. These risks include the
failure of a counterparty to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest rates
decline, the value of an investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of an investment in fixed
rate obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage
pass-through securities in particular, may be less effective than other types of
U.S. Government securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes. Investors should review
carefully the information discussed under the heading "Dividends, Distributions
and Taxes" and should discuss with their tax advisers the specific tax
consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between eight and 15
years in the case of Income Builder Fund, between five and 25 years in the case
of Utility Income Fund and between one year or less and 30 years in the case of
all other Funds that invest in such securities. In periods of increasing
interest rates, each of the Funds may, to the extent it holds mortgage-backed
securities, be subject to the risk that the average dollar-weighted maturity of
the Fund's portfolio of debt or other fixed-income securities may be extended as
a result of lower than anticipated prepayment rates. See "Additional Investment
Practices--Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of
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credit risk. They are, however, subject to certain limitations from an
investor's standpoint. The rating of an issuer is heavily weighted by past
developments and does not necessarily reflect probable future conditions. There
is frequently a lag between the time a rating is assigned and the time it is
updated. In addition, there may be varying degrees of difference in credit risk
of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in
lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of Additional Information for each Fund that invests in lower-rated
securities for a description of the bond ratings of Moody's, S&P, Duff & Phelps
and Fitch.
Certain lower-rated securities in which Growth Fund, Income Builder Fund,
Strategic Balanced Fund and Utility Income Fund may invest may contain call or
buy-back features that permit the issuers thereof to call or repurchase such
securities. Such securities may present risks based on prepayment expectations.
If an issuer exercises such a provision, a Fund may have to replace the called
security with a lower yielding security, resulting in a decreased rate of return
to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund, Global Environmental Fund and Income Builder Fund is a
"non-diversified" investment company, which means the Fund is not limited in the
proportion of its assets that may be invested in the securities of a single
issuer. However, each Fund intends to conduct its operations so as to qualify to
be taxed as a "regulated investment company" for purposes of the Code, which
will relieve the Fund of any liability for federal income tax to the extent its
earnings are distributed to shareholders. See "Dividends, Distributions and
Taxes" in each Fund's Statement
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of Additional Information. To so qualify, among other requirements, the Fund
will limit its investments so that, at the close of each quarter of the taxable
year, (i) not more than 25% of the Fund's total assets will be invested in the
securities of a single issuer, and (ii) with respect to 50% of its total assets,
not more than 5% of its total assets will be invested in the securities of a
single issuer and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. A Fund's investments in U.S. Government
securities and other regulated investment companies are not subject to these
limitations. Because each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund and Income Builder Fund is a non-diversified investment
company, it may invest in a smaller number of individual issuers than a
diversified investment company, and an investment in such Fund may, under
certain circumstances, present greater risk to an investor than an investment in
a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
Year 2000. Many computer software systems in use today cannot properly process
date-related information from and after January 1, 2000. Should any of the
computer systems employed by the Fund's major service providers fail to process
this type of information properly, that could have a negative impact on the
Fund's operations and the services that are provided to the Fund's shareholders.
Alliance, each Fund's investment adviser, Alliance Fund Distributors, Inc.
("AFD"), each Fund's principal underwriter, and Alliance Fund Services, Inc.
("AFS"), each Fund's registrar, transfer agent and dividend disbursing agent,
have advised the Funds that they are reviewing all of their computer systems
with the goal of modifying or replacing such systems prior to January 1, 2000 to
the extent necessary to foreclose any such negative impact. In addition,
Alliance has been advised by each Fund's custodian that they are also in the
process of reviewing their systems with the same goal. As of the date of this
Prospectus, the Funds and Alliance have no reason to believe that these goals
will not be achieved.
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PURCHASE AND SALE
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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."
Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares of each Fund in which
the program invests in order to be approved by AFD for investment in Advisor
Class shares. Share certificates are issued only upon request. See the
Subscription Application and the Statements of Additional Information for more
information.
The Funds may refuse any order to purchase Advisor Class shares. In this regard,
the Funds reserve the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.
How the Funds Value Their Shares
The net asset value of Advisor Class shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to the Advisor Class by the
outstanding shares of the Advisor Class. Shares are valued each day the Exchange
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Fund's Directors believe accurately reflects fair
market value.
HOW TO SELL SHARES
You may "redeem" (i.e., sell your shares in a Fund to the Fund) on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check or electronic
funds transfer, a Fund will not send proceeds until it is reasonably satisfied
that the check or electronic funds transfer has been collected (which may take
up to 15 days). If you are in doubt about what documents are required by your
fee-based program or employee benefit plan, you should contact your financial
representative.
37
<PAGE>
Selling Shares Through Your Financial Representative
Your financial representative must receive your request before 4:00 p.m. Eastern
time, and your financial representative must transmit your request to the Fund
by 5:00 p.m. Eastern time, for you to receive that day's net asset value. Your
financial representative is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service.
Selling Shares Directly To A Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. Stock power forms are
available from your financial representative, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and, for
redemptions made before March 1, 1998 may be made only once in any 30-day period
(except for certain omnibus accounts). A shareholder who has completed the
appropriate section of the Subscription Application, or the Shareholder Options
form obtained from AFS, can elect to have the proceeds of his or her redemption
sent to his or her bank via an electronic funds transfer. Proceeds of telephone
redemptions also may be sent by check to a shareholder's address of record.
Except for certain omnibus accounts, redemption requests by electronic funds
transfer may not exceed $100,000 and redemption requests by check may not exceed
$50,000 per day. Telephone redemption is not available for shares held in
nominee or "street name" accounts or retirement plan accounts or shares held by
a shareholder who has changed his or her address of record within the previous
30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of any Fund for Advisor Classshares
of other Alliance Mutual Funds (including AFD Exchange Reserves, a money market
fund managed by Alliance). Exchanges of shares are made at the net asset value
next determined and without sales or service charges. Exchanges may be made by
telephone or written request. Telephone exchange requests must be received by
AFS by 4:00 p.m. Eastern time on a Fund business day in order to receive that
day's net asset value.
Please read carefully the prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
GENERAL
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale or exchange of Advisor Class shares of a Fund that are different
from those described in this Prospectus. A transaction, service, administrative
or other similar fee may be charged by your broker-dealer, agent, financial
intermediary or other financial representative with respect to the purchase,
sale or exchange of Advisor Class shares made through such financial
representative. Such financial intermediaries may also impose requirements with
respect to the purchase, sale or exchange of shares that are different from, or
in addition to, those imposed by a Fund, including requirements as to the
minimum initial and subsequent investment amounts.
Each Fund offers three classes of shares other than the Advisor Class, which are
Class A, Class B and Class C. All classes of shares of a Fund have a common
investment objective and investment portfolio. Class A shares are offered with
an initial sales charge and pay a distribution services fee. Class B shares have
a contingent deferred sales charge (a "CDSC") and also pay a distribution
services fee. Class C shares have no initial sales charge or CDSC as long as
they are not redeemed within one year of purchase, but pay a distribution
services fee. Because
38
<PAGE>
Advisor Class shares have no initial sales charge or CDSC and pay no
distribution services fee, Advisor Class shares are expected to have different
performance from Class A, Class B or Class C shares. You can obtain more
information about Class A, Class B and Class C shares, which are not offered by
this Prospectus, by contacting AFS by telephone at 800-221-5672 or by contacting
your financial representative.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Alliance Fund Alden M. Stewart since 1997-- Associated with
Executive Vice President of Alliance since
Alliance Capital Management 1993; prior
Corporation ("ACMC")* thereto,
associated with
Equitable Capital
Management
Corporation
("Equitable
Capital")**
Randall E. Haase since 1997-- Associated with
Senior Vice President of ACMC Alliance since July
1993; prior
thereto,
associated with
Equitable Capital
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance since
July 1993; prior
thereto,
associated with
Equitable Capital
Premier Growth Fund Alfred Harrison since inception-- Associated with
Vice Chairman of ACMC Alliance
Technology Fund Peter Anastos since 1992-- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992-- Associated with
Senior Vice President of ACMC Alliance since
1992; prior
thereto
associated with
College
Retirement
Equities Fund
Quasar Fund Alden M. Stewart since 1994-- (see above)
(see above)
Randall E. Haase since 1994-- (see above)
(see above)
International Fund A. Rama Krishna since 1993-- Associated with
Senior Vice President of ACMC Alliance since
and director of Asian Equity 1993, prior
research thereto,
Chief Investment
Strategist and
Director--Equity
Research for CS
First Boston
Worldwide Privatization Mark H. Breedon since inception-- Associated with
Fund Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited ***
New Europe Fund Steven Beinhacker since 1997-- Associated with
Vice President of ACMC Alliance
All-Asia Investment A. Rama Krishna since inception-- (see above)
Fund (see above)
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
Global Environment Jeremy R. Kramer since 1995-- Associated with
Fund Vice President of ACMC Alliance since
1993; prior
thereto, securities
analyst with
Neuberger &
Berman
Strategic Balanced Nicholas D.P. Carn since 1997-- Associated with
Fund Vice President of ACMC Alliance since
1997; prior
thereto, Chief
Investment
Officer and
Portfolio Manager
at Draycott
Partners
Balanced Shares Paul Rissman since 1997-- Associated with
Senior Vice President of ACMC Alliance
Income Builder Fund Andrew M. Aran since 1994-- Associated with
Senior Vice President of ACMC Alliance
Thomas M. Perkins since 1991-- Associated with
Senior Vice President of ACMC Alliance
Vita Marie Pike since 1997-- Associated with
Vice President of ACMC Alliance
Corinne Molof Hill since 1997-- Associated with
Vice President of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- Associated with
(see above) Alliance
Growth & Income Paul Rissman since 1994-- Associated with
Fund (see above) Alliance
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Real Estate Daniel G. Pine since 1996 Associated with
Investment Fund Senior Vice President Alliance since
of ACMC 1996; prior
thereto, Senior
Vice President of
Desai Capital
Management
David Kruth since 1997-- Associated with
Vice President of ACMC Alliance since
1997; prior
thereto Senior
Vice President of
the Yarmouth
Group
</TABLE>
- --------------------------------------------------------------------------------
* The sole general partner of Alliance.
** Equitable Capital was, prior to Alliance's acquisition of it, a management
firm under common control with Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of September 30, 1997 totaling more than $217 billion
(of which approximately $81 billion represented the assets of investment
companies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations and
endowment funds. The 56 registered investment companies managed by Alliance
comprising 118 separate investment portfolios currently have over two million
shareholders. As of September 30, 1997, Alliance was an investment manager of
employee benefit plan assets for 28 of the Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States ("Equitable"), one of the largest
life insurance companies in the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding company controlled
by AXA-UAP, a French insurance holding company. Certain information concerning
the ownership and control of Equitable by AXA-UAP is set forth in each Fund's
Statement of Additional Information under "Management of the Funds."
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Premier Growth Fund, Mr. Harrison has ultimate responsibility for the
management of discretionary tax-exempt accounts of institutional clients managed
as described below without significant client-imposed restrictions ("Historical
Portfolios"). These accounts have substantially the same investment objectives
and policies and are managed in accordance with essentially the same investment
strategies and techniques as those for Premier Growth Fund, except for the
ability of Premier Growth Fund to use futures and options as hedging tools and
to invest in warrants. The Historical Portfolios are also not subject to certain
limitations, diversification requirements and other restrictions imposed under
the 1940 Act and the Code to which Premier Growth Fund, as a registered
investment company, is subject and which, if applicable to the Historical
Portfolios, may have adversely affected the performance results of the
Historical Portfolios. See "Investment Objective and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the nineteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios as an employee of Alliance
and cumulatively through December 31, 1997. As of December 31, 1997, the assets
in the Historical Portfolios totaled approximately $11.6 billion and the average
size of an institutional account in the Historical Portfolio was $341 million.
Each Historical Portfolio has a nearly identical composition of investment
holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be payable by Premier
Growth Fund, which are higher than the fees imposed on the Historical Portfolio
and will result in a higher expense ratio and lower returns for Premier Growth
Fund. Expenses associated with the distribution of Class A, Class B and Class C
shares of Premier Growth Fund in accordance with the plan adopted by Premier
Growth Fund's Board of Directors pursuant to Rule 12b-1 under the 1940 Act
("distribution fees") are also excluded. See "Expense Information." The
performance data has also not been adjusted for corporate or individual taxes,
if any, payable by the account owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset-weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The total returns set forth below are
calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is
40
<PAGE>
compiled by Frank Russell Company and is segmented into two style indices, based
on the capitalization-weighted median book-to-price ratio of each of the
securities. At each reconstitution, the Russell 1000 constituents are ranked by
their book-to-price ratio. Once so ranked, the breakpoint for the two styles is
determined by the median market capitalization of the Russell 1000. Thus, those
securities falling within the top fifty percent of the cumulative market
capitalization (as ranked by descending book-to-price) become members of the
Russell Price-Driven Indices. The Russell 1000 Growth Index is, accordingly,
designed to include those Russell 1000 securities with a greater-than-average
growth orientation. In contrast with the securities in the Russell Price-Driven
Indices, companies in the Growth Index tend to exhibit higher price-to-book and
price-earnings ratios, lower dividend yield and higher forecasted growth values.
To the extent Premier Growth Fund does not invest in U.S. common stocks or
utilizes investment techniques such as futures or options, the S&P 500 Index and
Russell 1000 Growth Index may not be substantially comparable to Premier Growth
Fund. The S&P 500 Index and Russell 1000 Growth Index are included to illustrate
material economic and market factors that existed during the time period shown.
The S&P 500 Index and Russell 1000 Growth Index do not reflect the deduction of
any fees. If Premier Growth Fund were to purchase a portfolio of securities
substantially identical to the securities comprising the S&P 500 Index or the
Russell 1000 Growth Index, Premier Growth Fund's performance relative to the
index would be reduced by Premier Growth Fund's expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees, transfer agency
costs and other administrative expenses as well as by the impact on Premier
Growth Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the Premier Growth Fund as
measured against certain broad based market indices and against the composite
performance of other open-end growth mutual funds. Investors should not rely on
the following performance data of the Historical Portfolios as an indication of
future performance of Premier Growth Fund. The composite investment performance
for the periods presented may not be indicative of future rates of return. Other
methods of computing investment performance may produce different results, and
the results for different periods may vary.
<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>
Year ended:
1997*** .......... 27.05% 34.90% 33.36% 30.49% 25.30%
1996*** .......... 18.84 22.22 22.96 23.12 17.48
1995*** .......... 40.66 40.12 37.58 37.19 32.65
1994 ............. (9.78) (4.83) 1.32 2.66 (1.57)
1993 ............. 5.35 10.62 10.08 2.90 11.98
1992 ............. -- 12.27 7.62 5.00 7.63
1991 ............. -- 39.19 30.47 41.16 35.20
1990 ............. -- (1.57) (3.10) (0.26) (5.00)
1989 ............. -- 39.08 31.69 35.92 28.60
1988 ............. -- 10.96 16.61 11.27 15.80
1987 ............. -- 8.57 5.25 5.31 1.00
1986 ............. -- 27.60 18.67 15.36 15.90
1985 ............. -- 37.68 31.73 32.85 30.30
1984 ............. -- (3.33) 6.27 (.95) (2.80)
1983 ............. -- 20.95 22.56 15.98 22.30
1982 ............. -- 28.23 21.55 20.46 20.20
1981 ............. -- (1.10) (4.92) (11.31) (8.40)
1980 ............. -- 51.10 32.50 39.57 37.30
1979 ............. -- 30.99 18.61 23.91 27.40
Cumulative total
return for
the period
January 1,
1979 to
December 31,
1997 ............. -- 3,689% 1,946% 1,683% 1,753%
</TABLE>
- --------------------------------------------------------------------------------
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion. Total returns for Premier Growth Fund are for Class A
Shares with imposition of the maximum 4.25% sales charge.
** Assumes imposition of the maximum advisory fee charged by Alliance for any
Historical Portfolio for the period involved, although not the impact of
the payment of that fee on a quarterly rather than an annual basis and the
compounding effect thereof over the periods for which return information is
provided in the table on page 50, which would correspondingly reduce the
returns presented.
*** During this period, the Historical Portfolios differed from Premier Growth
Fund in that Premier Growth Fund invested a portion of its net assets in
warrants on equity securities in which the Historical Portfolios were
unable, by their investment restrictions, to purchase. In lieu of warrants,
the Historical Portfolios acquired the common stock upon which the warrants
were based.
The average annual total returns presented below are based upon the cumulative
total return as of December 31, 1997, and for more than one year assume a steady
compounded rate of return and are not year-by-year results, which fluctuated
over the periods as shown.
<TABLE>
<CAPTION>
Average Annual Total Returns
-------------------------------------------------------------------------------------
Premier Russell Lipper
Growth Historical S&P 500 1000 Growth
Fund Portfolios** Index Growth Index Fund Index
------- ---------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C>
One year ............................ 27.05% 34.90% 33.36% 30.49% 25.30%
Three years ......................... 32.32 32.20 31.15 30.14 25.11
Five years .......................... 19.14 19.46 20.27 18.41 16.47
Ten years+ .......................... 20.13 19.17 18.05 17.94 15.93
Since January 1,
1979 .............................. -- 20.08 17.22 16.37 15.86
</TABLE>
- --------------------------------------------------------------------------------
+ Since inception on 9/28/92
41
<PAGE>
ADMINISTRATOR TO ALL-ASIA INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
CONSULTANT TO ALLIANCE WITH RESPECT TO INVESTMENT
IN REAL ESTATE SECURITIES
Alliance, with respect to investment in real estate securities, has retained as
a consultant CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held
company and the largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities management, and real
estate finance and investment advisory activities (CBC in August of 1997
acquired Koll, which previously provided these consulting services to Alliance).
In 1996, CBC (and Koll, on a combined basis) completed 25,000 sale and lease
transactions, managed over 4,100 client properties, created over $3.5 billion in
mortgage originations, and completed over 2,600 appraisal and consulting
assignments. In addition, they advised and managed for institutions over $4
billion in real estate investments. CBC will make available to Alliance the CBC
National Real Estate Index, which gathers, analyzes and publishes targeted
research data for the 65 largest U.S. markets, based on a variety of
public-sector and private-sector sources as well as CBC's proprietary database
of approximately 60,000 property transactions representing over $400 billion of
investment property. This information provides a substantial component of the
research and data used to create the REIToScore model. As a consultant, CBC
provides to Alliance, at Alliance's expense, such in-depth information regarding
the real estate market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-family properties
as Alliance shall from time to time request. CBC will not furnish advice or make
recommendations regarding the purchase or sale of securities by the Fund nor
will it be responsible for making investment decisions involving Fund assets.
CBC is one of the three largest fee-based property management firms in the
United States, the largest commercial real estate lease brokerage firm in the
country, the largest investment property brokerage firm in the country, as well
as one of the largest publishers of real estate research, with approximately
6,000 employees nationwide. CBC will provide Alliance with exclusive access to
its REIToScore model which ranks approximately 130 REITs based on the relative
attractiveness of the property markets in which they own real estate. This model
scores the approximately 12,000 individual properties owned by these companies.
REIToScore is in turn based on CBC's National Real Estate Index which gathers,
analyzes and publishes targeted research for the 65 largest U.S. real estate
markets based on a variety of public- and private-sector sources as well as
CBC's proprietary database of 60,000 commercial property transactions
representing over $400 billion of investment property and over 3,000 tracked
properties which report rent and expense data quarterly. CBC has previously
provided access to its REIToScore model results primarily to the institutional
market through subscriptions. The model is no longer provided to any research
publications and the Fund is currently the only mutual fund available to retail
investors that has access to CBC's REIToScore model.
DISTRIBUTION SERVICES AGREEMENTS
Each Fund has entered into a Distribution Services Agreement with AFD with
respect to the Advisor Class shares. The Glass-Steagall Act and other applicable
laws may limit the ability of a bank or other depository institution to become
an underwriter or distributor of securities. However, in the opinion of the
Funds' management, based on the advice of counsel, these laws do not prohibit
such depository institutions from providing services for investment companies
such as the administrative, accounting and other services referred to in the
Agreements. In the event that a change in these laws prevented a bank from
providing such services, it is expected that other service arrangements would be
made and that shareholders would not be adversely affected. The State of Texas
requires that shares of a Fund may be sold in that state only by dealers or
other financial institutions that are registered there as broker-dealers.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
- --------------------------------------------------------------------------------
AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund having an
aggregate net asset value as of the payment date of such dividend or
distribution equal to the cash amount of such income dividend or distribution.
Election to receive dividends and distributions in cash or shares is made at the
time shares are initially purchased and may be changed at any time prior to the
record date for a particular dividend or distribution. Cash dividends can be
paid by check or, if the shareholder so elects, electronically via the ACH
network. There is no sales or other charge in connection with the reinvestment
of dividends and capital gains distributions.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized
42
<PAGE>
capital gains, if any, the amount and time of any such dividend or distribution
must necessarily depend upon the realization by such Fund of income and capital
gains from investments. There is no fixed dividend rate, and there can be no
assurance that a Fund will pay any dividends or realize any capital gains. Since
REITs pay distributions based on cash flow, without regard to depreciation and
amortization, it is likely that a portion of the distributions paid to Real
Estate Investment Fund and subsequently distributed to shareholders may be a
nontaxable return of capital. The final determination of the amount of a Fund's
return of capital distributions for the period will be made after the end of
each calendar year.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that a Fund distributes its taxable income and net
capital gain to its shareholders, qualification as a regulated investment
company relieves that Fund of federal income taxes on that part of its taxable
income including net capital gains which it pays out to its shareholders.
Dividends out of net ordinary income and distributions of net short-term capital
gains are taxable to the recipient shareholders as ordinary income. In the case
of corporate shareholders, such dividends may be eligible for the
dividends-received deduction, except that the amount eligible for the deduction
is limited to the amount of qualifying dividends received by the Fund. Dividends
received from REITs generally do not constitute qualifying dividends. A
corporation's dividends-received deduction generally will be disallowed unless
the corporation holds shares in the Fund at least 46 days during the 90 day
period beginning 45 days before the date on which the corporation becomes
entitled to receive the dividend. Furthermore, the dividends-received deduction
will be disallowed to the extent a corporation's investment in shares of a Fund
is financed with indebtedness.
Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains--that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on capital assets held
for more than one year but not more than 18 months ("mid-term gains"), and a
second rate (generally 20%) applies to the balance of such net capital gains
("adjusted net capital gains"). Distributions of mid-term gains and adjusted net
capital gains will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund. Distributions of net capital gains are
not eligible for the dividends-received deduction referred to above.
Under the current federal tax law, the amount of an income dividend or capital
gains distribution declared by a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder although in effect a
return of capital to that particular shareholder, would be taxable to him or her
as described above. If a shareholder held shares six months or less and during
that period received a distribution of net capital gains, any loss realized on
the sale of such shares during such six-month period would be a long-term
capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, generally such as an individual retirement
account, 403(b)(7) retirement plan or corporate pension or profit-sharing plan,
will not be taxable to the plan. Distributions from such plans will be taxable
to individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant) any further returns of capital will be taxable as capital gain. See
"Dividends, Distributions and Taxes" in the Statements of Additional
Information. Shareholders will be advised annually as to the tax status of
dividends and capital gains and return of capital distributions. Shareholders
are urged to consult their tax advisors regarding their own tax situation.
Distributions by a Fund may be subject to state and local taxes.
43
<PAGE>
- --------------------------------------------------------------------------------
CONVERSION FEATURE
- --------------------------------------------------------------------------------
CONVERSION TO CLASS A SHARES
Advisor Class shares may be held solely through the fee-based program accounts,
employee benefit plans and registered investment advisory or other financial
intermediary relationships described above under "Purchase and Sale of SharesHow
to Buy Shares," and by investment advisory clients of, and certain other persons
associated with, Alliance and its affiliates or the Funds. If (i) a holder of
Advisor Class shares ceases to participate in the fee-based program or plan, or
to be associated with an investment advisor or financial intermediary, in each
case that satisfies the requirements to purchase shares set forth under
"Purchase and Sale of Shares--How to Buy Shares" or (ii) the holder is otherwise
no longer eligible to purchase Advisor Class shares as described in this
Prospectus (each, a "Conversion Event"), then all Advisor Class shares held by
the shareholder will convert automatically and without notice to the
shareholder, other than the notice contained in this Prospectus, to Class A
shares of the Fund during the calendar month following the month in which the
Fund is informed of the occurrence of the Conversion Event. The failure of a
shareholder or a fee-based program to satisfy the minimum investment
requirements to purchase Advisor Class shares will not constitute a Conversion
Event. The conversion would occur on the basis of the relative net asset values
of the two classes and without the imposition of any sales load, fee or other
charge.
DESCRIPTION OF CLASS A SHARES
The following sets forth maximum transaction costs, annual expenses, per share
income and capital charges for Class A shares of each of the Funds. Class A
shares are subject to a distribution fee that may not exceed an annual rate of
.30%. The higher fees mean a higher expense ratio, so Class A shares pay
correspondingly lower dividends and may have a lower net asset value than
Advisor Class shares.
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in Class A shares of a Fund and annual expenses for Class A
shares of each Fund. For each Fund, the "Examples" to the right of the table
below show the cumulative expenses attributable to a hypothetical $1,000
investment for the periods specified.
<TABLE>
<CAPTION>
Class A Shares
--------------
<S> <C>
Maximum sales charge imposed on purchases (as a percentage of
offering price) (a) ..................................................... None (sales
charge waived)
Sales charge imposed on dividend reinvestments .......................... None
Deferred sales charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower) ................................ None
Exchange fee ............................................................ None
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Examples(a)
- --------------------------------------- ----------------------------
Alliance Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .68% After 1 year $ 11
12b-1 fees .20% After 3 years $ 33
Other expenses (b) .15% After 5 years $ 57
---- After 10 years $126
Total fund
operating expenses 1.03%
====
<CAPTION>
Growth Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .74% After 1 year $ 13
12b-1 fees .30% After 3 years $ 40
Other expenses (b) .22% After 5 years $ 69
---- After 10 years $152
Total fund
operating expenses 1.26%
====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 46.
44
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples(a)
- ----------------------------------------- ----------------------------
Premier Growth Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 16
12b-1 fees .33% After 3 years $ 50
Other expenses (b) .24% After 5 years $ 86
---- After 10 years $187
Total fund
operating expenses 1.57%
====
<CAPTION>
Technology Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees (g) 1.04% After 1 year $ 17
12b-1 fees .30% After 3 years $ 53
Other expenses (b) .33% After 5 years $ 91
---- After 10 years $198
Total fund
operating expenses 1.67%
====
<CAPTION>
Quasar Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees (g) 1.16% After 1 year $ 17
12b-1 fees .22% After 3 years $ 53
Other expenses (b) .29% After 5 years $ 91
---- After 10 years $198
Total fund
operating expenses 1.67%
====
<CAPTION>
International Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .85% After 1 year $ 16
12b-1 fees .17% After 3 years $ 50
Other expenses (b) .56% After 5 years $ 86
---- After 10 years $188
Total fund
operating expenses (d) 1.58%
====
<CAPTION>
Worldwide Privatization Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 17
12b-1 fees .30% After 3 years $ 54
Other expenses (b) .42% After 5 years $ 93
---- After 10 years $203
Total fund
operating expenses 1.72%
====
<CAPTION>
New Europe Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees 1.06% After 1 year $ 21
12b-1 fees .30% After 3 years $ 64
Other expenses (b) .69% After 5 years $110
---- After 10 years $238
Total fund
operating expenses 2.05%
====
<CAPTION>
All-Asia Investment Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees After 1 year $ 21
(after waiver) (c) .65% After 3 years $ 65
12b-1 fees .30% After 5 years $111
Other expenses After 10 years $239
Administration fees
(after waiver) (d) 0.00%
Other operating expenses(b) 1.11%
----
Total fund
operating expenses (e) 2.06%
====
<CAPTION>
Global Small Cap Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 24
12b-1 fees .30% After 3 years $ 75
Other expenses (b) 1.11% After 5 years $129
---- After 10 years $275
Total fund
operating expenses 2.41%
====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 46.
45
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples(a)
- --------------------------------------- ----------------------------
Global Environment Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees 1.10% After 1 year $ 27
12b-1 fees .30% After 3 years $ 84
Other expenses (b) 1.29% After 5 years $142
---- After 10 years $302
Total fund
operating expenses 2.69%
====
<CAPTION>
Strategic Balanced Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .09% After 1 year $ 14
12b-1 fees .30% After 3 years $ 44
Other expenses (b) 1.01% After 5 years $ 77
---- After 10 years $168
Total fund
operating expenses (e) 1.40%
====
<CAPTION>
Balanced Shares Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .63% After 1 year $ 15
12b-1 fees .24% After 3 years $ 46
Other expenses (b) .60% After 5 years $ 80
---- After 10 years $176
Total fund
operating expenses 1.47%
====
<CAPTION>
Income Builder Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .75% After 1 year $ 21
12b-1 fees .30% After 3 years $ 65
Other expenses (b) 1.04% After 5 years $112
---- After 10 years $242
Total fund
operating expenses 2.09%
====
<CAPTION>
Utility Income Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees
(after waiver) (c) 0.00% After 1 year $ 15
12b-1 fees .30% After 3 years $ 47
Other expenses (b) 1.20% After 5 years $ 82
---- After 10 years $179
Total fund
operating expenses (f) 1.50%
====
<CAPTION>
Growth and Income Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .49% After 1 year $ 9
12b-1 fees .22% After 3 years $ 29
Other expenses (b) .21% After 5 years $ 51
---- After 10 years $113
Total fund
operating expenses .92%
====
<CAPTION>
Real Estate Investment Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .90% After 1 year $ 18
12b-1 fees .30% After 3 years $ 56
Other expenses (b) .57% After 5 years $ 96
---- After 10 years $208
Total fund
operating expenses 1.77%
====
</TABLE>
- --------------------------------------------------------------------------------
(a) Advisor Class shares convert to Class A shares at net asset value and
without the imposition of any sales charge and accordingly the maximum
sales charge of 4.25% on most purchases of Class A shares for cash does not
apply.
(b) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be .75% for Strategic Balanced Fund and Utility Income Fund and 1.00%
for All-Asia Investment Fund and 1.01% for International Fund.
International Fund's fee, absent the voluntary fee waiver, is calculated
based on average daily net assets. Maximum contractual rate, based on
quarter-end net assets, is 1.00%.
(d) Net voluntary fee waiver. Absent such fee waiver, administration fees would
have been .15% for the Fund's Class A shares. Reflects the fees payable by
All-Asia Investment Fund to Alliance pursuant to an administration
agreement.
(e) Net of voluntary fee waivers and expense reimbursements. Absent such
waivers and reimbursements, total fund operating expenses for Strategic
Balanced Fund would have been 2.08 for Class A shares. Total fund operating
expenses for All-Asia Investment Fund would have been 2.56% for Class A
shares annualized and total fund operating expenses for International Fund
would have been 1.74%, for Class A, annualized.
(f) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 3.55% for Class A
shares.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund and Technology
Fund.
46
<PAGE>
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. Long-term shareholders of Class A shares of a Fund may pay aggregate
sales charges totaling more than the economic equivalent of the maximum initial
sales charges permitted by the Conduct Rules of the National Association of
Securities Dealers, Inc. The Rule 12b-1 fee for Class A comprises a service fee
not exceeding .25% of the aggregate average daily net assets of the Fund
attributable to Class A and an asset-based sales charge equal to the remaining
portion of the Rule 12b-1 fee. "Management fees" for International Fund and
All-Asia Investment Fund and "Administration fees" for All-Asia Investment Fund
have been restated to reflect current voluntary fee waivers. "Other Expenses"
are based on estimated amounts for the Global Environment Fund's current fiscal
year. The Examples set forth above assume reinvestment of all dividends and
distributions and utilize a 5% annual rate of return as mandated by Commission
regulations. The Examples should not be considered representative of past or
future expenses; actual expenses may be greater or less than those shown.
Financial Highlights. The tables on the following pages present, for each Fund,
per share income and capital changes for a Class A share outstanding throughout
each period indicated. Except as indicated below, the information in the tables
for Alliance Fund, Growth Fund, Premier Growth Fund, Strategic Balanced Fund,
Balanced Shares, Utility Income Fund, Worldwide Privatization Fund and Growth
and Income Fund has been audited by Price Waterhouse LLP, the independent
accountants for each Fund, and for All-Asia Investment Fund, Technology Fund,
Quasar Fund, International Fund, New Europe Fund, Global Small Cap Fund, Global
Environment Fund, Real Estate Investment Fund and Income Builder Fund by Ernst &
Young LLP, the independent auditors for each Fund. A report of Price Waterhouse
LLP or Ernst & Young LLP, as the case may be, on the information with respect to
each Fund, appears in the Fund's Statement of Additional Information. The
following information for each Fund should be read in conjunction with the
financial statements and related notes which are included in the Fund's
Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting AFS
at the address or the "For Literature" telephone number shown on the cover of
this Prospectus.
47
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
--------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Fund
Class A
Year ended 11/30/97 ..... $ 7.71 $ (.02)(b) $ 2.09 $ 2.07 $ (.02) $ (1.06)
Year ended 11/30/96 ..... 7.72 .02 1.06 1.08 (.02) (1.07)
Year ended 11/30/95 ..... 6.63 .02 2.08 2.10 (.01) (1.00)
1/1/94 to 11/30/94** .... 6.85 .01 (.23) (.22) 0.00 0.00
Year ended 12/31/93 ..... 6.68 .02 .93 .95 (.02) (.76)
Year ended 12/31/92 ..... 6.29 .05 .87 .92 (.05) (.48)
Year ended 12/31/91 ..... 5.22 .07 1.70 1.77 (.07) (.63)
Year ended 12/31/90 ..... 6.87 .09 (.32) (.23) (.18) (1.24)
Year ended 12/31/89 ..... 5.60 .12 1.19 1.31 (.04) 0.00
Year ended 12/31/88 ..... 5.15 .08 .80 .88 (.08) (.35)
Growth Fund (i)
Class A
Year ended 10/31/97 ..... $ 34.91 $ (.10)(b) $ 10.17 $ 10.07 $ 0.00 $ (1.03)
Year ended 10/31/96 ..... 29.48 .05 6.20 6.25 (.19) (.63)
Year ended 10/31/95 ..... 25.08 .12 4.80 4.92 (.11) (.41)
5/1/94 to 10/31/94** .... 23.89 .09 1.10 1.19 0.00 0.00
Year ended 4/30/94 ...... 22.67 (.01)(c) 3.55 3.54 0.00 (2.32)
Year ended 4/30/93 ...... 20.31 .05(c) 3.68 3.73 (.14) (1.23)
Year ended 4/30/92 ...... 17.94 .29(c) 3.95 4.24 (.26) (1.61)
9/4/90++ to 4/30/91 ..... 13.61 .17(c) 4.22 4.39 (.06) 0.00
Premier Growth Fund
Class A
Year ended 11/30/97 ..... $ 17.98 $ (.10)(b) $ 5.20 $ 5.10 $ 0.00 $ (1.08)
Year ended 11/30/96 ..... 16.09 (.04)(b) 3.20 3.16 0.00 (1.27)
Year ended 11/30/95 ..... 11.41 (.03) 5.38 5.35 0.00 (.67)
Year ended 11/30/94 ..... 11.78 (.09) (.28) (.37) 0.00 0.00
Year ended 11/30/93 ..... 10.79 (.05) 1.05 1.00 (.01) 0.00
9/28/92+ to 11/30/92 .... 10.00 .01 .78 .79 0.00 0.00
Technology Fund
Class A
Year ended 11/30/97 ..... $ 51.15 $ (.51)(b) $ 4.22 $ 3.71 $ 0.00 $ (.42)
Year ended 11/30/96 ..... 46.64 .39 (b) 7.28 6.89 0.00 (2.38)
Year ended 11/30/95 ..... 31.98 (.30)(b) 18.13 17.83 0.00 (3.17)
1/1/94 to 11/30/94** .... 26.12 (.32) 6.18 5.86 0.00 0.00
Year ended 12/31/93 ..... 28.20 (.29) 6.39 6.10 0.00 (8.18)
Year ended 12/31/92 ..... 26.38 (.22)(b) 4.31 4.09 0.00 (2.27)
Year ended 12/31/91 ..... 19.44 (.02) 10.57 10.55 0.00 (3.61)
Year ended 12/31/90 ..... 21.57 (.03) (.56) (.59) 0.00 (1.54)
Year ended 12/31/89 ..... 20.35 0.00 1.22 1.22 0.00 0.00
Year ended 12/31/88 ..... 20.22 (.03) .16 .13 0.00 0.00
Quasar Fund
Class A
Year ended 9/30/97 ...... $ 27.92 $ (.24)(b) $ 6.80 $ 6.56 $ 0.00 $ (4.11)
Year ended 9/30/96 ...... 24.16 (.25) 8.82 8.57 0.00 (4.81)
Year ended 9/30/95 ...... 22.65 (.22)(b) 5.59 5.37 0.00 (3.86)
Year ended 9/30/94 ...... 24.43 (.60) (.36) (.96) 0.00 (.82)
Year ended 9/30/93 ...... 19.34 (.41) 6.38 5.97 0.00 (.88)
Year ended 9/30/92 ...... 21.27 (.24) (1.53) (1.77) 0.00 (.16)
Year ended 9/30/91 ...... 15.67 (.05) 5.71 5.66 (.06) 0.00
Year ended 9/30/90 ...... 24.84 .03(b) (7.18) (7.15) 0.00 (2.02)
Year ended 9/30/89 ...... 17.60 .02(b) 7.40 7.42 0.00 (.18)
Year ended 9/30/88 ...... 24.47 (.08) (2.08) (2.16) 0.00 (4.71)
International Fund
Class A
Year ended 6/30/97 ...... $ 18.32 $ .06(b) $ 1.51 $ 1.57 $ (.12) $ (1.08)
Year ended 6/30/96 ...... 16.81 .05(b) 2.51 2.56 0.00 (1.05)
Year ended 6/30/95 ...... 18.38 .04 .01 .05 0.00 (1.62)
Year ended 6/30/94 ...... 16.01 (.09) 3.02 2.93 0.00 (.56)
Year ended 6/30/93 ...... 14.98 (.01) 1.17 1.16 (.04) (.09)
Year ended 6/30/92 ...... 14.00 .01(b) 1.04 1.05 (.07) 0.00
Year ended 6/30/91 ...... 17.99 .05 (3.54) (3.49) (.03) (.47)
Year ended 6/30/90 ...... 17.24 .03 2.87 2.90 (.04) (2.11)
Year ended 6/30/89 ...... 16.09 .05 3.73 3.78 (.13) (2.50)
Year ended 6/30/88 ...... 23.70 .17 (1.22) (1.05) (.21) (6.35)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to footnotes on page 52.
48
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate(k)
- ------------- --------- ------------ ----------- ----------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (1.08) $ 8.70 31.82% $ 1,201,435 1.03% (.29)% 158% $ 0.0571
(1.09) 7.71 16.49 999,067 1.04 .30 80 0.0646
(1.01) 7.72 37.87 945,309 1.08 .31 81 --
0.00 6.63 (3.21) 760,679 1.05* .21* 63 --
(.78) 6.85 14.26 831,814 1.01 .27 66 --
(.53) 6.68 14.70 794,733 .81 .79 58 --
(.70) 6.29 33.91 748,226 .83 1.03 74 --
(1.42) 5.22 (4.36) 620,374 .81 1.56 71 --
(.04) 6.87 23.42 837,429 .75 1.79 81 --
(.43) 5.60 17.10 760,619 .82 1.38 65 --
$ (1.03) $ 43.95 29.54% $ 783,110 1.26%(l) (.25)% 48% $ 0.0562
(.82) 34.91 21.65 499,459 1.30 .15 46 0.0584
(.52) 29.48 20.18 285,161 1.35 .56 61 --
0.00 25.08 4.98 167,800 1.35* .86* 24 --
(2.32) 23.89 15.66 102,406 1.40 (f) .32 87 --
(1.37) 22.67 18.89 13,889 1.40 (f) .20 124 --
(1.87) 20.31 23.61 8,228 1.40 1.44 137 --
(.06) 17.94 32.40 713 1.40* 1.99* 130 --
$ (1.08) $ 22.00 30.46% $ 373,099 1.57% (.52)% 76% $ 0.0594
(1.27) 17.98 21.52 172,870 1.65 (.27) 95 0.0651
(.67) 16.09 49.95 72,366 1.75 (.28) 114 --
0.00 11.41 (3.14) 35,146 1.96 (.67) 98 --
(.01) 11.78 9.26 40,415 2.18 (.61) 68 --
0.00 10.79 7.90 4,893 2.17* .91* 0 --
$ (.42) $ 54.44 7.32% $ 624,716 1.67%(l) (.97)% 51% $ 0.0564
(2.38) 51.15 16.05 594,861 1.74 (.87) 30 0.0612
(3.17) 46.64 61.93 398,262 1.75 (.77) 55 --
0.00 31.98 22.43 202,929 1.66* (1.22)* 55 --
(8.18) 26.12 21.63 173,732 1.73 (1.32) 64 --
(2.27) 28.20 15.50 173,566 1.61 (.90) 73 --
(3.61) 26.38 54.24 191,693 1.71 (.20) 134 --
(1.54) 19.44 (3.08) 131,843 1.77 (.18) 147 --
0.00 21.57 6.00 141,730 1.66 .02 139 --
0.00 20.35 0.64 169,856 1.42 (.16) 139 --
$ (4.11) $ 30.37 27.81% $ 402,081 1.67% (.91)% 135% $ 0.0536
(4.81) 27.92 42.42 229,798 1.79 (1.11) 168 0.0596
(3.86) 24.16 30.73 146,663 1.83 (1.06) 160 --
(.82) 22.65 (4.05) 155,470 1.67 (1.15) 110 --
(.88) 24.43 31.58 228,874 1.65 (1.00) 102 --
(.16) 19.34 (8.34) 252,140 1.62 (.89) 128 --
(.06) 21.27 36.28 333,806 1.64 (.22) 118 --
(2.02) 15.67 (30.81) 251,102 1.66 .16 90 --
(.18) 24.84 42.68 263,099 1.73 .10 90 --
(4.71) 17.60 (8.61) 90,713 1.28 (.40) 58 --
$ (1.20) $ 18.69 9.30% $ 190,173 1.74% .31% 94% $ 0.0363
(1.05) 18.32 15.83 196,261 1.72 .31 78 --
(1.62) 16.81 .59 165,584 1.73 .26 119 --
(.56) 18.38 18.68 201,916 1.90 (.50) 97 --
(.13) 16.01 7.86 161,048 1.88 (.14) 94 --
(.07) 14.98 7.52 179,807 1.82 .07 72 --
(.50) 14.00 (19.34) 214,442 1.73 .37 71 --
(2.15) 17.99 16.98 265,999 1.45 .33 37 --
(2.63) 17.24 27.65 166,003 1.41 .39 87 --
(6.56) 16.09 (4.20) 132,319 1.41 .84 55 --
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Net Net Net Distributions
Asset Realized and Increase In Excess
Value Unrealized (Decrease) In Dividends From Of Net Distributions
Beginning Of Net Investment Gain(Loss)On Net Asset Value Net Investment Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Income Realized Gains
--------------------- ------------- -------------- ------------- --------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/97 ...... $ 12.13 $ .15(b) $ 2.55 $ 2.70 $ (.15) $ 0.00 $ (1.42)
Year ended 6/30/96 ...... 10.18 .10(b) 1.85 1.95 0.00 0.00 0.00
Year ended 6/30/95 ...... 9.75 .06 .37 .43 0.00 0.00 0.00
6/2/94+ to 6/30/94 ...... 10.00 .01 (.26) (.25) 0.00 0.00 0.00
New Europe Fund
Class A
Year ended 7/31/97 ...... $ 15.84 $ .07(b) $ 4.20 $ 4.27 $ (.15) $ (.03) $ (1.32)
Year ended 7/31/96 ...... 15.11 .18 1.02 1.20 0.00 0.00 (.47)
Year ended 7/31/95 ...... 12.66 .04 2.50 2.54 (.09) 0.00 0.00
Period ended 7/31/94** .. 12.53 .09 .04 .13 0.00 0.00 0.00
Year ended 2/28/94 ...... 9.37 .02(b) 3.14 3.16 0.00 0.00 0.00
Year ended 2/28/93 ...... 9.81 .04 (.33) (.29) (.15) 0.00 0.00
Year ended 2/29/92 ...... 9.76 .02(b) .05 .07 (.02) 0.00 0.00
4/2/90+ to 2/28/91 ...... 11.11(e) .26 (.91) (.65) (.26) 0.00 (.44)
All-Asia Investment Fund
Class A
Year ended 10/31/97 ..... $ 11.04 $ (.21)(b)(c) $ (2.95) $ (3.16) $ 0.00 $ 0.00 $ (.34)
Year ended 10/31/96 ..... 10.45 (.21)(b)(c) .88 .67 0.00 0.00 (.08)
11/28/94+ to 10/31/95 ... 10.00 (.19)(c) .64 .45 0.00 0.00 0.00
Global Small Cap Fund
Class A
Year ended 7/31/97 ...... $ 11.61 $ (.15)(b) $ 2.97 $ 2.82 $ 0.00 $ 0.00 $ (1.56)
Year ended 7/31/96 ...... 10.38 (.14)(b) 1.90 1.76 0.00 0.00 (.53)
Year ended 7/31/95 ...... 11.08 (.09) 1.50 1.41 0.00 0.00 (2.11)(j)
Period ended 7/31/94** .. 11.24 (.15)(b) (.01) (.16) 0.00 0.00 0.00
Year ended 9/30/93 ...... 9.33 (.15) 2.49 2.34 0.00 0.00 (.43)
Year ended 9/30/92 ...... 10.55 (.16) (1.03) (1.19) 0.00 0.00 (.03)
Year ended 9/30/91 ...... 8.26 (.06) 2.35 2.29 0.00 0.00 0.00
Year ended 9/30/90 ...... 15.54 (.05)(b) (4.12) (4.17) 0.00 0.00 (3.11)
Year ended 9/30/89 ...... 11.41 (.03) 4.25 4.22 0.00 0.00 (.09)
Year ended 9/30/88 ...... 15.07 (.05) (1.83) (1.88) 0.00 0.00 (1.78)
Global Environment Fund (n)
Class A
Year ended 10/31/97 ..... $ 16.48 $ (.23)(b) $ 3.65 $ 3.42 $ 0.00 $ 0.00 $ (1.13)
Year ended 10/31/96 ..... 12.37 (.13) 4.26 4.13 (.02) 0.00 0.00
Year ended 10/31/95 ..... 11.74 .03 .60 .63 0.00 0.00 0.00
Year ended 10/31/94 ..... 10.97 0.00 .77 .77 0.00 0.00 0.00
Year ended 10/31/93 ..... 10.78 .01 .18 .19 0.00 0.00 0.00
Year ended 10/31/92 ..... 13.12 .01 (2.17) (2.16) (.10) 0.00 (.08)
Year ended 10/31/91 ..... 12.46 .13 .87 1.00 (.25) 0.00 (.09)
1/1/90+ to 10/31/90 ..... 13.83 .20 (1.57) (1.37) 0.00 0.00 0.00
Strategic Balanced Fund (i)
Class A
Year ended 7/31/97 ...... $ 18.48 $ .47(b)(c) $ 3.56 $ 4.03 $ (.39) $ 0.00 $ (2.33)
Year ended 7/31/96 ...... 17.98 .35(b)(c) 1.08 1.43 (.32) 0.00 (.61)
Year ended 7/31/95 ...... 16.26 .34(c) 1.64 1.98 (.22) 0.00 (.04)
Period ended 7/31/94** .. 16.46 .07(c) (.27) (.20) 0.00 0.00 0.00
Year ended 4/30/94 ...... 16.97 .16(c) .74 .90 (.24) 0.00 (1.17)
Year ended 4/30/93 ...... 17.06 .39(c) .59 .98 (.42) 0.00 (.65)
Year ended 4/30/92 ...... 14.48 .27(c) 2.80 3.07 (.17) 0.00 (.32)
9/4/90++ to 4/30/91 ..... 12.51 .34(c) 1.66 2.00 (.03) 0.00 0.00
Balanced Shares
Class A
Year ended 7/31/97 ...... $ 14.01 $ .31(b) $ 3.97 $ 4.28 $ (.32) $ 0.00 $ (.18)
Year ended 7/31/96 ...... 15.08 .37 .45 .82 (.41) 0.00 (1.48)
Year ended 7/31/95 ...... 13.38 .46 1.62 2.08 (.36) 0.00 (.02)
Period ended 7/31/94** .. 14.40 .29 (.74) (.45) (.28) 0.00 (.29)
Year ended 9/30/93 ...... 13.20 .34 1.29 1.63 (.43) 0.00 0.00
Year ended 9/30/92 ...... 12.64 .44 .57 1.01 (.45) 0.00 0.00
Year ended 9/30/91 ...... 10.41 .46 2.17 2.63 (.40) 0.00 0.00
Year ended 9/30/90 ...... 14.13 .45 (2.14) (1.69) (.40) 0.00 (1.63)
Year ended 9/30/89 ...... 12.53 .42 2.18 2.60 (.46) 0.00 (.54)
Year ended 9/30/88 ...... 16.33 .46 (1.07) (.61) (.44) 0.00 (2.75)
Income Builder Fund (h)
Class A
Year ended 10/31/97 ..... $ 11.57 $ .50(b) $ 1.62 $ 2.12 $ (.51) $ 0.00 $ (.61)
Year ended 10/31/96 ..... 10.70 .56(b) .98 1.54 (.55) 0.00 (.12)
Year ended 10/31/95 ..... 9.69 .93(b) .59 1.52 (.51) 0.00 0.00
3/25/94++ to 10/31/94 ... 10.00 .96 (1.02) (.06) (.05)(g) 0.00 (.20)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 52.
50
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value(a) omitted) Net Assets Net Assets Turnover Rate Rate(k)
- ------------- --------- ------------ ---------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (1.57) $ 13.26 25.16% $ 561,793 1.72% 1.27% 48% $0.0132
0.00 12.13 19.16 672,732 1.87 .95 28 --
0.00 10.18 4.41 13,535 2.56 .66 36 --
0.00 9.75 (2.50) 4,990 2.75* 1.03* 0 --
$ (1.50) $ 18.61 28.78% $ 78,578 2.05%(l) .40% 89% $0.0569
(.47) 15.84 8.20 74,026 2.14 1.10 69 --
(.09) 15.11 20.22 86,112 2.09 .37 74 --
0.00 12.66 1.04 86,739 2.06* 1.85* 35 --
0.00 12.53 33.73 90,372 2.30 .17 94 --
(.15) 9.37 (2.82) 79,285 2.25 .47 125 --
(.02) 9.81 .74 108,510 2.24 .16 34 --
(.70) 9.76 (5.63) 188,016 1.52* 2.71* 48 --
$ (.34) $ 7.54 (29.61)% $ 5,916 3.45%(f) (1.97)% 70% $0.0248
(.08) 11.04 6.43 12,284 3.37(f) (1.75) 66 0.0280
0.00 10.45 4.50 2,870 4.42(f)* (1.87)* 90 --
$ (1.56) $ 12.87 26.47% $ 85,217 2.41%(l) (1.25)% 129% $0.0364
(.53) 11.61 17.46 68,623 2.51 (1.22) 139 --
(2.11) 10.38 16.62 60,057 2.54(f) (1.17) 128 --
0.00 11.08 (1.42) 61,372 2.42* (1.26)* 78 --
(.43) 11.24 25.83 65,713 2.53 (1.13) 97 --
(.03) 9.33 (11.30) 58,491 2.34 (.85) 108 --
0.00 10.55 27.72 84,370 2.29 (.55) 104 --
(3.11) 8.26 (31.90) 68,316 1.73 (.46) 89 --
(.09) 15.54 37.34 113,583 1.56 (.17) 106 --
(1.78) 11.41 (8.11) 90,071 1.54 (.50) 74 --
$ (1.13) $ 18.77 23.51% $ 52,378 2.39% (1.35)% 145% $0.0506
(.02) 16.48 33.48 100,271 1.60 (.85) 268 0.0313
0.00 12.37 5.37 85,416 1.57 .21 109 --
0.00 11.74 7.02 81,102 1.67 (.04) 42 --
0.00 10.97 1.76 75,805 1.62 .15 25 --
(.18) 10.78 (16.59) 74,442 1.63 .10 41 --
(.34) 13.12 8.66 90,612 1.49 .95 32 --
0.00 12.46 (10.68) 86,041 1.72* 3.95* 4 --
$ (2.72) $ 19.79 23.90% $ 20,312 1.41%(f)(l) 2.50% 170% $0.0395
(.93) 18.48 8.05 18,329 1.40(f) 1.78 173 --
(.26) 17.98 12.40 10,952 1.40(f) 2.07 172 --
0.00 16.26 (1.22) 9,640 1.40*(f) 1.63* 21 --
(1.41) 16.46 5.06 9,822 1.40(f) 1.67 139 --
(1.07) 16.97 5.85 8,637 1.40(f) 2.29 98 --
(.49) 17.06 20.96 6,843 1.40 1.92 103 --
(.03) 14.48 16.00 443 1.40* 3.54* 137 --
$ (2.12) $ 16.17 33.46% $ 115,500 1.47%(m) 2.11% 207% $0.0552
(1.89) 14.01 5.23 102,567 1.38 2.41 227 --
(.38) 15.08 15.99 122,033 1.32 3.12 179 --
(.57) 13.38 (3.21) 157,637 1.27* 2.50* 116 --
(.43) 14.40 12.52 172,484 1.35 2.50 188 --
(.45) 13.20 8.14 143,883 1.40 3.26 204 --
(.40) 12.64 25.52 154,230 1.44 3.75 70 --
(2.03) 10.41 (13.12) 140,913 1.36 4.01 169 --
(1.00) 14.13 22.27 159,290 1.42 3.29 132 --
(3.19) 12.53 (1.10) 111,515 1.42 3.74 190 --
$ (1.12) $ 12.57 19.36% $ 2,367 2.09% 4.18% 159% $0.0513
(.67) 11.57 14.82 2,056 2.20 4.92 108 0.0600
(.51) 10.70 16.22 1,398 2.38 5.44 92 --
(.25) 9.69 (.54) 600 2.52* 6.11* 126 --
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Net Net Net Distributions
Asset Realized and Increase In Excess
Value Unrealized (Decrease) In Dividends From Of Net Distributions
Beginning Of Net Investment Gain(Loss)On Net Asset Value Net Investment Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Income Realized Gains
--------------------- ------------- -------------- ------------- --------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Utility Income Fund
Class A
Year ended 11/30/97 ..... $ 10.59 $ .32(b)(c) $ 2.04 $ 2.36 $ (.34) $ 0.00 $ (.13)
Year ended 11/30/96 ..... 10.22 .18(b)(c) .65 .83 (.46) 0.00 0.00
Year ended 11/30/95 ..... 8.97 .27(c) 1.43 1.70 (.45) 0.00 0.00
Year ended 11/30/94 ..... 9.92 .42(c) (.89) (.47) (.48) 0.00 0.00
10/18/93+ to 11/30/93 ... 10.00 .02(c) (.10) (.08) 0.00 0.00 0.00
Growth and Income Fund
Class A
Year ended 10/31/97 ..... $ 3.00 $ .04(b) $ .87 $ .91 $ (.05) $ 0.00 $ (.38)
Year ended 10/31/96 ..... 2.71 .05 .50 .55 (.05) 0.00 (.21)
Year ended 10/31/95 ..... 2.35 .02 .52 .54 (.06) 0.00 (.12)
Year ended 10/31/94 ..... 2.61 .06 (.08) (.02) (.06) 0.00 (.18)
Year ended 10/31/93 ..... 2.48 .06 .29 .35 (.06) 0.00 (.16)
Year ended 10/31/92 ..... 2.52 .06 .11 .17 (.06) 0.00 (.15)
Year ended 10/31/91 ..... 2.28 .07 .56 .63 (.09) 0.00 (.30)
Year ended 10/31/90 ..... 3.02 .09 (.30) (.21) (.10) 0.00 (.43)
Year ended 10/31/89 ..... 3.05 .10 .43 .53 (.08) 0.00 (.48)
Year ended 10/31/88 ..... 3.48 .10 .33 .43 (.08) 0.00 (.78)
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 ..... $ 10.00 $ .30(b) $ 2.88 $ 3.18 $ (.38)(m) $ 0.00 $ 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of operations.
++ Commencement of distribution.
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment returns. Total investment returns calculated for a period
of less than one year is not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waivers and expense reimbursements.
(d) Adjusted for a 200% stock dividend paid to shareholders of record on
January 15, 1988.
(e) Net of offering costs of ($.05).
(f) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, without giving effect to the expense offset arrangement
described in (l) below, would have been as follows:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
All-Asia Investment Fund
Class A -- -- 10.57%# 3.61% 3.57%
Growth Fund
Class A 1.84% 1.46% -- --
Global Small Cap Fund
Class A -- -- 2.61% --
Strategic Balanced Fund
Class A 1.85% 1.70%1 1.81% 1.76% 2.06%
1.94%#2
Utility Income Fund
Class A 145.63%# 13.72% 4.86%# 3.38% 3.55%
</TABLE>
- ------------
# annualized
1. For the period ended April 30, 1994
2. For the period ended July 31, 1994
For the expense ratios of the Funds in years prior to fiscal year 1993,
assuming the Funds had borne all expenses, please see the Financial
Statements in each Fund's Statement of Additional Information.
(g) "Dividends from Net Investment Income" includes a return of capital. Income
Builder Fund had a return of capital with respect to Class A shares, for
the period ended October 31, 1994, of $(.01).
(h) On March 25, 1994, all existing shares of Income Builder Fund, previously
known as Alliance Multi-Market Income and Growth Trust, were converted into
Class C shares.
(i) Prior to July 22, 1993, Equitable Capital Management Corporation
("Equitable Capital") served as the investment adviser to the predecessor
to The Alliance Portfolios, of which Growth Fund and Strategic Balanced
Fund are series. On July 22, 1993, Alliance acquired the business and
substantially all assets of Equitable Capital and became investment adviser
to the Funds.
(j) "Distributions from Net Realized Gains" includes a return of capital.
Global Small Cap Fund had a return of capital with respect to Class A
shares, for the year ended July 31, 1995, of $(.12).
(k) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are changed.
(l) Amounts do not reflect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offset arrangements, the
ratios of expenses to average net assets, assuming the assumption and/or
waiver/reimbursement of expenses described in (f) above, would have been as
follows:
<TABLE>
<CAPTION>
1997 1997
---- ----
<S> <C> <C> <C>
International Fund Growth Fund
Class A 1.73% Class A 1.25%
Global Small Cap Fund Technology Fund
Class A 2.38% Class A 1.66%
Strategic Balanced Fund
Class A 1.40%
New Europe Fund
Class A 2.04%
Balanced Shares
Class A 1.46%
Growth and Income
Class A .91%
</TABLE>
(m) Distributions from net investment income include a tax return of capital of
$0.08.
(n) The Global Environment Fund operated as a closed-end investment company
through October 3, 1997 when it converted to an open-end investment company
and all shares of its common stock then outstanding were reclassified as
Class A shares.
52
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value(a) omitted) Net Assets Net Assets Turnover Rate Rate(k)
- ------------- --------- ------------ ---------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (.47) $ 12.48 23.10% $ 4,117 1.50%(f) 2.89% 37% $ 0.0442
(.46) 10.59 8.47 3,294 1.50 (f) 1.67 98 0.0536
(.45) 10.22 19.58 2,748 1.50 (f) 2.48 162 --
(.48) 8.97 (4.86) 1,068 1.50 (f) 4.13 30 --
0.00 9.92 (.80) 229 1.50*(f) 2.35* 11 --
$ (.43) $ 3.48 33.28% $ 787,566 .92%(l) 1.39% 88% $ 0.0589
(.26) 3.00 21.51 553,151 .97 1.73 88 0.0625
(.18) 2.71 24.21 458,158 1.05 1.88 142 --
(.24) 2.35 (.67) 414,386 1.03 2.36 68 --
(.22) 2.61 14.98 459,372 1.07 2.38 91 --
(.21) 2.48 7.23 417,018 1.09 2.63 104 --
(.39) 2.52 31.03 409,597 1.14 2.74 84 --
(.53) 2.28 (8.55) 314,670 1.09 3.40 76 --
(.56) 3.02 21.59 377,168 1.08 3.49 79 --
(.86) 3.05 16.45 350,510 1.09 3.09 66 --
$ (.38) $ 12.80 32.24% $ 37,638 1.77%(l) 2.73%* 20% $ 0.0518
</TABLE>
53
<PAGE>
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance Worldwide Privatization
Fund, Inc. (1994), Alliance New Europe Fund, Inc. (1990), Alliance All-Asia
Investment Fund, Inc. (1994), Alliance Global Small Cap Fund, Inc. (1966),
Alliance Global Environment Fund, Inc. (1990), Alliance Income Builder Fund,
Inc. (1991), Alliance Utility Income Fund, Inc. (1993), Alliance Growth and
Income Fund, Inc. (1932) and Real Estate Investment Fund, Inc. (1996). Each of
the following Funds is either a Massachusetts business trust or a series of a
Massachusetts business trust organized in the year indicated: Alliance Growth
Fund and Alliance Strategic Balanced Fund (each a series of The Alliance
Portfolios) (1987), and Alliance International Fund (1980). Prior to August 2,
1993, The Alliance Portfolios was known as The Equitable Funds, Growth Fund was
known as The Equitable Growth Fund and Strategic Balanced Fund was known as The
Equitable Balanced Fund. Prior to March 22, 1994, Income Builder Fund was known
as Alliance Multi-Market Income and Growth Trust, Inc.
It is anticipated that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal or state law. Shareholders
have available certain procedures for the removal of Directors.
A shareholder in a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares. The Funds are empowered to
establish, without shareholder approval, additional portfolios, which may have
different investment objectives, and additional classes of shares. If an
additional portfolio or class were established in a Fund, each share of the
portfolio or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together as a single
class on matters, such as the election of Directors, that affect each portfolio
and class in substantially the same manner. Advisor Class, Class A, Class B and
Class C shares have identical voting, dividend, liquidation and other rights,
except that each class bears its own transfer agency expenses, each of Class A,
Class B and Class C shares bears its own distribution expenses and Class B and
Advisor Class shares convert to Class A shares under certain circumstances. Each
class of shares votes separately with respect to matters for which separate
class voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the Directors and, in
liquidation of a Fund, are entitled to receive the net assets of the Fund. Since
this Prospectus sets forth information about all the Funds, it is theoretically
possible that a Fund might be liable for any materially inaccurate or incomplete
disclosure in this Prospectus concerning another Fund. Based on the advice of
counsel, however, the Funds believe that the potential liability of each Fund
with respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a Fund's
organization are discussed in its Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for each class of shares, including Advisor Class shares. Such
advertisements disclose a Fund's average annual compounded total return for the
periods prescribed by the Commission. A Fund's total return for each such period
is computed by finding, through the use of a formula prescribed by the
Commission, the average annual compounded rate of return over the period that
would equate an assumed initial amount invested to the value of the investment
at the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of a Fund are assumed
to have been reinvested when paid and the maximum sales charges applicable to
purchases and redemptions of a Fund's shares are assumed to have been paid.
Balanced Shares, Growth and Income Fund, Income Builder Fund, Real Estate
Investment Fund and Utility Income Fund may also advertise their "yield," which
is also computed separately for each class of shares, including Advisor Class
shares. A Fund's yield for any 30-day (or one-month) period is computed by
dividing the net investment income per share earned during such period by the
maximum public offering price per share on the last day of the period, and then
annualizing such 30-day (or one-month) yield in accordance with a formula
prescribed by the Commission which provides for compounding on a semi-annual
basis.
54
<PAGE>
Balanced Shares, Income Builder Fund, Utility Income Fund, Real Estate
Investment Fund and Growth and Income Fund may also state in sales literature an
"actual distribution rate" for each class which is computed in the same manner
as yield except that actual income dividends declared per share during the
period in question are substituted for net investment income per share. The
actual distribution rate is computed separately for each class of shares,
including Advisor Class shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
55
<PAGE>
================================================================================
Alliance Stock Funds
Subscription Application
- - Advisor Class
================================================================================
The Alliance Fund
Growth Fund
Premier Growth Fund
Technology Fund
Quasar Fund
International Fund
Worldwide Privatization Fund
New Europe Fund
All-Asia Investment Fund
Global Small Cap Fund
Global Environment Fund
Strategic Balanced Fund
Balanced Shares
Income Builder Fund
Real Estate Investment Fund
Utility Income Fund
Growth & Income Fund
To Open Your New Alliance Account...
Please complete the application and mail
it to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration (Required)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
-- Individuals, Joint Tenants, Transfer on Death and Gift/Transfer to a
Minor:
o Indicate your name(s) exactly as it appears on your social
security card.
-- Transfer on Death:
o Ensure that your state participates
-- Trust/Other:
o Indicate the name of the entity exactly as it appeared on the
notice you received from the IRS when your Employer
Identification number was assigned.
Section 2 Your Address (Required) Complete in full.
-- Non-Resident Alien:
o Indicate your permanent country of residence.
Section 3 Your Initial Investment (Required)
For each Fund in which you are investing: (1) Write the three digit Fund number
in the column titled 'Indicate three digit Fund number located below'.
(2) Write the dollar amount of your initial purchase in the column titled
'Indicate Dollar Amount'.
(3) Check off a distribution
<PAGE>
option for your dividends.
(4) Check off a distribution option for your capital gains. All distributions
(dividends and capital gains) will be reinvested into your fund account unless
you direct otherwise. If you want distributions sent directly to your bank
account, then you must complete Section 4D and attach a preprinted, voided check
for that account. If you want your distributions sent to a third party you must
complete Section 4E.
Section 4 Your Shareholder Options (Complete only those options you want)
A. Automatic Investment Plans (AIP) - You can make periodic investments into any
of your Alliance Funds in one of three ways. First, by a periodic withdrawal
($25 minimum) directly from your bank account and invested into an Alliance
Fund. Second, you can direct your distributions (dividends and capital gains)
from one Alliance Fund into another Fund. Or third, you can automatically
exchange monthly ($25 minimum) shares of one Alliance Fund for shares of another
Fund. To elect one of these options, complete the appropriate portion of Section
4A & 4D. If more than one dividend direction or monthly exchange is desired,
please call our Literature Center to obtain a Shareholder Account Services
Options Form for completion.
B. Telephone Transactions via EFT - Complete this option if you would like to be
able to transact via telephone between your fund account and your bank account.
C. Systematic Withdrawal Plans (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be made
via Electronic Funds Transfer (EFT) to your bank account or by check.
D. Bank Information - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a preprinted, voided check of the account you wish to use to this
section of the application.
E. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person and/or
address other than those provided in section 1 or 2, complete this option.
Medallion Signature Guarantee is required if your account is not maintained by a
broker dealer.
Section 5 Shareholder Authorization (Required)
All owners must sign. If it is a custodial, corporate, or trust account, the
custodian, an authorized officer, or the trustee respectively must sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At:
(800)221-5672.
================================================================================
For Literature Call: (800) 227-4618
================================================================================
<PAGE>
The Alliance Stock Funds Subscription Application - Advisor Class
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print in Capital Letters and Mark Check Boxes Where Applicable)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
|_| Individual Account { |_| Male |_| Female } --or-- Joint Account --or--
|_| Transfer On Death { |_| Male |_| Female } --or-- Gift/Transfer to a Minor
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Owner or Custodian (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
(First Name) Joint Owner*, Transfer On Death Beneficiary or Minor's Name (MI) (Last Name)
|_|_|_|-|_|_|-|_|_|_|_| If Uniform Gift/Transfer
Social Security Number of Owner or Minor (required to open account) to Minor Account:
|_| |_| Minor's State of Residence
If Joint Tenants Account: *The Account will be registered
"Joint Tenants with right of Survivorship" unless you indicate
otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust --or-- |_| Corporation --or-- |_| Other_____________________________
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trustee if applicable (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity continued
|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|
Trust Dated (MM,DD,YYYY) Tax ID Number (required to open account)
|_| Employer ID Number --or-- |_| Social Security
Number
- --------------------------------------------------------------------------------------------------------------------------
2. YOUR ADDRESS
- --------------------------------------------------------------------------------------------------------------------------
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_| - |_|_|_| - |_|_|_|_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
</TABLE>
Alliance Capital[LOGO](R)
1
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
3. Your Initial Investment
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
I hereby subscribe for shares of the following Alliance Stock Fund(s) and elect distribution options as indicated.
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
- ------------------------------------------ -
Broker/Dealer Use Only: Wire Confirm # C Send my distributions in cash to the address I have provided in
|_|_|_|_|_|_|_|_| - Section 2. (Complete Section 4D for direct deposit to your bank
- ------------------------------------------ account. Complete Section 4E for payment to a third party).
D Direct my distributions to another Alliance Fund. Complete the
- appropriate portion of Section 4A to direct your distributions
(dividends and capital gains) to another Alliance Fund.
- ------------- ============== ======================== =============================
Indicate three Distributions Options
digit Fund "Check One"
number located Indicate Dollar Amount =============================
below Dividends Captital Gains
Make all ============== ======================== =============================
checks
payable to: |_|_|_| $ R C D R C D
Alliance
Funds |_|_|_| $ R C D R C D
- ------------- |_|_|_| $ R C D R C D
|_|_|_| $ R C D R C D
==========================
Total Investment $
==========================
- --------------------------------------------------------------------------------------------------------------------------
Alliance Stock Fund Names and Numbers
- --------------------------------------------------------------------------------------------------------------------------
=======
Advisor
Class
=======
Domestic The Alliance Fund 444
Growth Fund 431
Premier Growth Fund 478
Technology Fund 482
Quasar Fund 426
Global International Fund 440
Worldwide Privatization Fund 412
New Europe Fund 462
All-Asia Investment Fund 418
Global Small Cap Fund 445
Global Environment Fund 481
Total Return Strategic Balanced Fund 432
Balanced Shares 496
Income Builder Fund 411
Real Estate Investment Fund 410
Utility Income Fund 409
Growth & Income Fund 494
</TABLE>
2
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. Your Shareholder Options
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
A. Automatic Investment Plans (AIP)
|_| Withdraw From My Bank Account Via EFT*
I authorize Alliance to draw on my bank account for investment in my fund account(s) as indicated below
(Complete Section 4D also for the bank account you wish to use).
1- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_| M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = Annually
3- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
*Electronic Funds Transfer. Your bank must be a member of the National Automated Clearing House Association (NACHA)
|_| Direct My Distributions
As indicated in Section 3, I would like my dividends and/or capital gains directed to the same class of shares of
another Alliance Fund.
FROM: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
TO : |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_| Exchange My Shares Monthly
I authorize Alliance to transact monthly exchanges, within the same class of shares, between my fund accounts as
listed below.
FROM: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_|_| , |_|_|_| .00 |_|_|
Amount ($25 minimum) Day of Exchange**
TO : |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
**Shares exchanged will be redeemed at the net asset value on the "Day of Exchange" (If the "Day of Exchange" is not a
fund business day, the exchange transaction will be processed on the next fund business day). The exchange privilege is not
available if stock certificates have been issued.
B. Purchases and Redemptions Via EFT
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund Services, Inc. in a recorded conversation
to purchase, redeem or exchange shares for your account. Purchase and redemption requests will be processed via
electronic funds transfer (EFT) to and from your bank account.
Instructions: o Review the information in the Prospectus about telephone transaction services.
o If you select the telephone purchase or redemption privilege, you must write "VOID" across the face of
a check from the bank account you wish to use and attach it to Section 4D of this application.
|_| Purchases and Redemptions via EFT
I hereby authorize Alliance Fund Services, Inc. to effect the purchase and/or redemption of Fund shares for my account
according to my telephone instructions or telephone instructions from my Broker/Agent, and to withdraw money or credit
money for such shares via EFT from the bank account I have selected.
- --------------------------------------------------------------------------------------------------------------------------
For shares recently purchased by check or electronic funds transfer, redemption proceeds will not be made available
until the Fund is reasonably assured that the check or electronic fund transfer has been collected, normally 15
calendar days after the purchase date.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. Your Shareholder Options (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
C. Systematic Withdrawal Plans (SWP)
In order to establish a SWP, you must reinvest all dividends and capital gains.
|_| I authorize Alliance to transact periodic redemptions from my fund account and send the proceeds to me as indicated
below.
1- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_| M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = Annually
3- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Please send my SWP proceeds to:
|_| My Address of Record (via check) |_| My checking account-via EFT (complete section 4D)
Your bank must be a member of the National
Automated Clearing House Association (NACHA) in
|_| The Payee and address specified in section 4E (via check) order for you to receive SWP proceeds directly
(Medallion Signature Guarantee required) into your bank account. Otherwise payment will be
made by check
D. Bank Information This bank account information will be used for:
|_| Distributions (Section 3) |_| Telephone Transactions (Section 4B)
|_| Automatic Investments (Section 4A) |_| Withdrawals (Section 4C)
- ---------------------------------------------------------------------------------------------------------------------------
Please Tape a Pre-printed Voided Check Here*
- ---------------------------------------------------------------------------------------------------------------------------
* The above services
cannot be established
[GRAPHIC OF BLANK CHECK WITH THE WORD VOID PRINTED ON IT.] without a pre-printed
voided check.
For EFT transactions,
the Fund requires
signatures of bank
account owners exactly
as they appear on bank
records. If the
registration at the
bank differs from that
on the Alliance mutual
fund, all parties must
sign in Section 5.
|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|
Your Bank's ABA Routing Number Your Bank Account Number
|_| Checking Account |_| Savings Account
</TABLE>
4
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS(CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
E. THIRD PARTY PAYMENT DETAILS Your signautre(s) in Section 5 must be Medallion Signature Guaranteed if your account is
not maintained by a dealer/broker. This third party payee information will be used for:
|_| Distributions (section 3) |_| Systematic Withdrawals (section 4C)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_||_|_|_|_|
Name (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
- --------------------------------------------------------------------------------------------------------------------------
DEALER/AGENT AUTHORIZATION -- For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in connection with transactions under this
authorization form; and we guarantee the signature(s) set forth in Section 5, as well as the legal capacity of
the shareholder.
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Authorized Signature
|________________________________________________________| |__| |_______________________________________________________|
Representative First Name MI Last Name
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Number Representative Number
|_____________________________________________________________| |_______________________________________________________|
Branch Number Branch Telephone Number
|_________________________________________________________________________________________________________________________|
Branch Office Address
|_____________________________________________________________| |_||_| |_______________________________________________|
City State Zip Code
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
5. SHAREHOLDER AUTHORIZATION -- This section MUST be completed
- --------------------------------------------------------------------------------
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of an investment dealer or agent requesting a
redemption or exchange on my behalf. (NOTE: Telephone exchanges may only be
processed between accounts that have identical registrations.) Telephone
redemption checks will only be mailed to the name and address of record;
and the address must not have changed within the last 30 days. The maximum
telephone redemption amount is $50,000 for redemptions by check.
|_| I do not elect the telephone exchange service.
|_| I do not elect the telephone redemption by check service.
By selecting any of the above telephone privileges, I agree that neither
the Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund
Services, Inc. or other Fund Agent will be liable for any loss, injury,
damage or expense as a result of acting upon telephone instructions
purporting to be on my behalf, that the Fund reasonably believes to be
genuine, and that neither the Fund nor any such party will be responsible
for the authenticity of such telephone instructions. I understand that any
or all of these privileges may be discontinued by me or the Fund at any
time. I understand and agree that the Fund reserves the right to refuse any
telephone instructions and that my investment dealer or agent reserves the
right to refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the
best of my knowledge and belief, I qualify as a foreign person as indicated
in Section 2.
I am of legal age and capacity and have received and read the Prospectus
and agree to its terms.
I CERTIFY UNDER PENALTY OF PERJURY THAT THE NUMBER SHOWN IN SECTION 1 OF
THIS FORM IS MY CORRECT TAX IDENTIFICATION NUMBER OR I AM WAITING FOR A
NUMBER TO BE ISSUED TO ME AND THAT I HAVE NOT BEEN NOTIFIED THAT THIS
ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION
OF THIS DOCUMENT OTHER THAN THE CERTIFICATE REQUIRED TO AVOID BACKUP
WITHHOLDING.
|__________________________________________________| |_______________________|
Signature Date
|__________________________________________________| |_______________________|
Signature Date
- ----------------------------------------------
Medallion Signautre Guarantee required if
completing Section 4E and your mutual fund is
not maintained by a broker dealer
Alliance Capital [LOGO]
6
<PAGE>
ALLIANCE BALANCED SHARES, INC.
FORM N-14
PART B - STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the assets of
Alliance Strategic Balanced Fund and
Alliance Income Builder Fund, Inc.
1345 Avenue of the Americas, New York, NY 10105,
Telephone (800) 221-5672
by and in exchange for shares of
Alliance Balanced Shares, Inc.,
1345 Avenue of the Americas, New York, NY 10105,
Telephone (800) 221-5672
This Statement of Additional Information relating to the
proposed transfer of the assets and liabilities of Alliance
Strategic Balanced Fund ("Strategic") and Alliance Income Builder
Fund, Inc. ("Income Builder") to Alliance Balanced Shares, Inc.
("Balanced Shares") in exchange for shares of Balanced Shares
(the "Transactions") consists of this cover page and the
following described documents, each of which is incorporated by
reference herein:
(1) Statement of Additional Information of
Balanced Shares dated October 31, 1997.
(2) Unaudited financial statements of Balanced
Shares as of and for the six months ended
January 31, 1998.
(3) Statement of Additional Information of The
Alliance Portfolios (including Strategic)
dated October 31, 1997.
(4) Unaudited financial statements of Strategic as
of and for the six months ended January 31,
1998.
(5) Statement of Additional Information of Income
Builder dated February 2, 1998.
(6) Unaudited financial statements of Income
Builder as of and for the six-month period
ended April 30, 1998.
(7) Unaudited pro forma combined financial
information as of and for the twelve months
ended June 30, 1998. The pro forma financial
statements give effect to each of the
Transactions separately, as well as jointly,
in each case as if consummated at the
beginning of the period presented.
<PAGE>
This Statement of Additional Information is not a
prospectus. A Prospectus/Proxy Statement dated August [ ],
1998 relating to the above referenced matter may be obtained
without charge by writing to Alliance Fund Services, Inc.,
P.O. Box 1520, Secaucus, New Jersey 07096, or by calling
Alliance Fund Services, Inc. toll-free at 1-800-221-5672.
This Statement of Additional Information relates to, and
should be read in conjunction with, such Prospectus/Proxy
Statement.
This Statement of Additional Information is dated
August [ ], 1998.
<PAGE>
Alliance Capital [LOGO](R) The Alliance Stock Funds
The Alliance Bond Funds
____________________________________________________________
_____
Supplement dated May 1, 1998 to the Statements of Additional
Information of The Alliance Stock Funds and The Alliance
Bond Funds (each, a "Fund").
The following information concerning the purchase of Class A
shares and Class B shares by Merrill Lynch Plans (as defined
below) supplements the information set forth under "Purchase
of Shares" and "Redemption and Repurchase of Shares."
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. 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
<PAGE>
(b) the plan is one which is already investing
in shares of or interests in MLAM Funds and
the assets of the plan have an aggregate
value of less than $5 million, as determined
by Merrill Lynch as of the date the plan
becomes an Active Plan.
For purposes of applying (a) and (b), there
are to be aggregated all assets of any Tax-
Qualified Plan maintained by the sponsor of
the Merrill Lynch Plan (or 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 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 under
"Purchase of Shares" and "Redemption and Repurchase of
Shares" in the accompanying Statement of Additional
Information of the Fund.
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
(LOGO) ALLIANCE BALANCED SHARES, INC.
_________________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 221-5672
_________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
October 31, 1997
_________________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the current Prospectus for Alliance Balanced Shares, Inc. (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 Prospectuses may be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone number shown above.
TABLE OF CONTENTS
PAGE
DESCRIPTION OF THE FUND .............................. 2
MANAGEMENT OF THE FUND ............................... 7
EXPENSES OF THE FUND ................................. 15
PURCHASE OF SHARES ................................... 18
REDEMPTION AND REPURCHASE OF SHARES .................. 36
SHAREHOLDER SERVICES ................................. 39
NET ASSET VALUE ...................................... 46
DIVIDENDS, DISTRIBUTIONS AND TAXES ................... 47
PORTFOLIO TRANSACTIONS ............................... 49
GENERAL INFORMATION .................................. 51
REPORT OF INDEPENDENT ACCOUNTANTS AND FINANCIAL
STATEMENTS ............................................ 54
APPENDIX A: FUTURES CONTRACTS, OPTIONS ON FUTURES
CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES ........ A-1
________________________
(R) This registered service mark used under license from owner,
Alliance Capital Management L.P.
<PAGE>
____________________________________________________________
DESCRIPTION OF THE FUND
____________________________________________________________
Except as otherwise indicated, the investment policies
of Alliance Balanced Shares, Inc. (the "Fund") are not
"fundamental policies" within the meaning of the Investment
Company Act of 1940, as amended (the "1940 Act"), and may,
therefore, be changed by the Board of Directors without a
shareholder vote. However, the Fund will not change its
investment policies without contemporaneous written notice to its
shareholders. There can be, of course, no assurance that the
Fund will achieve its investment objective.
Investment Objective
The investment objective of the Fund is to achieve a
high return through a combination of current income and capital
appreciation.
How the Fund Pursues its Objective
The Fund has adopted as a fundamental policy that it be
a "balanced fund;" this fundamental policy cannot be changed
without the approval of shareholders. As an investment policy,
the Fund will not purchase a security if as a result of such
purchase 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 preferred stocks to the extent their values is
attributable to their fixed-income characteristics); this
investment policy may be changed by the Fund's Board of Directors
but only with 60 days' prior shareholder notice and in accordance
with the 1940 Act and the Securities and Exchange Commission (the
"Commission"). Subject to such restrictions, the percentage of
the Fund's assets invested in each type of security at any time
shall be in accordance with the judgment of the management.
Additional Investment Policies and Practices
The following additional investment policies supplement
those set forth in the Prospectus.
The Fund's assets are invested in U.S. Government and
agency obligations, bonds whether convertible or nonconvertible
(except that only that portion of the value of the convertible
bonds attributable to their fixed-income characteristics shall be
used for purposes of meeting the 25% fixed-income securities
requirement), senior debt securities (as listed above), and
preferred and common stocks in such proportions and of such type
2
<PAGE>
as are deemed best adapted to the current economic and market
outlooks. At July 31, 1997, the amount invested in common stocks
was approximately 61.7% of the total assets. The Fund engages
primarily in holding securities for investment and not for
trading purposes. Purchases and sales of portfolio securities
are made at such times and in such amounts as are deemed
advisable in the light of market, economic and other conditions,
irrespective of the volume of portfolio turnover.
Investment in Covered Call Options. Subject to market
conditions, the Fund may try to realize income by writing covered
call option contracts provided that the option is listed on a
domestic securities exchange and that no option will be written
if, as a result, more than 25% of the Fund's assets are subject
to call options. A covered call option is an option on a
security which the Fund owns or can acquire by converting a
convertible security it owns. The purchaser of the option
acquires the right to buy the security from the Fund at a fixed
exercise price at any time prior to the expiration of the option,
regardless of the market price of the security at that time. A
security on which an option has been written will be held in
escrow by the Fund's custodian until the option expires, is
exercised, or a closing purchase transaction is made.
The Fund thus forgoes the opportunity to profit from an
increase in the market price in the underlying security above the
exercise price, in return for the premium it receives from the
purchaser of the option. The Fund's management believes that
such premiums will increase the Fund's income without subjecting
it to substantial risks.
When a security is sold from the Fund's portfolio
against which a call option has been written, the Fund will
effect a closing purchase transaction so as to close out any
existing call option on that security. The Fund will realize a
profit or loss from a closing purchase transaction if the amount
paid to purchase a call option is less or more than the amount
received as a premium from the writing thereof. A closing
purchase transaction cannot be made if trading in the option has
been suspended.
The premium received by the Fund upon writing a call
option will increase the Fund's assets, and a corresponding
liability will be recorded and subsequently adjusted from day to
day to the current value of the option written. For example, if
the current value of the option exceeds the premium received, the
excess would be an unrealized loss and, conversely, if the
premium exceeds the current value, such excess would be an
unrealized gain. The current value of the option will be the
last sales price on the principal exchange on which the option is
3
<PAGE>
traded or, in the absence of any transactions, the mean between
the closing bid and asked price.
Except as stated above, the Fund may not purchase or
sell put or call options on securities or combinations of put and
call options on securities.
Foreign Securities. 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 the investment
policies described above. Foreign securities investments are
affected by exchange control regulations as well as by changes in
governmental administration, economic or monetary policy (in the
United States and abroad) and changed circumstances in dealings
between nations. Currency exchange rate movements will increase
or reduce the U.S. Dollar value of the Fund's net assets and
income attributable to foreign securities. Costs will be
incurred in connection with the conversion of currencies held by
the Fund. There may be less publicly available information about
foreign issuers than about domestic issuers, and foreign issuers
may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to those of
domestic issuers. Securities of some foreign issuers are less
liquid and more volatile than securities of comparable domestic
issuers, and foreign brokerage commissions are generally higher
than in the United States. Foreign securities markets may also
be less liquid, more volatile, and less subject to governmental
supervision than in the United States. Investments in foreign
countries could be affected by other factors not present in the
United States, including expropriation, confiscatory taxation and
potential difficulties in enforcing contractual obligations.
Options on Foreign Currencies. For additional
information on the use, risks and costs of options on foreign
currencies, see Appendix A.
Forward Foreign Currency Exchange Contracts. The Fund
may purchase or sell forward foreign currency exchange contracts
("forward contracts"). While these contracts are not currently
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 the foreign currencies that are the subject of the
forward contracts. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than 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 proceeds of or
4
<PAGE>
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, as discussed below.
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.
In addition, 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. To the extent required by applicable law, 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 under forward contracts entered into with
respect to position hedges and cross-hedges. If the value of the
assets placed in a separate account declines, additional liquid
assets will be placed in the account on a daily basis so that the
value of the account will equal the amount of the Fund's
commitments with respect to such contracts. As an alternative to
maintaining all or part of the separate account, the Fund may
purchase a call option permitting the Fund to purchase the amount
of foreign currency being hedged by a forward sale contract at a
price no higher than the forward contract price or the Fund may
purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a
price as high or higher than the forward contract price. In
addition, the Fund may use such other methods of "cover" as are
permitted by applicable law.
General. There can be no assurance that the Fund will
achieve its investment objective since market risks are inherent
in all securities to varying degrees, although Alliance Capital
Management L.P., the Fund's Adviser (the "Adviser") will try to
limit these risks.
Portfolio Turnover. Ordinarily, the annual portfolio
turnover rate will not exceed 200%. A portfolio turnover rate
approximating 200% involves correspondingly greater brokerage
commission expenses than would a lower rate, which must be borne
directly by the Fund and its shareholders. The annual portfolio
turnover rates of securities of the Fund for its 1997 and 1996
fiscal years were 207% and 227%, respectively.
5
<PAGE>
Fundamental Investment Policies
The Fund is also subject to the following restrictions
in implementing its investment policies which cannot be changed
without the approval of the holders of a majority of the Fund's
outstanding voting securities. The Fund may not: (1) purchase
any security of any issuer (other than the United States
Government) if as a result more than 5% of the value of its total
assets would consist of the securities of such issuer or the Fund
would own more than 10% of the outstanding voting securities of
any issuer; (2) purchase the securities of any other investment
company except in a regular transaction in the open market; (3)
purchase the securities of any issuer the business of which has
been in continuous operation for less than three years; (4)
retain investments in the securities of any issuer if directors
or officers of the Fund or certain other interested persons own
more than 5% of such securities; (5) invest in other companies
for the purpose of exercising control of management; (6) purchase
securities on margin, borrow money, or sell securities short,
except that the Fund may borrow in an amount up to 10% of its
total assets to meet redemption requests and for the clearance of
purchases and sales of portfolio securities (this borrowing
provision is not for investment leverage but solely to facilitate
management of the portfolio to enable the Fund to meet redemption
requests where the liquidation of portfolio securities is deemed
to be disadvantageous or inconvenient and to obtain such short-
term credits as may be necessary for the clearance of purchases
and sales of portfolio securities; all borrowings at any time
outstanding will be repaid before any additional investments are
made; the Fund will not mortgage, pledge or hypothecate any
assets in connection with any such borrowing in excess of 15% of
the Fund's total assets); (7) make loans to other persons except
certain call loans upon collateral security (the Fund does not
intend to make such loans; the acquisition of publicly
distributed bonds, debentures and other debt securities is not
considered a loan); (8) concentrate its investments in any one
industry by investment of more than 25% of the value of its total
assets in such industry; (9) underwrite securities issued by
other persons; (10) purchase any securities as to which it would
be deemed a statutory underwriter under the Securities Act of
1933, as amended; (11) purchase or sell commodities or commodity
contracts; or (12) issue any securities senior to the capital
stock offered hereby.
The Fund has not engaged in the investment practice
described in restriction (6) above during its last fiscal year
and has no current intention of doing so in the foreseeable
future.
In addition, the Fund has undertaken with the securities
administrators of certain states where the Fund's shares are sold
6
<PAGE>
not to invest any part of its total assets in interests in oil,
gas, or other mineral exploration or development programs; make
loans to any person or individual; 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 assets would
be invested in securities of any one or more closed- end
investment companies, or more than 10% of the value of the Fund's
total assets would be invested in securities of closed-end
investment companies in the aggregate; invest only in investment
grade fixed income securities; 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 5% of the
value of the Fund's assets at the time of purchase provided that
not more than 2% of the Fund's net assets at the time of purchase
may be invested in warrants not listed on the New York Stock
Exchange (the "Exchange") or the American Stock Exchange;
purchase or sell real property (including limited partnership
interests, but excluding readily marketable interests in real
estate investment trusts or readily marketable securities of
companies which invest in real estate; limit its investments in
illiquid securities together with restricted securities
(excluding 144A securities) to no more than 15% of the Fund's
average net assets.
____________________________________________________________
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
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).
Alliance is a leading international investment manager
supervising client accounts with assets as of September 30, 1997
of more than $217 billion (of which more than $81 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundation and endowment funds. As of September 30, 1997, the
7
<PAGE>
Adviser was an investment manager of employee benefit fund assets
for 28 of the FORTUNE 100 companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,500
employees who operated out of domestic offices and the offices of
subsidiaries in Bahrain, Bangalore, Chennai, Istanbul, London,
Madrid, Mumbai, Paris, Singapore, Tokyo and Toronto and affiliate
offices located in Vienna, Warsaw, Hong Kong, Sao Paulo and
Moscow. The 54 registered investment companies comprising more
than 116 separate investment portfolios managed by the Adviser
currently have more than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the 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, a French insurance holding company which
at September 30, 1997, beneficially owned approximately 59% of
the outstanding voting shares of ECI. As of June 30, 1997, ACMC,
Inc. and Equitable Capital Management Corporation, each a wholly-
owned direct or indirect subsidiary of Equitable, together with
Equitable, owned in the aggregate approximately 57% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests in the Adviser.
AXA-UAP is a holding company for an international group
of insurance and related financial services companies. AXA-UAP's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA-UAP is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.
Based on information provided by AXA-UAP, as of
September 30, 1997 more than 25% of the voting power of AXA-UAP
was controlled directly and indirectly by FINAXA, a French
holding company. As of September 30, 1997 more than 25% of the
voting power of FINAXA was controlled directly and indirectly by
four French mutual insurance companies (the "Mutuelles AXA"), one
of which, AXA Assurances I.A.R.D. Mutuelle, itself controlled
directly and indirectly more than 25% of the voting power of
FINAXA. Acting as a group, the Mutuelles AXA control AXA-UAP and
FINAXA.
8
<PAGE>
Under the Advisory Agreement, the Adviser furnishes
advice and recommendations with respect to the Fund's portfolio
of securities and investments and provides persons satisfactory
to the Board of Directors to act as officers and employees of the
Fund. Such officers and employees, as well as certain Directors
of the Fund may be employees of the Adviser or its affiliates.
The Adviser is, under the Advisory Agreement,
responsible for certain expenses incurred by the Fund, including,
for example, office space and certain other equipment, investment
advisory and administrative services, and any expenses incurred
in promoting the sale of Fund shares (other than the portion of
the promotional expenses borne by the Fund in accordance with an
effective plan pursuant to Rule 12b-1 under the 1940 Act, and the
costs of printing Fund prospectuses and other reports to
shareholders and fees related to registration with the Securities
and Exchange Commission and with state regulatory authorities).
The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may utilize personnel employed
by the Adviser or by other subsidiaries of Equitable. The Fund
may employ its own personnel or contract for services to be
performed by third parties. In such event, the services will be
provided to the Fund at cost and the payments specifically
approved by the Fund's Board of Directors. The Fund paid to the
Adviser a total of $133,561 in respect of such services during
the fiscal year of the Fund ended in 1997.
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser at the annual rate
of .625 of 1% of the first $200 million, .50% of the excess over
$200 million up to $400 million and .45 of 1% of the excess over
$400 million of the average daily value of the Fund's net assets.
The fee is accrued daily and paid monthly. In this regard, for
the fiscal years ended July 31, 1995, July 31, 1996 and July 31,
1997, the Adviser received from the Fund advisory fees of
$1,044,023, $879,738 and $828,903, respectively.
At their Regular Meeting held on July 19, 1994, the
Board of Directors, including a majority of the Directors who are
not "interested persons" as defined in the 1940 Act, voted
unanimously to a change in the fiscal year end from September 30
to July 31.
The Advisory Agreement became effective on July 22,
1992. The Advisory Agreement was approved by the unanimous vote,
cast in person, of the Fund's Directors including the Directors
who are not parties to the Advisory Agreement or interested
persons, as defined in the 1940 Act, of any such party at a
9
<PAGE>
meeting called for the purpose and held on October 14, 1991. At
a meeting held on June 11, 1992, a majority of the outstanding
voting securities of the Fund approved the Advisory Agreement.
The Advisory Agreement continues in effect for
successive twelve-month periods (computed from each October 1)
provided that such continuance is specifically approved at least
annually by the Fund's Directors or by a majority vote of the
holders of the outstanding voting securities of the Fund and, in
either case, by a majority of the Directors who are not parties
to the Advisory Agreement, or interested persons, as defined in
the 1940 Act, of any such party, at a meeting in person called
for the purpose of voting on such matter. Most recently,
continuance of the Agreement was approved for the period ending
September 30, 1998 by the Board of Directors, including a
majority of the Directors who are not "interested persons" as
defined in the 1940 Act, at their Regular Meeting held on
July 15, 1997.
The Advisory Agreement may be terminated without penalty
on 60 days' written notice by a vote of a majority of the
outstanding voting securities, by a vote of the majority of the
Directors, or by the Adviser on 60 days' written notice, and will
automatically terminate in the event of assignment. The Advisory
Agreement provides that the Adviser shall not be liable under the
Advisory Agreement for any mistake of judgment, or in any event
whatsoever, except for lack of good faith, provided that the
Adviser shall be liable to the Fund and security holders by
reason of willful misfeasance, bad faith or gross negligence or
of reckless disregard of its obligations and duties under the
Advisory Agreement.
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 following registered investment
10
<PAGE>
companies: ACM Institutional Reserves, Inc., AFD Exchange
Reserves, The Alliance Fund, Alliance All-Asia Investment Fund,
Inc., Alliance Balanced Shares, Inc., Alliance Bond Fund, Inc.,
Alliance Capital Reserves, Alliance Developing Markets Fund,
Inc., Alliance Global Dollar Government Fund, Inc., Alliance
Global Environment Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Global Strategic Income Trust, Inc., Alliance
Government Reserves, Alliance Greater China '97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance High Yield Fund,
Inc., Alliance Income Builder Fund, Inc., Alliance International
Fund, Alliance Limited Maturity Government Fund, Inc., Alliance
Money Market Fund, Alliance Mortgage Securities Income Fund,
Inc., Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund II,
Alliance Municipal Trust, Alliance New Europe Fund, Inc.,
Alliance North American Government Income Trust, Inc., Alliance
Premier Growth Fund, Inc., Alliance Quasar Fund, Inc., Alliance
Real Estate Investment Fund, Inc., Alliance/Regent Sector
Opportunity Fund, Inc., Alliance Short-Term Multi-Market Trust,
Inc., Alliance Technology Fund, Inc., Alliance Utility Income
Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., The Alliance Portfolios,
Fiduciary Management Associates and The Hudson River Trust, all
registered open-end investment companies; and to ACM Government
Income Fund, Inc., ACM Government Securities Fund, Inc., ACM
Government Spectrum Fund, Inc., ACM Government Opportunity Fund,
Inc., ACM Managed Income Fund, Inc., ACM Managed Multi-Market
Trust, Inc., ACM Managed Dollar Income Fund, Inc., ACM Municipal
Securities Income Fund, Inc., Alliance World Dollar Government
Fund, Inc., Alliance World Dollar Government Fund II, Inc., The
Austria Fund, Inc., The Korean Investment Fund, Inc. and The
Spain Fund, Inc., all registered closed-end investment companies.
Directors and Officers
The Directors and officers of the Fund, their ages and
their primary occupations during the past five years are set
forth below. Each such Director and officer is also a director,
trustee or officer of other registered investment companies
sponsored by the Adviser. Unless otherwise specified, the
address of each such person is 1345 Avenue of the Americas, New
York, New York 10105.
Directors
JOHN D. CARIFA,2 52, Chairman and President of the Fund,
is the President and Chief Operating Officer, the Chief Financial
____________________
2. An "interested person" of the Fund as defined in the 1940
Act.
11
<PAGE>
Officer and a Director of Alliance Capital Management Corporation
("ACMC"), with which he has been associated since prior to 1992.
RUTH BLOCK, 66, was formerly an Executive Vice President
and the Chief Insurance Officer of Equitable. She is a Director
of Ecolab Incorporated (specialty chemicals) and Amoco
Corporation (oil and gas). Her address is P.O. Box 4653,
Stamford, Connecticut 06903.
DAVID H. DIEVLER, 68, was formerly a Senior Vice
President of ACMC, with which he had been associated since prior
to 1992 through 1994. He is currently an independent consultant.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 55, has been the President of Historic
Hudson Valley (historic preservation) prior to 1992. Previously,
he was Director of the National Academy of Design. His address
is Historic Hudson Valley, 150 White Plains Road, New York, New
York 10591.
WILLIAM H. FOULK, JR., 65, is an Investment Adviser and
an Independent Consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1992. His address is
Suite 100, 2 Greenwich Plaza, Greenwich, Connecticut 06830.
DR. JAMES M. HESTER, 73, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide
Corporation, with which he has been associated since prior to
1992. He was formerly President of New York University, The New
York Botanical Garden and Rector of the United Nations
University. His address is 45 East 89th Street, New York, New
York 10128.
CLIFFORD L. MICHEL, 57, is a partner of the law firm of
Cahill Gordon & Reindel with which he has been associated since
prior to 1992. He is President, Chief Executive Officer and a
Director of Wenonah Development Company (investment holding
company) and a Director of Placer Dome, Inc. (mining). His
address is 80 Pine Street, New York, New York, 10005.
DONALD J. ROBINSON, 62, was formerly a senior partner of
the law firm of Orrick, Herrington & Sutcliffe and is currently
of counsel to that firm. His address is 666 Fifth Avenue, New
York, New York, 10103.
Officers
JOHN D. CARIFA, President, Chairman and President, see
Biography, above.
12
<PAGE>
BRUCE W. CALVERT, Executive Vice President-Investments,
50, is Vice Chairman of the Board and Chief Investment Officer of
ACMC, with which he has been associated since prior to 1992.
KATHLEEN A. CORBET, Senior Vice President, 37, has been
a Senior Vice President of ACMC since July 1993. Previously, she
held various responsibilities as head of Equitable Capital
Management Corporation's Fixed Income Management Department,
Private Placement Secondary Trading and Fund Management since
prior to 1992.
THOMAS J. BARDONG, Vice President, 52, is a Senior Vice
President of ACMC, with which he has been associated since 1992.
PAUL C. RISSMAN, Senior Vice President, 40, is a Senior
Vice President of ACMC, with which he has been associated since
1992.
MATTHEW BLOOM, Vice President, 41, is a Vice President
of ACMC, with which he has been associated since prior to 1992.
DANIEL V. PANKER, Vice President, 58, is a Senior Vice
President of ACMC with which he has been associated since prior
to 1992.
EDMUND P. BERGAN, JR., Secretary, 47, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") with which he has been associated since prior to
1992.
ANDREW L. GANGOLF, Assistant Secretary, 43, has been a
Vice President and Assistant General Counsel of AFD since
December 1994. Prior thereto he was a Vice President and
Assistant Secretary of Delaware Management Company, Inc. since
October 1992 and a Vice President and Counsel to Equitable Life
Assurance Society of the United States since prior to 1992.
DOMENICK PUGLIESE, Assistant Secretary, 36, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since May 1995. Previously, he was Vice President
and Counsel of Concord Holding Corporation since 1994, Vice
President and Associate General Counsel of Prudential Securities
since 1992.
EMILIE D. WRAPP, Assistant Secretary, 41, is a Vice
President and Special Counsel of AFD, with which she has been
associated since prior to 1992.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
47, is a Senior Vice President of Alliance Fund Services, Inc.,
("AFS") with which he has been associated since prior to 1992.
13
<PAGE>
VINCENT S. NOTO, Controller, 33, is a Vice President of
AFS with which he has been associated since prior to 1992.
PHYLLIS CLARKE, Assistant Controller, 37, is an
Accounting Manager of Mutual Funds for AFS with which she has
been associated with since prior to 1992.
JOSEPH MANTINEO, Assistant Controller, 38, has been a
Vice President of AFS since prior to 1992.
JUAN J. RODRIGUEZ, Assistant Controller, 40, is an
Assistant Vice President of AFS with which he has been associated
since prior to 1992.
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended July 31, 1997, the
aggregate compensation paid to each of the Directors during
calendar year 1996 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of registered investment companies (and separate investment
portfolios within those companies) in the Alliance Fund Complex
with respect to which each of the Directors serves as a director
or trustee, are set forth below. Neither the Fund nor any other
fund in the Alliance Fund Complex provides compensation in the
form of pension or retirement benefits to any of its directors or
trustees.
Total Number Total Number
of Funds in of Investment
the Alliance Portfolios within
Total Fund Complex, the Funds,
Compensation Including the Including the
From the Fund, as to Fund, as to
Alliance Fund which the which the
Aggregate Complex, Director is a Director is a
Name of Compensation Including the Director or Director or
Director From the Fund Fund Trustee Trustee
___________ ____________ ______________ _____________ _______________
John D. Carifa $0 $0 52 114
Ruth Block $4,001 $157,500 38 76
David H. Dievler $3,986 $182,000 45 79
John H. Dobkin $4,007 $121,250 31 52
William H. Foulk, Jr. $4,108 $144,250 34 70
Dr. James M. Hester $3,976 $148,500 39 73
Clifford L. Michel $3,976 $146,068 39 88
Donald J. Robinson $3,933 $137,250 42 102
As of October 3, 1997, the Directors and officers of the
14
<PAGE>
Fund as a group owned less than 1% of the shares of the Fund.
____________________________________________________________
EXPENSES OF THE FUND
____________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Funds shares and to permit the Fund to pay distribution
services fees to defray expenses associated with the 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 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 in
that in each case the sales charge and distribution services fee
provide for the financing of the distribution of the relevant
class of the Fund's shares.
Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund for their review on a quarterly basis. Also, the Agreement
provides that the selection and nomination of Directors who are
not "interested persons" of the Fund (as defined in the 1940
Act), are committed to the discretion of such disinterested
Directors then in office.
The Agreement became effective on July 22, 1992 with
respect to Class A shares and Class B shares, was amended as of
April 30, 1993 to permit distribution of Class C Shares and again
on September 16, 1996 to permit the distribution of Advisor Class
shares.
15
<PAGE>
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 July 31, 1997, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class A shares, in amounts aggregating
$253,527, which constituted .24% of the average daily net assets
attributable to Class A shares during the period, and the Adviser
made payments from its own resources as described above
aggregating $189,412. Of the $442,939 paid by the Fund and the
Adviser under the Plan, $41,213 was spent on advertising, $1,911
on the printing and mailing of prospectuses for persons other
than current shareholders, $303,664 for compensation to broker-
dealers and other financial intermediaries (including $76,135 to
the Fund's Principal Underwriter), $7,015 for compensation to
sales personnel and $89,136 was spent on the printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses.
During the Fund's fiscal year ended July 31, 1997, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class B shares, in amounts aggregating
$204,078, which constituted 1.0% of the 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 $299,764. Of the $503,842 paid by the Fund and the
Adviser under the Plan, $55,398 was spent on advertising, $3,098
on the printing and mailing of prospectuses for persons other
than current shareholders, $306,232 for compensation to broker-
dealers and other financial intermediaries (including $102,071 to
the Fund's Principal Underwriter), $4,316 for compensation to
sales personnel, $108,823 was spent on the printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses and $25,975 was spent on interest on Class B
shares financing.
During the Fund's fiscal year ended July 31, 1997, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class C shares, in amounts aggregating
$60,441, which constituted 1.0% of the 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 $115,766. Of the $176,207 paid by the Fund and the
Adviser under the Plan, $21,109 was spent on advertising, $1,322
on the printing and mailing of prospectuses for persons other
than current shareholders, $109,184 for compensation to broker-
dealers and other financial intermediaries (including $39,831 to
16
<PAGE>
the Fund's Principal Underwriter), $639 for compensation to sales
personnel, $40,042 was spent on the printing of sales literature,
travel, entertainment, due diligence and other promotional
expenses, and $3,911 on interest on Class C shares financing.
The Agreement will continue in effect for successive
twelve-month periods (computed from each October 1), provided,
however, that such continuance is specifically approved at least
annually by the Directors of the Fund or by vote of the holders
of a majority of the outstanding voting securities (as defined in
the 1940 Act) of that class, and, in either case, by a majority
of the Directors of the Fund who are not parties to the Agreement
or interested persons, as defined in the 1940 Act, of any such
party (other than as directors of the Fund) and who have no
direct or indirect financial interest in the operation of the
Rule 12b-1 Plan or any agreement related thereto. Most recently
the continuance of the Agreement until September 30, 1998 was
approved by a vote, cast in person, of the Directors, including a
majority of the Directors who are not "interested persons", as
defined in the 1940 Act, at their meeting held on July 15, 1997.
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 Directors or the holders of the Fund's
outstanding voting securities, voting separately by class, and in
either case, by a majority of the disinterested Directors, cast
in person at a meeting called for the purpose of voting on such
approval; and the Agreement may not be amended in order to
increase materially the costs that a particular class may bear
pursuant to the Agreement without the approval of a majority of
the holders of the outstanding voting shares of the class or
classes affected. The Agreement may be terminated (a) by the
Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting
separately by class or by a majority vote of the Directors who
are not "interested persons" as defined in the 1940 Act, or
(b) by the Principal Underwriter. To terminate the Agreement,
any party must give the other 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.
17
<PAGE>
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each of the Class A shares, Class B shares,
Class C 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 and Advisor
Class shares, reflecting the additional costs associated with the
Class B and Class C contingent deferred sales charges. For the
fiscal year ended July 31, 1997, the Fund paid Alliance Fund
Services, Inc. $151,926 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)
18
<PAGE>
under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares), or
(iv) by directors and present or retired full-time employees of
CB Commercial Real Estate Group, Inc. Generally, a fee-based
program must charge an asset-based or other similar fee and must
invest at least $250,000 in Advisor Class shares of the Fund in
order to be approved by the Principal Underwriter for investment
in Advisor Class shares.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares made through such financial
representative. Such financial representative may also impose
requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed
by the Fund, including requirements as to the minimum initial and
subsequent investment amounts. Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares.
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below. 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 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
19
<PAGE>
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.
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. 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
20
<PAGE>
purchase request is received before 3:00 p.m. Eastern time on a
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription.
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, stock certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.
In addition to the discount or commission amount paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., formerly Equico
Securities, Inc., an affiliate of the Principal Underwriter, in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part, to provide
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, cash or other incentives
will be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other Alliance Mutual
Funds, as defined below, during a specific period of time. On
some occasions, such cash or other incentives may take the form
of payment for attendance at seminars, meals, sporting events or
theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel taken by persons
associated with a dealer or agent and their immediate family
members to urban or resort locations within or outside the United
States. Such dealer or agent may elect to receive cash incentives
of equivalent amount in lieu of such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B shares and Class C shares
each bear the expense of a higher distribution services fee than
do 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 do Class A and Advisor Class shares, (iv) each of
Class A, Class B and Class C shares has exclusive voting rights
21
<PAGE>
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,
Class B and Advisor Class shareholders will vote separately by
class, 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 Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Alternative Retail Purchase Arrangements -- Class A, Class B and
Class C Shares3
Class A, Class B and Class C shares have the following
alternative purchase arrangements: Class A shares are sold to
investors choosing the initial sales charge alternative, Class B
shares are sold to investors choosing the deferred sales charge
alternative, and Class C shares are sold to investors choosing
the asset-based sales charge alternative. These alternative
purchase arrangements permit an investor to choose the method of
purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the
shares, and other circumstances. Investors should consider
whether, during the anticipated life of their investment in the
Fund, the accumulated distribution services fee and contingent
deferred sales charges on Class B shares prior to conversion, or
the accumulated distribution services fee 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) for more than $250,000 for
Class B shares. Class C shares will normally not be suitable for
____________________
3. Advisor Class shares are sold only to investors described
above in this section under "-General."
22
<PAGE>
the investor who qualifies to purchase Class A shares at net
asset value. For this reason, the Principal Underwriter will
reject any order for more than $1,000,000 for Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
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 July 31, 1997, 1996
and 1995, the aggregate amounts of underwriting commission
payable with respect to shares of the Fund were $100,315,
$100,922, and $86,384, respectively. Of that amount the
Principal Underwriter received the amounts of $5,903, $7,573 and
$4,819, respectively, representing that portion of the sales
charges paid on shares of the Fund sold during the year which was
23
<PAGE>
not reallowed to selected dealers (and was, accordingly, retained
by the Principal Underwriter). During the Fund's fiscal years
ended in 1997, 1996 and 1995, the Principal Underwriter received
contingent deferred sales charges of $521, $0, and $0,
respectively, on Class A shares, $34,203, $43,572, and $71,604,
respectively, on Class B shares, and $1,445, $0, and $0,
respectively on Class C shares.
Class A Shares
The public offering price of Class A shares is the net asset
value plus a sales charge, as set forth below.
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
________ ________ ________ ____________
Less than $100,000 4.44% 4.25% 4.00%
$100,000 but less
than $250,000 3.36 3.25 3.00
$250,000 but less
than $500,000 2.30 2.25 2.00
$500,000 but less
than $1,000,000* 1.78 1.75 1.50
__________________
*There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, as described below under "Class B
shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
24
<PAGE>
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers and agents for selling
Class A Shares. With respect to purchases of $1,000,000 or more
made through selected dealers or agents, the Adviser may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
1% of the amount invested to compensate such dealers or agents
for their distribution assistance in connection with such
purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "Class B
Shares -- Conversion Feature" and "--Conversion of Advisor Class
Shares to Class A Shares." The Fund receives the entire net
asset value of its Class A shares sold to investors. The
Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above. In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter. A selected
dealer who receives reallowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities
Act of 1933, as amended.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$100,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund at October 1, 1997.
25
<PAGE>
Net Asset Value per Class A share
at October 1, 1997 $16.70
Class A Per Share Sales Charge -
4.25% of offering price
(4.44% of net asset value per $ 0.74
share) ______
Class A Per Share Offering Price to
the Public $17.44
======
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but may be subject in most such cases to a
contingent deferred sales charge) or (ii) a reduced initial sales
charge. The circumstances under which such investors may pay a
reduced initial sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
26
<PAGE>
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
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 Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
27
<PAGE>
Inc. at the address or the "For Literature" telephone number
shown on the front cover of this Statement of Additional
Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on the
previous day) of (a) all shares of the Fund held by
the investor and (b) all shares of any other Alliance
Mutual Fund held by the investor; and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder eligible
to combine his or her purchase with that of the
investor into a single "purchase" (see above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the 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.
28
<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 Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of this
Statement of Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
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
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<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 reinstatement 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 any initial sales
charge) and without any 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 Directors of the Fund;
present or former directors and trustees of other investment
companies managed by the Adviser, present or retired full-time
employees of the Adviser, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates; officers and directors
of ACMC, the Principal Underwriter, Alliance Fund Services, Inc.
and their affiliates; officers, directors and present and full-
time employees of selected dealers or agents; or the spouse,
sibling, direct ancestor or direct descendant (collectively
"relatives") of any such person; or any trust, individual
retirement account or retirement plan account for the benefit of
any such person or relative; or the estate of any such person or
relative, if such sales are made for investment purposes (such
shares may not be resold except to the Fund); (iii) the Adviser,
Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; certain employee benefit plans for employees of the
Adviser, the Principal Underwriter, Alliance Fund Services, Inc.
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<PAGE>
and their affiliates; (iv) 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 the Principal Underwriter
and clients of such registered investment advisers or financial
intermediaries whose accounts are linked to the master account of
such investment adviser or financial intermediary on the books of
such approved broker or agent; (v) persons participating in a
fee-based program, sponsored and maintained by a registered
broker-dealer or other financial intermediary and approved by the
Principal Underwriter, pursuant to which such persons pay an
asset-based fee to such broker-dealer or financial intermediary,
or its affiliate or agent, for service in the nature of
investment advisory or administrative services; (vi) persons who
establish to the Principal Underwriter's satisfaction that they
are investing within such time period as may be designated by the
Principal Underwriter, proceeds of redemption of shares of such
other registered investment companies as may be designated from
time to time by the Principal Underwriter; and (vii) employer-
sponsored qualified pension or profit-sharing plans (including
Section 401(k) plans), custodial accounts maintained pursuant to
Section 403(b)(7) retirement plans and individual retirement
accounts (including individual retirement accounts to which
simplified employee pension ("SEP") contributions are made), if
such plans or accounts are established or administered under
programs sponsored by administrators or other persons that have
been approved by the Principal Underwriter.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge 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.
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<PAGE>
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
To illustrate, assume that on or after November 19, 1993
an investor purchased 100 Class B shares at $10 per share (at a
cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor
has acquired 10 additional Class B shares upon dividend
reinvestment. If at such time the investor makes his or her
first redemption of 50 Class B shares (proceeds of $600), 10
Class B shares will not be subject to the charge because of
dividend reinvestment. With respect to the remaining 40 Class B
shares, the charge is applied only to the original cost of $10
per share and not to the increase in net asset value of $2 per
share. Therefore, $400 of the $600 redemption proceeds will be
charged at a rate of 3.0% (the applicable rate in the second year
after purchase as set forth below).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a %
of Dollar Amount Subject to Charge
Shares Purchased Shares Purchased
Year Before on or After
Since Purchase November 19, 1993 November 19, 1993
First 5.5% 4.0%
Second 4.5% 3.0%
Third 3.5% 2.0%
Fourth 2.5% 1.0%
Fifth 1.5% None
Sixth 0.5% None
Seventh and thereafter None None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions) and, second,
of shares held longest during the time they are subject to the
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<PAGE>
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding Class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services-- Systemic Withdrawal Plan" below).
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
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
33
<PAGE>
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 than Class A shares, and will thus have a higher
expense ratio and pay correspondingly lower dividends than
Class A 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
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<PAGE>
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.
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" by investment
advisory clients of, and 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 of
financial intermediary that satisfies the requirements to
purchase shares set forth under "Purchase of Shares--General" or
(ii) the holder is otherwise no longer eligible to purchase
Advisor Class shares as described in the Advisor Class Prospectus
and this Statement of Additional Information (each, a "Conversion
Event"), then all Advisor Class shares held by the shareholder
will convert automatically and without notice to the shareholder,
other than the notice contained in the Advisor Class Prospectus
and this Statement of Additional Information, to Class A shares
of the Fund during the 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.
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<PAGE>
____________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
____________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Redemption
Subject only to the limitations described below, the
Funds Articles of Incorporation require that the Fund redeem the
shares tendered to it, as described below, at a redemption price
equal to their net asset value as next computed following the
receipt of shares tendered for redemption in proper form. Except
for any contingent deferred sales charge which may be applicable
to Class A, 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
36
<PAGE>
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment received by a shareholder upon
redemption or repurchase of his shares, assuming the shares
constitute capital assets in his hands, will result in long-term
or short-term capital gains (or loss) depending upon the
shareholder's holding period and basis in respect of the shares
redeemed.
To redeem shares of the Fund for which no 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.
To redeem shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Fund. The
signature or signatures on the assignment form must be guaranteed
in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
fund transfer once in any 30 day period (except for certain
omnibus accounts) of shares for which no stock certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from Alliance Fund Services, Inc.
A telephone redemption request 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. Except for certain
omnibus accounts or as noted below, each Fund shareholder is
eligible to request redemption by check, once in any 30-day
period, of Fund shares by telephone at (800) 221-5672 before 4:00
p.m. Eastern time on a Fund business day in an amount not
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<PAGE>
exceeding $50,000. Proceeds of such redemptions are remitted by
check to the shareholder's address of record. Telephone
redemption by check is not available with respect to shares (i)
for which certificates have been issued, (ii) held in nominee or
"street name" accounts, (iii) 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. A
shareholder otherwise eligible for telephone redemption by check
may cancel the privilege by written instruction to Alliance Fund
Services, Inc., or by checking the appropriate box on the
Subscription Application found in the Prospectus.
Telephone Redemptions - General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information. The
Fund reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Neither the Fund
nor the Adviser, the Principal Underwriter or Alliance Fund
Services, Inc. will be responsible for the authenticity of
telephone requests for redemptions that the Fund reasonably
believes to be genuine. 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
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<PAGE>
the Principal Underwriter by 5:00 p.m. If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
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.
39
<PAGE>
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing "Electronic Funds
Transfer" drawn on the investor's own bank account. Under such a
program, pre-authorized monthly drafts for a fixed amount (at
least $25) are used to purchase shares through the selected
dealer or selected agent designated by the investor at the public
offering price next determined after the Principal Underwriter
receives the proceeds from the investor's bank. In electronic
form, drafts can be made on or about a date each month selected
by the shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus. Current shareholders should
contact Alliance Fund Services, Inc. at the address or telephone
numbers shown on the cover of this Statement of Additional
Information to establish an automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the 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, Alliance
Fund Services, Inc. and their affiliates may, on a tax-free
basis, exchange Class A shares of the Fund for Advisor Class
shares of the Fund. Exchanges of shares are made at the net
asset value next determined and without sales or service charges.
Exchanges may be made by telephone or written request. Telephone
exchange requests must be received by Alliance Fund Services,
Inc. by 4:00 p.m. Eastern time on a Fund business day in order to
receive that day's net asset value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call Alliance Fund Services, Inc. at (800) 221-5672 to exchange
uncertificated shares. Except with respect to exchange of
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<PAGE>
Class A shares of the Fund for Advisor Class shares of the Fund,
exchanges of shares as describe above in this section are taxable
transactions for the federal tax purposes. The exchange service
may be changed, suspended, or terminated on 60 days written
notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's Prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for federal income tax purposes.
Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc., receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m., Eastern time, on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
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<PAGE>
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers, agents or
financial representatives, as applicable, may charge a commission
for handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "For Literature" telephone number on the cover of
this Statement of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
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deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan reaches $1 million
on or before December 15 in any year, all Class B shares and
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
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to Alliance Fund Services, Inc. as compensation for its services
to the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
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Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund accounts,
a Class A, Class B, Class C or Advisor Class account with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on the shareholder's Class A, Class B,
Class C or Advisor Class Fund shares be automatically reinvested,
in any amount, without the payment of any sales or service
charges, in shares of the same class of such other Alliance
Mutual Fund(s). Further information can be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone number shown on the cover of this
Statement of Additional Information. Investors wishing to
establish a dividend direction plan in connection with their
initial investment should complete the appropriate section of the
Subscription Application found in the Prospectus. Current
shareholders should contact Alliance Fund Services, Inc. to
establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
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
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concurrently with withdrawals are undesirable because of sales
charges when purchases are made. While an occasional lump-sum
investment may be made by a holder of Class A shares who is
maintaining a systematic withdrawal plan, such investment should
normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting Alliance Fund Services, Inc. at the address or
the "For Literature" telephone number shown on the cover of this
Statement of Additional Information.
CDSC Waiver for Class B Shares and Class C Shares.
Under a systematic withdrawal plan, up to 1% monthly, 2%
bi-monthly or 3% quarterly of the value at the time of redemption
of the Class B or Class C shares in a shareholder's account may
be redeemed free of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares acquired after
that are held the longest will be redeemed next. Redemptions of
Class B shares in excess of the foregoing limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent accountants, Price Waterhouse
LLP, as well as a confirmation of each purchase and redemption.
By contacting his or her broker or Alliance Fund Services, Inc.,
a shareholder can arrange for copies of his or her account
statements to be sent to another person.
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____________________________________________________________
NET ASSET VALUE
____________________________________________________________
The net asset value per share is computed in accordance
with the Fund's Articles of Incorporation and By-Laws, at the
next close of regular trading on the Exchange (currently
4:00 p.m. Eastern time) following receipt of a purchase or
redemption order (and on such other days as the Directors of the
Fund deem 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 its total assets, less its liabilities, by
the total number of its shares then outstanding. The net asset
value is calculated at the close of business on each Fund
business day. For this purpose, a Fund's business day is any
weekday on which the Exchange is open for trading. Portfolio
securities which are traded over-the-counter and on a national
securities exchange are valued in the market which the Board of
Directors determines is the broadest and most representative.
When securities are valued in the over-the-counter market,
valuations are at the mean of the closing bid and asked prices.
When Exchange valuations are used, the valuation is the last
quoted sales price as of the close of the Exchange on the day of
valuation; if there have been no sales during the day, the mean
value of the closing bid and asked prices is used. If no
quotations are available, securities will be valued at fair value
as determined in good faith by the Board of Directors. The Board
of Directors has further determined that the value of certain
portfolio debt securities, other than temporary investments in
short-term securities, be determined by reference to valuations
obtained from a pricing service which takes into account
appropriate factors such as institution-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type
of issue, trading characteristics and other market data in
determining valuations of such securities, without exclusive
reliance upon quoted prices, since such valuations are believed
by the Board more accurately to reflect the fair value of such
securities. At the present time, the Fund is employing a pricing
service. Several pricing services are available, and the Board
of Directors may authorize the use of another such service. In
addition, the Board has directed the officers of the Fund
periodically to compare valuations obtained from the pricing
service with quotations from bond dealers. Temporary investments
in short-term securities having a maturity of 60 days or less are
valued at original cost which, when combined with amortized
discount or accrued interest receivable, approximates market.
The assets belonging to the Class A shares, the Class B
shares, the Class C shares and the Advisor Class shares will be
invested together in a single portfolio. The net asset value of
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each class will be determined separately by subtracting the
accrued expenses and liabilities allocated to that class from the
assets belonging to that class.
____________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
____________________________________________________________
The Fund intends to qualify as a regulated investment
company under the Internal Revenue Code for each taxable year.
Qualification as a regulated investment company under the
Internal Revenue Code requires, among other things, that (a) at
least 90% of the Fund's annual gross income, without offset for
losses from the sale or other disposition of securities, be
derived from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of
securities or options thereon; (b) the Fund diversify its
holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the Fund's assets is
represented by cash, government securities and other securities
limited in respect of any one issuer to an amount not greater
than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one
issuer (other than government securities); and (c) with respect
to its taxable year ending July 31, 1998, the Fund derive less
than 30% of its gross income from gains (without offset for
losses) from the sale or other disposition of securities or
options thereon held for less than three months. If the Fund
qualifies as a regulated investment company for any taxable year
and makes timely distributions to the Fund's shareholders of 90%
or more of its net investment income for that year (calculated
without regard to its net capital gain, i.e., the excess of its
net long- term capital gain over its net short-term capital loss)
it will not be subject to federal income tax on the portion of
its taxable income for the year (including any net capital gain)
that it distributes to its shareholders. The Fund will also
avoid the nondeductible 4% federal excise tax that would
otherwise apply to certain undistributed income for a given
calendar year if it makes timely distributions to its
shareholders which meet certain minimum distribution
requirements. For this purpose, income or gain retained by the
Fund which is subject to corporate income tax will be considered
to have been distributed by year-end. In addition, dividends
declared in October, November or December payable to shareholders
of record as of a specified date during such month and paid in
the following January will be treated as having been paid by the
Fund and received by shareholders in December.
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Gains or losses on sales of securities by the Fund
generally will be long-term capital gains or losses if the
securities have been held by it for more than one year. Other
gains or losses on the sale of securities will be short-term
capital gains or losses. If an option written by the Fund lapses
or is terminated through a closing transaction, such as a
repurchase by the Fund of the option of its holder, the Fund may
realize a short-term capital gain or loss, depending on whether
the premium income is greater or less than the amount paid by the
Fund in the closing transaction. If securities are sold by the
Fund pursuant to the exercise of a call option written by it, the
Fund will add the premium received to the sale price of the
securities delivered in determining the amount of gain or loss on
the sale. The requirement that the Fund derive no more than 30%
of its gross income from gains from the sale of securities held
for less than three months may limit the Fund's ability to write
options.
It is the present policy of the Fund to distribute to
shareholders all net investment income quarterly and to
distribute net realized capital gains, if any, annually. The
amount of any such distributions must necessarily depend upon the
realization by the Fund of income and capital gains from
investments.
Pursuant to the Taxpayer Relief Act of 1997, two
different tax rates apply to net capital gains--that is, the
excess of net gains from capital assets held for more than one
year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on
capital assets held for more than one year but not more than 18
months ("mid-term gains"), and a second rate (generally 20%)
applies to the balance of such net capital gains ("adjusted net
capital gains"). Except as noted below, distributions of net
capital gains will be treated in the hands of shareholders as
mid-term gains to the extent designated by the Fund as deriving
from net gains from assets held for more than one year but not
more than 18 months, and the balance will be treated as adjusted
net capital gains. Gains derived from assets sold before May 7,
1997, and held for more than 18 months will be treated as mid-
term gains. Gains derived from assets sold after May 6, 1997,
and before July 29, 1997, and held for more than one year will be
treated as adjusted net capital gains. Distributions of mid-term
gains and adjusted net capital gains will be taxable to
shareholders as such, regardless of how long a shareholder has
held shares in the Fund.
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____________________________________________________________
PORTFOLIO TRANSACTIONS
____________________________________________________________
Subject to the general supervision and control of the
Directors of the Fund, the Adviser makes the Fund's portfolio
decisions and determines the broker to be used in each specific
transaction with the objective of negotiating best price and
execution. When consistent with the objective of obtaining best
execution, brokerage may be directed to persons or firms
supplying investment information to the Adviser. There may be
occasions where the transaction cost charged by a broker may be
greater than that which another broker may charge if the Fund
determines in good faith that the amount of such transaction cost
is reasonable in relation to the value of the brokerage, research
and statistical services provided by the executing broker.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking
best execution, the Fund may consider sales of shares of the Fund
as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
Neither the Fund nor the Adviser has entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research or
statistical services they provide. To the extent that such
persons or firms supply investment information to the Adviser for
use in rendering investment advice to the Fund, such information
may be supplied at no cost to the Adviser. While it is
impossible to place an actual dollar value on such investment
information, its receipt by the Adviser probably does not reduce
the overall expenses of the Adviser to any material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e)(3) of the Securities Exchange
Act of 1934 and is designed to augment the Adviser's own internal
research and investment strategy capabilities. Research and
statistical services furnished by brokers through which the Fund
effects securities transactions are used by the Adviser in
carrying out its investment management responsibilities with
respect to all its client accounts but not all such services may
be used by the Adviser in connection with the Fund.
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
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useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc. and subject
to seeking best execution, the Fund may consider sales of shares
of the Fund or other investment companies managed by the Adviser
as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
The Fund may deal in some instances in securities which
are not listed on a national stock exchange but are traded in the
over-the-counter market. The Fund may also purchase listed
securities through the third market, i.e., from a dealer which is
not a member of the exchange on which a security is listed. Where
transactions are executed in the over-the-counter market or third
market, the Fund will seek to deal with the primary market
makers; but when necessary in order to obtain the best price and
execution, it will utilize the services of others. In all cases,
the Fund will attempt to negotiate best execution.
With respect to orders placed with Donaldson, Lufkin &
Jenrette Securities Corporation (DLJ), for execution on a
national securities exchange, commissions received must conform
to Section 17(e)(2)(A) of the 1940 Act and Rule 17e- 1
thereunder, which permit an affiliated person of a registered
investment company (such as the Fund), or any affiliated person
of such person, to receive a brokerage commission from such
registered investment company provided that such commission is
reasonable and fair compared to the commissions received by other
brokers in connection with comparable transactions involving
similar securities during a comparable period of time.
During the fiscal years ended July 31, 1997, 1996 and
1995, the Fund incurred brokerage commissions amounting in the
aggregate to $225,475, $275,290 and $308,733, respectively.
During the fiscal years ended July 31, 1997, 1996 and 1995,
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 July 31, 1997, 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 July 31, 1997, of the Fund's aggregate dollar amount of
brokerage transactions involving the payment of commissions, 0%
were effected through DLJ and 0% were effected through brokers
utilizing the Pershing Division of DLJ. During the fiscal year
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ended July 31, 1997, transactions in portfolio securities of the
Fund aggregating $548,427,354 with associated brokerage
commissions of approximately $225,475 were allocated to persons
or firms supplying research services to the Fund or the Adviser.
____________________________________________________________
GENERAL INFORMATION
____________________________________________________________
Capitalization
The Fund's capital stock of the Fund currently consists
of 60,000,000 shares of Class A Common Stock, 60,000,000 shares
of Class B Common Stock, 60,000,000 shares of Class C and
60,000,000 shares of Advisor Class Common Stock each having a par
value $.01 per share. All shares of the Fund, when issued, are
fully paid and non-assessable. The Directors are authorized to
reclassify and issue any unissued shares to any number of
additional series and classes without shareholder approval.
Accordingly, the Directors in the future, for reasons such as the
desire to establish one or more additional portfolios with
different investment objectives, policies or restrictions, may
create additional classes or series of shares. Any issuance of
shares of another class or series would be governed by the 1940
Act and the law of the State of Maryland. If shares of another
series were issued in connection with the creation of a second
portfolio, each share of either portfolio would normally be
entitled to one vote for all purposes. Generally, shares of both
portfolios would vote as a single series on matters, such as the
election of Directors, 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 a separate series.
Procedures for calling a shareholders' meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act will be available to shareholders
of the Fund. The rights of the holders of shares of a series may
not be modified except by the vote of a majority of the
outstanding shares of such series.
At October 1, 1997 there were 9,042,612 shares of common
stock of the Fund outstanding including 7,044,326 Class A shares,
1,557,512 Class B shares, 343,437 Class C shares, and 97,337
Advisor Class shares. To the knowledge of the Fund, the
following persons owned of record or owned beneficially, 5% or
more of the outstanding shares of the Fund as of October 3, 1997:
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No. of % of
Name and Address Class Shares Class
Merrill Lynch B 220,453 14.18%
4800 Deer Lake Dr.
Jacksonville, FL
Merrill Lynch C 83,648 24.20%
4800 Deer Lake Dr.
Jacksonville, FL
Ray Lillywhite ADVISOR 10,165 10.43%
1227 Ballena Blvd.
Alameda, CA
Alliance Capital Mgmt. ADVISOR 82,825 85.00%
Profit Sharing Plan
1345 Avenue of the
Americas
New York, NY
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, will act as the Fund's
custodian for the assets of the Fund but plays no part in
deciding the purchase or sale of portfolio securities. Subject
to the supervision of the Fund's Directors, State Street Bank and
Trust Company may enter into sub-custodial agreements for the
holding of the Fund's foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter and as such may solicit orders from the
public to purchase shares of the Fund. Under the Distribution
Services Agreement , 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 of 1933, as
amended.
Counsel
Legal matters in connection with the issuance of the
common stock offered hereby are passed upon by Seward & Kissel,
New York, New York. Seward & Kissel has relied upon the opinion
of Venable, Baetjer & Howard, LLP, Baltimore, Maryland, for
matters relating to Maryland law.
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Independent Accountants
Price Waterhouse LLP, New York, New York, serves as
independent accountants for the Fund. All references to Price
Waterhouse in the Prospectus and Statement of Additional
Information are to Price Waterhouse LLP.
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. The Fund's total
return for such a period is computed through the use of a formula
prescribed by the Securities and Exchange Commission, by finding
the average annual compounded rate of return over the period that
would equate an assumed initial amount invested to the value of
such investment at the end of the period. For purposes of
computing total return, income dividends and capital gains
distributions paid on shares of the Fund are assumed to have been
reinvested when received and the maximum sales charge applicable
to purchases of Fund shares is assumed to have been paid.
The Fund's average annual total return for Class A
shares for the one-, five- and ten-year period ended July 31,
1997 was 27.80%, 11.32% and 9.18%, respectively. The Fund's
average annual total return for Class B shares for the one- and
five- year period ended July 31, 1997 was 28.34% and 11.42%,
respectively, and for the period February 4, 1991 (commencement
of distribution) through July 31, 1997 was 11.25%. The Fund's
average annual total return for Class C shares for the one-year
period ended July 31, 1997 was 31.37%, and for the period from
May 3, 1993 (commencement of distribution) through July 31, 1997
was 12.08%. The Fund's average annual total return for Advisor
Class shares for the period October 2, 1996 (commencement of
distribution) through July 31, 1997 was 25.96%.
The Fund's total return is computed separately for
Class A, Class B, Class C and Advisor Class shares. The Fund's
total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and
quality of the securities in the Fund's portfolio and the Fund's
expenses. Total return information is useful in reviewing the
Fund's performance but such information may not provide a basis
for comparison with bank deposits or other investments which pay
a fixed return for a stated period of time. An investor's
principal invested in the Fund is not fixed and will fluctuate in
response to prevailing market conditions.
Advertisements quoting performance ratings of the Fund
as measured by financial publications or by independent
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organizations such as Lipper Analytical Services, Inc.,
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.
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or other financial adviser or to Alliance
Fund Services, Inc. at the address or telephone numbers shown on
the front cover of this Statement of Additional Information. This
Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the
Fund with the Commission under the Securities Act of 1933, as
amended. Copies of the Registration Statement may be obtained at
a reasonable charge from the Commission or may be examined,
without charge, at the offices of the Securities and Exchange
Commission in Washington, D.C.
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________________________________________________________________
REPORT OF INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
________________________________________________________________
55
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ALLIANCE BALANCED SHARES
ANNUAL REPORT
JULY 31, 1997
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
JULY 31, 1997 ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-61.7%
FINANCE-15.7%
BROKERAGE & MONEY MANAGEMENT-1.8%
Morgan Stanley, Dean Witter, Discover & Co. 26,000 $ 1,360,125
Salomon, Inc. 20,700 1,313,156
------------
2,673,281
INSURANCE-6.1%
American International Group, Inc. 25,500 2,715,750
Life Re Corp. 39,500 2,162,625
Providian Financial Corp. (a) 38,000 1,489,125
TIG Holdings, Inc. 7,800 255,450
Travelers Group, Inc. 32,000 2,302,000
------------
8,924,950
MISCELLANEOUS-7.8%
American Express Co. 20,000 1,675,000
Associates First Capital Corp. Cl.A 22,500 1,483,594
Beneficial Corp. 29,000 2,102,500
MBNA Corp. 78,750 3,543,750
MGIC Investment Corp. 49,000 2,575,562
------------
11,380,406
------------
22,978,637
ENERGY-12.4%
DOMESTIC PRODUCTS-2.5%
Apache Corp. 26,500 934,125
Gulf Canada Resources, Ltd. (a)(b) 147,600 1,143,900
Louis Dreyfus Natural Gas Corp. (a) 50,800 806,450
Murphy Oil Corp. 15,000 780,938
------------
3,665,413
OIL & GAS EXPLORATION-0.4%
Union Texas Petroleum, Inc. 23,900 497,419
OIL SERVICE-9.5%
Baker Hughes, Inc. 48,000 2,115,000
BJ Services Co. (a) 18,700 1,215,500
Halliburton Co. 50,000 2,300,000
Nabors Industries, Inc. (a) 33,900 1,059,375
Noble Drilling Corp. (a) 56,500 1,585,531
Parker Drilling Co. (a) 101,200 1,321,925
Santa Fe International Corp. (a) 20,500 845,625
Schlumberger, Ltd. 13,500 1,031,062
Transocean Offshore, Inc. 18,900 1,543,894
USX-Marathon Group 30,000 965,625
------------
13,983,537
------------
18,146,369
CONSUMER SERVICES-9.8%
BROADCASTING & CABLE-2.6%
Cablevision Systems Corp. Cl.A (a) 17,000 1,009,375
Nextel Communications, Inc. Cl.A (a) 46,100 1,110,722
Viacom, Inc. Cl.B (a) 8,000 247,000
Westinghouse Electric Corp. 60,000 1,443,750
------------
3,810,847
ENTERTAINMENT & LEISURE-1.9%
Time Warner, Inc. 50,000 2,728,125
HOTELS & RESTAURANTS-3.2%
Host Marriott Corp. (a) 77,000 1,535,187
ITT Corp. (a) 50,000 3,196,875
------------
4,732,062
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
RETAILING-2.1%
Dayton Hudson Corp. 13,750 $ 888,594
Federated Department Stores, Inc. (a) 40,800 1,787,550
Office Depot, Inc. (a) 22,500 390,937
------------
3,067,081
------------
14,338,115
HEALTH CARE-5.6%
BIOTECHNOLOGY-0.6%
Centocor, Inc. (a) 25,000 961,719
DRUGS-2.3%
Pfizer, Inc. 23,000 1,371,375
Warner-Lambert Co. 14,700 2,053,406
------------
3,424,781
MEDICAL PRODUCTS-0.6%
Steris Corp. (a) 22,400 863,100
MEDICAL SERVICES-2.1%
McKesson Corp. 12,000 1,040,250
Pacificare Health Systems Cl.B (a) 28,000 1,986,250
------------
3,026,500
------------
8,276,100
TECHNOLOGY-5.4%
COMPUTER HARDWARE-2.3%
Ceridian Corp. (a) 50,700 2,218,125
Storage Technology Corp. (a) 24,100 1,205,000
------------
3,423,125
COMPUTER PERIPHERALS-0.4%
Seagate Technology, Inc. (a) 15,250 626,203
SEMI-CONDUCTORS CAPITAL EQUIPMENT-0.2%
Teradyne, Inc. (a) 4,600 215,050
SEMI-CONDUCTORS & RELATED-1.6%
Micron Technology, Inc. 33,500 1,631,031
National Semiconductor Corp. (a) 20,000 630,000
------------
2,261,031
TELECOMMUNICATION EQUIPMENT-0.9%
Nokia Corp. (ADR)(c) 16,000 1,370,000
------------
7,895,409
CONSUMER STAPLES-4.0%
RETAIL/FOOD & DRUG-0.9%
Rite Aid Corp. 27,000 1,402,313
TOBACCO-3.1%
Loews Corp. 10,000 1,081,250
RJR Nabisco Holdings Corp. 105,000 3,445,312
------------
4,526,562
------------
5,928,875
UTILITY-2.7%
Teleport Communications Group, Inc. Cl.A. (a) 35,000 1,380,313
WorldCom, Inc. (a) 75,350 2,634,895
------------
4,015,208
BASIC INDUSTRIES-1.6%
CHEMICALS-1.2%
Cytec Industries, Inc. (a) 12,250 483,875
Monsanto Co. 24,500 1,220,406
------------
1,704,281
PAPER & FOREST PRODUCTS-0.4%
Jefferson Smurfit Corp. (a) 17,400 327,338
Stone Container Corp. (a) 20,000 332,500
------------
659,838
------------
2,364,119
MULTI INDUSTRY COMPANIES-1.6%
Tyco International, Ltd. 28,000 2,268,000
8
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
POLLUTION CONTROL-1.4%
WMX Technologies, Inc. 64,500 $ 2,064,000
TRANSPORTATION-1.3%
SHIPPING-1.3%
Knightsbridge Tankers, Ltd. 41,200 1,143,300
Omi Corp. (a) 73,900 822,138
------------
1,965,438
CONSUMER MANUFACTURING-0.2%
AUTO & RELATED-0.2%
Republic Industries, Inc. (a) 14,600 359,525
Total Common Stocks & Other Investments
(cost $66,152,902) 90,599,795
U.S. GOVERNMENT OBLIGATIONS-18.0%
U.S. Treasury Bond
6.625%, 2/15/27 $ 2,460 2,568,387
U.S. Treasury Notes
6.125%, 8/31/98 11,575 11,636,463
6.25%, 4/30/01 4,450 4,511,187
6.50%, 5/31/02 3,750 3,841,388
6.875%, 5/15/06 2,650 2,796,996
7.875%, 4/15/98 1,000 1,015,940
Total U.S. Government Obligations
(cost $25,783,727) 26,370,361
YANKEE BONDS-8.5%
Dao Heng Bank, Ltd.
7.75%, 1/24/07 (d) 2,000 2,064,800
Perez Companc, S.A.
8.125%, 7/15/07 (d) 1,500 1,515,000
Quebec Province Canada
7.125%, 2/09/24 2,000 2,016,400
RAS Laffan Liquefied Natural Gas
8.294%, 3/15/14 (d) 1,250 1,382,404
Reliance Industries, Ltd.
10.375%, 6/24/16 (d) 1,650 1,860,375
Russian Federation
10.00%, 6/26/07 (d) 1,500 1,539,375
Zurich Capital Trust I
8.376%, 6/01/37 (d) 2,000 2,171,874
Total Yankee Bonds
(cost $12,002,757) 12,550,228
CORPORATE DEBT OBLIGATIONS-5.4%
FINANCIAL-2.8%
Ford Motor Credit Co.
6.125%, 1/09/06 2,000 1,938,278
United Companies Financial Corp.
8.375%, 7/01/05 2,000 2,070,960
------------
4,009,238
INDUSTRIAL-1.5%
Turner Broadcasting Systems, Inc.
8.375%, 7/01/13 2,040 2,215,909
BANKING-1.1%
Dime Capital Trust I, Series A
9.33%, 5/06/27 1,500 1,651,353
Total Corporate Debt Obligations
(cost $7,534,649) 7,876,500
MORTGAGE-RELATED SECURITIES-3.3%
Federal Home Loan Bank
7.00%, 9/01/11 2,750 2,785,718
Government National Mortgage Association
7.50%, 3/15/27 1,007 1,024,237
7.50%, 4/15/27 994 1,010,578
Total Mortgage-Related Securities
(cost $4,686,591) 4,820,533
9
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
COMMERCIAL PAPER-2.9%
Prudential Funding Corp.
5.48%, 8/08/97 $ 3,430 $ 3,426,345
5.55%, 8/06/97 800 799,384
Total Commercial Paper
(amortized cost $4,225,729) 4,225,729
TOTAL INVESTMENTS-99.8%
(cost $120,386,355) $ 146,443,146
Other assets less liabilities-0.2% 323,612
NET ASSETS-100% $ 146,766,758
(a) Non-income producing security.
(b) Canadian holding.
(c) Country of origin--Finland.
(d) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to certain qualified buyers. At July 31, 1997, the
aggregate market value of these securities amounted to $10,533,828 representing
7.2% of net assets.
Glossary:
ADR - American Depository Receipt
See notes to financial statements.
10
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1997 ALLIANCE BALANCED SHARES
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $120,386,355) $ 146,443,146
Cash 27,993
Receivable for investment securities sold 2,127,113
Dividends and interest receivable 871,896
Receivable for capital stock sold 83,879
Total assets 149,554,027
LIABILITIES
Payable for investment securities purchased 2,059,514
Payable for capital stock redeemed 334,796
Advisory fee payable 75,330
Distribution fee payable 47,322
Accrued expenses 270,307
Total liabilities 2,787,269
NET ASSETS $ 146,766,758
COMPOSITION OF NET ASSETS
Capital stock, at par $ 91,162
Additional paid-in capital 112,063,341
Undistributed net investment income 384,796
Accumulated net realized gain on investments and
foreign currency transactions 8,170,668
Net unrealized appreciation of investments 26,056,791
$ 146,766,758
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($115,499,920 / 7,143,992 shares of capital stock
issued and outstanding) $16.17
Sales charge--4.25% of public offering price .72
Maximum offering price $16.89
CLASS B SHARES
Net asset value and offering price per share
($24,191,887 / 1,527,970 shares of capital stock
issued and outstanding) $15.83
CLASS C SHARES
Net asset value and offering price per share
($5,510,171 / 347,492 shares of capital stock
issued and outstanding) $15.86
ADVISOR CLASS SHARES
Net asset value, redemption and offering price
per share ($1,564,780 / 96,761 shares of capital
stock issued and outstanding) $16.17
See notes to financial statements.
11
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1997 ALLIANCE BALANCED SHARES
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 3,836,283
Dividends (net of foreign taxes withheld of $5,211) 899,694 $ 4,735,977
EXPENSES
Advisory fee 828,903
Distribution fee - Class A 253,527
Distribution fee - Class B 204,078
Distribution fee - Class C 60,441
Transfer agency 222,239
Administrative 133,561
Custodian 122,132
Audit and Legal 99,331
Registration 97,085
Printing 60,821
Directors' fees 33,500
Miscellaneous 41,347
Total expenses 2,156,965
Less: expense offset arrangement (see Note B) (16,623)
Net expense 2,140,342
Net investment income 2,595,635
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investment transactions 8,453,794
Net realized gain on foreign currency transactions 27,713
Net change in unrealized appreciation (depreciation) of:
Investments 27,538,594
Foreign currency (2,283)
Net gain on investments and foreign currency transactions 36,017,818
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 38,613,453
See notes to financial statements.
12
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE BALANCED SHARES
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1997 1996
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,595,635 $ 3,133,713
Net realized gain on investments and
foreign currency transactions 8,481,507 19,958,567
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency denominated assets
and liabilities 27,536,311 (15,276,292)
Net increase in net assets from operations 38,613,453 7,815,988
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (2,308,924) (3,160,459)
Class B (341,037) (358,703)
Class C (102,618) (123,287)
Advisor Class (10,350) -0-
Net realized gain on investments
Class A (12,582,512) (11,691,852)
Class B (2,409,113) (1,628,196)
Class C (793,084) (577,846)
Advisor Class (19,832) -0-
CAPITAL STOCK TRANSACTIONS
Net decrease (335,371) (5,439,472)
Total increase (decrease) 19,710,612 (15,163,827)
NET ASSETS
Beginning of year 127,056,146 142,219,973
End of year (including undistributed net
investment income of $384,796 and
$200,802, respectively) $146,766,758 $127,056,146
See notes to financial statements.
13
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 ALLIANCE BALANCED SHARES
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Balanced Shares (the "Fund") is registered under the Investment
Company Act of 1940, as a diversified, open end management investment company.
The Fund offers Class A, Class B, Class C and Advisor Class shares. Class A
shares are sold with a front-end sales charge of up to 4.25% for purchases not
exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a contingent
deferred sales charge of 1%. Class B shares are currently sold with a
contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month of
purchase. Class C shares purchased on or after July 1, 1996, are subject to a
contingent deferred sales charge of 1% on redemptions made within the first
year after purchase. Advisor Class shares are sold without an initial or
contingent deferred sales charge and are not subject to ongoing distribution
expenses. Advisor Class shares are offered to investors participating in fee
based programs and to certain retirement plan accounts. All four classes of
shares have identical voting, dividend, liquidation and other rights, except
that each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. The following is a summary of
significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on national securities exchanges are valued at the
last sales price or, if no sale occurred, at the mean of the bid and asked
price at the regular close of that exchange. Securities traded on the over the
counter market are valued at the mean of the closing bid and asked price.
Securities for which current market quotations are not readily available
(including investments which are subject to limitations as to their sale) are
valued at their fair value as determined in good faith by the Board of
Directors. The Board of Directors has further determined that the value of
certain portfolio debt securities, other than temporary investments in short
term securities, be determined by reference to valuations obtained from a
pricing service. Securities which mature in 60 days or less are valued at
amortized cost, which approximates market value. The ability of issuers of debt
securities held by the Fund to meet their obligations may be affected by
economic developments in a specific industry or region.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net foreign currency gains represent foreign exchange gains from sales and
maturities of securities, currency gains and losses realized between the trade
and settlement dates on security transactions and the difference between the
amounts of interest recorded on the Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net currency gains and losses from valuing
foreign currency denominated assets and liabilities at year end exchange rates
are reflected as a component of net unrealized appreciation on investments and
foreign currency denominated assets and liabilities.
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts as adjustments to interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gains distributions are determined in accordance with
federal tax
14
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
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 foreign exchange gains, resulted in a net decrease in
accumulated net realized gain on investments and foreign currency transactions
and a corresponding increase in undistributed net investment income. This
reclassification had no effect on net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays its Adviser,
Alliance Capital Management L.P. (the "Adviser") an advisory fee at an annual
rate of .625% of the first $200 million, .50% of the next $200 million and .45%
of the excess over $400 million of the average daily net assets of the Fund.
Such fee is accrued daily and paid monthly.
Pursuant to the Advisory Agreement, the Fund reimburses the Adviser for the
cost of certain legal and accounting services provided to the Fund by the
Adviser. For the year ended July 31, 1997, such reimbursement amounted to
$133,561.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) in accordance with a Services Agreement for providing personnel
and facilities to perform transfer agency services for the Fund. Such
compensation amounted to $151,926 for the year ended July 31, 1997.
In addition, for the year ended July 31, 1997, the Fund's expenses were reduced
by $16,623 under an expense offset arrangement with Alliance Fund Services.
Transfer Agency fees reported in the statement of operations exclude these
credits.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $5,903 from the sales of Class A shares and $521,
$34,203 and $1,445 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class A, Class B and Class C, respectively, for
the year ended July 31, 1997.
Brokerage commissions paid on securities transactions for the year ended July
31, 1997 amounted to $225,475, 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 the Fund's average daily net assets attributable to the
Class A shares and 1% of the average daily net assets attributable to both
Class B shares and Class C shares. There is no distribution fee on the Advisor
Class shares. The Agreement provides that the Distributor will use such
payments in their entirety for distribution assistance and promotional
activities. The Distributor has incurred expenses in excess of the distribution
costs reimbursed by the Fund in the amount of $1,533,382 and $463,860, for
Class B and C shares, respectively; such costs may be recovered from the Fund
in future periods. 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.
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short term investments
and U.S. government securities) aggregated $152,574,432 and $163,494,792,
respectively, for the year ended July 31, 1997. There were purchases of
$113,603,802 and sales of $118,754,328 of U.S. government and government agency
obligations for the year ended July 31, 1997.
At July 31, 1997, the cost of securities for federal income tax purposes was
$120,416,909. Accordingly gross unrealized appreciation of investments was
$26,475,557 and gross unrealized depreciation of investments was $449,320
resulting in net unrealized appreciation of $26,026,237 excluding foreign
currency.
The Fund incurred and elected to defer post October currency losses of $15,159
for the year ended July 31, 1997.
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward 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 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
contracts and the closing of such contracts is included in net realized gains
or losses on foreign currency transactions.
Fluctuations in the value of forward 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 in a separate account of the Fund having a value equal to the
aggregate amount of the Fund's commitments under forward 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. The face or contract amount, in U.S.
dollars, as reflected in the following table, reflects the total exposure the
Fund has in that particular currency contract.
At July 31, 1997, the Fund had no outstanding forward exchange currency
contracts.
2. OPTION TRANSACTIONS
For hedging purposes, the Fund purchases and writes (sells) put and call
options on U.S. securities that are traded on U.S. securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from option
transactions. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security or currency in determining whether the Fund has realized a gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security or currency purchased by the Fund. In writing an option, the Fund
bears the market risk of an unfavorable change in the price of the security or
currency underlying the written option. Exercise of an option written by the
Fund could result in the Fund selling or buying a security or currency at a
price different from the current market value. There were no transactions in
written options for the year ended July 31, 1997.
16
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 180,000,000 shares of $.01 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 30,000,000 authorized shares. Transactions
in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 308,965 448,058 $ 4,417,304 $ 6,746,741
Shares issued in
reinvestment of
dividends and
distributions 872,819 836,417 12,031,921 12,060,428
Shares converted
from Class B 37,939 6,918 545,801 99,012
Shares redeemed (1,394,620) (2,066,376) (19,984,934) (30,463,433)
Net decrease (174,897) (774,983) $ (2,989,908) $ (11,557,252)
CLASS B
Shares sold 414,263 430,446 $ 5,850,511 $ 6,327,512
Shares issued in
reinvestment of
dividends and
distributions 168,175 113,453 2,274,998 1,612,145
Shares converted
to Class A (38,679) (6,961) (545,801) (99,012)
Shares redeemed (349,522) (216,587) (4,922,989) (3,180,587)
Net increase 194,237 320,351 $ 2,656,719 $ 4,660,058
CLASS C
Shares sold 116,909 157,902 $ 1,671,934 $ 2,334,144
Shares issued in
reinvestment of
dividends and
distributions 50,995 37,104 690,495 527,785
Shares redeemed (261,860) (96,534) (3,718,421) (1,404,207)
Net increase
(decrease) (93,956) 98,472 $ (1,355,992) $ 1,457,722
OCT. 2, 1996* OCT. 2, 1996*
TO TO
JULY 31, 1997 JULY 31, 1997
------------ --------------
ADVISOR CLASS
Shares sold 99,609 $ 1,393,347
Shares issued in
reinvestment of
dividends and
distributions 2,157 30,179
Shares redeemed (5,005) (69,716)
Net increase 96,761 $ 1,353,810
* Commencement of distribution.
17
FINANCIAL HIGHLIGHTS ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
OCT. 1,
1993 YEAR
YEAR ENDED JULY 31, THROUGH ENDED
-------------------------------------- JULY 31, SEPT. 30,
1997 1996 1995 1994(A) 1993
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.01 $15.08 $13.38 $14.40 $13.20
INCOME FROM INVESTMENT OPERATIONS
Net investment income .31(b) .37 .46 .29 .34
Net realized and unrealized gain (loss)
on investments 3.97 .45 1.62 (.74) 1.29
Net increase (decrease) in net asset
value from operations 4.28 .82 2.08 (.45) 1.63
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.32) (.41) (.36) (.28) (.43)
Distributions from net realized gains (1.80) (1.48) (.02) (.29) -0-
Total dividends and distributions (2.12) (1.89) (.38) (.57) (.43)
Net asset value, end of period $16.17 $14.01 $15.08 $13.38 $14.40
TOTAL RETURN
Total investment return based on net
asset value (c) 33.46% 5.23% 15.99% (3.21)% 12.52%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $115,500 $102,567 $122,033 $157,637 $172,484
Ratio of expenses to average net assets 1.47%(d) 1.38% 1.32% 1.27%(e) 1.35%
Ratio of net investment income to average
net assets 2.11% 2.41% 3.12% 2.50%(e) 2.50%
Portfolio turnover rate 207% 227% 179% 116% 188%
Average commission rate (f) $.0552 -- -- -- --
</TABLE>
See footnote summary on page 21.
18
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------
OCT. 1,
1993 YEAR
YEAR ENDED JULY 31, THROUGH ENDED
------------------------------------- JULY 31, SEPT. 30,
1997 1996 1995 1994(A) 1993
------------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.79 $14.88 $13.23 $14.27 $13.13
INCOME FROM INVESTMENT OPERATIONS
Net investment income .19(b) .28 .30 .22 .29
Net realized and unrealized gain (loss)
on investments 3.89 .42 1.65 (.75) 1.22
Net increase (decrease) in net asset
value from operations 4.08 .70 1.95 (.53) 1.51
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.24) (.31) (.28) (.22) (.37)
Distribution from net realized gains (1.80) (1.48) (.02) (.29) -0-
Total dividends and distributions (2.04) (1.79) (.30) (.51) (.37)
Net asset value, end of period $15.83 $13.79 $14.88 $13.23 $14.27
TOTAL RETURN
Total investment return based on net
asset value (c) 32.34% 4.45% 15.07% (3.80)% 11.65%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $24,192 $18,393 $15,080 $14,347 $12,789
Ratio of expenses to average net assets 2.25%(d) 2.16% 2.11% 2.05%(e) 2.13%
Ratio of net investment income to
average net assets 1.32% 1.61% 2.30% 1.73%(e) 1.72%
Portfolio turnover rate 207% 227% 179% 116% 188%
Average commission rate (f) $.0552 -- -- -- --
</TABLE>
See footnote summary on page 21.
19
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------------
OCT. 1,
1993 YEAR
YEAR ENDED JULY 31, THROUGH ENDED
------------------------------------- JULY 31, SEPT. 30,
1997 1996 1995 1994(A) 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.81 $14.89 $13.24 $14.28 $13.63
INCOME FROM INVESTMENT OPERATIONS
Net investment income .20(b) .26 .30 .24 .11
Net realized and unrealized gain (loss)
on investments 3.89 .45 1.65 (.77) .71
Net increase (decrease) in net asset
value from operations 4.09 .71 1.95 (.53) .82
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.24) (.31) (.28) (.22) (.17)
Distributions from net realized gains (1.80) (1.48) (.02) (.29) -0-
Total dividends and distributions (2.04) (1.79) (.30) (.51) (.17)
Net asset value, end of period $15.86 $13.81 $14.89 $13.24 $14.28
TOTAL RETURN
Total investment return based on net
asset value (c) 32.37% 4.52% 15.06% (3.80)% 6.01%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $5,510 $6,096 $5,108 $6,254 $1,487
Ratios of expenses to average net assets 2.23%(d) 2.15% 2.09% 2.03%(e) 2.29%(e)
Ratios of net investment income to
average net assets 1.37% 1.63% 2.32% 1.81%(e) 1.47%(e)
Portfolio turnover rate 207% 227% 179% 116% 188%
Average commission rate (f) $.0552 -- -- -- --
</TABLE>
See footnote summary on page 21.
20
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD
ADVISOR CLASS
OCTOBER 2, 1996(G)
TO
JULY 31, 1997
------------------
Net asset value, beginning of period $14.79
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .23
Net realized and unrealized gain on investments 3.22
Net increase in net asset value from operations 3.45
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.27)
Distributions from net realized gains (1.80)
Total dividends and distributions (2.07)
Net asset value, end of period $16.17
TOTAL RETURN
Total investment return based on net asset value (c) 25.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,565
Ratio of expenses to average net assets (d)(e) 1.30%
Ratio of net investment income to average net assets (e) 2.15%
Portfolio turnover rate 207%
Average commission rate (f) $.0552
(a) The Fund changed its fiscal year end from September 30 to July 31.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment returns calculated for periods of less than one year
are not annualized.
(d) Ratio reflects expenses grossed up for expense offset arrangement with the
transfer agent. For the year ended July 31, 1997, the net expense ratio was
1.46%, 2.24%, 2.22% and 1.29% for Class A, B, C and Advisor Class shares,
respectively.
(e) Annualized.
(f) For fiscal year beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
(g) Commencement of distribution.
21
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE BALANCED SHARES
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ALLIANCE BALANCED SHARES, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Alliance Balanced Shares, Inc. at
July 31, 1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at July 31, 1997 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
September 17, 1997
22
<PAGE>
ALLIANCE BALANCED SHARES
SEMI-ANNUAL REPORT
JANUARY 31, 1998
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-58.1%
FINANCE-11.0%
BANKING - MONEY CENTER-3.4%
Chase Manhattan Corp. 34,000 $ 3,644,375
Citicorp 14,000 1,666,000
------------
5,310,375
BROKERAGE & MONEY MANAGEMENT-1.0%
Morgan Stanley, Dean Witter, Discover and Co. 26,000 1,517,750
INSURANCE-1.5%
American International Group, Inc. 8,600 948,687
Hartford Life, Inc. Cl.A 11,000 470,938
Travelers Group, Inc. 18,086 895,257
------------
2,314,882
MISCELLANEOUS-5.1%
Household International, Inc. 7,900 983,550
MBNA Corp. 118,125 3,669,258
MGIC Investment Corp. 49,000 3,313,625
------------
7,966,433
------------
17,109,440
CONSUMER SERVICES-7.6%
AIRLINES-0.8%
Northwest Airlines Corp. Cl.A (a) 21,000 1,189,125
BROADCASTING & CABLE-1.6%
A.H. Belo Corp. Series A 19,500 1,046,906
Cablevision Systems Corp. Cl.A (a) 17,000 1,502,375
------------
2,549,281
ENTERTAINMENT & LEISURE-0.6%
Harley-Davidson, Inc. 35,000 879,375
PRINTING & PUBLISHING-1.4%
Gannett Co., Inc. 19,000 1,149,500
Reuters Holdings Plc Cl.B (ADR) (b) 20,000 1,070,000
------------
2,219,500
RETAIL - GENERAL MERCHANDISE-3.2%
Dayton Hudson Corp. 20,350 1,463,928
Federated Department Stores, Inc. (a) 40,800 1,728,900
Home Depot, Inc. 27,900 1,682,719
------------
4,875,547
------------
11,712,828
HEALTH CARE-7.3%
BIOTECHNOLOGY-1.2%
Centocor, Inc. (a) 35,000 1,403,281
Genzyme Corp. (a) 15,000 400,781
------------
1,804,062
DRUGS-3.4%
American Home Products Corp. 13,000 1,240,688
Merck & Co., Inc. 20,800 2,438,800
Schering-Plough Corp. 22,900 1,657,387
------------
5,336,875
MEDICAL PRODUCTS-1.0%
Baxter International, Inc. 18,000 1,002,375
Becton, Dickinson & Co. 10,000 631,250
------------
1,633,625
MEDICAL SERVICES-1.7%
PacifiCare Health Systems, Inc. Cl.B (a) 28,000 1,624,875
United Healthcare Corp. 19,000 973,750
------------
2,598,625
------------
11,373,187
ENERGY-7.3%
DOMESTIC INTEGRATED-1.9%
USX-Marathon Group 87,000 2,919,937
6
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
DOMESTIC PRODUCERS-2.4%
Apache Corp. 39,500 $ 1,308,437
Enron Oil & Gas Co. 24,000 480,000
Gulf Canada Resources, Ltd. (a)(c) 147,600 793,350
Murphy Oil Corp. 15,000 749,063
Union Pacific Resources Group, Inc. 20,000 447,500
------------
3,778,350
OIL SERVICE-2.9%
Nabors Industries, Inc. (a) 33,900 811,481
Noble Drilling Corp. (a) 56,500 1,511,375
Santa Fe International Corp. 20,500 749,531
Schlumberger, Ltd. 13,500 994,782
Transocean Offshore, Inc. 9,800 389,550
------------
4,456,719
MISCELLANEOUS-0.1%
AES Corp. (a) 1,700 72,781
------------
11,227,787
TECHNOLOGY-7.3%
COMMUNICATIONS EQUIPMENT-0.8%
Nokia Corp. (ADR) (d) 16,000 1,216,000
COMPUTER HARDWARE-1.4%
Compaq Computer Corp. 44,800 1,346,800
Hewlett-Packard Co. 14,000 840,000
------------
2,186,800
COMPUTER SERVICES-2.5%
Electronic Data Systems Corp. 27,700 1,153,012
First Data Corp. 86,400 2,646,000
------------
3,799,012
NETWORKING SOFTWARE-1.1%
CISCO Systems, Inc. (a) 27,000 1,703,531
SEMI-CONDUCTOR COMPONENTS-1.5%
Altera Corp. (a) 13,500 462,797
Atmel Corp. (a) 51,300 828,816
Xilinx, Inc. (a) 27,000 1,025,156
------------
2,316,769
------------
11,222,112
CONSUMER STAPLES-5.3%
COSMETICS-0.6%
Avon Products, Inc. 15,000 900,000
FOOD-1.3%
Campbell Soup Co. 23,200 1,241,200
Tyson Foods, Inc. Cl.A 46,000 830,875
------------
2,072,075
HOUSEHOLD PRODUCTS-0.6%
Viad Corp. 48,000 954,000
TOBACCO-2.8%
Loews Corp. 10,000 998,125
RJR Nabisco Holdings Corp. 105,000 3,307,500
------------
4,305,625
------------
8,231,700
UTILITIES-4.4%
ELECTRIC & GAS UTILITY-1.9%
FPL Group, Inc. 50,000 2,868,750
TELEPHONE UTILITY-2.5%
Teleport Communications Group, Inc. Cl.A (a) 21,100 1,177,644
WorldCom, Inc. (a) 75,350 2,700,826
------------
3,878,470
------------
6,747,220
BASIC INDUSTRIES-2.4%
CHEMICALS-1.7%
E.I. Du Pont de Nemours & Co. 29,100 1,647,787
Praxair, Inc. 21,600 895,050
------------
2,542,837
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
CONTAINERS-0.4%
Sealed Air Corp. (a) 10,400 $ 653,900
PAPER & FOREST PRODUCTS-0.3%
Jefferson Smurfit Corp. (a) 17,400 266,438
Stone Container Corp. (a) 20,000 255,000
------------
521,438
------------
3,718,175
MULTI INDUSTRY COMPANIES-2.2%
Tyco International, Ltd. 56,000 2,485,000
U.S. Industries, Inc. 33,000 926,063
------------
3,411,063
CAPITAL GOODS-2.0%
POLLUTION CONTROL-1.1%
USA Waste Services, Inc. (a) 24,000 882,000
Waste Management, Inc. 37,000 869,500
------------
1,751,500
MISCELLANEOUS-0.9%
United Technologies Corp. 17,300 1,412,113
------------
3,163,613
CONSUMER MANUFACTURING-0.7%
APPLIANCES-0.5%
Sunbeam Corp. 20,000 758,750
AUTO & RELATED-0.2%
Republic Industries, Inc. (a) 14,600 305,688
------------
1,064,438
AEROSPACE & DEFENSE-0.6%
AEROSPACE-0.6%
General Dynamics Corp. 11,000 948,750
Total Common Stocks
(cost $77,289,133) 89,930,313
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
DEBT OBLIGATIONS-35.7%
U.S. GOVERNMENT & AGENCY OBLIGATIONS-25.0%
Federal Home Loan Bank
7.00%, 9/01/11 $ 2,560 $ 2,619,459
U.S. Treasury Bond
6.125%, 11/15/27 7,785 8,128,007
U.S. Treasury Notes
6.25%, 4/30/01 11,700 11,996,127
6.50%, 8/31/01 6,900 7,140,396
6.50%, 5/31/02 8,550 8,901,320
------------
38,785,309
CORPORATE DEBT OBLIGATIONS-8.1%
ELECTRIC & GAS UTILITY-1.3%
Consolidated Edison Co.
6.45%, 12/01/07 2,000 2,036,490
FINANCIAL-2.7%
Railcar Leasing LLC
7.125%, 1/15/13 (e) 2,000 2,150,038
United Companies Financial Corp.
8.375%, 7/01/05 2,000 1,983,840
------------
4,133,878
INDUSTRIAL-4.1%
Tele-Communications, Inc.
9.80%, 2/01/12 1,650 2,054,811
The Williams Cos., Inc.
6.125%, 2/01/01 2,000 2,004,760
Turner Broadcasting Systems, Inc.
8.375%, 7/01/13 2,040 2,313,829
------------
6,373,400
------------
12,543,768
8
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
GOVERNMENT OBLIGATION-1.6%
AUSTRALIA-1.6%
Commonwealth of Australia
10.00%, 10/15/07 (f) $2,750 $ 2,424,470
YANKEE BOND-1.0%
Reliance Industries, Ltd.
10.375%, 6/24/16 (e) 1,650 1,595,976
Total Debt Obligations
(cost $54,376,604) 55,349,523
SHORT-TERM INVESTMENTS-6.2%
COMMERCIAL PAPER-4.9%
Ford Motor Credit Corp.
5.50%, 2/09/98 1,685 1,682,940
5.59%, 2/02/98 2,500 2,499,612
Prudential Funding Corp.
5.45%, 2/05/98 3,480 3,477,893
-------------
7,660,445
TIME DEPOSIT-1.3%
State Street Cayman Islands
5.25%, 2/02/98 $2,000 2,000,000
Total Short-Term Investments
(amortized cost $9,660,445) 9,660,445
TOTAL INVESTMENTS-100.0%
(cost $141,326,182) 154,940,281
Other assets less liabilities-0.0% 15,676
NET ASSETS-100% $154,955,957
(a) Non-income producing security.
(b) Country of origin--United Kingdom.
(c) Canadian holding.
(d) Country of origin--Finland.
(e) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to certain qualified buyers. At January 31, 1998, the
aggregate market value of these securities amounted to $3,746,014 representing
2.4% of net assets.
(f) Security, or portion thereof, with aggregate market value of $2,424,470
has been segregated to collateralize forward exchange currency contracts.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
9
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $141,326,182) $154,940,281
Cash 20,805
Receivable for investment securities sold 1,742,948
Dividends and interest receivable 822,198
Receivable for capital stock sold 277,313
Prepaid expenses 5,872
Total assets 157,809,417
LIABILITIES
Payable for investment securities purchased 2,106,249
Unrealized depreciation of forward exchange currency contracts 203,662
Unclaimed dividends 90,989
Advisory fee payable 81,066
Distribution fee payable 53,490
Payable for capital stock redeemed 23,239
Accrued expenses 294,765
Total liabilities 2,853,460
NET ASSETS $154,955,957
COMPOSITION OF NET ASSETS
Capital stock, at par $ 104,746
Additional paid-in capital 131,951,823
Undistributed net investment income 264,796
Accumulated net realized gain on investments and foreign
currency transactions 9,222,663
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 13,411,929
$154,955,957
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($116,396,091/
7,820,492 shares of capital stock issued and outstanding) $14.88
Sales charge--4.25% of public offering price .66
Maximum offering price $15.54
CLASS B SHARES
Net asset value and offering price per share ($29,827,438/
2,056,248 shares of capital stock issued and outstanding) $14.51
CLASS C SHARES
Net asset value and offering price per share ($6,930,490/
476,792 shares of capital stock issued and outstanding) $14.54
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($1,801,938/121,033 shares of capital stock issued and
outstanding) $14.89
See notes to financial statements.
10
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
INVESTMENT INCOME
Interest $1,968,767
Dividends 461,427 $ 2,430,194
EXPENSES
Advisory fee 469,582
Distribution fee - Class A 139,649
Distribution fee - Class B 131,685
Distribution fee - Class C 29,543
Transfer agency 100,914
Custodian 64,997
Administrative 59,675
Registration 58,445
Audit and legal 51,460
Printing 46,869
Directors' fees 13,472
Miscellaneous 8,535
Total expenses 1,174,826
Net investment income 1,255,368
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain on investment transactions 19,896,047
Net realized gain on foreign currency transactions 174,072
Net change in unrealized appreciation (depreciation) of:
Investments (12,442,692)
Foreign currency denominated assets and liabilities (202,170)
Net gain on investments and foreign currency transactions 7,425,257
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 8,680,625
See notes to financial statements.
11
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JAN. 31, 1998 JULY 31,
(UNAUDITED) 1997
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 1,255,368 $ 2,595,635
Net realized gain on investments and foreign
currency transactions 20,070,119 8,481,507
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities (12,644,862) 27,536,311
Net increase in net assets from operations 8,680,625 38,613,453
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (1,121,437) (2,308,924)
Class B (193,415) (341,037)
Class C (43,197) (102,618)
Advisor Class (17,319) (10,350)
Net realized gain on investments
Class A (14,565,359) (12,582,512)
Class B (3,474,566) (2,409,113)
Class C (778,193) (793,084)
Advisor Class (200,006) (19,832)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 19,902,066 (335,371)
Total increase 8,189,199 19,710,612
NET ASSETS
Beginning of year 146,766,758 127,056,146
End of period (including undistributed net
investment income of $264,796 and $384,796,
respectively) $154,955,957 $146,766,758
See notes to financial statements.
12
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Balanced Shares (the "Fund") is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The Fund offers Class A, Class B, Class C and Advisor Class shares. Class A
shares are sold with a front-end sales charge of up to 4.25% for purchases not
exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a contingent
deferred sales charge of 1%. Class B shares are currently sold with a
contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month of
purchase. Class 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 prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Fund's Board of Directors. Fixed income securities may be valued on the basis
of prices obtained from a pricing service when such prices are believed to
reflect the fair value of such securities.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized foreign currency gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities, currency gains and
losses realized between the trade and settlement dates on security transactions
and the difference between the amounts of interest recorded on the Fund's books
and the U.S. dollar equivalent amounts actually received or paid. The Fund does
not isolate the effect of fluctuations in foreign currency exchange rates when
determining the gain or loss upon the sale of equity securities. Net currency
gains and losses from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation on 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 BALANCED SHARES
_______________________________________________________________________________
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. The Fund accretes discounts and amortizes premiums as
adjustments to interest income. Investment gains and losses are determined on
the identified cost basis.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and Advisory Class shares (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.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at an annual rate of
.625% of the first $200 million, .50% of the next $200 million and .45% of the
excess over $400 million of the average daily net assets of the Fund. Such fee
is accrued daily and paid monthly.
Pursuant to the advisory agreement, the Fund paid $59,675 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the six months ended January 31, 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 $76,066 for the six months ended January 31, 1998.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Adviser, serves as the Distributor of the Fund's shares. The
Distributor received front-end sales charges of $5,530 from the sales of Class
A shares, $16,867 and $1,087 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class B and Class C shares, respectively, for
the six months ended January 31, 1998.
Brokerage commissions paid on investment transactions for the six months ended
January 31, 1998 amounted to $137,367, of which $625 was paid to Donaldson,
Lufkin & Jenrette Securities Corp., an affiliate of the Adviser.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30% of the Fund's average daily net assets attributable to the
Class A shares and 1% of the average daily net assets attributable to both
Class B and Class C shares. There is no distribution fee on the Advisor Class
shares. The fees are accrued daily and paid monthly. The Agreement provides
that the Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amount of
$234,383 and $2,533, 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.
14
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $74,969,476 and $85,993,019,
respectively, for the six months ended January 31, 1998. There were purchases
of $56,347,566 and sales of $49,519,869 of U.S. government and government
agency obligations for the six months ended January 31, 1998.
At January 31, 1998, the cost of investments for federal income tax purposes
was $141,326,182. Accordingly, gross unrealized appreciation of investments was
$16,861,061 and gross unrealized depreciation of investments was $3,246,962
resulting in net unrealized appreciation of $13,614,099 excluding foreign
currency transactions.
The Fund incurred and elected to defer post October currency losses of $15,159
for the year ended July 31, 1997.
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on foreign portfolio
holdings and to hedge certain firm purchase and sale commitments denominated in
foreign currencies. A forward 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
contracts and the closing of such contract is included in net realized gain or
loss on foreign currency transactions.
Fluctuations in the value of forward 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 other liquid assets in a separate account of the Fund having a value equal
to the aggregate amount of the Fund's commitments under forward 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. The face or contract amount, in U.S.
dollars, as reflected in the following table, reflects the total exposure the
Fund has in that particular currency contract.
At January 31, 1998, the Fund had outstanding forward exchange currency
contracts, to buy and sell foreign currencies against the U.S. dollar, as
follows:
CONTRACT VALUE ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
-------- ----------- ---------- --------------
FOREIGN CURRENCY BUY
CONTRACTS
- ------------------------
Swedish Krona,
settling 4/20/98 20,085 $2,540,520 $2,481,100 $ (59,420)
FOREIGN CURRENCY SALE
CONTRACTS
- ------------------------
Australian Dollar,
settling 2/12/98 3,552 2,261,900 2,435,397 (173,497)
Swedish Krona,
settling 4/20/98 20,085 2,510,355 2,481,100 29,255
------------
$(203,662)
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Fund purchases and writes (sells) put
and call options on U.S. securities that are traded on U.S. securities
exchanges and over-the-counter markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
purchased are accounted for in the same manner as portfolio securities. The
cost of securities acquired through the exercise of call options is increased
by premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from option
transactions. The difference between the premium received and the amount paid
on effecting a closing purchase transaction, including brokerage commissions,
is also treated as a realized gain, or if the premium is less than the amount
paid for the closing purchase transaction, as a realized loss. If a call option
is exercised, the premium received is added to the proceeds from the sale of
the underlying security or currency in determining whether the Fund has
realized a gain or loss. If a put option is exercised, the premium received
reduces the cost basis of the security or currency purchased by the Fund. The
risk involved in writing an option is that, if the option was exercised the
underlying security could then be purchased or sold by the Fund at a
disadvantageous price.
For the six months ended January 31, 1998, the Fund did not engage in any
option transactions.
NOTE E: CAPITAL STOCK
There are 180,000,000 shares of $.01 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 30,000,000 authorized shares. Transactions
in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JAN. 31,1998 JULY 31, JAN. 31,1998 JULY 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
------------- ----------- --------------- -------------
CLASS A
Shares sold 290,323 308,965 $ 4,782,584 $ 4,417,304
Shares issued in
reinvestment of
dividends and
distributions 884,666 872,819 12,998,847 12,031,921
Shares converted
from Class B 24,157 37,939 388,498 545,801
Shares redeemed (522,646) (1,394,620) (8,387,193) (19,984,934)
Net increase(decrease) 676,500 (174,897) $ 9,782,736 $ (2,989,908)
CLASS B
Shares sold 446,342 414,263 $ 6,864,148 $ 5,850,511
Shares issued in
reinvestment of
dividends and
distributions 239,830 168,175 3,435,475 2,274,998
Shares converted
to Class A (24,711) (38,679) (388,498) (545,801)
Shares redeemed (133,183) (349,522) (2,059,836) (4,922,989)
Net increase 528,278 194,237 $ 7,851,289 $ 2,656,719
CLASS C
Shares sold 124,603 116,909 $ 1,897,580 $ 1,671,934
Shares issued in
reinvestment of
dividends and
distributions 51,919 50,995 745,175 690,495
Shares redeemed (47,222) (261,860) (729,094) (3,718,421)
Net increase(decrease) 129,300 (93,956) $ 1,913,661 $ (1,355,992)
16
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS OCTOBER 2, SIX MONTHS OCTOBER 2,
ENDED 1996(A) ENDED 1996(A)
JAN. 31,1998 TO, JAN. 31,1998 TO
(UNAUDITED) JULY 31,1997 (UNAUDITED) JULY 31,1997
------------ ------------- ------------- --------------
ADVISOR CLASS
Shares sold 13,302 99,609 $ 199,621 $ 1,393,347
Shares issued in
reinvestment of
dividends and
distributions 14,779 2,157 217,320 30,179
Shares redeemed (3,809) (5,005) (62,561) (69,716)
Net increase 24,272 96,761 $ 354,380 $ 1,353,810
(a) Commencement of distribution.
17
FINANCIAL HIGHLIGHTS ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
SIX MONTHS OCTOBER 1,
ENDED 1993
JANUARY 31, YEAR ENDED JULY 31, THROUGH YEAR ENDED
1998 ------------------------------------- JULY 31, SEP. 30,
(UNAUDITED) 1997 1996 1995 1994(A) 1993
------------- ----------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.17 $14.01 $15.08 $13.38 $14.40 $13.20
INCOME FROM INVESTMENT OPERATIONS
Net investment income .15(b) .31(b) .37 .46 .29 .34
Net realized and unrealized gain (loss)
on investment transactions .79 3.97 .45 1.62 (.74) 1.29
Net increase (decrease) in net asset
value from operations .94 4.28 .82 2.08 (.45) 1.63
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.16) (.32) (.41) (.36) (.28) (.43)
Distributions from net realized gains (2.07) (1.80) (1.48) (.02) (.29) -0-
Total dividends and distributions (2.23) (2.12) (1.89) (.38) (.57) (.43)
Net asset value, end of period $14.88 $16.17 $14.01 $15.08 $13.38 $14.40
TOTAL RETURN
Total investment return based on net
asset value (c) 6.06% 33.46% 5.23% 15.99% (3.21)% 12.52%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $116,396 $115,500 $102,567 $122,033 $157,637 $172,484
Ratio of expenses to average net assets 1.40%(d) 1.47%(e) 1.38% 1.32% 1.27%(d) 1.35%
Ratio of net investment income to
average net assets 1.83%(d) 2.11% 2.41% 3.12% 2.50%(d) 2.50%
Portfolio turnover rate 91% 207% 227% 179% 116% 188%
Average commission rate (f) $.0565 $.0552 -- -- -- --
</TABLE>
See footnote summary on page 21.
18
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------------
SIX MONTHS OCTOBER 1,
ENDED 1993
JANUARY 31, YEAR ENDED JULY 31, THROUGH YEAR ENDED
1998 ------------------------------------- JULY 31, SEP. 30,
(UNAUDITED) 1997 1996 1995 1994(A) 1993
------------- ----------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.83 $13.79 $14.88 $13.23 $14.27 $13.13
INCOME FROM INVESTMENT OPERATIONS
Net investment income .08(b) .19(b) .28 .30 .22 .29
Net realized and unrealized gain (loss)
on investment transactions .79 3.89 .42 1.65 (.75) 1.22
Net increase (decrease) in net asset
value from operations .87 4.08 .70 1.95 (.53) 1.51
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.12) (.24) (.31) (.28) (.22) (.37)
Distributions from net realized gains (2.07) (1.80) (1.48) (.02) (.29) -0-
Total dividends and distributions (2.19) (2.04) (1.79) (.30) (.51) (.37)
Net asset value, end of period $14.51 $15.83 $13.79 $14.88 $13.23 $14.27
TOTAL RETURN
Total investment return based on net
asset value (c) 5.74% 32.34% 4.45% 15.07% (3.80)% 11.65%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $29,827 $24,192 $18,393 $15,080 $14,347 $12,789
Ratio of expenses to average net assets 2.18%(d) 2.25%(e) 2.16% 2.11% 2.05%(d) 2.13%
Ratio of net investment income to
average net assets 1.06%(d) 1.32% 1.61% 2.30% 1.73%(d) 1.72%
Portfolio turnover rate 91% 207% 227% 179% 116% 188%
Average commission rate (f) $.0565 $.0552 -- -- -- --
</TABLE>
See footnote summary on page 21.
19
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------------
SIX MONTHS OCTOBER 1, MAY 3,
ENDED 1993 1993(G)
JANUARY 31, YEAR ENDED JULY 31, THROUGH TO
1998 ------------------------------------- JULY 31, SEPTEMBER 30,
(UNAUDITED) 1997 1996 1995 1994(A) 1993
------------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.86 $13.81 $14.89 $13.24 $14.28 $13.63
INCOME FROM INVESTMENT OPERATIONS
Net investment income .08(b) .20(b) .26 .30 .24 .11
Net realized and unrealized gain (loss)
on investment transactions .79 3.89 .45 1.65 (.77) .71
Net increase (decrease) in net asset
value from operations .87 4.09 .71 1.95 (.53) .82
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.12) (.24) (.31) (.28) (.22) (.17)
Distributions from net realized gains (2.07) (1.80) (1.48) (.02) (.29) -0-
Total dividends and distributions (2.19) (2.04) (1.79) (.30) (.51) (.17)
Net asset value, end of period $14.54 $15.86 $13.81 $14.89 $13.24 $14.28
TOTAL RETURN
Total investment return based on net
asset value (c) 5.72% 32.37% 4.52% 15.06% (3.80)% 6.01%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $6,931 $5,510 $6,096 $5,108 $6,254 $1,487
Ratio of expenses to average net assets 2.16%(d) 2.23%(e) 2.15% 2.09% 2.03%(d) 2.29%(d)
Ratio of net investment income to
average net assets 1.08%(d) 1.37% 1.63% 2.32% 1.81%(d) 1.47%(d)
Portfolio turnover rate 91% 207% 227% 179% 116% 188%
Average commission rate (f) $.0565 $.0552 -- -- -- --
</TABLE>
See footnote summary on page 21.
20
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
---------------------------
SIX MONTHS OCTOBER 2,
ENDED 1996(G)
JANUARY 31, TO
1998 JULY 31,
(UNAUDITED) 1997
----------- -------------
Net asset value, beginning of period $16.17 $14.79
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .16 .23
Net realized and unrealized gain
on investment transactions .81 3.22
Net increase in net asset
value from operations .97 3.45
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.18) (.27)
Distributions from net realized gains (2.07) (1.80)
Total dividends and distributions (2.25) (2.07)
Net asset value, end of period $14.89 $16.17
TOTAL RETURN
Total investment return based on net asset value (c) 6.25% 25.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,802 $1,565
Ratio of expenses to average net assets (d) 1.16% 1.30%(e)
Ratio of net investment income to
average net assets (d) 2.07% 2.15%
Portfolio turnover rate 91% 207%
Average commission rate $.0565 $.0552
(a) The Fund changed its fiscal year end from September 30 to July 31.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment returns calculated for periods of less than one year
are not annualized.
(d) Annualized.
(e) Ratio reflects expenses grossed up for expense offset arrangement with the
transfer agent. For the year ended July 31, 1997, the net expense ratio was
1.46%, 2.24%, 2.22% and 1.29% for Class A, B, C and Advisor Class shares,
respectively.
(f) For fiscal year beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
(g) Commencement of distribution.
21
<PAGE>
____________________________________________________________
APPENDIX A: FUTURES CONTRACTS, OPTIONS ON FUTURES
CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES
____________________________________________________________
Futures Contracts.
The Fund may enter into contracts for the purchase or
sale for future delivery of foreign currencies. 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 1/2% to 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 price or
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
contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.
A-1
<PAGE>
Options on Futures Contracts
The Fund intends to purchase and write options on
futures contracts for hedging purposes. The Fund is not a
commodity pool and all transactions in futures contracts and
options on futures contracts engaged in by the Fund must
constitute bona fide hedging or other permissible transactions in
accordance with the rules and regulations promulgated by the
CFTC. 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 foreign currency. 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 debt securities,
it may or may not be less risky than ownership of the futures
contract or underlying debt securities. As with the purchase of
futures contracts, when the Fund is not fully invested it may
purchase a call option on a futures contract to hedge against
adverse market conditions.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
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 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 a foreign currency
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 rising interest rates.
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
A-2
<PAGE>
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 for hedging purposes in a manner similar to that in
which futures contracts on foreign currencies, or forward
contracts, will be utilized. For example, a decline in the
dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities,
even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of
portfolio securities, 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 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 write options on foreign currencies for the
same types of hedging 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
A-3
<PAGE>
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
consideration (or for additional cash consideration held in a
segregated account by its Custodian) upon conversation 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 and
other high-grade liquid debt securities in a segregated account
with its Custodian.
The Fund also intends to write call options on foreign
currencies for cross-hedging purposes. An option that is
cross-hedged 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 high- grade liquid debt 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 SEC. To
the contrary, such instruments are traded through financial
institutions acting as market- makers, although foreign currency
A-4
<PAGE>
options are also traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. Similarly, options
on securities 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.
Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the SEC, 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 exercise, 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.
A-5
<PAGE>
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
<PAGE>
(LOGO) THE ALLIANCE PORTFOLIOS-
Alliance Strategic Balanced Fund
Alliance Growth 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
October 31, 1997
________________________________________________________________
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Funds' current Prospectus
that offers Class A, Class B and Class C shares and the Funds'
current Prospectus that offers the Advisor Class shares (the
"Advisor Class Prospectus" and, together with the Funds'
Prospectus that offers the Class A, Class B and Class C shares,
the "Prospectus"). A copy of the Funds' Prospectus may be
obtained by contacting Alliance Fund Services, Inc. at the
address or telephone numbers shown above.
TABLE OF CONTENTS
PAGE
INVESTMENT POLICIES AND RESTRICTIONS.......................
ADDITIONAL INVESTMENT TECHNIQUES OF THE FUNDS..............
INVESTMENT RESTRICTIONS....................................
MANAGEMENT OF THE FUNDS....................................
PORTFOLIO TRANSACTIONS.....................................
EXPENSES OF THE FUNDS......................................
PURCHASE OF SHARES.........................................
REDEMPTION AND REPURCHASE OF SHARES........................
SHAREHOLDER SERVICES.......................................
NET ASSET VALUE............................................
DIVIDENDS, DISTRIBUTIONS AND TAXES.........................
GENERAL INFORMATION........................................
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT
ACCOUNTANTS..............................................
APPENDIX...................................................A-1
__________________________________
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
A-7
<PAGE>
______________________________________________________________
INVESTMENT POLICIES AND RESTRICTIONS
______________________________________________________________
The following investment policies and restrictions
supplement and should be read in conjunction with the information
set forth in the Prospectus of Alliance Strategic Balanced Fund
(the "Strategic Balanced Fund") formerly Alliance Balanced Fund,
and Alliance Growth Fund (the "Growth Fund"), each a series (a
"Fund") of The Alliance Portfolios (the "Trust"), under the
heading "Investment Objective and Policies." In addition to the
investment techniques described in this section for each of the
Funds, the Funds also may engage in the investment techniques
described below under the sub-heading "Additional Investment
Techniques of the Funds."
INVESTMENT OBJECTIVE AND POLICIES OF THE STRATEGIC BALANCED FUND
GENERAL. Although the Fund seeks to reduce the risks
associated with any one investment medium by utilizing a variety
of investments, performance will depend upon the additional
factors of timing, asset allocation and the ability of Alliance
Capital Management L.P. (the "Adviser") to anticipate and react
to changing market conditions.
The average dollar-weighted maturity of debt securities
held by the Fund will vary according to market conditions and
interest rate cycles and will range between 1 year and 30 years
under normal market conditions. In periods of rising interest
rates, the Fund may, to the extent it holds mortgage-backed
securities, be subject to the risk that the average dollar-
weighted maturity of its portfolio of debt or other fixed-income
securities may be extended as a result of lower than anticipated
prepayment rates. See "Mortgage-backed Securities," below.
As a fundamental policy, the Fund will invest at least
25% of its total assets in fixed-income securities, which for
this purpose includes debt securities, preferred stocks and that
portion of the value of securities convertible into common stock,
including convertible preferred stock and convertible debt, which
is attributable to the fixed-income characteristics of those
securities.
The Fund's debt securities will generally consist of
investment grade securities, that is securities rated at the time
of purchase at least Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's ("S&P"), Fitch Investors
Service, Inc. ("Fitch") or Duff & Phelps Credit Rating Co. ("Duff
& Phelps") or will be unrated securities deemed to be of
comparable quality by the Adviser. (For a further description of
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<PAGE>
these bond ratings, see Appendix A to this Statement of
Additional Information.) Securities rated Baa by Moody's or BBB
by S&P, Fitch or Duff & Phelps have speculative characteristics,
and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and
interest payments on such obligations than in the case of higher-
rated securities. In the event that the rating of any debt
securities held by the Fund falls below Baa by Moody's and/or BBB
by S&P, Fitch or Duff & Phelps (or in the case of unrated
securities, such securities are no longer determined by the
Adviser to be of investment grade), the Fund will not be
obligated to dispose of such obligations and may continue to hold
such obligations if, in the opinion of the Adviser, such
investment is appropriate under the circumstances. For temporary
defensive purposes, the Fund may invest in money market
instruments.
MORTGAGE-BACKED SECURITIES. Interest and principal
payments (including prepayments) on the mortgages underlying
mortgage-backed securities are passed through to the holders of
the mortgage-backed security. 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 an individual mortgage prepays the
remaining principal before the mortgage's scheduled maturity
date. Because the prepayment characteristics of the underlying
mortgages vary, it is not possible to predict accurately the
realized yield or average life of a particular issue of pass-
through certificates. During periods of declining interest
rates, such 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 maturities 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.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Fund may
engage in foreign currency exchange transactions to protect
against uncertainty in the level of future currency exchange
rates. The Adviser expects to engage in foreign currency
exchange transactions in connection with the purchase and sale of
portfolio securities ("transaction hedging") and to protect
against changes in the value of specific portfolio positions
("position hedging").
The Fund may engage in transaction hedging to protect
against a change in foreign currency exchange rates between the
3
<PAGE>
date on which the Fund contracted to purchase or sell a security
and the settlement date, or to "lock in" the U.S. dollar
equivalent of a dividend or interest payment in a foreign
currency. The Fund may purchase or sell a foreign currency on a
spot (or cash) basis at the prevailing spot rate in connection
with the settlement of transactions in portfolio securities
denominated in that foreign currency.
If conditions warrant, the Fund may also enter into
contracts to purchase or sell foreign currencies at a future date
("forward contracts"), and may purchase and sell foreign currency
futures contracts, as a hedge against changes in foreign currency
exchange rates between the trade and settlement dates on
particular transactions and not for speculation. A foreign
currency forward contract is a negotiated agreement higher or
lower than the spot rate. Foreign currency futures contracts are
standardized exchange-traded contracts and have margin
requirements.
For transaction hedging purposes, the Fund may also
purchase and sell call and put options on foreign currency
futures contracts and on foreign currencies.
The Fund may engage in position hedging to protect
against a decline in value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or
quoted (or an increase in value of a currency in which securities
the Fund intends to buy are denominated, when the Fund holds cash
or short-term investments). For position hedging purposes, the
Fund may purchase or sell foreign currency futures contracts,
foreign currency forward contracts, and options on foreign
currency futures contracts and on foreign currencies. In
connection with position hedging, the Fund may also purchase or
sell foreign currency on a spot basis.
The Fund's currency hedging transactions may call for
the delivery of one foreign currency in exchange for another
foreign currency and may at times not involve currencies in which
its portfolio securities are then denominated. The Adviser will
engage in such "cross hedging" activities when it believes that
such transactions provide significant hedging opportunities for
the Fund.
CONVERTIBLE SECURITIES. The Fund may invest in
convertible securities. These securities normally provide a
higher yield than the underlying stock but lower than a fixed-
income security without the conversion feature. Also, the price
of the convertible security will normally vary to some degree
with changes in the price of the underlying stock although under
some market conditions the higher yield of the convertible
security tends to make it less volatile than the underlying
4
<PAGE>
common stock. In addition, the price of the convertible security
will generally also vary inversely to some degree with interest
rates. For a description of these risks, see "Investment
Objective and Policies of the Growth Fund -- High-Yield
Securities" below.
INVESTMENT OBJECTIVE AND POLICIES OF THE GROWTH FUND
GENERAL. The Fund invests primarily in common stocks and
securities convertible into common stocks, such as convertible
bonds, convertible preferred stocks and warrants convertible into
common stocks. Because the values of fixed- income securities are
expected to vary inversely with changes in interest rates
generally, when the Adviser expects a general decline in interest
rates the Fund may also invest for capital growth in fixed-income
securities. The Fund may invest up to 25% of its total assets in
fixed-income securities rated at the time of purchase below
investment grade, that is, securities rated Ba or lower by
Moody's or BB or lower by S&P, Fitch or Duff & Phelps or in
unrated fixed-income securities determined by the Adviser to be
of comparable quality. For a description of the ratings referred
to above, see Appendix A to this Statement of Additional
Information. For temporary defensive purposes, the Fund may
invest in money market instruments.
HIGH-YIELD SECURITIES. The Fund may invest in high-
yield, high-risk, fixed-income and convertible securities rated
at the time of purchase Ba or lower by Moody's or BB or lower by
S&P, or, if unrated, judged by the Adviser to be of comparable
quality ("High-Yield Securities"). The Fund will generally
invest in securities with a minimum rating of Caa- by Moody's or
CCC- by S&P or Fitch or CCC by Duff & Phelps or in unrated
securities judged by the Adviser to be of comparable quality.
However, from time to time, the Fund may invest in securities
rated in the lowest grades of Moody's (C), S&P (D), Fitch (D) or
Duff & Phelps (DD) or in unrated securities judged by the Adviser
to be of comparable quality, if the Fund's management determines
that there are prospects for an upgrade or a favorable conversion
into equity securities (in the case of convertible securities).
Securities rated Ba or BB or lower (and comparable unrated
securities) are commonly referred to as "junk bonds." Securities
rated D by S&P or Fitch and DD by Duff & Phelps are in default.
During the fiscal year ended October 31, 1996, the Fund did not
invest in any High-Yield Securities.
As with other fixed-income securities, High-Yield
Securities are subject to credit risk and market risk and their
yields may fluctuate. Market risk relates to changes in a
security's value as a result of changes in interest rates. Credit
risk relates to the ability of the issuer to make payments of
principal and interest. High-Yield Securities are subject to
5
<PAGE>
greater credit risk (and potentially greater incidences of
default) than comparable higher-rated securities because issuers
are more vulnerable to economic downturns, higher interest rates
or adverse issuer-specific developments. In addition, the prices
of High-Yield Securities are generally subject to greater market
risk and therefore react more sharply to changes in interest
rates. The value and liquidity of High-Yield Securities may be
diminished by adverse publicity and investor perceptions.
Because High-Yield Securities are frequently traded only
in markets where the number of potential purchasers and sellers,
if any, is limited, the ability of the Fund to sell High-Yield
Securities at their fair value either to meet redemption requests
or to respond to changes in the financial markets may be limited.
Thinly traded High-Yield Securities may be more difficult to
value accurately for the purpose of determining the Fund's net
asset value. Also, because the market for certain High-Yield
Securities is relatively new, that market may be particularly
sensitive to an economic downturn or a general increase in
interest rates. In addition, under such circumstances the values
of such securities may be more volatile.
Some High-Yield Securities in which the Fund may invest
may be subject to redemption or call provisions. Such provisions
may limit increases in market value that might otherwise result
from lower interest rates while increasing the risk that the Fund
may be required to reinvest redemption or call proceeds during a
period of relatively low interest rates.
The credit ratings issued by Moody's, S&P, Fitch and
Duff & Phelps, a description of which is included as Appendix A
to this Statement of Additional Information, are subject to
various limitations. For example, while such ratings evaluate
credit risk, they ordinarily do not evaluate the market risk of
High-Yield Securities. In certain circumstances, the ratings may
not reflect in a timely fashion adverse developments affecting an
issuer. For these reasons, the Adviser conducts its own
independent credit analysis of High-Yield Securities. When the
Fund invests in securities in the lower rating categories, the
achievement of the Fund's goals is more dependent on the
Adviser's ability than would be the case if the Fund were
investing in higher rated securities.
In the event that the credit rating of a High-Yield
Security held by the Fund falls below its rating at the time of
purchase (or, in the case of unrated securities, the Adviser
determines that the quality of such security has deteriorated
since purchased by the Fund), the Fund will not be obligated to
dispose of such security and may continue to hold the obligation
if, in the opinion of the Adviser, such investment is appropriate
in the circumstances.
6
<PAGE>
Securities rated Baa by Moody's or BBB by S&P, Fitch, or
Duff & Phelps or judged by the Adviser to be of comparable
quality share some of the speculative characteristics of High-
Yield Securities described above.
CONVERTIBLE SECURITIES. The Fund may invest in
convertible securities. These securities normally provide a yield
that is higher than that of the underlying stock but lower than
that of a fixed-income security without the conversion feature.
Also, the price of the convertible security will normally vary to
some degree with changes in the price of the underlying stock
although under some market conditions the higher yield of the
convertible security tends to make it less volatile than the
underlying common stock. In addition, the price of the
convertible security will generally also vary inversely to some
degree with interest rates. Convertible debt securities that are
rated below BBB by S&P, Fitch, or Duff & Phelps, or Baa by
Moody's or comparable unrated securities as determined by the
Adviser may share some or all of the risks of High-Yield
Securities. For a description of these risks, see "High-Yield
Securities" above.
ZERO-COUPON AND PAYMENT-IN-KIND BONDS. The Fund may at
times invest in so-called "zero-coupon" bonds 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, at its
option, to make current interest payments on the bonds either in
cash or in additional bonds. Because zero-coupon bonds do not
pay current interest, their value is generally subject to greater
fluctuation in response to changes in market interest rates than
bonds which pay interest 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, the Fund is nonetheless required to accrue
interest income on such investments and to distribute such
amounts at least annually to shareholders. Thus, the Fund could
be required to liquidate other investments in order to satisfy
its dividend requirements at times when the Adviser would not
otherwise deem it advisable to do so.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Fund may
engage in foreign currency exchange transactions to protect
against uncertainty in the level of future currency exchange
rates. The Adviser expects to engage in foreign currency
exchange transactions in connection with the purchase and sale of
portfolio securities ("transaction hedging") and to protect
against changes in the value of specific portfolio
positions("position hedging").
7
<PAGE>
The Fund may engage in transaction hedging to protect
against a change in foreign currency exchange rates between the
date on which the Fund contracted to purchase or sell a security
and the settlement date, or to "lock in" the U.S. dollar
equivalent of a dividend or interest payment in a foreign
currency. The Fund may purchase or sell a foreign currency on a
spot (or cash) basis at the prevailing spot rate in connection
with the settlement of transactions in portfolio securities
denominated in that foreign currency.
If conditions warrant, the Fund may also enter into
contracts to purchase or sell foreign currencies at a future date
("forward contracts"), and may purchase and sell foreign currency
futures contracts, as a hedge against changes in foreign currency
exchange rates between the trade and settlement dates on
particular transactions and not for speculation. A foreign
currency forward contract is a negotiated agreement higher or
lower than the spot rate. Foreign currency futures contracts are
standardized exchange-traded contracts and have margin
requirements.
For transaction hedging purposes, the Fund may also
purchase and sell call and put options on foreign currency
futures contracts and on foreign currencies.
The Fund may engage in position hedging to protect
against a decline in value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or
quoted (or an increase in value of a currency in which securities
the Fund intends to buy are denominated, when the Fund holds cash
or short-term investments). For position hedging purposes, the
Fund may purchase or sell foreign currency futures contracts,
foreign currency forward contracts, and options on foreign
currency futures contracts and on foreign currencies. In
connection with position hedging, the Fund may also purchase or
sell foreign currency on a spot basis.
The Fund's currency hedging transactions may call for
the delivery of one foreign currency in exchange for another
foreign currency and may at times not involve currencies in which
its portfolio securities are then denominated. The Adviser will
engage in such "cross hedging" activities when it believes that
such transactions provide significant hedging opportunities for
the Fund.
PORTFOLIO MANAGEMENT
The Adviser manages each Fund's portfolio by buying and
selling securities to help attain its investment objective. The
portfolio turnover rate for each Fund is included under
"Financial Highlights" in the Funds' Prospectus. A high
8
<PAGE>
portfolio turnover rate will involve greater costs to a Fund
(including brokerage commissions and other transaction costs) and
may also result in the realization of taxable capital gains,
including short-term capital gains taxable at ordinary income
rates. See "Dividends, Distributions and Taxes" and "Portfolio
Transactions" below.
______________________________________________________________
ADDITIONAL INVESTMENT TECHNIQUES OF THE FUNDS
______________________________________________________________
REPURCHASE AGREEMENTS
The repurchase agreements referred to in the Funds'
Prospectus are agreements by which a Fund purchases a security
and obtains a simultaneous commitment from the seller to
repurchase the security at an agreed upon price and date. The
resale price is in excess of the purchase price and reflects an
agreed upon market rate unrelated to the coupon rate on the
purchased security. The purchased security serves as collateral
for the obligation of the seller to repurchase the security. The
value of the purchased security is initially greater than or
equal to the amount of the repurchase obligation, and the seller
is required to furnish additional collateral on a daily basis in
order to maintain with the purchaser securities with a value
greater than or equal to the amount of the repurchase obligation.
Such transactions afford the Funds the opportunity to earn a
return on temporarily available cash. While at times the
underlying security may be a bill, certificate of indebtedness,
note, or bond issued by an agency, authority or instrumentality
of the U.S. Government, the obligation of the seller is not
guaranteed by the U.S. Government and there is a risk that the
seller may fail to repurchase the underlying security, whether
because of the seller's bankruptcy or otherwise. In such event,
the Funds would attempt to exercise their rights with respect to
the underlying security, including possible disposition in the
market. However, the Funds may incur various expenses in the
attempted enforcement and may be subject to various delays and
risks of loss, including (a) possible declines in the value of
the underlying security, (b) possible reduced levels of income
and lack of access to income and (c) possible inability to
enforce their rights.
NON-PUBLICLY TRADED SECURITIES
The Funds may invest in securities that are not publicly
traded, including securities sold pursuant to Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A Securities"). The
sale of these securities is usually restricted under federal
securities laws, and market quotations may not be readily
9
<PAGE>
available. As a result, a Fund may not be able to sell these
securities (other than Rule 144A Securities) unless they are
registered under applicable federal and state securities laws, or
may have to sell such securities at less than fair market value.
Investment in these securities is restricted to 5% of a Fund's
total assets (excluding, to the extent permitted by applicable
law, Rule 144A Securities) and is also subject to the restriction
against investing more than 15% of total assets in "illiquid"
securities. 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 the
liquidity guidelines established by the Trust's Board of
Trustees. Pursuant to these guidelines, the Adviser will monitor
the liquidity of a Fund's investment in Rule 144A Securities.
FOREIGN SECURITIES
The Funds may invest without limit in securities of
foreign issuers which are not publicly traded in the United
States, although each of these Funds generally will not invest
more than 15% of its total assets in such securities. The
Strategic Balanced Fund may also purchase certificates of deposit
issued by foreign branches of domestic banks without regard to
the 15% limit. These certificates of deposit are not insured by
an agency or instrumentality of the U.S. Government. Investment
in foreign issuers or securities principally traded outside the
United States may involve certain special risks due to foreign
economic, political, diplomatic and legal developments, including
favorable or unfavorable changes in currency exchange rates,
exchange control regulations (including currency blockage),
expropriation or nationalization of assets, confiscatory
taxation, imposition of withholding taxes on dividend or interest
payments, and possible difficulty in obtaining and enforcing
judgments against foreign entities. Furthermore, issuers of
foreign securities are subject to different, often less
comprehensive, accounting, reporting and disclosure requirements
than domestic issuers. The securities of some foreign companies
and foreign securities markets are less liquid and at times more
volatile than securities of comparable U.S. companies and U.S.
securities markets, and foreign securities markets may be subject
to less regulation than U.S. securities markets. The laws of
some foreign countries may limit the Funds' abilities to invest
in securities of certain issuers located in these countries.
Foreign brokerage commissions and other fees are also generally
higher than in the United States. There are also special tax
considerations which apply to securities of foreign issuers and
securities principally traded overseas. Foreign settlement
procedures and trade regulations may involve certain risks (such
as delay in payment or delivery of securities or in the abroad)
and expenses not present in the settlement of domestic
investments. The Fund may invest a portion of its assets in
10
<PAGE>
developing countries or in countries with new or developing
capital markets. The risks noted above are generally increased
with respect to these investments. These countries may have
relatively unstable governments, economies based on only a few
industries or securities markets that trade in limited volume.
Securities of issuers located in these countries tend to have
volatile prices and may offer significant potential for loss.
The value of foreign investments measured in U.S.
dollars will rise or fall because of decreases or increases,
respectively, in the value of the U.S. dollar in comparison to
the value of the currency in which the foreign investment is
denominated. The Fund may buy or sell foreign currencies,
options on foreign currencies, foreign currency futures contracts
(and related options) and deal in forward foreign currency
exchange contracts in connection with the purchase and sale of
foreign investments. See "Investment Objective and Policies of
the Strategic Balanced Fund--Foreign Currency Exchange
Transactions" above.
DESCRIPTIONS OF CERTAIN MONEY MARKET SECURITIES IN
WHICH THE FUNDS MAY INVEST
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND BANK
TIME DEPOSITS. Certificates of deposit are receipts issued by a
bank in exchange for the deposit of funds. The issuer agrees to
pay the amount deposited plus interest to the bearer of the
receipt on the date specified on the certificate. The certificate
usually can be traded in the secondary market prior to maturity.
Bankers' acceptances typically arise from short-term
credit arrangements designed to enable businesses to obtain funds
to finance commercial transactions. Generally, an acceptance is
a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise.
The draft is then "accepted" by another bank that, in effect,
unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be held
by the accepting bank as an earning asset or it may be sold in
the secondary market at the going rate of discount for a specific
maturity. Although maturities for acceptances can be as long as
270 days, most maturities are six months or less.
Bank time deposits are funds kept on deposit with a bank
for a stated period of time in an interest-bearing account. At
present, bank time deposits maturing in more than seven days are
not considered by the Adviser to be readily marketable.
COMMERCIAL PAPER. Commercial paper consists of short-
term (usually from 1 to 270 days) unsecured promissory notes
issued in order to finance current operations.
11
<PAGE>
VARIABLE NOTES. Variable amount master demand notes and
variable amount floating rate notes are obligations that permit
the investment of fluctuating amounts by a Fund at varying rates
of interest pursuant to direct arrangements between a Fund, as
lender, and the borrower. Master demand notes permit daily
fluctuations in the interest rate while the interest rate under
variable amount floating rate notes fluctuates on a weekly basis.
These notes permit daily changes in the amounts borrowed. The
Funds have the right to increase the amount under these notes at
any time up to the full amount provided by the note agreement, or
to decrease the amount, and the borrower may repay up to the full
amount of the note without penalty. Because these types of notes
are direct lending arrangements between the lender and the
borrower, it is not generally contemplated that such instruments
will be traded and there is no secondary market for these notes.
Master demand notes are redeemable (and, thus, immediately
repayable by the borrower) at face value, plus accrued interest,
at any time. Variable amount floating rate notes are subject to
next-day redemption 14 days after the initial investment therein.
With both types of notes, therefore, the Funds' right to redeem
depends on the ability of the borrower to pay principal and
interest on demand. In connection with both types of note
arrangements, the Funds consider earning power, cash flow and
other liquidity ratios of the issuer. These notes, as such, are
not typically rated by credit rating agencies. Unless they are
so rated, a Fund may invest in them only if at the time of an
investment the issuer has an outstanding issue of unsecured debt
rated Aa or better by Moody's or AA or better by S&P, Fitch, or
Duff & Phelps.
ASSET-BACKED SECURITIES
The Funds may invest in asset-backed securities
(unrelated to first mortgage loans) which represent fractional
interests in pools of retail installment loans, leases or
revolving credit receivables, both secured (such as Certificates
for Automobile Receivables or "CARS") and unsecured (such as
Credit Card Receivable Securities or "CARDS"). 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 if the full amounts due on underlying sales
contracts or receivables are not realized by the trust holding
the obligations because of unanticipated legal or administrative
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costs of enforcing the contracts or because of depreciation or
damage to the collateral (usually automobiles) securing certain
contracts, or other factors. If consistent with their investment
objectives and policies, each of the Funds may invest in other
types of asset-backed securities that may be developed in the
future.
The staff of the Securities and Exchange Commission (the
"SEC") is of the view that certain asset-backed securities may
constitute investment companies under the Investment Company Act
of 1940 (the "1940 Act"). The Funds intend to conduct their
operations in a manner consistent with this view; therefore, the
Funds generally may not invest more than 10% of their total
assets in such securities without obtaining appropriate
regulatory relief.
LENDING OF SECURITIES
The Funds may seek to increase income by lending
portfolio securities. Under present regulatory policies,
including those of the Board of Governors of the Federal Reserve
System and the SEC, such loans may be made only to member firms
of the New York Stock Exchange (the "Exchange") and would be
required to be secured continuously by collateral in cash, cash
equivalents, or U.S. Treasury Bills maintained on a current basis
at an amount at least equal to the market value of the securities
loaned. A Fund would have the right to call a loan and obtain
the securities loaned at any time on five days' notice. During
the existence of a loan, a Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the
securities loaned and would also receive compensation based on
investment of the collateral. A Fund would not, however, have
the right to vote any securities having voting rights during the
existence of the loan but would call the loan in anticipation of
an important vote to be taken among holders of the securities or
of 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 the Adviser to be of good standing, and when, in the
judgment of the Adviser, the consideration that can be earned
currently from securities loans of this type justifies the
attendant risk. The value of the securities loaned will not
exceed 25% of the value of such Fund's total assets at the time
any such loan is made.
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FORWARD COMMITMENTS AND WHEN-ISSUED AND DELAYED DELIVERY
SECURITIES
Each of the Funds may enter into forward commitments for
the purchase of securities and may purchase securities on a
"when-issued" or "delayed delivery" basis. Agreements for such
purchases might be entered into, for example, when a Fund
anticipates a decline in interest rates and is able to obtain a
more advantageous yield by committing currently to purchase
securities to be issued later. When a Fund purchases securities
in this manner (i.e., on a forward commitment, "when-issued" or
"delayed delivery" basis), it does not pay for the securities
until they are received, and a Fund is required to create a
segregated account with the Trust's custodian and to maintain in
that account liquid assets in an amount equal to or greater than,
on a daily basis, the amount of the Fund's forward commitments
and "when-issued" or "delayed delivery" commitments.
A Fund will enter into forward commitments and make
commitments to purchase securities on a "when-issued" or "delayed
delivery" basis only with the intention of actually acquiring the
securities. However, a Fund may sell these securities before the
settlement date if, in the opinion of the Adviser, it is
advisable as a matter of investment strategy.
Although neither of the Funds intends to make such
purchases for speculative purposes and each Fund intends to
adhere to the provisions of SEC policies, purchases of securities
on such bases may involve more risk than other types of
purchases. For example, by committing to purchase securities in
the future, a Fund subjects itself to a risk of loss on such
commitments as well as on its portfolio securities. Also, a Fund
may have to sell assets which have been set aside in order to
meet redemptions. In addition, if a Fund determines it is
advisable as a matter of investment strategy to sell the forward
commitment or "when-issued" or "delayed delivery" securities
before delivery, that Fund may incur a gain or loss because of
market fluctuations since the time the commitment to purchase
such securities was made. Any such gain or loss would be treated
as a capital gain or loss and would be treated for tax purposes
as such. When the time comes to pay for the securities to be
purchased under a forward commitment or on a "when-issued" or
"delayed delivery" basis, a Fund will meet its obligations from
the then available cash flow or the sale of securities, or,
although it would not normally expect to do so, from the sale of
the forward commitment or "when-issued" or "delayed delivery"
securities themselves (which may have a value greater or less
than a Fund's payment obligation).
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OPTIONS
OPTIONS ON SECURITIES. The Funds may write call and put
options and may purchase call and put options on securities. Each
Fund intends to write only covered options. In addition to the
methods of "cover" described in the Prospectus, this means that
so long as a Fund is obligated as the writer of a call option, it
will own the underlying securities subject to the option or
securities convertible into such securities without additional
consideration (or for additional cash consideration held in a
segregated account by the custodian). In the case of call options
on U.S. Treasury Bills, a Fund might own U.S. Treasury Bills of a
different series from those underlying the call option, but with
a principal amount and value corresponding to the option contract
amount and a maturity date no later than that of the securities
deliverable under the call option. A Fund will be considered
"covered" with respect to a put option it writes, if, so long as
it is obligated as the writer of a put option, it deposits and
maintains with its custodian in a segregated account liquid
assets having a value equal to or greater than the exercise price
of the option.
Effecting a closing transaction in the case of a written
call option will permit a Fund to write another call option on
the underlying security with either a different exercise price or
expiration date or both, or in the case of a written put option
will permit a Fund to write another put option to the extent that
the exercise price thereof is secured by deposited cash or short-
term securities. Such transactions permit a Fund to generate
additional premium income, which will partially offset declines
in the value of portfolio securities or increases in the cost of
securities to be acquired. Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other investments
by a Fund, provided that another option on such security is not
written. If a Fund desires to sell a particular security from
its portfolio on which it has written a call option, it will
effect a closing transaction in connection with the option prior
to or concurrent with the sale of the security.
A Fund will realize a profit from a closing transaction
if the premium paid in connection with the closing of an option
written by the Fund is less than the premium received from
writing the option, or if the premium received in connection with
the closing of an option purchased by the Fund is more than the
premium paid for the original purchase. Conversely, a Fund will
suffer a loss if the premium paid or received in connection with
a closing transaction is more or less, respectively, than the
premium received or paid in establishing the option position.
Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying
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security, any loss resulting from the repurchase of a call option
previously written by a Fund is likely to be offset in whole or
in part by appreciation of the underlying security owned by the
Fund.
A Fund may purchase a security and then write a call
option against that security or may purchase a security and
concurrently write an option on it. The exercise price of the
call a Fund determines to write will depend upon the expected
price movement of the underlying security. The exercise price of
a call option may be below ("in-the-money"), equal to ("at-the-
money") or above ("out-of-the-money") the current value of the
underlying security at the time the option is written. In-the-
money call options may be used when it is expected that the price
of the underlying security will decline moderately during the
option period. Out-of-the-money call options may be written when
it is expected that the premiums received from writing the call
option plus the appreciation in the market price of the
underlying security up to the exercise price will be greater than
the appreciation in the price of the underlying security alone.
If the call options are exercised in such transactions, a Fund's
maximum gain will be the premium received by it for writing the
option, adjusted upwards or downwards by the difference between
the Fund's purchase price of the security and the exercise price.
If the options are not exercised and the price of the underlying
security declines, the amount of such decline will be offset in
part, or entirely, by the premium received.
The writing of covered put options is similar in terms
of risk/return characteristics to buy-and-write transactions. If
the market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless
and a Fund's gain will be limited to the premium received. If
the market price of the underlying security declines or otherwise
is below the exercise price, a Fund may elect to close the
position or retain the option until it is exercised, at which
time the Fund will be required to take delivery of the security
at the exercise price; the Fund's return will be the premium
received from the put option minus the amount by which the market
price of the security is below the exercise price, which could
result in a loss. Out-of-the-money put options may be written
when it is expected that the price of the underlying security
will decline moderately during the option period. In-the-money
put options may be used when it is expected that the premiums
received from writing the put option plus the appreciation in the
market price of the underlying security up to the exercise price
will be greater than the appreciation in the price of the
underlying security alone.
Each of the Funds may also write combinations of put and
call options on the same security, known as "straddles," with the
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same exercise and expiration date. By writing a straddle, a Fund
undertakes a simultaneous obligation to sell and purchase the
same security in the event that one of the options is exercised.
If the price of the security subsequently rises above the
exercise price, the call will likely be exercised and the Fund
will be required to sell the underlying security at a below
market price. This loss may be offset, however, in whole or
part, by the premiums received on the writing of the two options.
Conversely, if the price of the security declines by a sufficient
amount, the put will likely be exercised. The writing of
straddles will likely be effective, therefore, only where the
price of the security remains stable and neither the call nor the
put is exercised. In those instances where one of the options is
exercised, the loss on the purchase or sale of the underlying
security may exceed the amount of the premiums received.
By writing a call option, a Fund limits its opportunity
to profit from any increase in the market value of the underlying
security above the exercise price of the option. By writing a put
option, a Fund assumes the risk that it may be required to
purchase the underlying security for an exercise price above its
then current market value, resulting in a capital loss unless the
security subsequently appreciates in value. Where options are
written for hedging purposes, such transactions constitute only a
partial hedge against declines in the value of portfolio
securities or against increases in the value of securities to be
acquired, up to the amount of the premium.
Each of the Funds may purchase put options to hedge
against a decline in the value of portfolio securities. If such
decline occurs, the put options will permit the Fund to sell the
securities at the exercise price or to close out the options at a
profit. By using put options in this way, a Fund will reduce any
profit it might otherwise have realized on the underlying
security by the amount of the premium paid for the put option and
by transaction costs.
A Fund may purchase call options to hedge against an
increase in the price of securities that the Fund anticipates
purchasing in the future. If such increase occurs, the call
option will permit the Fund to purchase the securities at the
exercise price, or to close out the options at a profit. The
premium paid for the call option plus any transaction costs will
reduce the benefit, if any, realized by a Fund upon exercise of
the option, and, unless the price of the underlying security
rises sufficiently, the option may expire worthless to the Fund
and the Fund will suffer a loss on the transaction to the extent
of the premium paid.
OPTIONS ON SECURITIES INDEXES. Each of the Funds may
write (sell) covered call and put options on securities indexes
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and purchase call and put options on securities indexes. A call
option on a securities index is considered covered if, so long as
a Fund is obligated as the writer of the call option, the Fund
holds in its portfolio securities the price changes of which are
expected by the Adviser to replicate substantially the movement
of the index or indexes upon which the options written by the
Fund are based. A put option on a securities index written by a
Fund will be considered covered if, so long as it is obligated as
the writer of the put option, the Fund maintains with its
custodian in a segregated account liquid assets having a value
equal to or greater than the exercise price of the option.
A Fund may purchase put options on securities indexes to
hedge against a decline in the value of portfolio securities. By
purchasing a put option on a securities index, a Fund will seek
to offset a decline in the value of securities it owns through
appreciation of the put option. If the value of a Fund's
investments does not decline as anticipated, or if the value of
the option does not increase, the Fund's loss will be limited to
the premium paid for the option. The success of this strategy
will largely depend on the accuracy of the correlation between
the changes in value of the index and the changes in value of a
Fund's security holdings.
A Fund may purchase call options on securities indexes
to attempt to reduce the risk of missing a broad market advance,
or an advance in an industry or market segment, at a time when
the Fund holds uninvested cash or short-term debt securities
awaiting investment. When purchasing call options for this
purpose, a Fund will also bear the risk of losing all or a
portion of the premium paid if the value of the index does not
rise. The purchase of call options on stock indexes when a Fund
is substantially fully invested is a form of leverage, up to the
amount of the premium and related transaction costs, and involves
risks of loss and of increased volatility similar to those
involved in purchasing call options on securities the Fund owns.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
FUTURES CONTRACTS. The Funds may enter into interest
rate futures contracts, index futures contracts and foreign
currency futures contracts. (Unless otherwise specified,
interest rate futures contracts, index futures contracts and
foreign currency futures contracts are collectively referred to
as "Futures Contracts.") Such investment strategies will be used
as a hedge and not for speculation.
Purchases or sales of stock or bond index futures
contracts are used for hedging purposes to attempt to protect a
Fund's current or intended investments from broad fluctuations in
stock or bond prices. For example, a Fund may sell stock or bond
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index futures contracts in anticipation of or during a market
decline to attempt to offset the decrease in market value of the
Fund's portfolio securities that might otherwise result. If such
decline occurs, the loss in value of portfolio securities may be
offset, in whole or part, by gains on the futures position. When
a Fund is not fully invested in the securities market and
anticipates a significant market advance, it may purchase stock
or bond index futures contracts in order to gain rapid market
exposure that may, in whole or in part, offset increases in the
cost of securities that the Fund intends to purchase. As such
purchases are made, the corresponding positions in stock or bond
index futures contracts will be closed out.
Interest rates futures contracts are purchased or sold
for hedging purposes to attempt to protect against the effects of
interest rate changes on a Fund's current or intended investments
in fixed-income securities. For example, if a Fund owned long-
term bonds and interest rates were expected to increase, that
Fund might sell interest rate futures contracts. Such a sale
would have much the same effect as selling some of the long-term
bonds in that Fund's portfolio. However, since the futures
market is more liquid than the cash market, the use of interest
rate futures contracts as a hedging technique allows a Fund to
hedge its interest rate risk without having to sell its portfolio
securities. If interest rates were to increase, the value of the
debt securities in the portfolio would decline, but the value of
that Fund's interest rate futures contracts would be expected to
increase at approximately the same rate, thereby keeping the net
asset value of that Fund from declining as much as it otherwise
would have. On the other hand, if interest rates were expected
to decline, interest rate futures contracts could be purchased to
hedge in anticipation of subsequent purchases of long-term bonds
at higher prices. Because the fluctuations in the value of the
interest rate futures contracts should be similar to those of
long-term bonds, a Fund could protect itself against the effects
of the anticipated rise in the value of long-term bonds without
actually buying them until the necessary cash became available or
the market had stabilized. At that time, the interest rate
futures contracts could be liquidated and that Fund's cash
reserves could then be used to buy long-term bonds on the cash
market.
The Funds may purchase and sell foreign currency futures
contracts for hedging purposes in order to protect against
fluctuations in currency exchange rates. Such fluctuations could
reduce the dollar value of portfolio securities denominated in
foreign currencies, or increase the cost of foreign-denominated
securities to be acquired, even if the value of such securities
in the currencies in which they are denominated remains constant.
The Funds may sell futures contracts on a foreign currency, for
example, when they hold securities denominated in such currency
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and it anticipates a decline in the value of such currency
relative to the dollar. If such a decline were to occur, the
resulting adverse effect on the value of foreign-denominated
securities may be offset, in whole or in part, by gains on the
futures contracts. However, if the value of the foreign currency
increases relative to the dollar, the Fund's loss on the foreign
currency futures contract may or may not be offset by an increase
in the value of the securities because a decline in the price of
the security stated in terms of the foreign currency may be
greater than the increase in value as a result of the change in
exchange rates.
Conversely, the Funds could protect against a rise in
the dollar cost of foreign-denominated securities to be acquired
by purchasing futures contracts on the relevant currency, which
could offset, in whole or in part, the increased cost of such
securities resulting from a rise in the dollar value of the
underlying currencies. When a Fund purchases futures contracts
under such circumstances, however, and the price of securities to
be acquired instead declines as a result of appreciation of the
dollar, the Fund will sustain losses on its futures position
which could reduce or eliminate the benefits of the reduced cost
of portfolio securities to be acquired.
The Funds may also engage in currency "cross hedging"
when, in the opinion of the Adviser, the historical relationship
among foreign currencies suggests that a Fund may achieve
protection against fluctuations in currency exchange rates
similar to that described above at a reduced cost through the use
of a futures contract relating to a currency other than the U.S.
dollar or the currency in which the foreign security is
denominated. Such "cross hedging" is subject to the same risks
as those described above with respect to an unanticipated
increase or decline in the value of the subject currency relative
to the dollar.
OPTIONS ON FUTURES CONTRACTS. The writing of a call
option on a Futures Contract constitutes a partial hedge against
declining prices of the securities in the Fund's portfolio. If
the futures price at expiration of the option is below the
exercise price, a Fund will retain the full amount of the option
premium, which provides a partial hedge against any decline that
may have occurred in the Fund's portfolio holdings. The writing
of a put option on a Futures Contract constitutes a partial hedge
against increasing prices of the securities or other instruments
required to be delivered under the terms of the Futures Contract.
If the futures price at expiration of the put option is higher
than the exercise price, a Fund will retain the full amount of
the option premium, in the price of securities which the Fund
intends to purchase. If a put or call option a Fund has written
is exercised, the Fund will incur a loss which will be reduced by
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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 options on futures
positions, a Fund's losses from exercised options on futures may
to some extent be reduced or increased by changes in the value of
portfolio securities.
The Funds may purchase options on Futures Contracts for
hedging purposes instead of purchasing or selling the underlying
Futures Contracts. For example, where a decrease in the value of
portfolio securities is anticipated as a result of a projected
market-wide decline or changes in interest or exchange rates, a
Fund could, in lieu of selling Futures Contracts, purchase put
options thereon. In the event that such decrease were to occur,
it may be offset, in whole or part, by a profit on the option. If
the market decline were not to occur, the Fund will suffer a loss
equal to the price of the put. Where it is projected that the
value of securities to be acquired by a Fund will increase prior
to acquisition, due to a market advance or changes in interest or
exchange rates, a Fund could purchase call options on Futures
Contracts, rather than purchasing the underlying Futures
Contracts. If the market advances, the increased cost of
securities to be purchased may be offset by a profit on the call.
However, if the market declines, the Fund will suffer a loss
equal to the price of the call, but the securities which the Fund
intends to purchase may be less expensive.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Funds may enter into 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 foreign currencies. The Funds intend
to enter into Forward Contracts for hedging purposes similar to
those described above in connection with their transactions in
foreign currency futures contracts. In particular, a Forward
Contract to sell a currency may be entered into in lieu of the
sale of a foreign currency futures contract where a Fund seeks to
protect against an anticipated increase in the exchange rate for
a specific currency which could reduce the dollar value of
portfolio securities denominated in such currency. Conversely, a
Fund may enter into a Forward Contract to purchase a given
currency to protect against a projected increase in the dollar
value of securities denominated in such currency which the Fund
intends to acquire. A Fund also may enter into a Forward
Contract in order to assure itself of a predetermined exchange
rate in connection with a security denominated in a foreign
currency. The Funds may engage in currency "cross hedging" when,
in the opinion of the Adviser, the historical relationship among
foreign currencies suggests that a Fund may achieve the same
protection for a foreign security at a reduced cost through the
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use of a Forward Contract relating to a currency other than the
U.S. dollar or the foreign currency in which the security is
denominated.
If a hedging transaction in Forward Contracts is
successful, the decline in the value of portfolio securities or
the increase in the cost of securities to be acquired may be
offset, at least in part, by profits on the Forward Contract.
Nevertheless, by entering into such Forward Contracts, a Fund may
be required to forego all or a portion of the benefits which
otherwise could have been obtained from favorable movements in
exchange rates.
Each Fund has established procedures consistent with SEC
policies concerning purchases of foreign currency through Forward
Contracts. Since those policies currently recommend that an
amount of a Fund's assets equal to the amount of the purchase be
held aside or segregated to be used to pay for the commitment, a
Fund will always have liquid assets available sufficient to cover
any commitments under these contracts or to limit any potential
risk.
OPTIONS ON FOREIGN CURRENCIES
The Funds may purchase and write options on foreign
currencies for hedging purposes. 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 Funds may purchase put options on the
foreign currency. If the value of the currency does decline, the
Funds will have the right to sell such currency for a fixed
amount in dollars and will thereby offset, in whole or in part,
the adverse effect on its portfolio which otherwise would have
resulted.
Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Funds 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 a Fund derived from
purchases of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the
direction or to the extent anticipated, a Fund could sustain
losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of
advantageous changes in such rates.
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The Funds may write options on foreign currencies for
the same types of hedging purposes or to increase return. For
example, where a Fund anticipates a decline in the dollar value
of foreign-denominated securities due to adverse fluctuations in
exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected
decline occurs, the option will most likely not be exercised, and
the diminution in value of portfolio securities will be offset by
the amount of the premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, a Fund could write a put option on the relevant
currency, which, if rates move in the manner projected, will
expire unexercised and allow 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
will be required to purchase or sell the underlying currency at a
loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, a Fund also
may be required to forego all or a portion of the benefits which
might otherwise have been obtained from favorable movements in
exchange rates.
RISK FACTORS IN OPTIONS, FUTURES AND FORWARD TRANSACTIONS
RISK OF IMPERFECT CORRELATION OF HEDGING INSTRUMENTS
WITH A FUND'S PORTFOLIO. The Funds' abilities effectively to
hedge all or a portion of their portfolios through transactions
in options, Futures Contracts, options on Futures Contracts,
Forward Contracts and options on foreign currencies depend on the
degree to which price movements in the underlying index or
instrument correlate with price movements in the securities that
are the subject of the hedge. In the case of futures and options
based on an index, the portfolio will not duplicate the
components of the index, and in the case of futures and options
on are being hedged may not be the same as those underlying such
contract. As a result, the correlation, to the extent it exists,
probably will not be exact.
It should be noted that stock index futures contracts or
options based upon a narrower index of securities, such as those
of a particular industry group, may present greater risk than
options or futures based on a broad market index. This is due to
the fact that a narrower index is more susceptible to rapid and
extreme fluctuations as a result of changes in the value of a
small number of securities.
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The trading of futures and options entails the
additional risk of imperfect correlation between movements in the
futures or option price and the price of the underlying index or
instrument. The anticipated spread between the prices may be
distorted due to the differences in the nature of the markets,
such as differences in margin requirements, the liquidity of such
markets and the participation of speculators in the futures
market. In this regard, trading by speculators in futures and
options has in the past occasionally resulted in market
distortions, which may be difficult or impossible to predict,
particularly near the expiration of such contracts.
The trading of options on Futures Contracts 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.
Further, with respect to options on securities, options
on foreign currencies, options on stock indexes and options on
Futures Contracts, the Funds are subject to the risk of market
movements between the time that the option is exercised and the
time of performance thereunder. This could increase the extent
of any loss suffered by a Fund in connection with such
transactions.
If a Fund purchases futures or options in order to hedge
against a possible increase in the price of securities before the
Fund is able to invest its cash in such securities, the Fund
faces the risk that the market may instead decline. If the Fund
does not then invest in such securities because of concern as to
possible further market declines or for other reasons, the Fund
may realize a loss on the futures or option contract that is not
offset by a reduction in the price of securities purchased.
In writing a call option on a security, foreign
currency, index or Futures Contract, a Fund also incurs the risk
that changes in the value of the assets used to cover the
position will not correlate closely with changes in the value of
the option or underlying index or instrument. For example, when
a Fund writes a call option on a stock index, the securities used
as "cover" may not match the composition of the index, and the
Fund may not be fully covered. As a result, the Fund could
suffer a loss on the call which is not entirely offset or not
offset at all by an increase in the value of the Fund's portfolio
securities.
The writing of options on securities, options on stock
indexes or options on Futures Contracts constitutes only a
partial hedge against fluctuations in the value of a Fund's
portfolio. When a Fund writes an option, it will receive premium
income in return for the holder's purchase of the right to
acquire or dispose of the underlying security or future or, in
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the case of index options, cash. In the event that the price of
such obligation does not rise sufficiently above the exercise
price of the option, in the case of a call, or fall below the
exercise price, in the case of a put, the option will not be
exercised and the Fund will retain the amount of the premium,
which will constitute a partial hedge against any decline that
may have occurred in the Fund's portfolio holdings, or against
the increase in the cost of the instruments to be acquired.
When the price of the underlying obligation moves
sufficiently in favor of the holder to warrant exercise of the
option, however, and the option is exercised, the Fund will incur
a loss which may only be partially offset by the amount of the
premium the Fund received. Moreover, by writing an option, a
Fund may be required to forego the benefits which might otherwise
have been obtained from an increase in the value of portfolio
securities or a decline in the value of securities to be
acquired.
In the event of the occurrence of any of the foregoing
adverse market events, a Fund's overall return may be lower than
if it had not engaged in the transactions described above.
With respect to the writing of straddles on securities,
a Fund incurs the risk that the price of the underlying security
will not remain stable, that one of the options written will be
exercised and that the resulting loss will not be offset by the
amount of the premiums received. Such transactions, therefore,
while creating an opportunity for increased return by providing a
Fund with two simultaneous premiums on the same security,
nonetheless involve additional risk, because the Fund may have an
option exercised against it regardless of whether the price of
the security increases or decreases.
POTENTIAL LACK OF A LIQUID SECONDARY MARKET. Prior to
exercise or expiration, a futures or option position can be
terminated only by entering into a closing purchase or sale
transaction. This requires a secondary market for such
instruments on the exchange on which the initial transaction was
entered into. While the Funds will enter into options or futures
positions only if there appears to be a liquid secondary market
therefor, there can be no assurance that such a market will exist
for any particular contracts at any specific time. In that
event, it may not be possible to close out a position held by a
Fund, and the Fund could be required to purchase or sell the
instrument underlying an option, make or receive a cash
settlement or meet ongoing variation margin requirements. Under
such circumstances, if the Fund has insufficient cash available
to meet margin requirements, it may be necessary to liquidate
portfolio securities at a time when, in the opinion of the
Adviser, it is disadvantageous to do so. The inability to close
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<PAGE>
out options and futures positions, therefore, could have an
adverse impact on the Funds' ability to effectively hedge their
portfolios, and could result in trading losses.
The liquidity of a secondary market in a Futures
Contract or option thereon may be adversely affected by "daily
price fluctuation limits," established by exchanges, which limit
the amount of fluctuation in the price of a contract during a
single trading day. Once the daily limit has been reached in the
contract, no trades may be entered into at a price beyond the
limit, thus preventing the liquidation of open futures or option
positions and requiring traders to make additional margin
deposits. Prices of some Futures Contracts have in the past
moved to the daily limit on a number of consecutive trading days.
The trading of Futures Contracts and options (including
options on Futures Contracts) is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment
failures, government intervention, insolvency of a brokerage firm
or clearing house or other disruptions of normal trading
activity, which could at times make it difficult or impossible to
liquidate existing positions or to recover excess variation
margin payments.
The staff of the SEC has taken the position that over-
the-counter options and the assets used as cover for over-the-
counter options are illiquid securities, unless certain
arrangements are made with the other party to the option
contract, permitting the prompt liquidation of the option
position. The Funds will enter into those special arrangements
only with primary U.S. Government securities dealers recognized
by the Federal Reserve Bank of New York ("primary dealers").
Under these special arrangements, the Trust will enter into
contracts with primary dealers which provide that each Fund has
the absolute right to repurchase an option it writes at any time
at a repurchase price which represents fair market value, as
determined in good faith through negotiation between the parties,
but which in no event will exceed a price determined pursuant to
a formula contained in the contract. Although the specific
details of the formula may vary between contracts with different
primary dealers, the formula will generally be based on a
multiple of the premium received by the Fund for writing the
option, plus the amount, if any, by which the option is "in-the-
money." The formula will also include a factor to account for
the difference between the price of the security and the strike
price of the option if the option is written "out-of-the-money."
Under such circumstances, the Fund only needs to treat as
illiquid that amount of the "cover" assets equal to the amount by
which (i) the formula price exceeds (ii) any amount by which the
market value of the security subject to the option exceeds the
exercise price of the option (the amount by which the option is
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<PAGE>
"in-the-money"). Although each agreement will provide that the
Fund's repurchase price shall be determined in good faith (and
that it shall not exceed the maximum determined pursuant to the
formula), the formula price will not necessarily reflect the
market value of the option written; therefore, the Fund might pay
more to repurchase the option contract than the Fund would pay to
close out a similar exchange-traded option.
MARGIN. Because of low initial margin deposits made
upon the opening of a futures position and the writing of an
option, such transactions involve substantial leverage. As a
result, relatively small movements in the price of the contract
can result in substantial unrealized gains or losses. However,
to the extent the Funds purchase or sell Futures Contracts and
options on Futures Contracts and purchase and write options on
securities and securities indexes for hedging purposes, any
losses incurred in connection therewith should, if the hedging
strategy is successful, be offset, in whole or in part, by
increases in the value of securities held by the Fund or
decreases in the prices of securities the Fund intends to
acquire. When a Fund writes options on securities or options on
stock indexes for other than hedging purposes, the margin
requirements associated with such transactions could expose the
Fund to greater risk.
TRADING AND POSITION LIMITS. The exchanges on which
futures and options are traded may impose limitations governing
the maximum number of positions on the same side of the market
and involving the same underlying instrument which may be held by
a single investor, whether acting alone or in concert with others
(regardless of whether such contracts are held on the same or
different exchanges or held or written in one or more accounts or
through one or more brokers). In addition, the Commodity Futures
Trading Commission (the "CFTC") and the various contract markets
have established limits referred to as "speculative position
limits" on the maximum net long or net short position which any
person may hold or control in a particular futures or option
contract. An exchange may order the liquidation of positions
found to be in violation of these limits and may impose other
sanctions or restrictions. The Adviser does not believe that
these trading and position limits will have any adverse impact on
the strategies for hedging the portfolios of the Funds.
RISKS OF OPTIONS ON FUTURES CONTRACTS. The amount of
risk a Fund assumes when it purchases an option on a Futures
Contract is the premium paid for the option, plus related
transaction costs. In order to profit from an option purchased,
however, it may be necessary to exercise the option and to
liquidate the underlying Futures Contract, subject to the risks
of the availability of a liquid offset market described herein.
The writer of an option on a Futures Contract is subject to the
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<PAGE>
risks of commodity futures trading, including the requirement of
initial and variation margin payments, as well as the additional
risk that movements in the price of the option may not correlate
with movements in the price of the underlying security, index,
currency or Futures Contract.
RISKS OF FORWARD CONTRACTS, FOREIGN CURRENCY FUTURES
CONTRACTS AND OPTIONS THEREON, OPTIONS ON FOREIGN CURRENCIES AND
OVER-THE-COUNTER OPTIONS ON SECURITIES. Transactions in Forward
Contracts, as well as futures and options on foreign currencies,
are subject to all of the correlation, liquidity and other risks
outlined above. In addition, however, such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of currencies underlying such contracts, which
could restrict or eliminate trading and could have a substantial
adverse effect on the value of positions held by a Fund. In
addition, the value of such positions could be adversely affected
by a number of other complex political and economic factors
applicable to the countries issuing the underlying currencies.
Further, unlike trading in most other types of
instruments, there is no systematic reporting of last sale
information with respect to the foreign currencies underlying
contracts thereon. As a result, the available information on
which trading decisions will be based may not be as complete as
the comparable data on which a Fund makes investment and trading
decisions in connection with other transactions. Moreover,
because the foreign currency market is a global, twenty-four hour
market, events could occur on that market which will not be
reflected in the forward, futures or options markets until the
following day, thereby preventing the Funds from responding to
such events in a timely manner.
Settlements of exercises of over-the-counter Forward
Contracts or foreign currency options generally must occur within
the country issuing the underlying currency, which in turn
requires traders to accept or make delivery of such currencies in
conformity with any U. S. or foreign restrictions and regulations
regarding the maintenance of foreign banking relationships and
fees, taxes or other charges.
Unlike transactions entered into by the Funds in Futures
Contracts and exchange-traded options, options on foreign
currencies, Forward Contracts and over-the-counter options on
securities and securities indexes are not traded on contract
markets regulated by the CFTC or (with the exception of certain
foreign currency options) the SEC. Such instruments are instead
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 SEC
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regulation. 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 could lose amounts
substantially in excess of the initial investment, due to the
margin and collateral requirements associated with such
positions.
In addition, over-the-counter transactions can be
entered into only with a financial institution willing to take
the opposite side, as principal, of a Fund's position unless the
institution acts as broker and is able to find another
counterparty willing to enter into the transaction with the Fund.
Where no such counterparty is available, it will not be possible
to enter into a desired transaction. There also may be no liquid
secondary market in the trading of over-the-counter contracts,
and a Fund could be required to retain options purchased or
written, or Forward Contracts entered into, until exercise,
expiration or maturity. This in turn could limit the Fund's
ability to profit from open positions or to reduce losses
experienced, and could result in greater losses.
Further, over-the-counter transactions are not subject
to the guarantee of an exchange clearing house, and a Fund will
therefore be subject to the risk of default by, or the bankruptcy
of, the financial institution serving as its counterparty. A
Fund will enter into an over-the-counter transaction only with
parties whose creditworthiness has been reviewed and found
satisfactory by the Adviser.
Transactions in over-the-counter options on foreign
currencies are subject to a number of conditions regarding the
commercial purpose of the purchaser of such option. The Funds
are not able to determine at this time whether or to what extent
additional restrictions on the trading of over-the-counter
options on foreign currencies may be imposed at some point in the
future, or the effect that any such restrictions may have on the
hedging strategies to be implemented by them.
As discussed below, CFTC regulations require that a Fund
not enter into transactions in commodity futures contracts or
commodity option contracts for other than "bona fide" hedging
purposes, unless the aggregate initial margin and premiums do not
exceed 5% of the fair market value of the Fund's total assets.
Premiums paid to purchase over-the-counter options on foreign
currencies, and margins paid in connection with the writing of
such options, are required to be included in determining
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<PAGE>
compliance with this requirement, which could, depending upon the
existing positions in Futures Contracts and options on Futures
Contracts already entered into by a Fund, limit the Fund's
ability to purchase or write options on foreign currencies.
Conversely, the existence of open positions in options on foreign
currencies could limit the ability of the Fund to enter into
desired transactions in other options or futures contracts.
While Forward Contracts are not presently subject to
regulation by the CFTC, the CFTC may in the future assert or be
granted authority to regulate such instruments. In such event,
the Fund's ability to utilize Forward Contracts in the manner set
forth above could be restricted.
Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the SEC, 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 a 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, the
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, if
the OCC 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, the OCC may 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.
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RESTRICTIONS ON THE USE OF FUTURES AND OPTION CONTRACTS
Under applicable regulations, when a Fund enters into
transactions in Futures Contracts and options on Futures
Contracts other than for bona fide hedging purposes, that Fund is
required to maintain with its custodian in a segregated account
cash, short-term U.S. Government securities or high quality U. S.
dollar-denominated money market instruments, which, together with
any initial margin deposits, are equal to the aggregate market
value of the Futures Contracts and options on Futures Contracts
that it purchases. In addition, a Fund may not purchase or sell
such instruments for other than bona fide hedging purposes if,
immediately thereafter, the sum of the amount of initial margin
deposits on such futures and options positions and premiums paid
for options purchased would exceed 5% of the market value of the
Fund's total assets.
Each Fund has adopted the additional restriction that it
will not enter into a Futures Contract if, immediately
thereafter, the value of securities and other obligations
underlying all such Futures Contracts would exceed 50% of the
value of such Fund's total assets. Moreover, a Fund will not
purchase put and call options if as a result more than 10% of its
total assets would be invested in such options.
ECONOMIC EFFECTS AND LIMITATIONS
Income earned by a Fund from its hedging activities will
be treated as capital gain and, if not offset by net realized
capital losses incurred by a Fund, will be distributed to
shareholders in taxable distributions. Although gain from such
transactions may hedge against a decline in the value of a Fund's
portfolio securities, that gain, to the extent not offset by
losses, will be distributed in light of certain tax
considerations and will constitute a distribution of that portion
of the value preserved against decline.
Neither Fund will "over-hedge," that is, neither Fund
will maintain open short positions in futures or options
contracts if, in the aggregate, the market value of its open
positions exceeds the current market value of its securities
portfolio plus or minus the unrealized gain or loss on such open
positions, adjusted for the historical volatility relationship
between the portfolio and futures and options contracts.
Each Fund's ability to employ the options and futures
strategies described above will depend in part on the
availability of liquid markets in such instruments. Markets in
financial futures and related options are still developing. It
is impossible to predict the amount of trading interest that may
hereafter exist in various types of options or futures. Therefore
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no assurance can be given that a Fund will be able to use these
instruments effectively for the purposes set forth above.
The Funds' ability to use options, futures and forward
contracts may be limited by tax considerations. In particular,
tax rules might affect the length of time for which the Funds can
hold such contracts and the character of the income earned on
such contracts. In addition, differences between each Fund's
book income (upon the basis of which distributions are generally
made) and taxable income arising from its hedging activities may
result in return of capital distributions, and in some
circumstances, distributions in excess of the Fund's book income
may be required to be made in order to meet tax requirements.
FUTURE DEVELOPMENTS
The foregoing discussion relates to each Fund's proposed
use of Futures Contracts, Forward Contracts, options and options
on Futures Contracts currently available. As noted above, the
relevant markets and related regulations are evolving. In the
event of future regulatory or market developments, each Fund may
also use additional types of futures contracts or options and
other investment techniques for the purposes set forth above.
________________________________________________________________
INVESTMENT RESTRICTIONS
________________________________________________________________
Except as described below and except as otherwise
specifically stated in the Funds' Prospectus or this Statement of
Additional Information, the investment policies of each Fund set
forth in the Prospectus and in this Statement of Additional
Information are not fundamental and may be changed without
shareholder approval.
The following is a description of the fundamental
restrictions on the investments that may be made by the Funds,
which restrictions may not be changed without the approval of a
majority of the outstanding voting securities of the relevant
Fund.
Neither of the Funds will:
(1) Borrow money in excess of 10% of the value (taken
at the lower of cost or current value) of its total
assets (not including the amount borrowed) at the time
the borrowing is made, and then only from banks as a
temporary measure to facilitate the meeting of
redemption requests (not for leverage) which might
otherwise require the untimely disposition of portfolio
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investments or pending settlement of securities
transactions or for extraordinary or emergency purposes.
(2) Underwrite securities issued by other persons
except to the extent that, in connection with the
disposition of its portfolio investments, it may be
deemed to be an underwriter under certain federal
securities laws.
(3) Purchase or retain real estate or interests in real
estate, although each Fund may purchase securities which
are secured by real estate and securities of companies
which invest in or deal in real estate.
(4) Make loans to other persons except by the purchase
of obligations in which such Fund may invest consistent
with its investment policies and by entering into
repurchase agreements, or by lending its portfolio
securities representing not more than 25% of its total
assets.
(5) Issue any senior security (as that term is defined
in the 1940 Act), if such issuance is specifically
prohibited by the 1940 Act or the rules and regulations
promulgated thereunder. For the purposes of this
restriction, collateral arrangements with respect to
options, Futures Contracts and options on Futures
Contracts and collateral arrangements with respect to
initial and variation margins are not deemed to be the
issuance of a senior security. (There is no intention to
issue senior securities except as set forth in paragraph
1 above.)
It is also a fundamental policy of each Fund that it may
purchase and sell Futures Contracts and related options.
In addition, the following is a description of operating
policies which the Trust has adopted on behalf of the
Funds but which are not fundamental and are subject to
change without shareholder approval.
Neither of the Funds will:
(a) Pledge, mortgage, hypothecate or otherwise
encumber an amount of its assets taken at
current value in excess of 15% of its total
assets (taken at the lower of cost or current
value) and then only to secure borrowings
permitted by restriction (1) above. For the
purpose of this restriction, the deposit of
securities and other collateral arrangements
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<PAGE>
with respect to reverse repurchase agreements,
options, Futures Contracts, Forward Contracts
and options on foreign currencies, and
payments of initial and variation margin in
connection therewith are not considered
pledges or other encumbrances.
(b) Purchase securities on margin, except that
each Fund may obtain such short-term credits
as may be necessary for the clearance of
purchases and sales of securities, and except
that each Fund may make margin payments in
connection with Futures Contracts, options on
Futures Contracts, options, Forward Contracts
or options on foreign currencies.
(c) Make short sales of securities or maintain a
short position for the account of such Fund
unless at all times when a short position is
open it owns an equal amount of such
securities or unless by virtue of its
ownership of other securities it has at all
such times a right to obtain securities
(without payment of further consideration)
equivalent in kind and amount to the
securities sold, provided that if such right
is conditional the sale is made upon
equivalent conditions and further provided
that no Fund will make such short sales with
respect to securities having a value in excess
of 5% of its total assets.
(d) Write, purchase or sell any put or call option
or any combination thereof, provided that this
shall not prevent a Fund from writing,
purchasing and selling puts, calls or
combinations thereof with respect to
securities, indexes of securities or foreign
currencies, and with respect to Futures
Contracts.
(e) Purchase voting securities of any issuer if
such purchase, at the time thereof, would
cause more than 10% of the outstanding voting
securities of such issuer to be held by such
Fund; or purchase securities of any issuer if
such purchase at the time thereof would cause
more than 10% of any class of securities of
such issuer to be held by such Fund. For this
purpose all indebtedness of an issuer shall be
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deemed a single class and all preferred stock
of an issuer shall be deemed a single class.
(f) Invest in securities of any issuer if, to the
knowledge of the Trust, officers and Trustees
of the Trust and officers and directors of the
Adviser who beneficially own more than 0.5% of
the shares of securities of that issuer
together own more than 5%.
(g) Purchase securities issued by any other
registered open-end investment company or
investment trust except (A) by purchase in the
open market where no commission or profit to a
sponsor or dealer results from such purchase
other than the customary broker's commission,
or (B) where no commission or profit to a
sponsor or dealer results from such purchase,
or (C) when such purchase, though not made in
the open market, is part of a plan of merger
or consolidation; provided, however, that a
Fund will not purchase such securities if such
purchase at the time thereof would cause more
than 5% of its total assets (taken at market
value) to be invested in the securities of
such issuers; and, provided further, that a
Fund's purchases of securities issued by such
open-end investment company will be consistent
with the provisions of the 1940 Act.
(h) Make investments for the purpose of exercising
control or management.
(i) Participate on a joint or joint and several
basis in any trading account in securities.
(j) Invest in interests in oil, gas, or other
mineral exploration or development programs,
although each Fund may purchase securities
which are secured by such interests and may
purchase securities of issuers which invest in
or deal in oil, gas or other mineral
exploration or development programs.
(k) Purchase warrants, if, as a result, a Fund
would have more than 5% of its total assets
invested in warrants or more than 2% of its
total assets invested in warrants which are
not listed on the New York Stock Exchange or
the American Stock Exchange.
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(l) Purchase commodities or commodity contracts,
provided that this shall not prevent a Fund
from entering into interest rate futures
contracts, securities index futures contracts,
foreign currency futures contracts, forward
foreign currency exchange contracts and
options (including options on any of the
foregoing) to the extent such action is
consistent with such Fund's investment
objective and policies.
(m) Purchase additional securities in excess of 5%
of the value of its total assets until all of
a Fund's outstanding borrowings (as permitted
and described in Restriction No. 1 above) have
been repaid.
Whenever any investment restriction states a maximum
percentage of a 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 such Fund's acquisition of such securities or other
assets. Accordingly, any later increase or decrease beyond the
specified limitation resulting from a change in value or net
asset value will not be considered a violation of such percentage
limitation.
______________________________________________________________
MANAGEMENT OF THE FUNDS
______________________________________________________________
Adviser
Alliance Capital Management L.P. (the "Adviser"), a
Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been
retained under an investment advisory agreement (the "Investment
Advisory Contract") to provide investment advice and, in general,
to conduct the management and investment program of the Trust
under the supervision of the Trust's Board of Trustees (see
"Management of the Funds" in the Prospectus).
The Adviser is a leading international investment
manager supervising client accounts with assets as of June 30,
1997 of more than $199 billion (of which more than $71 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. As of June 30, 1997, the
Adviser was an investment manager of employee benefit fund assets
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<PAGE>
for 29 of the FORTUNE 100 companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,500
employees who operated out of domestic offices and the offices of
subsidiaries in Bahrain, Bangalore, Chennai, , Istanbul, London,
Madrid, Mumbai, Paris, Singapore, Tokyo and Toronto and
affiliate offices located in Vienna, Warsaw, Hong Kong, Sao Paulo
and Moscow. The 54 registered investment companies comprising
more than 116 separate investment portfolios managed by the
Adviser currently have more than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the 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, a French insurance holding company which
at September 30, 1997, beneficially owned approximately 59% of
the outstanding voting shares of ECI. As of June 30, 1997, ACMC,
Inc. and Equitable Capital Management Corporation, each a wholly-
owned direct or indirect subsidiary of Equitable, together with
Equitable, owned in the aggregate approximately 57% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests in the Adviser.
AXA-UAP is a holding company for an international group
of insurance and related financial services companies. AXA-UAP's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA-UAP is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.
Based on information provided by AXA-UAP, as of
September 30, 1997 more than 25% of the voting power of AXA-UAP
was controlled directly and indirectly by FINAXA, a French
holding company. As of September 30, 1997 more than 25% of the
voting power of FINAXA was controlled directly and indirectly by
four French mutual insurance companies (the "Mutuelles AXA"), one
of which, AXA Assurances I.A.R.D. Mutuelle, itself controlled
directly and indirectly more than 25% of the voting power of
FINAXA. Acting as a group, the Mutuelles AXA control AXA-UAP and
FINAXA.
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<PAGE>
INVESTMENT ADVISORY CONTRACT AND EXPENSES
The Adviser serves as investment manager and adviser of
each of the Funds, continuously furnishes an investment program
for each Fund and manages, supervises and conducts the affairs of
each Fund. The Investment Advisory Contract also provides that
the Adviser will furnish or pay the expenses of the Trust for
office space, facilities and equipment, services of executive and
other personnel of the Trust and certain administrative services.
The Adviser is compensated for its services to the Funds at an
annual rate of .75% of each Fund's average daily net assets. The
Adviser has voluntarily undertaken until further notice to waive
its fees in respect of each Fund and has agreed to bear certain
expenses of the Class A, Class B, Class C and Advisor Class
shares of each Fund to the extent that expenses exceed an annual
rate of 1.40% for Class A shares, 2.10% for Class B and Class C
shares and 1.10% for Advisor Class shares. The management fees
of the Funds are higher than those paid by most mutual funds.
The Investment Advisory Contract became effective on
July 23, 1993. The Investment Advisory Contract replaced an
earlier agreement (the "First Investment Advisory Contract")
between the Trust and Equitable Capital with respect to the
Funds. The First Investment Advisory Contract terminated because
of its technical assignment in connection with the transfer of
substantially all of the assets comprising Equitable Capital's
business to the Adviser and certain of its subsidiaries in
exchange for newly issued limited partnership interests in the
Adviser and the assumption by the Adviser and such subsidiaries
of certain liabilities of Equitable Capital. Equitable Capital
was compensated for its services as investment manager of the
Funds at the same rates as are currently paid by the Funds to the
Adviser.
In anticipation of the assignment of the First
Investment Advisory Contract, the Investment Advisory Contract
was approved by the vote of the Trust's Trustees, including the
Trustees who are not parties to the Investment Advisory
Contractor interested persons of any such party, at meetings
called for the purpose and held on February 16, 1993 and
March 31, 1993. At a meeting held on April 8, 1993, a majority
of the outstanding voting securities of the Funds approved the
Investment Advisory Contract. Most recently, the continuance of
the Investment Advisory Contract until July 31, 1998 was approved
by a vote, cast in person, of the Board of Trustees, including a
majority of the Trustees who are not parties to the Investment
Advisory Contract or interested persons of any such party, at
their Regular Meeting held on July 16, 1997.
The Adviser is, under the Investment Advisory Contract,
responsible for certain expenses incurred by the Funds,
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<PAGE>
including, for example, office facilities and certain
administrative services, and any expenses incurred in promoting
the sale of Fund shares (other than the portion of the
promotional expenses borne by the Fund in accordance with an
effective plan pursuant to Rule 12b-1 under the 1940 Act, and the
costs of printing Fund prospectuses and other reports to
shareholders and fees related to registration with the Securities
and Exchange Commission and with state regulatory authorities).
For the fiscal year ended October 31, 1996, the Adviser
earned $20,263,705 in management fees from the Growth Fund (none
of which was waived). For the fiscal year ended October 31,
1995, the Adviser earned $11,100,437 in management fees from the
Growth Fund (none of which was waived). During the period
May 1, 1994 through October 31, 1994, the Adviser earned
$2,953,562 in management fees from the Growth Fund. During the
period July 23, 1993 through April 30, 1994, the Adviser earned
$1,425,457 in management fees from the Growth Fund (of which
$56,371 was waived).
For the fiscal year ended July 31, 1997, the Adviser
earned $380,244 in management fees from the Strategic Balanced
Fund (of which $334,820 was waived). For the fiscal year ended
July 31, 1996, the Adviser earned $396,099 in management fees
from the Strategic Balanced Fund (of which $194,243 was waived).
For the fiscal year ended July 31, 1995, the Adviser earned
$400,593 in management fees from the Strategic Balanced Fund (of
which $211,406 was waived).
The Investment Advisory Contract provides that it will
continue in effect for two years from its date of execution and
thereafter from year to year if its continuance is approved at
least annually (i) by the Board of Trustees or by vote of a
majority of the outstanding voting securities of the relevant
Fund, and (ii) by vote of a majority of the Trustees who are not
interested persons of the Adviser cast in person at a meeting
called for the purpose of voting on such approval. Any amendment
to the Investment Advisory Contract must be approved by vote of a
majority of the outstanding voting securities of the relevant
Fund and by vote of a majority of the Trustees who are not such
interested persons, cast in person at a meeting called for the
purpose of voting on such approval. The Investment Advisory
Contract may be terminated without penalty by the Adviser, by
vote of the Trustees or by vote of a majority of the outstanding
voting securities of the relevant Fund upon sixty days' written
notice, and it terminates automatically in the event of its
assignment. The Adviser controls the word "Alliance" in the
names of the Trust and each Fund, and if Alliance should cease to
be the investment manager of any Fund, the Trust and such Fund
may be required to change their names and delete the word
"Alliance" from their names.
39
<PAGE>
The Investment Advisory Contract provides that the
Adviser shall not be subject to any liability in connection with
the performance of its services thereunder in the absence of
willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
TRUSTEES AND OFFICERS
The Trustees and principal officers of the Trust, their
ages as of the date of this Statement of Additional Information
and their primary occupations during the past five years are set
forth below.
TRUSTEES
John D. Carifa,4 52, Chairman of the Board and
President, is the President, Chief Operating Officer, and a
Director of Alliance Capital Management Corporation ("ACMC"), the
general partner of the Adviser. His address is 1345 Avenue of
the Americas, New York, New York 10105.
Ruth Block, 66, was formerly an Executive Vice President
and the Chief Insurance Officer of The Equitable Life Assurance
Society of the United States. She is a Director of Ecolab
Incorporated (specialty chemicals) and Amoco Corporation (oil and
gas). Her address is Box 4653, Stamford, Connecticut 06903.
Richard W. Couper, 74, is President Emeritus and Trustee
of The Woodrow Wilson Fellowship Foundation and President
Emeritus of the New York Public Library. His address is Box 345,
Clinton, New York, 13323-0345.
William H. Foulk, Jr., 65, is an Investment Adviser and
an Independent Consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1992. His address is
2 Hekma Road, Greenwich, Connecticut 06831.
Brenton W. Harries, 69, is a Director of Enhance
Reinsurance Co. and was formerly the President and Chief
Executive of Global Electronic Markets Company. His address is
14 Point Road, Wilson Point, South Norwalk, Connecticut 06854.
Donald J. Robinson, 63, was formerly a partner at
Orrick, Herrington & Sutcliffe and is currently Senior Counsel to
that firm. He was also a Trustee of the Museum of the City of
____________________
4. An "interested person" of the Trust, as defined by the 1940
Act.
40
<PAGE>
New York from 1977 to 1995. His address is 98 Hell's Peak Road,
Webston, Vermont 05161.
OFFICERS
John D. Carifa, President, see biography above.
Edmund P. Bergan, Jr., 47, Clerk, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
("AFD"). His address is 1345 Avenue of the Americas, New York,
New York 10105.
Mark D. Gersten, 47, Treasurer and Chief Financial
Officer, is a Vice President of AFD and a Senior Vice President
of Alliance Fund Services, Inc. ("AFS"). His address is 500
Plaza Drive, Secaucus, New Jersey 07094.
Vincent S. Noto, 32, Controller and Chief Accounting
Officer, is a Vice President of AFS. His address is 500 Plaza
Drive, Secaucus, New Jersey 07094.
Bruce W. Calvert, 50, Vice President, is the Vice
Chairman and Chief Investment Officer of ACMC, the general
partner of the Adviser. His address is 1345 Avenue of the
Americas, New York, New York 10105.
Kathleen A. Corbet, 37, Vice President, is, an Executive
Vice President of ACMC, the general partner of the Adviser. Her
address is 1345 Avenue of the Americas, New York, New York 10105.
Wayne D. Lyski, 56, Vice President, is an Executive Vice
President of ACMC, the general partner of the Adviser. His
address is 1345 Avenue of the Americas, New York, New York 10105.
The aggregate compensation paid to each of the Trustees
by the Growth Fund for the fiscal year ended October 31, 1996,
and by the Strategic Balanced Fund for the fiscal year ended July
31, 1997, the aggregate compensation paid to each of the Trustees
during calendar year 1996 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
the companies)in the Alliance Fund Complex with respect to which
each of the Trustees serves as a director or trustee, are set
forth below. Neither of the Funds nor any fund in the Alliance
Fund Complex provides compensation in the form of pension or
retirement benefits to any of its directors or trustees. Each of
the Trustees is a director or trustee of one or more other
registered investment companies in the Alliance Fund Complex.
41
<PAGE>
Total Number Total Number
of Funds in of Investment
the Alliance Portfolios
Total Fund Complex, Within the
Compensation Including the Funds Including
Aggregate From the Fund, as to the Fund, as
Compensation Alliance Fund which the to which the
from the Complex, Director is a Director is a
Strategic Including the Director or Director or
Name of Trustee Balanced Fund Fund Trustee Trustee
_______________ ____________ ______________ _____________ _______________
John D. Carifa $ -0- $ -0- 50 114
Ruth Block $5,440 $157,500 37 76
Richard W. Couper $5,400 $ 85,000 2 24
William H. Foulk, Jr. $4,021 $144,250 32 69
Brenton W. Harries $5,600 $ 86,000 2 24
Donald J. Robinson $5,227 $137,250 39 89
Total Number Total Number
of Funds in of Investment
the Alliance Portfolios
Total Fund Complex, Within the
Compensation Including the Funds Including
From the Fund, as to the Fund, as
Alliance Fund which the to which the
Aggregate Complex, Director is a Director is a
Compensation Including the Director or Director or
Name of Trustee From the Fund Fund Trustee Trustee
_______________ ____________ ______________ _____________ _______________
John D. Carifa $ -0- $ -0- 50 114
Ruth Block $5,227 $157,500 37 76
Richard W. Couper $5,200 $ 85,000 2 24
William H. Foulk, Jr. $ -0- $144,250 32 69
Brenton W. Harries $5,400 $ 86,000 2 24
Donald J. Robinson $5,227 $137,250 39 89
____________________________
** As of June 30, 1997 there were 116 investment companies or portfolios
thereof in the Alliance Fund Complex.
*** Appointed Trustee as of December 31, 1996.
As of October 15, 1997, the Trustees and officers of the
Funds as a group owned less than 1% of the shares of the Fund.
The Trust undertakes to provide assistance to
shareholders in communications concerning the removal of any
Trustee of the Trust in accordance with Section 16 of the 1940
Act.
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<PAGE>
______________________________________________________________
PORTFOLIO TRANSACTIONS
______________________________________________________________
Under the general supervision of the Board of Trustees,
the Adviser makes the Funds' portfolio decisions and determines
the broker to be used in each specific transaction with the
objective of negotiating a combination of the most favorable
commission and the best price obtainable on each transaction
(generally defined as best execution). When consistent with the
objective of obtaining best execution, brokerage may be directed
to persons or firms supplying investment information to the
Adviser. Neither the Funds nor the Adviser have entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research services
they provide. To the extent that such persons or firms supply
investment information to the Adviser for use in rendering
investment advice to the Funds, such information may be supplied
at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the
Funds. While it is impossible to place an actual dollar value on
such investment information, the Adviser believes its receipt
probably does not reduce the overall expenses of the Adviser to
any material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e) 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 brokers through which the Funds
effect securities transactions are used by the Adviser in
carrying out its investment management responsibilities with
respect to all its clients' accounts. There may be occasions
where the transaction cost charged by a broker may be greater
than that which another broker may charge if it is determined in
good faith that the amount of such transaction cost is reasonable
in relation to the value of brokerage and research services
provided by the executing broker.
The Funds may deal in some instances in securities which
are not listed on a national securities exchange but are traded
in the over-the-counter market. They may also purchase listed
securities through the third market. Where transactions are
executed in the over-the-counter market or third market, the
Funds will seek to deal with the primary market makers; but when
necessary in order to obtain best execution, they will utilize
the services of others.
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<PAGE>
Aggregate securities transactions for the Growth Fund
during the fiscal year ended October 31, 1996 were $3,328,133,598
and, in connection therewith, brokerage commissions of $3,395,225
(100%) were allocated to persons or firms supplying research
information. Aggregate securities transactions for the Strategic
Balanced Fund during the fiscal year ended July 31, 1997 were
$167,598,375 and, in connection therewith, brokerage commissions
of $2,565 (2.54%) were allocated to persons or firms supplying
research information. For the fiscal year ended October 31,
1996, the Growth Fund paid an aggregate of $3,395,225 in
brokerage commissions. For the fiscal year ended October 31,
1995, the Growth Fund paid an aggregate of $3,231,153 in
brokerage commissions. For the fiscal period May 1, 1994 through
October 31, 1994, the Growth Fund paid an aggregate of $909,509
in brokerage commissions. For the fiscal year ended April 30,
1994, the Growth Fund paid an aggregate of $1,235,459 in
brokerage commissions. For the fiscal year ended July 31, 1997,
the Strategic Balanced Fund paid an aggregate of $100,951 in
brokerage commissions. For the fiscal year ended July 31, 1996,
the Strategic Balanced Fund paid an aggregate of $173,237 in
brokerage commissions. For the fiscal year ended July 31, 1995,
the Strategic Balanced Fund paid an aggregate of $196,452 in
brokerage commissions.
The extent to which commissions that will be charged by
broker-dealers selected by the Funds may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Funds place 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 Funds; 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 servicing the Funds. Consistent with the Conduct Rules
of the National Association of Securities Dealers, Inc. and
subject to seeking best execution, the Funds may consider sales
of shares of the Funds or other investment companies managed by
the Adviser as a factor in the selection of broker-dealers to
execute portfolio transactions for the Funds.
The Funds may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
and with brokers which may have their transactions cleared or
settled, or both, by the Pershing Division of DLJ, for which DLJ
may receive a portion of the brokerage commissions. In such
instances, the placement of orders with such brokers would be
consistent with the Funds' objective of obtaining the best
execution and would not be dependent upon the fact that DLJ is an
44
<PAGE>
affiliate of the Adviser. With respect to orders placed with DLJ
for execution on a national securities exchange, commissions
received must conform to Section 17(e)(2)(A) of the 1940 Act and
Rule 17e-1 thereunder, which permit an affiliated person of a
registered investment company (such as the Trust), 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.
The brokerage transactions engaged in by the Funds with
DLJ and its affiliates during the fiscal years ended October 31,
1996 for the Growth Fund and July 31, 1997 for the Strategic
Balanced Fund are set forth below:
% of Fund's
% of Fund's Aggregate
Amount of Aggregate Dollar
Fiscal Year Brokerage Brokerage Amount of
Ended Fund Commissions Commissions Transactions
October 31, 1996 Growth Fund $2,500 0.07% 0.0%
July 31, 1997 Strategic $-0- 0.0% 0.0%
Balanced Fund
______________________________________________________________
EXPENSES OF THE FUNDS
______________________________________________________________
In addition to the payments to the Adviser under the
Investment Advisory Contract described above, the Trust pays
certain other costs including (a) brokerage and commission
expenses, (b) federal, state and local taxes, including issue and
transfer taxes incurred by or levied on a Fund, (c) interest
charges on borrowing, (d) fees and expenses of registering the
shares of the Funds under the appropriate federal securities laws
and of qualifying shares of the Funds under applicable state
securities laws including expenses attendant upon renewing and
increasing such registrations and qualifications, (e) expenses of
printing and distributing the Funds' prospectuses and other
reports to shareholders, (f) costs of proxy solicitations,
(g) transfer agency fees described below, (h) charges and
expenses of the Trust's custodian, (i) compensation of the
Trust's officers, Trustees and employees who do not devote any
part of their time to the affairs of the Adviser or its
affiliates, (j) costs of stationery and supplies, and (k) such
45
<PAGE>
promotional expenses as may be contemplated by the Distribution
Services Agreement described below.
DISTRIBUTION ARRANGEMENTS
Rule 12b-1 adopted by the SEC under the 1940 Act permits
an investment company to directly or indirectly pay expenses
associated with the distribution of its shares in accordance with
a duly adopted and approved plan. The Trust has adopted a plan
for each class of shares of the Funds pursuant to Rule 12b-1
(each a "Plan" and collectively the "Plans"). Pursuant to the
Plans, each Fund pays AFD (the "Principal Underwriter") a Rule
12b-1 distribution services fee which may not exceed an annual
rate of .50% of a Fund's aggregate average daily net assets
attributable to the Class A shares, 1.00% of a Fund's aggregate
average daily net assets attributable to the Class B shares and
1.00% of a Fund's aggregate average daily net assets attributable
to the Class C shares to compensate the Principal Underwriter for
distribution expenses. The Trustees currently limit payments
under the Class A Plan to .30% of a Fund's aggregate average
daily net assets attributable to the Class A shares. 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 a Fund attributable to each of the Class A, Class B and
Class C shares constitutes a service fee that the Principal
Underwriter will use for personal service and/or the maintenance
of shareholder accounts. The Plans also provide that the Adviser
may use its own resources, which may include management fees
received by the Adviser from the Trust or other investment
companies which it manages and the Adviser's past profits, to
finance the distribution of the Funds' shares.
Each Plan may be terminated with respect to the class of
shares of any Fund to which the Plan relates by vote of a
majority of the Trustees who are not "interested persons" of the
Trust and who have no direct or indirect financial interest in
the operation of the Plans or in any agreement related to the
Plans (the "Qualified Trustees"), or by vote of a majority of the
outstanding voting securities of that class. Each Plan may be
amended by vote of the Trustees, including a majority of the
Qualified Trustees, cast in person at a meeting called for that
purpose. Any change in a Plan that would materially increase the
distribution costs to the class of shares of any Fund to which
the Plan relates requires approval by the affected class of
shareholders of that Fund. The Trustees review quarterly a
written report of such distribution costs and the purposes for
which such costs have been incurred with respect to each Fund's
Class A, Class B and Class C shares. For so long as the Plans
are in effect, selection and nomination of those Trustees who are
not interested persons of the Trust shall be committed to the
discretion of such disinterested persons.
46
<PAGE>
The Plans may be terminated with respect to any Fund or
class of shares thereof at any time on 60 days' written notice
without payment of any penalty by the Principal Underwriter or by
vote of a majority of the outstanding voting securities of that
Fund or that class (as appropriate) or by vote of a majority of
the Qualified Trustees.
The Plans will continue in effect with respect to each
Fund and each class of shares thereof for successive one-year
periods, provided that each such continuance is specifically
approved (i) by the vote of a majority of the Qualified Trustees
and (ii) by the vote of a majority of the entire Board of
Trustees cast in person at a meeting called for that purpose.
For services rendered by the Principal Underwriter in
connection with the distribution of Class A shares pursuant to
the Plan applicable to such shares, the Principal Underwriter
received $637 with respect to the Class A shares of the Strategic
Balanced Fund and $1,164,975 with respect to the Class A shares
of the Growth Fund for the fiscal years ended July 31, 1997 and
October 31, 1996, respectively.
For services rendered by the Principal Underwriter in
connection with the distribution of Class B shares pursuant to
the Plan applicable to such shares, the Principal Underwriter
received $45,934 with respect to the Class B shares of the
Strategic Balanced Fund and $20,009,061 with respect to the
Class B shares of the Growth Fund for the fiscal years ended July
31, 1997 and October 31, 1996, respectively.
For services rendered by the Principal Underwriter in
connection with the distribution of Class C shares pursuant to
the Plan applicable to such shares, the Principal Underwriter
received $1,317 with respect to the Class C shares of the
Strategic Balanced Fund and $3,125,766 with respect to the
Class C shares of the Growth Fund for the fiscal years ended
July 31, 1997 and October 31, 1996, respectively.
The Principal Underwriter has informed the Trust that
expenses incurred by it and costs allocated to it in connection
with activities primarily intended to result in the sale of
Class A, Class B, and Class C shares, respectively, were as
follows for the periods indicated:
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<PAGE>
STRATEGIC BALANCED FUND
Amount of Expense and Allocated Cost
Class A Shares Class B Shares Class C Shares
(for the Fiscal (for the Fiscal (for the Fiscal
year ended year ended year ended
Category of Expense July 31, 1997) July 31, 1997) July 31, 1997)
Advertising/Marketing $ 24,354 $ 61,178 $ 14,925
Printing and Mailing
of Prospectuses and
Semi-Annual and
Annual Reports to
Other than Current
Shareholders $ 1,207 $ 3,170 $ 784
Compensation to
Underwriters $ 44,495 $113,288 $ 28,114
Compensation to
Dealers $ 58,198 $162,291 $ 38,783
Compensation to Sales
Personnel $ 2,666 $ 3,388 $ 425
Interest, Carrying or
Other Financing
Charges $ -0- $ 35,855 $ 2,198
Other (includes personnel
costs of those home
office employees involved
in the distribution
effort and the
travel-related expenses
incurred by the marketing
personnel conducting
seminars) $ 50,467 $119,795 $ 29,122
Total $181,387 $498,965 $114,358
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<PAGE>
GROWTH FUND
Amount of Expense and Allocated Cost
Class A Shares Class B Shares Class C Shares
(For the Fiscal (For the Fiscal (For the Fiscal
year ended year ended year ended
October 31, October 31, October 31,
Category of Expense 1996) 1996) 1996)
Advertising/Marketing $87,675 $475,286 $96,488
Printing and Mailing
of Prospectuses and
Semi-Annual and
Annual Reports to
Other than Current
Shareholders $27,183 $174,033 $33,918
Compensation to
Underwriters $512,551 $1,188,936 $244,204
Compensation to
Dealers $946,028 $36,857,713 $3,586,955
Compensation to Sales
Personnel $142,557 $777,733 $158,125
Interest, Carrying or
Other Financing
Charges -0- $2,957,042 -0-
Other (includes
personnel costs
of those home office
employees involved
in the distribution
effort and the
travel-related
expenses incurred
by the marketing
personnel conducting
seminars) $439,511 $1,051,534 $214,435
$2,155,505 $43,482,277 $4,334,125
49
<PAGE>
CUSTODIAL ARRANGEMENTS
State Street Bank and Trust Company ("State Street
Bank"), 225 Franklin Street, Boston, MA, 02110 acts as the
Trust's custodian, but plays no part in deciding the purchase or
sale of portfolio securities. Subject to the supervision of the
Funds' Trustees, State Street Bank may enter into subcustodial
agreements for the holding of the Funds' securities outside of
the United States.
TRANSFER AGENCY ARRANGEMENTS
AFS, an indirect wholly-owned subsidiary of the Adviser,
receives a transfer agency fee per account holder of each of the
Class A, Class B , Class C and Advisor Class shares of the Trust,
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
and Advisor Class shares. For the fiscal year ended July 31,
1997, Alliance Strategic Balanced Fund paid AFS $71,092 for
transfer agency services. For the fiscal year ended October 31,
1996, Alliance Growth Fund paid AFS $4,893,030 for transfer
agency services.
_________________________________________________________________
PURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Funds' Prospectus under the heading "Purchase and Sale of
Shares--How To Buy Shares."
GENERAL
Shares of the Funds are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase (the "Class A shares"), with a
contingent deferred sales charge (the "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 ("Advisor Class Shares"), in each case as
described below. Shares of the Funds 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
50
<PAGE>
affiliates, that have entered into selected agent agreements with
the Principal Underwriter ("selected agents"), and (iii) the
Principal Underwriter.
Advisor Class shares of the Funds may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, or (iii) by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such persons, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares), or (iv)
by directors and present or retired full-time employees of CB
Commercial Real Estate Group, Inc. Generally, a fee-based
program must charge an asset-based or other similar fee and must
invest at least $250,000 in Advisor Class shares of the Fund in
order to be approved by the Principal Underwriter for investment
in Advisor Class shares.
Investors may purchase shares of the Funds either
through selected broker-dealers, agents, financial intermediaries
or other financial representatives, or directly through the
Principal Underwriter. A transaction, service, administrative or
other similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares 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 Funds, including requirements as to the minimum initial
and subsequent investment amounts. Sales personnel of selected
dealers and agents distributing the Funds' shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares.
The Funds may refuse any order for the purchase of
shares. The Funds reserve the right to suspend the sale of their
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of the Funds is
their net asset value, plus, in the case of Class A shares, a
sales charge which will vary depending on the amount of the
purchase alternative chosen by the investor, as shown in the
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<PAGE>
table below under "Class A Shares". On each Fund business day on
which a purchase or redemption order is received by a Fund and
trading in the types of securities in which the Fund invests
might materially affect the value of Fund shares, the per share
net asset value is computed in accordance with the Trust's
Agreement and Declaration of Trust and By-Laws as of the next
close of regular trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m. Eastern time) by dividing the
value of the total assets attributable to a class, 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.
The Funds will accept unconditional orders for their
shares to be executed at the public offering price equal to their
net asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchase of shares placed through
selected dealers, agents or financial representatives, as
applicable, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer,
agent or financial representative receives the order prior to the
close of regular trading on the Exchange and transmits it to the
Principal Underwriter prior to 5:00 p.m. Eastern time. The
selected dealer, agent or financial representative, as
applicable, is responsible for transmitting such orders by
5:00 p.m. Eastern time. If the selected dealer, agent or
financial representative, as applicable, fails to do so, the
investor's right to purchase shares at 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
52
<PAGE>
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, both of which may be obtained by calling the "For
Literature" telephone number shown on the cover of this Statement
of Additional Information. Except with respect to certain omnibus
accounts, telephone purchase orders may not exceed $500,000.
Payment for shares purchased by telephone can be made only by
Electronic Funds Transfer from a bank account maintained by the
shareholder at a bank that is a member of the National Automated
Clearing House Association ("NACHA"). If a shareholder's
telephone purchase request is received before 3:00 p.m. Eastern
time on a Fund business day, the order to purchase shares is
automatically placed the following Fund business day, and the
applicable public offering price will be the public offering
price determined as of the close of business on such following
business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription. As
a convenience to the subscriber, and to avoid unnecessary expense
to the Fund, share certificates representing shares of the Fund
are not issued except upon written request to the Fund by the
shareholder or his or her authorized selected dealer or agent.
This facilitates later redemption and relieves the shareholder of
the responsibility for and inconvenience of lost or stolen
certificates. No certificates are issued for fractional shares,
although such shares remain in the shareholder's account on the
books of the Fund.
In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., formerly Equico
Securities, Inc., an affiliate of the Principal Underwriter
("Equico"), in connection with the sale of shares of the Funds.
Such additional amounts may be utilized, in whole or in part, to
provide additional compensation to registered representatives who
sell shares of the Funds. On some occasions, such cash or other
incentives will be conditioned upon the sale of a specified
minimum dollar amount of the shares of a Fund and/or other
Alliance Mutual Funds, as defined below, during a specified
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 incurred in
connection with travel, lodging and entertainment incurred in
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<PAGE>
connection with travel taken by persons associated with a dealer
or agent and their immediate family members to urban or resort
locations within or outside the United States. Such dealer or
agent may elect to receive cash incentives of equivalent amount
in lieu of such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of a
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, the Class B
shareholders and the Advisor Class shareholders will vote
separately by class 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 Trust 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 Trust, 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 Shares5
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
____________________
5. Advisor Class shares are sold only to investors described
above in this section under "--General."
54
<PAGE>
expects to hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their
investment in the Funds, 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) for more than
$250,000 for Class B shares. Class C shares will normally not be
suitable for the investor who qualifies to purchase Class A
shares at net asset value. For this reason, the Principal
Underwriter will reject any order for more than $1,000,000 for
Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
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
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<PAGE>
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 Growth Fund's fiscal year ended October 31,
1996, the aggregate amount of underwriting commissions payable
with respect to Class A shares of the Fund was $6,003,066 of
which $231,038, representing that portion of the sales charges
paid on Class A shares of the Fund sold during the year which was
not reallowed to selected dealers, was retained by the Principal
Underwriter. During the Growth Fund's fiscal year ended October
31, 1996, the Principal Underwriter received $2,632,819 in
contingent deferred sales charges. During the Growth Fund's
fiscal year ended October 31, 1995, the aggregate amount of
underwriting commissions payable with respect to Class A shares
of the Fund was $3,688,506, of which $144,082, representing that
portion of the sales charges paid on Class A shares of the Fund
sold during the year which was not reallowed to selected dealers,
was retained by the Principal Underwriter. During the Growth
Fund's fiscal year ended October 31, 1995, the Principal
Underwriter received $2,140,032 in contingent deferred sales
charges. During the Growth Fund's fiscal year ended October 31,
1994, the Principal Underwriter received $410,313 in contingent
deferred sales charges
During the Strategic Balanced Fund's fiscal year ended
July 31, 1997, the aggregate amount of underwriting commissions
payable with respect to Class A shares of the Fund was $17,128,
of which $637, representing that portion of the sales charges
paid on Class A shares of the Fund sold during the year which was
not reallowed to selected dealers, was retained by the Principal
Underwriter. During the Strategic Balanced Fund's fiscal year
ended July 31, 1997, the Principal Underwriter received $47,251
in contingent deferred sales charges. During the Strategic
Balanced Fund's fiscal year ended July 31, 1996, the aggregate
amount of underwriting commissions payable with respect to
Class A shares of the Fund was $15,976, of which $1,204,
representing that portion of the sales charges paid on Class A
shares of the Fund sold during the year which was not reallowed
to selected dealers, was retained by the Principal Underwriter.
During the Strategic Balanced Fund's fiscal year ended July 31,
1996, the Principal Underwriter received $37,022 in contingent
deferred sales charges. During the Strategic Balanced Fund's
fiscal year ended July 31, 1995, the aggregate amount of
underwriting commissions payable with respect to Class A shares
of the Fund was $44,654, of which $1,814, representing that
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<PAGE>
portion of the sales charges paid on Class A shares of the Fund
sold during the year which was not reallowed to selected dealers,
was retained by the Principal Underwriter. During the Strategic
Balanced Fund's fiscal year ended July 31, 1995, the Principal
Underwriter received $85,826 in contingent deferred sales
charges.
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 or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
__________ ________ _______ ____________
Less than
$100,000 . . . 4.44% 4.25% 4.00%
$100,000 but
less than
$250,000 . . . 3.36 3.25 3.00
$250,000 but
less than
$500,000 . . . 2.30 2.25 2.00
$500,000 but
less than
$1,000,000*. . 1.78 1.75 1.50
____________________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. 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
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<PAGE>
sales charge was paid with respect to the shares, or they have
been held beyond the period during which the charge applies or
were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Funds
in connection with 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, (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 Funds receive the entire net
asset value of their Class A shares sold to investors. The
Principal Underwriter's commission is the sales charge shown in
the Prospectus 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 a reallowance in excess of 90% of
such a sales charge may be deemed to be an "underwriter" under
the Securities Act of 1933, as amended.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Growth Fund aggregating less
than $100,000 subject to the schedule of sales charges set forth
in the Prospectus at a price based upon the net asset value of
Class A shares of the Fund on October 15, 1997.
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<PAGE>
Net Asset Value per Class A
Share at October 15, 1997 $46.38
Per Share Sales Charge--4.25%
of offering price (4.44% of
net asset value per share) $2.06
Class A Per Share Offering Price
to the Public $48.44
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 Strategic Balanced Fund
aggregating less than $100,000 subject to the schedule of sales
charges set forth in the Prospectus at a price based upon the net
asset value of Class A shares of the Fund on July 31, 1997.
Net Asset Value per Class A
Share at July 31, 1997 $19.79
Per Share Sales Charge--4.25%
of offering price (4.45% of
net asset value per share) $ .88
Class A Per Share Offering Price
to the Public $20.67
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but be subject in most such cases to a contingent
deferred sales charge) or (ii) a reduced initial sales charge.
The circumstances under which such investors may pay a reduced
initial sales charge are described below.
COMBINED PURCHASE PRIVILEGE. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges shown above by combining purchases of shares of a
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or two concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of a Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as that 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
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<PAGE>
than the purchase of shares of a Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
The Alliance Fund, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
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.
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<PAGE>
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Conservative Investors Fund
-Alliance Growth Fund
-Alliance Growth Investors Fund
-Alliance Short-Term U.S. Government Fund
-Alliance Strategic Balanced Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting AFS at the address or the
"For Literature" telephone number shown on the front cover of
this Statement of Additional Information.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). An
investor's purchase of additional Class A shares of a 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.
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<PAGE>
STATEMENT OF INTENTION. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B,
Class C and/or Advisor Class shares) of a 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 a Fund or any other Alliance Mutual Fund
made not more than 90 days prior to the date that the investor
signs the Statement of Intention; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of a Fund, the investor and the
investor's spouse each purchase shares of 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 initial
sales charge applicable to the shares actually purchased if the
full amount indicated is not purchased, and such escrowed shares
will be involuntarily redeemed to pay the additional sales
charge, if necessary. Dividends on escrowed shares, whether paid
in cash or reinvested in additional Fund shares, are not subject
to escrow. When the full amount indicated has been purchased,
the escrow will be released. To the extent that an investor
purchases more than the dollar amount indicated on the Statement
of Intention and qualifies for a further reduced sales charge,
the sales charge will be adjusted for the entire amount purchased
at the end of the 13-month period. The difference in the sales
charge will be used to purchase additional shares of a Fund
subject to the rate of the sales charge applicable to the actual
amount of the aggregate purchases.
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Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
a Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders 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 a Fund or
any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of a Fund will be that normally applicable,
under the schedule of sales charges set forth above, to an
investment 13 times larger than such initial purchase. The sales
charge applicable to each succeeding monthly purchase will be
that normally applicable, under such schedule, to an investment
equal to the sum of (i) the total purchases previously made
during the 13-month period and (ii) the current month's purchase
multiplied by the number of months (including the current month)
remaining in the 13-month period. Sales charges previously paid
during such period will not be retroactively adjusted on the
basis of later purchases.
REINSTATEMENT PRIVILEGE. A shareholder who has caused
any or all of his or her Class A or Class B shares of a Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of 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 reinstatement 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 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 a
Fund at the address shown on the cover of this Statement of
Additional Information.
SALES AT NET ASSET VALUE. The Funds may sell their
Class A shares at net asset value (i.e., without any initial
sales charge) and without any contingent deferred sales charge to
certain categories of investors including: (i) investment
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management clients of the Adviser or its affiliates;
(ii) officers and present or former Trustees of the Trust;
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; any trust,
individual retirement account or retirement plan account for the
benefit of any such person or relative; or the estate of any such
person or relative, if such shares are purchased for investment
purposes (such shares may not be resold except to the relevant
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 service and who purchase shares through a broker or
agent approved by the Principal Underwriter and clients of such
registered investment advisers or financial intermediaries whose
accounts are linked to the master account of such investment
adviser or financial intermediary on the books of such approved
broker or agent; (v) persons participating in a fee-based
program, sponsored and maintained by a registered broker-
dealer or other financial intermediary and approved by the
Principal Underwriter, pursuant to which such persons pay an
asset-based fee to such broker-dealer or financial intermediary,
or its affiliate or agent, for services in the nature of
investment advisory or administrative services; (vi) persons who
establish to the Principal Underwriter's satisfaction that they
are investing in the Fund, within such time period as may be
designated by the Principal Underwriter, proceeds of redemption
of shares of such other registered investment companies as may be
designated from time to time by the Principal Underwriter; and
(vii) employer-sponsored qualified pension or profit-sharing
plans (including Section 401(k) plans), custodial accounts
maintained pursuant to Section 403(b)(7) retirement plans and
individual retirement accounts (including individual retirement
accounts to which simplified employee pension (SEP) contributions
are made), if such plans or accounts are established or
administered under programs sponsored by administrators or other
persons that have been approved by the Principal Underwriter.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
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<PAGE>
sold without an initial sales charge so that the Funds will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
the Class B shares are paid to the Principal Underwriter and are
used by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Funds 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 Funds to sell 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
at a rate of 3.0% (the applicable rate in the second year after
purchase).
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.
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Contingent Deferred Sales Charge for the
Funds as a % of Dollar Amount
Shares purchased
Shares on or after Shares
purchased August 2, 1993, purchased
Year Since before but before on or after
Purchase August 2, 1993 November 19, 1993 November 19,
1993
________ ______________ _________________ ____________
First 5.00% 5.50% 4.00%
Second 4.00% 4.50% 3.00%
Third 3.00% 3.50% 2.00%
Fourth 1.00% 2.50% 1.00%
Fifth None 1.50 None
Sixth None 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 Trust, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services--Systematic Withdrawal Plan" below).
CONVERSION FEATURE. Class B shares purchased on or
after August 2, 1993 and held for eight years after the end of
the calendar month in which the shareholder's purchase order was
accepted will automatically convert to Class A shares. Class B
shares purchased before August 2, 1993 and held for six years
after the calendar month in which the shareholder's purchase
order was accepted will automatically convert to Class A shares
at the end of this period and such shares will no longer be
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subject to a higher distribution services fee. Such conversions
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 shares, 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
shares, an equal pro-rata portion of the Class B shares in the
sub-account will also convert to Class A shares.
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 at least one year, upon redemption. Class C
shares are sold without an initial sales charge, so that a 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 a 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
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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% of the lesser of the cost of shares being redeemed or 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 Funds
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 Funds 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
paid with respect to Class A and Advisor Class shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts and employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares-- General," and by
investment advisory clients of, and certain other persons
associated with, the Adviser and its affiliates or the Trust. If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan, or to be associated with the
investment adviser or financial intermediary that satisfies the
requirements to purchase shares set forth under "Purchase of
Shares--General" or (ii) the holder is otherwise no longer
eligible to purchase Advisor Class shares as described in the
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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 same Funds
during the calendar month following the month in which the Funds
are 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 or her Advisor Class shares, which would constitute a
taxable event under federal income tax law.
_________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Funds' 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 Funds that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
REDEMPTION
Subject only to the limitations described below, the
Funds will redeem the shares tendered to them, as described
below, at a redemption price equal to their net asset value as
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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 a Fund's
receipt of such tender for redemption. If a shareholder is in
doubt about what documents are required by his or her fee-based
program or employee benefit plan, the shareholder should contact
his or her financial representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the SEC determines that
trading thereon is restricted, or for any period during which an
emergency (as determined by the SEC) exists as a result of which
disposal by a Fund of securities owned by it is not reasonably
practicable or as a result of which it is not reasonably
practicable for a Fund fairly to determine the value of its net
assets, or for such other periods as the SEC may by order permit
for the protection of security holders of a Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of a Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds from Class A, Class B and Class
C shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment received by a shareholder upon
redemption or repurchase of his or her shares, assuming the
shares constitute capital assets in his or her hands, will result
in long-term or short-term capital gain (or loss) depending upon
the shareholder's holding period and basis in respect of the
shares redeemed.
To redeem shares of a 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.
To redeem shares of the Funds 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 relevant Fund with the request that
the shares represented thereby, or a specified portion thereof,
be redeemed. The stock assignment form on the reverse side of
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<PAGE>
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 relevant Fund.
The signature or signatures on the assignment form must be
guaranteed in the manner described above.
TELEPHONE REDEMPTION BY ELECTRONIC FUNDS TRANSFER. Each
Fund shareholder is entitled to request redemption by Electronic
Funds Transfer once in any 30-day period, (except for certain
omnibus accounts) 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 found in the Prospectus or, in the case of an
existing shareholder, an "Autosell" application obtained from
AFS. A telephone redemption request 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. Except for certain
omnibus accounts or as noted below, each Fund shareholder is
eligible to request redemption by check, once in any 30-day
period, 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. Telephone redemption by check is
not available with respect to shares (i) for which certificates
have been issued, (ii) held in nominee or "street name" accounts,
(iii) 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. 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 Funds reserve the right to suspend
or terminate their telephone redemption service at any time
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<PAGE>
without notice. Neither the Funds nor the Adviser, the Principal
Underwriter nor AFS will be responsible for the authenticity of
telephone requests for redemptions that a Fund reasonably
believes to be genuine. The Funds will employ reasonable
procedures in order to verify that telephone requests for
redemptions are genuine, including, among others, recording such
telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders. If a Fund did
not employ such procedures, 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 Funds may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), 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 the 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. If the
financial intermediary or selected dealer or agent fails to do
so, the shareholder's right to receive that day's closing price
must be settled between the shareholder and the dealer or agent.
A shareholder may offer shares of a Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Funds 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 Funds 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 Funds as described
above is a voluntary service of the Funds and the Funds may
suspend or terminate this practice at any time.
GENERAL
The Funds reserve the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
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account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Funds recently purchased by check, redemption proceeds
will not be made available until the relevant 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 Funds' 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 Funds that are different from those described
herein. A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
AUTOMATIC INVESTMENT PROGRAM
Investors may purchase shares of the Funds through an
automatic investment program utilizing Electronic Funds Transfers
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives
the proceeds from the investor's bank. In electronic form,
drafts can be made on or about a date each month selected by the
shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus. Current shareholders should
contact AFS at the address or telephone numbers shown on the
cover of this Statement of Additional Information to establish an
automatic investment program.
EXCHANGE PRIVILEGE
You may exchange your investment in the Funds for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Adviser).
In addition, (i) present officers and full-time employees of the
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Adviser, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
employees of the Adviser, the Principal Underwriter, AFS and
their affiliates may exchange Class A shares of any Alliance
Mutual Fund for Advisor Class shares of any other Alliance Mutual
Fund, including the Funds. Exchanges of shares are made at the
net asset value next determined after receipt of a properly
completed exchange request 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 purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call AFS at (800) 221-5672 to exchange uncertificated shares. 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.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's prospectus or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for federal income tax purposes.
Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
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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
exchange received before 4:00 p.m. Eastern time on a Fund
business day will be processed as of the close of business on
that day. During periods of drastic economic or market
developments, such as the market break of October 1987, it is
possible that shareholders would have difficulty in
reaching AFS by telephone (although no such difficulty was
apparent at any time in connection with the 1987 market break).
If a shareholder were to experience such difficulty, the
shareholder should issue written instructions to AFS at the
address shown on the cover of this Statement of Additional
Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or AFS will be responsible for the
authenticity of telephone requests for exchanges that a Fund
reasonably believes to be genuine. AFS 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 AFS did
not employ such procedures, it could be liable for losses arising
from unauthorized or fraudulent telephone instructions. Selected
dealers, agents or financial representatives, as applicable, may
charge a commission for handling telephone requests for
exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Funds being acquired may legally be
sold. Each Alliance Mutual Fund reserves the right, at any time
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on 60 days' notice to its shareholders, to modify, restrict or
terminate the exchange privilege.
RETIREMENT PLANS
The Funds may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Funds have available forms of
such plans pursuant to which investments can be made in a Fund
and other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact 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 a Fund is
deferred until distribution from the IRA. An individual's
eligible contributions to an IRA will be deductible if neither
the individual nor his or her spouse is an active participant in
an employer-sponsored retirement plan. If the individual or his
or her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
EMPLOYER-SPONSORED QUALIFIED RETIREMENT PLANS. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan reaches $1 million
on or before December 15 in any year, all Class B shares or
Class C shares of the Fund held by such plan can be exchanged, at
the plan's request, without any sales charge, for Class A shares
of such Fund. shortly before the end of the calendar year in
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which the $1
SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) RETIREMENT PLAN. Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Funds, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to AFS as compensation for its services to the retirement plan
accounts maintained with a Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact AFS at the
address or "For Literature" telephone number shown on the cover
of this Statement of Additional Information.
DIVIDEND DIRECTION PLAN
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund accounts,
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 distributions paid on his or her Class A,
Class B, Class C or Advisor Class Fund shares be automatically
reinvested, in any amount, without the payment of any sales or
service charges, in shares of the same class of such other
Alliance Mutual Fund(s). Further information can be obtained by
contacting AFS at the address or the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Investors wishing to establish a dividend direction
plan in connection with their initial investment should complete
the appropriate section of the Subscription Application found in
the Prospectus. Current shareholders should contact AFS to
establish a dividend direction plan.
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SYSTEMATIC WITHDRAWAL PLAN
General. Any shareholder who owns or purchases shares
of a Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from a Fund automatically reinvested in additional shares of that
Fund.
Shares of a Fund owned by a participant in 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 relevant 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 a
Fund's involuntary redemption provisions. See "How to Sell
Shares--General." Purchases of additional shares concurrently
with withdrawals are undesirable because of sales charges imposed
when the purchases are made. While an occasional lump-sum
investment may be made by a holder of Class A shares who is
maintaining a systematic withdrawal plan, such investment should
normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of a Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting AFS at the address or the "For Literature"
telephone number shown on the cover of this Statement of
Additional Information.
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CDSC WAIVER FOR CLASS B SHARES AND CLASS C SHARES.
Under a systematic withdrawal plan, up to 1% monthly, 2%
bi-monthly or 3% quarterly of the value at the time of redemption
of the Class B or Class C shares in a shareholder's account may
be redeemed free of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
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 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 Trust's
independent auditors, Price Waterhouse 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 net asset value of a share of each class is
determined by dividing the value, as of the close of regular
trading on the Exchange (currently 4:00 p.m. Eastern time), of
the net assets of the Fund represented by that class (i.e., the
value of the assets of the Fund allocated to that class less the
liabilities of the Fund allocated to that class, including
expenses payable or accrued) by the total number of shares of
such class then outstanding at such closing.
For purposes of this computation, readily marketable
portfolio securities, including open short positions, listed on
the Exchange are valued at the last sale price reflected on the
consolidated tape at the close of the Exchange on the business
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day as of which such value is being determined. If there has
been no sale on such day, then the security is valued at the mean
of the closing bid and asked prices on such day. If no bid and
asked prices are quoted on such day, then the security is valued
by such method as the Board of Trustees of the Trust shall
determine in good faith to reflect its fair market value.
Securities not listed on the Exchange but listed on other
national securities exchanges or admitted to trading on the
National Association of Securities Dealers Automated Quotations,
Inc. ("Nasdaq") National List ("List") are valued in like manner.
Portfolio securities traded on more than one national
securities exchange are valued at the last sale price on the
business day as of which such value is being determined as
reflected on the tape at the close of the exchange representing
the principal market for such securities. Securities traded only
in the over-the-counter market, excluding those admitted to
trading on the List, are valued at the mean of the current bid
and asked prices therefor as reported by Nasdaq or, in the case
of securities not quoted by Nasdaq, the National Quotation Bureau
or such other comparable sources as the Board of Trustees of the
Trust deems appropriate to reflect the fair market value thereof.
Call options written or purchased by a Fund are valued at the
last sale price and put options purchased by a Fund are valued at
the last sale price. Readily marketable fixed-income securities
may be valued on the basis of prices provided by a pricing
service when such prices are believed by the Adviser to reflect
the fair market value of such securities. The prices provided by
a pricing service take into account institutional size trading in
similar groups of securities and any developments related to
specific securities. U.S. Government Securities and other debt
instruments having 60 days or less remaining until maturity are
stated at amortized cost if their original maturity was 60 days
or less, or by amortizing their fair value as of the 61st day
prior to maturity if their original term to maturity exceeded 60
days (unless in either case the Board of Trustees of the Trust
determines that this method does not represent fair value). All
other assets, including restricted securities of a Fund, are
valued in such manner as the Board of Trustees of the Trust in
good faith deems appropriate to reflect their fair market value.
The Trustees may suspend the determination of a Fund's
net asset value (and the offering and sales of shares), subject
to the rules of the SEC and other governmental rules and
regulations, at a time when: (1) the Exchange is closed, other
than customary weekend and holiday closings, (2) an emergency
exists as a result of which it is not reasonably practicable for
a Fund to dispose of securities owned by it or to determine
fairly the value of its net assets, or (3) for the protection of
shareholders, the SEC by order permits a suspension of the right
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of redemption or a postponement of the date of payment on
redemption.
The assets belonging to the Class A shares, the Class B
shares, the Class C shares and the 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
accrued expenses and liabilities allocated to that class from the
assets belonging to that class pursuant to a multi-class plan
adopted by the Trust pursuant to Rule 18f-3 under the 1940 Act.
_________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________
UNITED STATES FEDERAL INCOME TAXATION OF DIVIDENDS AND
DISTRIBUTIONS
General. Each Fund intends to qualify for tax treatment
as a "regulated investment company" under the Code for each
taxable year. In order to qualify as a regulated investment
company, each Fund must, among other things, (1) derive at least
90% of its gross income from dividends, interest, payments with
respect to securities loans, and gains from the sale or other
disposition of stock or securities, foreign currencies or other
income (including gains from options, futures or forward
contracts) derived with respect to its business of investing in
stock, securities or currencies and (2) diversify its holdings
so that at the end of each quarter of its taxable year, the
following two conditions are met: (i) at least 50% of the market
value of the Fund's assets is represented by cash or cash items,
U.S. Government Securities, securities of other regulated
investment companies, and other securities limited, in respect of
any one issuer, to an amount not greater than 5% of the value of
the Fund's assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other
than U.S. Government Securities or securities of other regulated
investment company) or of two or more issuers that the Fund
controls and that are engaged in the same, similar or related
trades or businesses. These requirements may restrict the degree
to which the Fund may engage in short-term trading and limit the
range of the Fund's investments.
In addition, until the start of each Fund's first tax
year beginning after August 5, 1997, each Fund must derive less
than 30% of its gross income from the sale or other disposition
of stock, securities, options, futures, forward contracts, and
certain foreign currencies (or options, futures, or forward
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<PAGE>
contracts on foreign currencies held for less than three months).
If a Fund qualifies as a regulated investment company,
it will not be subject to federal income tax on the part of its
income distributed to shareholders, provided the Fund distributes
during its taxable year at least (a) 90% of its taxable net
investment income (generally, dividends, interest, certain other
income, and the excess, if any, of net short-term capital gain
over net long-term capital loss) and (b) 90% of the excess of
(i) its tax-exempt interest income less (ii) certain deductions
attributable to that income. Each Fund intends to make sufficient
distributions to shareholders to meet this requirement. Investors
should consult their own counsel for a complete understanding of
the requirements the Funds must meet to qualify for such
treatment.
In addition, if a Fund fails to distribute in a calendar
year substantially all of its ordinary income for such year and
substantially all of its capital gain net income for the one-year
period ending October 31 (or later if the Fund is permitted so to
elect and so elects), plus any retained amount from the prior
year, the Fund will be subject to a 4% excise tax on the
undistributed amounts. A dividend paid to shareholders by a Fund
in January of a year generally is deemed to have been paid by the
Fund on December 31 of the preceding year, if the dividend was
declared and payable to shareholders of record on a date in
October, November or December of that preceding year. The Funds
intend generally to make distributions sufficient to avoid
imposition of the 4% excise tax.
The information set forth in the Funds' Prospectus and
the following discussion relates solely to federal income taxes
on dividends and distributions by a Fund and assumes that each
Fund qualifies as a regulated investment company. Investors
should consult their own counsel for further details and for the
application of state and local tax laws to his or her particular
situation.
Dividends out of net ordinary income and distributions
of net short-term capital gains are taxable to shareholders as
ordinary income. The dividends-received deduction for
corporations should also be applicable to a Fund's dividends of
net investment income, but only to the extent so designated by
the Fund. The amount of such dividends and distributions that
may be designated by the Fund as eligible for the dividends-
received deduction is limited to the amount of dividends from
domestic corporations received by a Fund during the fiscal year.
Furthermore, provisions of the tax law disallow the dividends-
received deduction to the extent a corporation's investment in
shares of a Fund is financed with indebtedness. The dividends-
received deduction shall also be disallowed with respect to a
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dividend unless the corporate shareholder held its shares on the
ex-dividend date and for at least 45 more days during the 90-day
period surrounding the ex-dividend date.
Pursuant to the Taxpayer Relief Act of 1997, two
different tax rates apply to net capital gains (that is, the
excess of net gains from capital assets held for more than one
year ("long-term capital assets") over net losses from capital
assets held for not more than one year ("short-term capital
assets")). One rate (generally 28%) applies to net gains on
capital assets held for more than one year but not more than 18
months ("mid-term gains") and a second, preferred rate (generally
20%) applies to the balance of such net capital gains ("adjusted
net capital gains"). Distributions of net capital gains will be
treated in the hands of shareholders as mid-term gains to the
extent designated by a Fund as deriving from net gains from
assets held for more than one year but not more than 18 months,
and the balance will be treated as adjusted net capital gains.
Distributions of mid-term gains and adjusted net capital gains
will be taxable to shareholders as such, regardless of how long a
shareholder has held the shares in a Fund.
Capital gains distributions are not eligible for the
dividends-received deduction referred to above. Any dividend or
distribution received by a shareholder on shares of a Fund (even
if received shortly after the purchase of such shares by him or
her) will have the effect of reducing the net asset value of such
shares by the amount of such dividend or distribution. A loss on
the sale of shares held for six months or less will be treated as
a long-term capital loss for federal income tax purposes to the
extent of any capital gain distribution made with respect to such
shares.
Dividends and distributions are taxable in the manner
described above regardless of whether they are paid to the
shareholder in cash or are reinvested in additional shares of a
Fund.
For federal income tax purposes, when equity call
options which a Fund has written expire unexercised, the premiums
received by the Fund give rise to short-term capital gains at the
time of expiration. When a call written by a Fund is exercised,
the selling price or purchase price of stock is increased by the
amount of the premium, and the nature of the gain or loss on the
sale of stock depends upon the holding period of the stock.
There may be short-term gains or losses associated with closing
purchase transactions.
A Fund's hedging transactions, including hedging
transactions in options, futures contracts and straddles, or
other similar transactions, will subject the Fund to special tax
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<PAGE>
rules (including mark-to-market, straddle, wash sale and short
sale rules), the effect of which may be to accelerate income to a
Fund, defer losses to a Fund, cause adjustments in the holding
periods of a Fund's securities, or convert short-term capital
losses into long-term capital losses. These rules could
therefore affect the amount, timing and character of
distributions to shareholders. Each Fund will endeavor to make
any available elections pertaining to such transactions in a
manner believed to be in the best interest of the Fund.
Each Fund is required to withhold and remit to the U.S.
Treasury 31% of all dividend income paid to any shareholder
account for which an incorrect or no taxpayer identification
number has been provided or where the Fund is notified that the
shareholder has under-reported income in the past (or the
shareholder fails to certify that he or she is not subject to
such withholding). In addition, the Fund will be required to
withhold and remit to the U.S. Treasury 31% of the amount of the
proceeds of any redemption of shares of a shareholder account for
which an incorrect or no taxpayer identification number has been
provided.
The foregoing discussion relates only to U.S. federal
income tax law as it affects U.S. shareholders. The effects of
federal income tax law on non-U.S. shareholders may be
substantially different. Foreign investors should consult their
counsel for further information as to the U.S. tax consequences
of investing in a Fund.
_________________________________________________________________
GENERAL INFORMATION
_________________________________________________________________
DESCRIPTION OF THE TRUST
The Trust is organized as a Massachusetts business trust
under the laws of The Commonwealth of Massachusetts by an
Agreement and Declaration of Trust ("Declaration of Trust") dated
March 26, 1987, a copy of which is on file with the Secretary of
State of The Commonwealth of Massachusetts. The Trust is a
"series" company as described in Rule 18f-2 under the 1940 Act,
having five separate portfolios, each of which is represented by
a separate series of shares. In addition to the Funds, the other
portfolios of the Trust are Alliance Short-Term U.S. Government
Fund, Alliance Conservative Investors Fund and Alliance Growth
Investors Fund.
The Declaration of Trust permits the Trustees to issue
an unlimited number of full and fractional shares of each series
and of each class of shares thereof. The shares of each Fund and
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<PAGE>
each class thereof do not have any preemptive rights. Upon
termination of any Fund or any class thereof, whether pursuant to
liquidation of the Trust or otherwise, shareholders of that Fund
or that class are entitled to share pro rata in the net assets of
that Fund or that class then available for distribution to such
shareholders.
The assets received by the Trust for the issue or sale
of the Class A, Class B, Class C and Advisor Class shares of each
Fund and all income, earnings, profits, losses and proceeds
therefrom, subject only to the rights of creditors, are allocated
to, and constitute the underlying assets of, the appropriate
class of that Fund. The underlying assets of each Fund and each
class of shares thereof are segregated and are charged with the
expenses with respect to that Fund and that class and with a
share of the general expenses of the Trust. While the expenses
of the Trust are allocated to the separate books of account of
each series and each class of shares thereof, certain expenses
may be legally chargeable against the assets of all series or a
particular class of shares thereof.
The Declaration of Trust provides for the perpetual
existence of the Trust. The Trust or any Fund, however, may be
terminated at any time by vote of at least a majority of the
outstanding shares of each Fund affected. The Declaration of
Trust further provides that the Trustees may also terminate the
Trust upon written notice to the shareholders.
CAPITALIZATION
Except as noted below under "Shareholder and Trustee
Liability," all shares of the Funds when duly issued will be
fully paid and non-assessable.
Set forth below is certain information as to all persons
who owned of record or beneficially 5% or more of any class of
the Funds' outstanding shares at October 15, 1997:
NAMES AND ADDRESSES % OF CLASS
GROWTH FUND--CLASS A
Merrill Lynch 1,897,358 10.82%
Mutual Fund Operations
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6486
CLASS B
Merrill Lynch 19,550,261 19.86%
Mutual Fund Operations
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6486
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<PAGE>
CLASS C
Merrill Lynch 6,643,155 40.47%
Mutual Fund Operations
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6486
ADVISOR CLASS
Merrill Lynch 2,028,499 90.62%
Mutual Fund Operations
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6486
Trust for Profit 142,986 6.39%
Sharing Plan For
Employees of Alliance
Capital Management L.P. Plan R
Attn: Jill Smith-32nd Fl.
1345 Avenue of the Americas
New York, NY 10105-0302
STRATEGIC BALANCED FUND--CLASS C
Merrill Lynch 42,971 23.61%
Mutual Fund Operations
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6486
ADVISOR CLASS
Alliance Fund Services 1.283 50.00%
Audit Output Account
Attn: Corporate Actions
P.O. Box 1520
Secaucus, NJ 07096-1520
Alliance Fund Services 1.2830 50.00%
Audit Output Account
Attn: Corporate Actions
P.O. Box 1520
Secaucus, NJ 07096-1520
VOTING RIGHTS
As summarized in the Prospectus, shareholders are
entitled to one vote for each full share held (with fractional
votes for fractional shares held) and will vote (to the extent
provided herein) in the election of Trustees and the termination
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<PAGE>
of the Trust or a Fund and on other matters submitted to the vote
of shareholders.
The By-Laws of the Trust provide that the shareholders
of any particular series or class shall not be entitled to vote
on any matters as to which such series or class is not affected.
Except with respect to matters as to which the Trustees have
determined that only the interests of one or more particular
series or classes are affected or as required by law, all of the
shares of each series or class shall, on matters as to which such
series or class is entitled to vote, vote with other series or
classes so entitled as a single class. Notwithstanding the
foregoing, with respect to matters which would otherwise be voted
on by two or more series or classes as a single class, the
Trustees may, in their sole discretion, submit such matters to
the shareholders of any or all such series or classes,
separately. Rule 18f-2 under the 1940 Act provides in effect
that a series shall be deemed to be affected by a matter unless
it is clear that the interests of each series in the matter are
substantially identical or that the matter does not affect any
interest of such series. Although not governed by Rule 18f-2,
shares of each class of a Fund will vote separately with respect
to matters pertaining to the respective Distribution Plans
applicable to each class.
The terms "shareholder approval" and "majority of the
outstanding voting securities" as used in the Prospectus and this
Statement of Additional Information mean the lesser of (i) 67% or
more of the shares of the applicable Fund or applicable class
thereof represented at a meeting at which more than 50% of the
outstanding shares of such Fund or such class are represented or
(ii) more than 50% of the outstanding shares of such Fund or such
class.
There will normally be no meetings of shareholders for
the purpose of electing Trustees, except that in accordance with
the 1940 Act (i) the Trust will hold a shareholders' meeting for
the election of Trustees at such time as less than a majority of
the Trustees holding office have been elected by shareholders,
and (ii) if, as a result of a vacancy on the Board of Trustees,
less than two-thirds of the Trustees holding office have been
elected by the shareholders, that vacancy may only be filled by a
vote of the shareholders. The Funds' shares have non-cumulative
voting rights, which means that the holders of more than 50% of
the shares voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so, and in such event the
holders of the remaining less than 50% of the shares voting for
such election of Trustees will not be able to elect any person or
persons to the Board of Trustees. A special meeting of
shareholders for any purpose may be called by 10% of the Trust's
outstanding shareholders.
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Except as set forth above, the Trustees shall continue
to hold office and may appoint successor Trustees.
No amendment may be made to the Declaration of Trust
without the affirmative vote of a majority of the outstanding
shares of the Trust except (i) to change the Trust's name,
(ii) to establish, change or eliminate the par value of shares or
(iii) to supply any omission, cure any ambiguity or cure, correct
or supplement any defective or inconsistent provision contained
in the Declaration of Trust.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law shareholders could, under
certain circumstances, be held personally liable for the
obligations of the Trust. However, the Declaration of Trust
disclaims shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or
executed by the Trust or the Trustees. The Declaration of Trust
provides for indemnification out of a Fund's property for all
loss and expense of any shareholder of that Fund held liable on
account of being or having been a shareholder. Thus, the risk of
a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund of which
he or she was a shareholder would be unable to meet its
obligations.
The Declaration of Trust further provides that the
Trustees will not be liable for errors of judgment or mistakes of
fact or law. However, nothing in the Declaration of Trust
protects a Trustee against any liability to which the Trustee
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his or her office. The By-Laws of the
Trust provide for indemnification by the Trust of the Trustees
and the officers of the Trust but no such person may be
indemnified against any liability to the Trust or the Trust's
shareholders to which he or she would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
or her office.
COUNSEL
Legal matters in connection with the issuance of the
shares of the Funds offered hereby are passed upon by Ropes &
Gray, One International Place, Boston, Massachusetts 02110.
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INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New
York, New York 10036, the independent accountants to the Trust,
is registered as a Registered Limited Liability Partnership (LLP)
under the laws of the State of Delaware.
The financial statements of the Strategic Balanced Fund
for the fiscal year ended July 31, 1997, and of the Growth Fund
for the fiscal year ended October 31, 1996, which are included in
this Statement of Additional Information, have been audited by
Price Waterhouse LLP, the Trust's independent accountants for
such period, as stated in their report appearing herein, and have
been so included in reliance upon such report given upon the
authority of that firm as experts in accounting and auditing.
PERFORMANCE INFORMATION
From time to time, a Fund may advertise its "total
return." Total return is computed separately for Class A,
Class B, Class C and Advisor Class shares. Such advertisements
disclose a Fund's average annual compounded total return for its
most recently completed one-, five- and ten-year periods (or the
life of a Fund or class, if shorter). Total return for each such
period is computed by finding, through the use of a formula
prescribed by the SEC, the average annual compounded rate of
return over such period that would equate an assumed initial
amount invested to the value of such investment at the end of the
period. For purposes of computing total return, income dividends
and capital gains distributions paid on shares of a Fund are
assumed to have been reinvested when received and the maximum
sales charge applicable to purchases of Fund shares is assumed to
have been paid.
The average annual compounded total return for Class A
shares of the Growth Fund was 9.28% for the one-year period ended
April 30, 1997, 16.34% for the five-year period ended April 30,
1997, and 20.64% for the period September 4, 1990 (commencement
of distribution of Class A shares), through April 30, 1997. The
average annual compounded total return for Class B shares of the
Growth Fund was 9.34% for the one-year period ended April 30,
1997, 16.55% for the five-year period ended April 30, 1997, and
19.79% for the period October 23, 1987 (commencement of
distribution of Class B shares) through April 30, 1997. The
average annual compounded total return for Class C shares of the
Growth Fund was 12.33% for the one-year period ended April 30,
1997, and 14.64% for the period August 2, 1993 (commencement of
distribution of Class C shares) through April 30, 1997. The
cumulative total return for Advisor Class shares of the Growth
Fund was 8.02% for the period October 2, 1996 (commencement of
operations) through April 30, 1997. The average annual
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compounded total return for Class A shares of the Strategic
Balanced Fund was 18.64% for the one-year period ended July 31,
1997, 9.83% for the five-year period ended July 31, 1997, and
12.55% for the period September 4, 1990 (commencement of
distribution of Class A shares) through July 31, 1997. The
average annual compounded total return for Class B shares of the
Strategic Balanced Fund was 19.01% for the one-year period ended
July 31, 1997, 10.00% for the five-year period ended July 31,
1997, and 12.83% for the period October 23, 1987 (commencement of
distribution of Class B shares) through July 31, 1997. The
average annual compounded total return for Class C shares of the
Strategic Balanced Fund was 22.01% for the one-year period ended
July 31, 1997, and was 9.67% for the period August 2, 1993
(commencement of distribution of Class C shares) through July 31,
1997. The cumulative total return for Advisor Class shares of
the Strategic Balanced Fund was 1.54% for the period October 2,
1996 (commencement of operations) through July 31, 1997.
Each Fund's total return is computed separately for
Class A, Class B, Class C and Advisor Class shares. A Fund's
total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and
quality of the securities in the Fund's portfolio and the Fund's
expenses. Total return information is useful in reviewing the
Fund's performance but such information may not provide a basis
for comparison with bank deposits or other investments which pay
a fixed return for a stated period of time. An investor's
principal invested in the Fund is not fixed and will fluctuate in
response to prevailing market conditions.
Advertisements quoting performance rankings of a Fund as
measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc., and advertisements presenting the historical
performance of such 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 such Fund.
ADDITIONAL INFORMATION
This Statement of Additional Information does not
contain all the information set forth in the Registration
Statement filed by the Trust with the SEC under the Securities
Act of 1933. Copies of the Registration Statement may be
obtained at a reasonable charge from the SEC or may be examined,
without charge, at the offices of the SEC in Washington, D.C.
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- ---------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
- ---------------------------------------------------------------
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ALLIANCE STRATEGIC BALANCED FUND
ANNUAL REPORT
JULY 31, 1997
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
JULY 31, 1997 ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-57.6%
UNITED STATES INVESTMENTS-39.1%
TECHNOLOGY-9.2%
AEROSPACE & DEFENSE-0.3%
United Technologies Corp. 2,000 $ 169,125
COMMUNICATIONS EQUIPMENT-1.3%
Lucent Technologies, Inc. 6,000 509,625
Tellabs, Inc. (a) 2,800 167,650
------------
677,275
COMPUTER HARDWARE-0.8%
COMPAQ Computer Corp. (a) 7,525 429,866
COMPUTER NETWORKING SOFTWARE-1.1%
Cisco Systems, Inc. (a) 7,000 556,937
COMPUTER SOFTWARE & SERVICES-1.7%
First Data Corp. 3,758 163,943
Microsoft Corp. (a) 1,700 240,550
Netscape Communications Corp. (a) 1,600 58,700
Oracle Systems Corp. (a) 7,550 411,003
------------
874,196
SEMI-CONDUCTORS & RELATED-2.3%
Altera Corp. (a) 6,084 367,321
Applied Materials, Inc. (a) 2,000 183,750
Intel Corp. 6,610 606,881
------------
1,157,952
TELECOMMUNICATIONS-1.0%
Cox Communications, Inc. Cl.A (a) 20,000 506,250
TELEPHONE UTILITY-0.7%
WorldCom, Inc. (a) 10,000 349,375
------------
4,720,976
FINANCE-6.2%
BANKING-MONEY CENTERS-1.1%
Chase Manhattan Corp. (a) 5,000 567,813
BROKERAGE & MONEY MANAGEMENT-1.4%
Merrill Lynch & Co., Inc. 4,600 324,012
Morgan Stanley, Dean Witter, Discover & Co. 7,900 413,269
------------
737,281
INSURANCE-1.9%
American International Group, Inc. 4,500 479,250
Travelers Group, Inc. 7,001 503,634
------------
982,884
MISCELLANEOUS-1.8%
American Express Co. 5,000 418,750
MBNA Corp. 11,040 496,800
------------
915,550
------------
3,203,528
CONSUMER STAPLES-5.7%
COSMETICS-0.5%
Gillette Co. 2,380 235,620
FOOD-1.7%
Campbell Soup Co. (a) 8,900 461,687
Coca-Cola Co. 6,000 415,500
------------
877,187
HOUSEHOLD PRODUCTS-0.7%
Colgate-Palmolive Co. 5,000 378,750
RETAIL-FOOD-0.6%
Kroger Co. (a) 10,000 295,625
TOBACCO-2.2%
Philip Morris Cos., Inc. 25,000 1,128,125
------------
2,915,307
HEALTH CARE-4.9%
BIOTECHNOLOGY-0.4%
Centocor, Inc. (a) 5,113 196,851
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
DRUGS-3.3%
Merck & Co., Inc. 7,000 $ 727,562
Pfizer, Inc. 5,000 298,125
Schering-Plough Corp. 12,000 654,750
------------
1,680,437
MEDICAL PRODUCTS-1.2%
Boston Scientific Corp. (a) 5,000 358,750
Medtronic, Inc. 3,000 261,750
------------
620,500
------------
2,497,788
ENERGY-4.6%
DOMESTIC PRODUCTS-0.2%
Apache Corp. 3,600 126,900
INTERNATIONAL-1.2%
Texaco, Inc. 5,500 638,344
OIL SERVICE-3.2%
BJ Services Co. (a) 3,800 247,000
Halliburton Co. 14,000 644,000
Noble Drilling Corp. (a) 6,000 168,375
Schlumberger Ltd. 1,500 114,563
Transocean Offshore, Inc. 5,500 449,281
------------
1,623,219
------------
2,388,463
CONSUMER SERVICES-3.9%
BROADCASTING & CABLE-0.5%
Tele-Communications, Inc.-
Liberty Media Cl.A (a) 9,000 230,063
ENTERTAINMENT & LEISURE-0.9%
Walt Disney Co. 6,000 484,875
RETAILING-GENERAL-2.5%
Dayton Hudson Corp. 4,600 297,275
Federated Department Stores, Inc. (a) 12,000 525,750
Sears, Roebuck & Co. 7,000 443,187
------------
1,266,212
------------
1,981,150
CAPITAL GOODS-2.1%
ELECTRICAL EQUIPMENT-1.0%
General Electric Co. 7,000 491,313
MACHINERY-0.6%
Allied-Signal, Inc. 3,600 332,100
POLLUTION CONTROL-0.5%
USA Waste Services, Inc. (a) 6,900 278,156
------------
1,101,569
CONSUMER MANUFACTURING-1.5%
APPLIANCES-0.6%
Sunbeam Corp. 8,000 313,000
AUTO & RELATED-0.9%
Ford Motor Co. 11,000 449,625
------------
762,625
TRANSPORTATION-0.7%
RAILROAD-0.7%
Union Pacific Corp. 4,800 344,100
MULTI INDUSTRY-0.3%
U.S. Industries, Inc. (a) 4,000 161,250
Total United States Investments
(cost $14,890,986) 20,076,756
FOREIGN INVESTMENTS-18.5%
AUSTRALIA-0.1%
Woolworths, Ltd. 17,326 54,102
BELGIUM-0.1%
Barco N.V. 221 46,236
BRAZIL-0.3%
Telecomunicacoes Brasileras S.A. (ADR) 1,200 178,050
CANADA-0.2%
Gulf Canada Resources, Ltd. (a) 12,100 93,775
8
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
DENMARK-0.4%
Den Danske Bank 2,000 $ 210,928
FINLAND-1.0%
Huhtamaki OY 600 27,063
Nokia AB OY Corp. Ser A 5,000 431,489
Orion-Yhtymae OY Cl.B 750 27,144
Rautaruukki OY 2,128 21,867
------------
507,563
FRANCE-1.2%
Banque National de Paris 11 523
Compagnie Francaise d'Etudes et de
Construction Technip (b) 375 47,250
Compagnie Generale des Eaux (b) 437 55,132
warrants expiring 5/02/01 (a) 437 260
Legrand S.A. (b) 125 25,156
Legris Industries S.A. (b) 544 23,666
Promodes (b) 90 36,079
Societe Centrale des Assurances
Generales de France (b) 1,228 44,024
Societe Generale (b) 1,024 134,964
Total, S.A. Cl.B (b) 1,200 120,264
Unibail, S.A. (b) 969 88,214
Usinor Sacilor (b) 1,900 37,808
------------
613,340
GERMANY-1.0%
Adidas A.G. 1,000 117,283
Bayer AG 1,310 55,054
Continental A.G. 2,000 51,257
Henkel KGAA 130 7,235
Hornbach Holding A.G. 2,000 144,432
Merck KG 975 39,758
Schmalbach Lubeca A.G. 240 48,933
Veba A.G. 650 37,729
------------
501,681
HONG KONG-0.8%
Cheung Kong 5,000 55,538
Citic Pacific, Ltd. 7,000 44,391
Dao Heng Bank Group, Ltd. 14,000 85,347
Dickson Concepts International, Ltd. 5,000 17,436
Hong Kong Electric Holdings, Ltd. 5,000 20,407
Peregrine Investments Holdings, Ltd. 14,000 30,920
Swire Pacific 12,000 113,917
Wing Hang Bank, Ltd 5,000 29,900
------------
397,856
INDIA-0.0%
Videsh Sanchar Nigam, Ltd. (a)(c) 500 8,825
INDONESIA-0.2%
BDNI Bank Dagang Nas 38,000 17,801
PT Indostat (ADR) 2,000 62,250
PT Tempo Scan Pacific 7,000 14,188
------------
94,239
IRELAND-0.2%
Allied Irish Banks 10,000 92,219
Smurfit (Jefferson) Group Plc 6,000 18,214
------------
110,433
ITALY-0.6%
Credito Italiano 50,000 99,356
Ente Nazionale Idrocarburi 5,000 29,180
IMI LNV 6,000 57,777
Parmalat Finanziaria S.p.A. 16,000 22,265
Telecom Italia S.p.A. (a) 13,885 88,106
------------
296,684
9
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
JAPAN-4.9%
77th Bank 4,000 $ 38,868
Canon, Inc. 6,000 191,635
Credit Saison Co., Ltd. 3,000 92,269
Daikin Industries, Ltd. 5,000 46,472
Daito Trust Construction Co., Ltd. 4,000 42,924
DDI Corp. 6 41,268
Fuji Photo Film, Co. (ORD) 2,000 84,157
Fujitec Co., Ltd. 4,000 50,697
Hirose Electric Co. 1,000 81,284
Hitachi Chemical Co., Ltd. 6,000 53,739
Honda Motor Co. 8,000 267,681
Hoya Corp. 1,000 50,697
Japan Tobacco, Inc. 5 38,826
Kokuyo 2,000 47,824
Kuraray Co., Ltd. 3,000 28,897
Mabuchi Motor Co. 500 31,812
Makita Corp. 7,000 105,281
Mitsubishi Heavy Industries, Ltd. 3,000 21,166
NGK Insulators, Ltd. 3,000 32,446
Nintendo Corp., Ltd. 1,000 101,394
Onward Kashiyama Co., Ltd. 3,000 47,655
Rohm Co., Ltd. 1,000 130,968
Sankyo Co. 3,000 107,224
Sony Corp. 2,000 199,409
Sumitomo Electric Industries 15,000 249,683
Taisho Pharmaceutical Co. 2,000 52,218
Takeda Chemical Industries 1,000 30,334
TDK Corp. 1,000 86,185
Yakult Honsha Co. 5,000 55,344
Yamaguchi Bank 2,000 29,066
Yamaha Motor Co., Ltd. 4,000 47,993
Yamanouchi Pharmaceutical Co., Ltd. 2,000 54,077
------------
2,539,493
KOREA-0.1%
SK Telecom Co., Ltd. 6,180 71,070
MALAYSIA-0.2%
Berjaya Sports 10,000 47,393
Telekom Malaysia Bhd. 4,500 16,550
UMW Holdings Bhd. 4,000 15,773
------------
79,716
NETHERLANDS-0.6%
AKZO Nobel N.V. 1,000 154,729
Hunter Douglas N.V. 608 28,240
Koninklijke Hoogovens N.V. 600 36,319
Koninklijke KNP BT 1,700 39,030
Stork N.V. 900 36,116
Vendex International N.V. 506 26,065
------------
320,499
NORWAY-0.1%
Bergesen DY AS 1,600 40,935
Orkla ASA 270 19,505
------------
60,440
PHILIPPINES-0.0%
Philippine Long Distance 400 13,153
RUSSIA-0.7%
Lukoil Holdings (ADR)(c) 2,000 182,000
Tatneft (ADR)(a)(c) 1,400 167,230
------------
349,230
SINGAPORE-0.0%
Overseas Chinese Bank 480 4,829
SPAIN-0.2%
Tabacalera, S.A. 550 29,315
Telefonica de Espana 1,800 48,201
------------
77,516
SWEDEN-0.6%
Ericsson LM Telecom 4,000 180,198
Sparbanken Sverige AB 5,000 109,648
------------
289,846
10
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
SWITZERLAND-2.2%
Baloise Holdings, Ltd. 60 $ 146,225
Ciba Specialty Chemicals A.G. (a) 491 45,238
Nestle, S.A. 245 310,518
Novartis A.G. 250 400,733
Schindler Holding A.G. 35 45,654
Zurich Versicherungs-gesellschaft 500 203,421
------------
1,151,789
UNITED KINGDOM-2.8%
Anglian Water Plc 4,500 59,183
BAA Plc 20,000 188,375
Bass Plc 6,000 82,111
BG Plc 6,000 24,515
Boots Co. Plc 2,300 29,174
BPB Plc 15,000 82,947
British Aerospace Plc 1,500 32,822
British Petroleum Co. Plc 7,000 95,796
BTR Plc 9,000 27,986
Cable & Wireless Plc 3,500 35,263
Compass Group Plc 15,000 150,881
Granada Group Plc 3,300 45,486
Guinness Plc 2,000 19,198
IMI Plc 4,000 22,546
Kingfisher Plc 2,500 29,536
Ladbroke Group Plc 25,000 101,325
PowerGen Plc 3,400 40,727
Reed International 7,000 70,296
Scottish Power Plc 8,500 60,114
Tomkins Plc 30,000 151,619
United Assurance Group Plc 4,000 27,961
United News Media Plc 3,061 35,335
Whitbread Plc 3,500 48,932
------------
1,462,128
Total Foreign Investments
(cost $8,589,550) 9,533,421
Total Common Stocks & Other Investments
(cost $23,480,536) 29,610,177
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCIES-30.8%
Federal Home Loan Bank
7.00%, 9/01/11 $ 940 $ 951,787
Federal National Mortgage Association
6.00%, 4/01/11 362 356,135
6.50%, 5/01/11 605 602,699
6.50%, 6/01/11 677 675,119
6.50%, 9/01/11 423 421,369
7.00%, 5/01/26 966 966,246
7.00%, 5/01/27 445 443,907
U.S. Treasury Bond
6.625%, 2/15/27 595 621,216
U.S. Treasury Notes
6.125%, 8/31/98 1,150 1,156,106
6.25%, 4/30/01 3,200 3,244,000
6.375%, 5/15/99 4,000 4,043,760
6.50%, 5/31/02 1,940 1,987,278
6.625%, 5/15/07 325 339,625
Total U.S. Government & Agencies
(cost $15,532,853) 15,809,247
CORPORATE DEBT OBLIGATIONS-5.7%
FINANCIAL-2.5%
Ford Motor Credit Co.
7.50%, 8/01/26 400 422,612
Zurich Capital Trust I (c)
8.376%, 6/01/37 800 868,750
------------
1,291,362
INDUSTRIAL-3.2%
Caliber Systems, Inc.
7.80%, 8/01/06 800 851,257
Time Warner, Inc.
8.375%, 3/15/23 700 767,438
------------
1,618,695
Total Corporate Debt Obligations
(cost $2,750,456) 2,910,057
11
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
YANKEE BONDS-7.0%
Deutsche Bank Financial, Inc.
6.70%, 12/13/06 $ 700 $ 708,589
Empresa Nacional de Electricidad, S.A.
7.875%, 2/01/27 700 752,046
Quebec Province Canada
7.50%, 7/15/23 425 447,257
Ras Laffan Liquefied Natural Gas (c)
7.628%, 9/15/06 800 843,244
St. George Bank, Ltd. (c)
7.15%, 10/15/05 850 870,868
Total Yankee Bonds
(cost $3,480,824) 3,622,004
SHORT-TERM DEBT SECURITY-2.7%
Federal Home Loan Mortgage Association
5.75%, 8/01/97
(amortized cost $1,400,000) 1,400 1,400,000
TOTAL INVESTMENTS -103.8%
(cost $46,644,669) 53,351,485
Other assets less liabilities-(3.8%) (1,957,444)
NET ASSETS-100% $ 51,394,041
(a) Non-income producing security.
(b) Securities with an aggregate market value of $612,557 have been segregated
to collateralize forward exchange currency contracts.
(c) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to certain qualified institutional buyers. At July 31,
1997, these securities amounted to $2,940,917 representing 5.7% of net assets.
Glossary of Terms:
ADR - American Depository Receipt.
ORD - Ordinary.
12
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1997 ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $46,644,669) $ 53,351,485
Cash, at value (cost $121,649) 121,700
Receivable for investment securities sold 1,012,194
Interest and dividends receivable 375,200
Receivable for shares of beneficial interest sold 193,286
Unrealized appreciation of forward exchange
currency contracts 22,126
Foreign taxes receivable 10,167
Total assets 55,086,158
LIABILITIES
Payable for investment securities purchased 3,180,990
Payable for shares of beneficial interest redeemed 241,389
Distribution fee payable 31,127
Advisory fee payable 5,135
Accrued expenses 233,476
Total liabilities 3,692,117
NET ASSETS $ 51,394,041
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 29
Additional paid-in capital 42,068,928
Undistributed net investment income 509,629
Accumulated net realized gain on investments and foreign
currency transactions 2,111,261
Net unrealized appreciation on investments and foreign
currency denominated assets and liabilities 6,704,194
$ 51,394,041
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($20,312,457/1,026,612 shares of beneficial interest
issued and outstanding) $19.79
Sales charge--4.25% of public offering price .88
Maximum offering price $20.67
CLASS B SHARES
Net asset value and offering price per share
($28,037,005/1,689,904 shares of beneficial interest
issued and outstanding) $16.59
CLASS C SHARES
Net asset value and offering price per share
($3,044,529/183,512 shares of beneficial interest
issued and outstanding) $16.59
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($50/2.526 shares of beneficial interest issued
and outstanding) $19.79
See notes to financial statements.
13
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1997 ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 1,669,018
Dividends (net of foreign of taxes
withheld of $15,907) 303,034 $ 1,972,052
EXPENSES
Advisory fee 380,244
Distribution fee - Class A 57,280
Distribution fee - Class B 283,015
Distribution fee - Class C 33,039
Custodian 174,945
Transfer agency 118,994
Audit and legal 82,303
Registration 58,001
Printing 37,233
Trustees' fees 30,000
Miscellaneous 18,564
Total expenses 1,273,618
Less: expenses waived and assumed
by adviser (see note B) (334,820)
Less: expense offset arrangement (see note B) (7,546)
Net expenses 931,252
Net investment income 1,040,800
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain on investment transactions 2,202,099
Net realized loss on foreign currency transactions (54,935)
Net change in unrealized depreciation of:
Investments 7,382,361
Foreign currency denominated assets
and liabilities 12,844
Net gain on investments and foreign
currency transactions 9,542,369
NET INCREASE IN NET ASSETS FROM OPERATIONS $10,583,169
See notes to financial statements.
14
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1997 1996
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 1,040,800 $ 645,462
Net realized gain on investments and foreign
currency transactions 2,147,164 7,954,336
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities 7,395,205 (4,551,438)
Net increase in net assets from operations 10,583,169 4,048,360
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (368,073) (251,709)
Class B (450,279) (425,006)
Class C (53,257) (52,350)
Net realized gain on investments
Class A (2,227,559) (479,820)
Class B (3,959,058) (1,296,269)
Class C (468,257) (159,666)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net decrease (1,640,718) (3,771,397)
Total increase (decrease) 1,415,968 (2,387,857)
NET ASSETS
Beginning of year 49,978,073 52,365,930
End of year (including undistributed net
investment income of $564,564 and $395,373,
respectively) $ 51,394,041 $ 49,978,073
See notes to financial statements.
15
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Strategic Balanced Fund (the "Fund"), formerly Alliance Balanced Fund,
a series of The Alliance Portfolios (the "Trust"), is registered under the
Investment Company Act of 1940, as a diversified, open-end 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. Shares purchased before August 2, 1993 and redeemed within six
years of purchase are subject to different rates than shares purchased after
that date. 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 votings
rights with respect to its distribution plan. The following is a summary of
significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on national securities exchanges are valued at the
last sale price or, if no sale occurred, at the mean of the bid and asked price
at the regular close of that exchange. Securities traded on the
over-the-counter market are valued at the mean of the closing bid and asked
price. Securities for which current market quotations are not readily available
(including investments which are subject to limitations as to their sale) are
valued at their fair value as determined in good faith by the Board of
Trustees. The Board of Trustees has further determined that the value of
certain portfolio debt securities, other than temporary investments in short
term securities, be determined by reference to valuations obtained from a
pricing service. Restricted securities are valued at fair value as determined
by the Board of Trustees. Securities which mature in 60 days or less are valued
at amortized cost, which approximates market value. The ability of issuers of
debt securities held by the Funds to meet their obligations may be affected by
economic developments in a specific industry or region.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized foreign currency gains and losses represent foreign exchange gains
from sales and maturities of securities, currency gains and losses realized
between the trade and settlement dates on security transactions and the
difference between the amounts of interest recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid. Net currency gains
and losses from valuing foreign currency denominated assets and liabilities at
year end exchange rates are reflected as a component of unrealized appreciation
on investments and foreign currency denominated assets and liabilities.
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts and amortizes premiums as adjustments
to interest income.
16
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
5. 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 foreign exchange losses, resulted in a net increase in
accumulated net realized gain on investments and foreign currency transactions
and a corresponding decrease in undistributed net investment income. This
reclassification had no affect on net assets.
6. 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 shares of such class, except that the Funds'
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisory Class shares have no distribution fees.
Expenses attributable to the Fund are charged to the Fund. Expenses of the
Trust are charged to the Fund in proportion to net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser") an advisory fee at an annual rate of
.75% of the Fund's average daily net assets. Such fee is accrued daily and paid
monthly. The Adviser has agreed to voluntarily waive its fees and bear certain
expenses so that total expenses do not exceed on an annual basis 1.40%, 2.10%,
2.10% and 1.10% of average net assets, respectively, for the Class A, Class B,
Class C and Advisor Class shares. Prior to August 2, 1993, the annual expense
cap for Class B Shares was 2.15%. For the year ended July 31, 1997, such
reimbursement amounted to $334,820.
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. Compensation under
this agreement amounted to $71,092 for the year ended July 31, 1997.
In addition, for the year ended July 31, 1997, the Fund's expenses were reduced
by $7,546 under an expense offset arrangement with Alliance Fund Services.
Transfer Agency fees reported in the statement of operation exclude these
credits.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Adviser, serves as the Distributor of the Fund's shares. The
Distributor received front-end sales charges of $637 from the sales of Class A
shares and $45,934 and $1,317 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class B and Class C shares, respectively, for
the year ended July 31, 1997.
Brokerage commissions paid on investment transactions for the year ended July
31, 1997 amounted to $100,951, none of which was paid to brokers utilizing the
services of the Pershing Division of Donaldson, Lufkin & Jenrette Securities
Corp., an affiliate of the Adviser.
Accrued expenses includes $66,369 owed to a Trustee and a former Trustee under
the Trust's deferred compensation plan.
NOTE C: DISTRIBUTION PLANS
The Trust has adopted a Plan for each class of shares of the Fund, except the
Advisor Class pursuant to Rule 12b-1 under the Investment Company Act of 1940
(each a "Plan" and collectively the "Plans"). Under the Plan, the Fund pays a
distribution fee to the Distributor at an annual rate of up to .50% of the
Fund's average daily net assets attributable to Class A shares and 1% of the
average daily net assets attributable to both Class B and Class C shares. The
Trustees currently limit payments under the Class A plan to .30% of the Fund's
average daily net assets attributable to Class A shares.
17
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
The Fund is not obligated under the Plan to pay any distribution services fee
in excess of the amounts set forth above. The purpose of the payments to the
Distributor under the Plan is to compensate the Distributor for its
distribution services with respect to the sale of the Fund's shares. Since the
Distributor's compensation is not directly tied to its expenses, the amount of
compensation received by it under the Plan during any year may be more or less
than its actual expenses. For this reason, the Plan is characterized by the
staff of the Commission as being of the "compensation" variety.
In the event that a Plan is terminated or not continued, (i) no distribution
services fees (other than current amounts accrued but not yet paid) would be
owed by the Funds to the Distributor with respect to the relevant class and
(ii) the Funds would not be obligated to pay the Distributor for any amounts
expended by the Distributor not previously recovered by the Distributor from
distribution services fees in respect of shares of such class or, in the case
of Class B shares, recovered through deferred sales charges.
The Plans also provides that the Adviser may use its own resources to finance
the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $40,977,433 and $44,378,007,
respectively, for the year ended July 31, 1997. There were purchases of
$40,238,803 and sales of $42,004,132 of U.S. government and government agency
obligations for the year ended July 31, 1997.
At July 31, 1997, the cost of investments for federal income tax purposes was
$46,673,357. Accordingly, gross unrealized appreciation of investments was
$6,843,523 and gross unrealized depreciation of investments was $165,395
resulting in net unrealized appreciation of $6,678,128 excluding foreign
currency.
The Fund incurred and elected to defer post October currency losses of $55,391
for the year ended July 31, 1997.
FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward 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 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
contracts and the closing of such contracts is included in net realized gains
or losses on foreign currency transactions.
Fluctuations in the value of forward 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 in a separate account of the Fund having a value equal to the
aggregate amount of the Fund's commitments under forward 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. The face or contract amount, in U.S.
dollars, as reflected in the following table, reflects the total exposure the
Fund has in that particular currency contract.
At July 31, 1997, the Fund had an outstanding forward exchange currency
contract to sell foreign currency against the U.S. dollar, as follows:
CONTRACT VALUE ON U.S. $
AMOUNT ORIGINATION CURRENT UNREALIZED
(000) DATE VALUE APPRECIATION
-------- ----------- -------- ------------
FOREIGN CURRENCY SALE CONTRACT
French Franc, maturing 9/5/97 2,580 $438,859 $416,733 $22,126
18
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
NOTE E: SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $0.00001 par value shares of beneficial
interest authorized divided into four classes, designated Class A, Class B,
Class C and Advisor Class shares. Transactions in shares of beneficial interest
were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 44,362 107,270 $ 813,717 $ 1,979,138
Shares issued in
reinvestment of
dividends and
distributions 140,204 37,530 2,424,151 680,784
Shares converted
from Class B 134,087 488,896 2,479,067 9,126,460
Shares redeemed (283,790) (251,216) (5,240,141) (4,690,077)
Net increase 34,863 382,480 $ 476,794 $ 7,096,305
CLASS B
Shares sold 249,874 328,916 $ 3,910,285 $ 5,260,317
Shares issued in
reinvestment of
dividends and
distributions 271,011 98,905 3,946,629 1,547,870
Shares converted
to Class A (158,380) (566,688) (2,479,067) (9,126,460)
Shares redeemed (465,417) (466,102) (7,252,359) (7,499,239)
Net decrease (102,912) (604,969) $ (1,874,512) $ (9,817,512)
CLASS C
Shares sold 54,856 59,772 $ 860,802 $ 956,171
Shares issued
in reinvestment
of dividends and
distributions 28,201 11,410 410,610 178,564
Shares redeemed (98,217) (136,703) (1,514,680) (2,184,925)
Net decrease (15,160) (65,521) $ (243,268) $ (1,050,190)
OCT. 2, 1996(A) OCT. 2, 1996(A)
TO TO
JULY 31, 1997 JULY 31, 1997
-------------- ---------------
ADVISOR CLASS
Shares sold 1,460 $ 26,057
Shares redeemed (1,457) (25,789)
Net increase 3 $ 268
(a) Commencement of distribution.
19
FINANCIAL HIGHLIGHTS ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------
MAY 1,
1994
YEAR ENDED JULY 31, TO YEAR ENDED APRIL 30,
------------------------------------- JULY 31, ------------------------
1997 1996 1995 1994(A) 1994 1993
------------ ------------ --------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $18.48 $17.98 $16.26 $16.46 $16.97 $17.06
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .47(c) .35(c) .34 .07 .16 .39
Net realized and unrealized gain (loss)
on investment transactions 3.56 1.08 1.64 (.27) .74 .59
Net increase (decrease) in net asset
value from operations 4.03 1.43 1.98 (.20) .90 .98
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.39) (.32) (.22) -0- (.24) (.42)
Distributions from net realized gains (2.33) (.61) (.04) -0- (1.17) (.65)
Total dividends and distributions (2.72) (.93) (.26) -0- (1.41) (1.07)
Net asset value, end of period $19.79 $18.48 $17.98 $16.26 $16.46 $16.97
TOTAL RETURN
Total investment return based on net
asset value (d) 23.90% 8.05% 12.40% (1.22)% 5.06% 5.85%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $20,312 $18,329 $10,952 $9,640 $9,822 $8,637
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.41%(e) 1.40% 1.40% 1.40%(f) 1.40% 1.40%
Expenses, before waivers/reimbursements 2.06% 1.76% 1.81% 1.94%(f) 1.70% 1.85%
Net investment income (b) 2.50% 1.78% 2.07% 1.63%(f) 1.67% 2.29%
Portfolio turnover rate 170% 173% 172% 21% 139% 98%
Average commission rate (g) $.0395 -- -- -- -- --
</TABLE>
See footnote summary on page 23.
20
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------------------
MAY 1,
1994
YEAR ENDED JULY 31, TO YEAR ENDED APRIL 30,
------------------------------------- JULY 31, ------------------------
1997 1996 1995 1994(A) 1994 1993
------------ ------------ --------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.89 $15.56 $14.10 $14.30 $14.92 $15.51
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .28(c) .16(c) .22 .03 .06 .23
Net realized and unrealized gain (loss)
on investment transactions 3.02 .98 1.40 (.23) .63 .53
Net increase (decrease) in net asset
value from operations 3.30 1.14 1.62 (.20) .69 .76
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.27) (.20) (.12) -0- (.14) (.25)
Distributions from net realized gain s (2.33) (.61) (.04) -0- (1.17) (1.10)
Total dividends and distributions (2.60) (.81) (.16) -0- (1.31) (1.35)
Net asset value, end of period $16.59 $15.89 $15.56 $14.10 $14.30 $14.92
TOTAL RETURN
Total investment return based on net
asset value (d) 23.01% 7.41% 11.63% (1.40)% 4.29% 4.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $28,037 $28,492 $37,301 $43,578 $43,616 $36,155
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.12%(e) 2.10% 2.10% 2.10%(f) 2.10% 2.15%
Expenses, before waivers/reimbursements 2.76% 2.47% 2.49% 2.64%(f) 2.42% 2.56%
Net investment income (b) 1.78% .99% 1.38% .92%(f) .93% 1.55%
Portfolio turnover rate 170% 173% 172% 21% 139% 98%
Average commission rate (g) $.0395 -- -- -- -- --
</TABLE>
See footnote summary on page 23.
21
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------------
MAY 1, AUGUST 2,
1994 1993(H)
YEAR ENDED JULY 31, TO TO
------------------------------------- JULY 31, APRIL 30,
1997 1996 1995 1994(A) 1994
------------ ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.89 $15.57 $14.11 $14.31 $15.64
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .28(c) .14(c) .16 .03 .15
Net realized and unrealized gain (loss)
on investment transactions 3.02 .99 1.46 (.23) (.17)
Net increase (decrease) in net asset
value from operations 3.30 1.13 1.62 (.20) (.02)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.27) (.20) (.12) -0- (.14)
Distributions from net realized gains (2.33) (.61) (.04) -0- (1.17)
Total dividends and distributions (2.60) (.81) (.16) -0- (1.31)
Net asset value, end of period $16.59 $15.89 $15.57 $14.11 $14.31
TOTAL RETURN
Total investment return based on net
asset value (d) 23.01% 7.34% 11.62% (1.40)% .45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,045 $3,157 $4,113 $4,317 $4,289
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.12%(e) 2.10% 2.10% 2.10%(f) 2.10%(f)
Expenses, before waivers/reimbursements 2.76% 2.48% 2.50% 2.64%(f) 2.07%(f)
Net investment income (b) 1.78% .99% 1.38% .93%(f) .69%(f)
Portfolio turnover rate 170% 173% 172% 21% 139%
Average commission rate (g) $.0395 -- -- -- --
</TABLE>
See footnote summary on page 23.
22
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD
ADVISOR CLASS
------------------
OCTOBER 2, 1996(H)
TO
JULY 31, 1997
------------------
Net asset value, beginning of period $19.49
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .42
Net realized and unrealized loss on investment transactions (.12)
Net increase in net asset value from operations .30
Net asset value, end of period $19.79
TOTAL RETURN
Total investment return based on net
asset value (d) 1.54%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $50
Ratio to average net assets of:
Expenses, net of waivers/reimbursements (e)(f) 1.10%
Expenses, before waivers/reimbursements (f) 2.35%
Net investment income (b)(f) 3.40%
Portfolio turnover rate 170%
Average commission rate $.0395
(a) The Fund changed its fiscal year end from April 30 to July 31.
(b) Net of fees waived and expenses reimbursed by the Adviser.
(c) Based on average shares outstanding.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment returns calculated for periods of less than one year
are not annualized.
(e) Ratio reflects expenses grossed up for expense offset arrangement with the
Transfer Agent. For the year ended July 31, 1997, the ratios of expenses net of
waivers/reimbursements would have been 1.40%, 2.10%, 2.10% and 1.10% for Class
A, B, C and Advisor Class shares, respectively.
(f) Annualized.
(g) For fiscal year beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
(h) Commencement of distribution.
23
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ALLIANCE STRATEGIC BALANCED FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Alliance Strategic Balanced Fund
(one of the portfolios of The Alliance Portfolios, hereafter referred to as the
"Fund") at July 31, 1997, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at July 31, 1997 by correspondence with the custodian and brokers
and the application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
September 17, 1997
<PAGE>
ALLIANCE STRATEGIC BALANCED FUND
SEMI-ANNUAL REPORT
JANUARY 31, 1998
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1998 (UNAUDITED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON & PREFERRED STOCKS-56.3%
UNITED STATES INVESTMENTS-37.5%
FINANCE-7.9%
BANKING - MONEY CENTER-1.5%
Chase Manhattan Corp. 4,000 $ 428,750
Citicorp 3,000 357,000
------------
785,750
BANKING - REGIONAL-0.7%
Banc One Corp. 6,000 335,250
BROKERAGE & MONEY MANAGEMENT-1.6%
Merrill Lynch & Co., Inc. 7,600 479,750
Morgan Stanley, Dean Witter,
Discover and Co. 6,000 350,250
------------
830,000
INSURANCE-1.9%
American International Group, Inc. 4,500 496,406
Travelers Group, Inc. 9,001 445,550
------------
941,956
MISCELLANEOUS-2.2%
MBNA Corp. 20,000 621,250
PMI Group, Inc. 6,900 467,906
------------
1,089,156
------------
3,982,112
TECHNOLOGY-5.7%
COMMUNICATIONS EQUIPMENT-0.9%
Lucent Technologies, Inc. 5,000 442,500
COMPUTER HARDWARE-1.2%
Compaq Computer Corp. 20,000 601,250
NETWORKING SOFTWARE-1.5%
Cisco Systems, Inc. (a) 12,000 756,750
SEMI-CONDUCTOR COMPONENTS-2.1%
Altera Corp. (a) 7,000 239,750
Intel Corp. 5,000 405,000
National Semiconductor Corp. (a) 15,000 421,875
------------
1,066,625
------------
2,867,125
CONSUMER SERVICES-5.6%
BROADCASTING & CABLE-1.8%
Cox Communications, Inc. Cl.A (a) 12,000 442,500
Scripps E.W. Co. Cl.A 4,000 193,000
Tele-Communications, Inc. -
Liberty Media Group Cl.A (a) 7,000 250,687
------------
886,187
ENTERTAINMENT & LEISURE-2.8%
Harley-Davidson, Inc. 22,000 552,750
Walt Disney Co. 8,000 852,500
------------
1,405,250
RETAIL-GENERAL MERCHANDISE-1.0%
Dayton Hudson Corp. 7,000 503,563
------------
2,795,000
ENERGY-4.8%
DOMESTIC INTEGRATED-0.7%
USX-Marathon Group 10,000 335,625
DOMESTIC PRODUCERS-0.7%
Apache Corp. 10,000 331,250
OIL SERVICES-3.4%
BJ Services Co. (a) 8,000 484,500
Halliburton Co. 16,000 719,000
Noble Drilling Corp. (a) 20,000 535,000
------------
1,738,500
------------
2,405,375
6
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
CONSUMER STAPLES-4.6%
COSMETICS-1.8%
Avon Products, Inc. 4,000 $ 240,000
Gillette Co. 4,000 395,000
The Estee Lauder Co., Inc. Cl.A 5,000 274,687
------------
909,687
RETAIL-FOOD & DRUG-1.2%
Kroger Co. (a) 15,000 586,875
TOBACCO-1.6%
Philip Morris Cos., Inc. 20,000 830,000
------------
2,326,562
HEALTH CARE-4.2%
DRUGS-3.8%
Merck & Co., Inc. 9,000 1,055,250
Schering-Plough Corp. 12,000 868,500
------------
1,923,750
MEDICAL PRODUCTS-0.4%
Medtronic, Inc. 4,000 204,250
------------
2,128,000
CAPITAL GOODS-1.5%
POLLUTION CONTROL-0.7%
USA Waste Services, Inc. (a) 9,000 330,750
MISCELLANEOUS-0.8%
United Technologies Corp. 5,000 408,125
------------
738,875
UTILITIES-1.4%
TELEPHONE UTILITY-1.4%
WorldCom, Inc. (a) 20,000 716,250
MULTI INDUSTRY COMPANIES-1.2%
Tyco International, Ltd. 6,000 266,250
U.S. Industries, Inc. 12,000 336,750
------------
603,000
CONSUMER MANUFACTURING-0.6%
APPLIANCES-0.6%
Sunbeam Corp. 7,300 276,944
Total United States Investments
(cost $15,404,519) 18,839,243
FOREIGN INVESTMENTS-18.8%
AUSTRALIA-0.2%
Normandy Mining, Ltd. 75,000 87,909
BRAZIL-0.4%
Telebras SA (ADR) 2,000 222,000
CANADA-0.2%
Gulf Canada Resources, Ltd. (a) 18,400 98,900
DENMARK-0.7%
Ratin Cl.A (a) 2,000 286,496
Sophus Berendsen Cl.B (a) 2,000 67,040
------------
353,536
FINLAND-1.0%
Nokia AB OY Corp. pfd. 4,000 312,965
Orion-Yhtymae OY Cl.B 7,000 211,377
------------
524,342
FRANCE-1.7%
Sanofi SA 2,000 219,952
SEITA (b) 4,000 148,590
Total, SA Cl.B (b) 3,000 311,843
Unibail SA (b) 1,502 168,610
------------
848,995
GERMANY-1.1%
Adidas AG 1,300 190,540
Hornbach Holdings AG pfd. 2,000 125,553
ProSieben Media AG (a) 5,000 247,011
Schmalbach-Lubeca AG 96 16,979
------------
580,083
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
HONG KONG-0.6%
Cheung Kong Holdings, Ltd. 25,000 $ 127,633
Citic Pacific, Ltd. 11,000 31,563
Dickson Concepts
International, Ltd. 30,000 34,703
Sun Hung Kai Properties, Ltd. 20,000 102,624
------------
296,523
JAPAN-4.5%
Bank of Tokyo, Ltd. 12,000 173,927
Canon, Inc. 5,000 121,307
Daiwa Securities Co., Ltd. 30,000 137,771
Fuji Photo Film Co. 3,000 125,719
Honda Motor Co. 6,000 217,881
Japan Tobacco, Inc. 15 102,087
Nintendo Corp., Ltd. 2,000 211,107
Orix Corp 3,000 216,463
Promise Co., Ltd. 300 15,786
Rohm Co. 1,000 109,492
Sankyo Co., Ltd 5,000 130,366
Santen Pharmaceutical Co. 10,000 131,548
Sony Corp. 3,000 276,487
Sumitomo Electric Industries 7,000 103,111
Yamanouchi Pharmaceutical Co., Ltd. 7,000 169,831
------------
2,242,883
MEXICO-0.3%
Coca-Cola Femsa SA (ADS) 9,000 166,500
NETHERLANDS-1.6%
AKZO Nobel NV 1,500 271,149
ASM Lithography Holding NV 3,000 206,340
ING Groep NV 7,000 320,070
------------
797,559
NORWAY-0.2%
Bergesen DY AS 4,000 86,557
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
SWEDEN-0.7%
Ericsson LM Telecom Series B 4,000 $ 156,822
Volvo AB Cl.A 7,000 188,569
------------
345,391
SWITZERLAND-2.7%
Baloise Holdings, Ltd. 120 229,648
Ciba Specialty Chemicals AG (a) 1,500 171,628
Nestle, SA 200 317,943
Novartis AG 200 341,569
Zurich Versicherungsgesellschaft 600 299,311
------------
1,360,099
UNITED KINGDOM-2.9%
BAA Plc 30,000 234,101
BPB Plc 40,000 197,206
Compass Group Plc 25,000 321,194
HSBC Holdings Plc 5,000 130,294
SmithKline Beecham Plc 25,000 318,338
Tomkins Plc 30,000 161,618
United News Media Plc 9,000 104,023
------------
1,466,774
Total Foreign Investments
(cost $9,265,934) 9,478,051
Total Common & Preferred Stocks
(cost $24,670,453) 28,317,294
DEBT OBLIGATIONS-41.7%
U.S. GOVERNMENT & AGENCY OBLIGATIONS-34.7%
Federal Home Loan Bank
7.00%, 9/01/11 $875 894,982
Federal National Mortgage Association
6.00%, 4/01/11 343 340,175
6.50%, 5/01/11 568 574,967
6.50%, 6/01/11 638 645,721
6.50%, 9/01/11 398 401,442
7.00%, 5/01/26 924 938,056
7.00%, 5/01/27 435 441,575
8
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
Government National Mortgage Association (TBA)
7.00%, 1/21/28 $1,100 $ 1,116,500
U.S. Treasury Bond
6.125%, 11/15/27 2,295 2,396,118
U.S. Treasury Notes
6.00%, 8/15/00 1,125 1,142,055
6.25%, 4/30/01 1,900 1,948,089
6.375%, 5/15/99 4,000 4,048,760
6.50%, 8/31/01 1,250 1,293,550
6.50%, 5/31/02 1,110 1,155,610
6.625%, 5/15/07 25 26,894
6.875%, 5/15/06 80 86,900
------------
17,451,394
CORPORATE DEBT OBLIGATIONS-5.2%
ELECTRIC & GAS UTILITY-0.8%
Texas Utilities Co.
6.375%, 1/01/08 (c) 425 416,458
FINANCIAL-1.3%
Railcar Leasing LLC
7.125%, 1/15/13 (c) 625 671,887
INDUSTRIAL-3.1%
Caliber Systems, Inc.
7.80%, 8/01/06 800 868,947
Time Warner, Inc.
8.375%, 3/15/23 600 687,552
------------
1,556,499
------------
2,644,844
YANKEE BOND-1.8%
St. George Bank, Ltd.
7.15%, 10/15/05 (c) 850 886,907
Total Debt Obligations
(cost $20,481,115) 20,983,145
SHORT-TERM INVESTMENT-5.0%
Student Loan Marketing Association
Zero Coupon, 2/02/98 2,500 2,499,614
TOTAL INVESTMENTS-103.0%
(cost $47,651,182) 51,800,053
Other assets less liabilities-(3.0%) (1,519,534)
NET ASSETS-100% $50,280,519
(a) Non-income producing security.
(b) Security, or portion thereof, with an aggregate market value of $629,043,
has been segregated to collateralize forward exchange currency contracts.
(c) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to certain qualified institutional buyers. At January
31, 1998, these securities amounted to $1,975,252 representing 3.9% of net
assets.
Glossary of Terms:
ADR - American Depositary Receipt
ADS - American Depositary Shares
pfd. - Preferred Stock
TBA - To be announced
9
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1998 (UNAUDITED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $47,651,182) $ 51,800,053
Cash, at value (cost $256,002) 253,948
Receivable for investment securities and
foreign currency sold 1,304,827
Interest and dividends receivable 302,661
Receivable for shares of beneficial interest sold 14,007
Unrealized appreciation of forward exchange
currency contracts 12,468
Foreign taxes receivable 6,783
Total assets 53,694,747
LIABILITIES
Payable for investment securities and foreign
currency purchased 3,154,606
Distribution fee payable 29,509
Advisory fee payable 7,265
Payable for shares of beneficial interest redeemed 930
Accrued expenses 221,918
Total liabilities 3,414,228
NET ASSETS $ 50,280,519
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 31
Additional paid-in capital 46,107,021
Distribution in excess of net investment income (165,926)
Accumulated net realized gain on investments and
foreign currency transactions 210,007
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 4,129,386
$ 50,280,519
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($21,688,399/1,209,382 shares of beneficial interest
issued and outstanding) $17.93
Sales charge--4.25% of public offering price .80
Maximum offering price $18.73
CLASS B SHARES
Net asset value and offering price per share
($25,475,448/1,721,652 shares of beneficial interest
issued and outstanding) $14.80
CLASS C SHARES
Net asset value and offering price per share
($3,116,324/210,620 shares of beneficial interest
issued and outstanding) $14.80
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($348/19.47 shares of beneficial interest issued
and outstanding) $17.87
See notes to financial statements.
10
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1998 (UNAUDITED)
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 715,875
Dividends (net of foreign taxes
withheld of $3,413) 125,410 $ 841,285
EXPENSES
Advisory fee 190,439
Distribution fee - Class A 31,338
Distribution fee - Class B 134,436
Distribution fee - Class C 15,021
Custodian 108,252
Transfer agency 58,858
Registration 29,094
Audit and legal 27,618
Printing 15,164
Trustees' fees 15,000
Miscellaneous 5,100
Total expenses 630,320
Less: expenses waived and assumed
by adviser (see Note B) (170,214)
Net expenses 460,106
Net investment income 381,179
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain on investment transactions 2,538,758
Net realized loss on foreign currency transactions (42,978)
Net realized loss on futures transactions (251,706)
Net change in unrealized appreciation (depreciation) of:
Investments (2,557,945)
Foreign currency denominated assets and liabilities (16,863)
Net loss on investments and foreign
currency transactions (330,734)
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 50,445
See notes to financial statements.
11
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JAN. 31, 1998 JULY 31,
(UNAUDITED) 1997
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 381,179 $ 1,040,800
Net realized gain on investments and foreign
currency transactions 2,244,074 2,147,164
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities (2,574,808) 7,395,205
Net increase in net assets from operations 50,445 10,583,169
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (407,484) (368,073)
Class B (435,005) (450,279)
Class C (48,311) (53,257)
Advisor Class (8) -0-
Distribution in excess of net investment income
Class A (75,900) -0-
Class B (81,026) -0-
Class C (8,999) -0-
Advisor Class (1) -0-
Net realized gain on investments
Class A (1,572,349) (2,227,559)
Class B (2,315,766) (3,959,058)
Class C (257,187) (468,257)
Advisor Class (26) -0-
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) 4,038,095 (1,640,718)
Total increase (decrease) (1,113,522) 1,415,968
NET ASSETS
Beginning of year 51,394,041 49,978,073
End of period (including undistributed net
investment income of $509,629 for the year
ended July 31, 1997) $50,280,519 $51,394,041
See notes to financial statements.
12
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1998 (UNAUDITED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Strategic Balanced Fund (the "Fund"), formerly Alliance Balanced Fund,
a series of The Alliance Portfolios (the "Trust"), is registered under the
Investment Company Act of 1940 as a diversified, open-end investment company.
The Fund offers Class A, Class B, Class C and Advisor Class shares. Class A
shares are sold with a front-end sales charge of up to 4.25% for purchases not
exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a contingent
deferred sales charge of 1%. Class B shares are currently sold with a
contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. Shares purchased before August 2, 1993
and redeemed within six years of purchase are subject to different rates than
shares purchased after that date. 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 votings 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 prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Fund's Board of Directors. Fixed income securities may be valued on the basis
of prices obtained from a pricing service when such prices are believed to
reflect the fair value of such securities.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized foreign currency gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities and foreign exchange
currency contracts, currency gains and losses realized between the trade and
settlement dates on security transactions and the difference between the
amounts of interest recorded on the Fund's books and the U.S. dollar equivalent
amounts actually received or paid. The Fund does not isolate the effect of
fluctuations in foreign currency exchange rates when determining the gain or
loss upon the sale of equity securities. Net currency gains and losses from
valuing foreign currency denominated assets and liabilities at period end
exchange rates are reflected as a component of net unrealized appreciation of
investments and foreign currency denominated assets and liabilities.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the trade date securities
are purchased or sold. The Fund accretes discounts and amortizes premiums as
adjustments to interest income. Investment gains and losses are determined on
the identified cost basis.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisory Class shares have no distribution fees.
Expenses attributable to the Fund are charged to the Fund. Expenses of the
Trust are charged to the Fund in proportion to net assets.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividend and capital gains distributions are determined in
accordance with federal tax regulations and may differ from those determined in
accordance with generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences, do
not require such reclassification.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at an annual rate of
.75% of the average daily net assets of the Fund. Such fee is accrued daily and
paid monthly. The Adviser has agreed to voluntarily waive its fees and bear
certain expenses so that total expenses do not exceed on an annual basis 1.40%,
2.10%, 2.10% and 1.10% of average daily net assets, respectively, for the Class
A, Class B, Class C and Advisor Class shares. Prior to August 2, 1993, the
annual expense cap for Class B Shares was 2.15%. For the six months ended
January 31, 1998, such reimbursement amounted to $170,214.
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 $39,270 for the six months ended January 31, 1998.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Adviser, serves as the Distributor of the Fund's shares. The
Distributor received front-end sales charges of $1,953 from the sales of Class
A shares and $335 in contingent deferred sales charges imposed upon redemptions
by shareholders of Class C shares, respectively, for the six months ended
January 31, 1998.
Brokerage commissions paid on investment transactions for the six months ended
January 31, 1998 amounted to $59,727, none of which was paid to Donaldson,
Lufkin & Jenrette Securities Corp., an affiliate of the Adviser.
Accrued expenses includes $49,717 owed to a Trustee and a former Trustee under
the Trust's deferred compensation plan.
NOTE C: DISTRIBUTION PLANS
The Trust has adopted a Plan for each class of shares of the Fund, except the
Advisor Class, pursuant to Rule 12b-1 under the Investment Company Act of 1940
(each a "Plan" and collectively the "Plans"). Under the Plans, the Fund pays a
distribution fee to the Distributor at an annual rate of up to .50% of the
Fund's average daily net assets attributable to Class A shares and 1% of the
14
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
average daily net assets attributable to both Class B and Class C shares. The
Trustees currently limit payments under the Class A plan to .30% of the Fund's
average daily net assets attributable to Class A shares.
The Fund is not obligated under the Plans to pay any distribution services fee
in excess of the amounts set forth above. The purpose of the payments to the
Distributor under the Plans is to compensate the Distributor for its
distribution services with respect to the sale of the Fund's shares. Since the
Distributor's compensation is not directly tied to its expenses, the amount of
compensation received by it under the Plan during any year may be more or less
than its actual expenses. For this reason, the Plans are characterized by the
staff of the Commission as being of the "compensation" variety.
In the event that a Plan is terminated or not continued, (i) no distribution
services fees (other than current amounts accrued but not yet paid) would be
owed by the Fund to the Distributor with respect to the relevant class and (ii)
the Fund would not be obligated to pay the Distributor for any amounts expended
by the Distributor not previously recovered by the Distributor from
distribution services fees in respect of shares of such class or, in the case
of Class B shares, recovered through deferred sales charges.
The Plans also provide that the Adviser may use its own resources to finance
the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $19,296,584 and $23,309,687,
respectively, for the six months ended January 31, 1998. There were purchases
of $14,228,763 and sales of $12,609,686 of U.S. government and government
agency obligations for the six months ended January 31, 1998.
At January 31, 1998, the cost of investments for federal income tax purposes
was $47,651,658. Accordingly, gross unrealized appreciation of investments was
$4,920,449 and gross unrealized depreciation of investments was $772,054
resulting in net unrealized appreciation of $4,148,395 excluding foreign
currency transactions.
The Fund incurred and elected to defer post October currency losses of $55,391
for the year ended July 31, 1997.
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on foreign portfolio
holdings and to hedge certain firm purchase and sale commitments denominated in
foreign currencies. A forward 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
contracts and the closing of such contracts is included in net realized gain or
loss on foreign currency transactions.
Fluctuations in the value of forward 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 other liquid assets in a separate account of the Fund having a value equal
to the aggregate amount of the Fund's commitments under forward 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. The face or contract amount, in U.S.
dollars, as reflected in the following table, reflects the total exposure the
Fund has in that particular currency contract.
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
At January 31, 1998, the Fund had an outstanding forward exchange currency
contract to sell foreign currency against the U.S. dollar, as follows:
CONTRACT VALUE ON U.S. $
AMOUNT ORIGINATION CURRENT UNREALIZED
(000) DATE VALUE APPRECIATION
-------- ----------- -------- ------------
FOREIGN CURRENCY
SALE CONTRACT
French Franc,
settling 3/5/98 2,580 $433,696 $421,228 $ 12,468
2. FINANCIAL FUTURES CONTRACTS
The Fund may buy or sell financial futures contracts for the purpose of hedging
its portfolio against adverse affects of anticipated movements in the market.
The Fund bears the market risk that arises from changes in the value of these
financial instruments.
At the time the Fund enters into a futures contract the Fund deposits and
maintains as collateral an initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract.
Such receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the time it was closed. At January
31, 1998, the Fund had no outstanding futures contracts.
NOTE E: SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $0.00001 par value shares of beneficial
interest authorized divided into four classes, designated Class A, Class B,
Class C and Advisor Class shares. Transactions in shares of beneficial interest
were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JAN. 31, 1998 JULY 31, JAN. 31, 1998 JULY 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
-------------- ---------- ---------------- ------------
CLASSS A
Shares sold 17,021 44,362 $ 364,839 $ 813,717
Shares issued in
reinvestment of
dividends and
distributions 107,474 140,204 1,915,188 2,424,151
Shares converted
from Class B 128,047 134,087 2,378,555 2,479,067
Shares redeemed (69,772) (283,790) (1,314,460) (5,240,141)
Net increase 182,770 34,863 $ 3,344,122 $ 476,794
CLASS B
Shares sold 153,663 249,874 $ 2,424,580 $ 3,910,285
Shares issued in
reinvestment of
dividends and
distributions 177,542 271,011 2,613,418 3,946,629
Shares converted
to Class A (154,179) (158,380) (2,378,555) (2,479,067)
Shares redeemed (145,278) (465,417) (2,352,965) (7,252,359)
Net increase (decrease) 31,748 (102,912) $ 306,478 $ (1,874,512)
16
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JAN. 31, 1998 JULY 31, JAN. 31, 1998 JULY 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
-------------- ---------- ---------------- ------------
CLASS C
Shares sold 36,711 54,856 $ 561,396 $ 860,802
Shares issued in
reinvestment of
dividends and
distributions 20,673 28,201 304,309 410,610
Shares redeemed (30,276) (98,217) (478,542) (1,514,680)
Net increase (decrease) 27,108 (15,160) $ 387,163 $ (243,268)
OCT. 2,1996(A) OCT. 2,1996(A)
TO TO
JULY 31,1997 JULY 31,1997
------------- --------------
ADVISOR CLASS
Shares sold 15 1,460 $ 300 $ 26,057
Shares issued in
reinvestment of
dividends and
distributions 2 -0- 32 -0-
Shares redeemed -0- (1,457) -0- (25,789)
Net increase 17 3 $ 332 $ 268
(a) Commencement of distribution.
17
FINANCIAL HIGHLIGHTS ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------------
SIX MONTHS MAY 1,
ENDED 1994
JANUARY 31, YEAR ENDED JULY 31, TO YEAR ENDED APRIL 30,
1998 ------------------------------------- JULY 31, ----------------------
(UNAUDITED) 1997 1996 1995 1994(A) 1994 1993
------------- ----------- ---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $19.79 $18.48 $17.98 $16.26 $16.46 $16.97 $17.06
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .18(c) .47(c) .35(c) .34 .07 .16 .39
Net realized and unrealized gain (loss)
on investment transactions (.14) 3.56 1.08 1.64 (.27) .74 .59
Net increase (decrease) in net asset
value from operations .04 4.03 1.43 1.98 (.20) .90 .98
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.39) (.39) (.32) (.22) -0- (.24) (.42)
Distributions in excess of net
investment income (.06) -0- -0- -0- -0- -0- -0-
Distributions from net realized gains (1.45) (2.33) (.61) (.04) -0- (1.17) (65)
Total dividends and distributions (1.90) (2.72) (.93) (.26) -0- (1.41) (1.07)
Net asset value, end of period $17.93 $19.79 $18.48 $17.98 $16.26 $16.46 $16.97
TOTAL RETURN
Total investment return based on
net asset value (d) .27% 23.90% 8.05% 12.40% (1.22)% 5.06% 5.85%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $21,688 $20,312 $18,329 $10,952 $9,640 $9,822 $8,637
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 1.40%(e) 1.41%(f) 1.40% 1.40% 1.40%(e) 1.40% 1.40%
Expenses, before waivers/
reimbursements 2.06%(e) 2.06% 1.76% 1.81% 1.94%(e) 1.70% 1.85%
Net investment income (b) 1.91%(e) 2.50% 1.78% 2.07% 1.63%(e) 1.67% 2.29%
Portfolio turnover rate 69% 170% 173% 172% 21% 139% 98%
Average commission rate (g) $.0412 $.0395 -- -- -- -- --
</TABLE>
See footnote summary on page 21.
18
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------------------------------
SIX MONTHS MAY 1,
ENDED 1994
JANUARY 31, YEAR ENDED JULY 31, TO YEAR ENDED APRIL 30,
1998 ------------------------------------- JULY 31, ----------------------
(UNAUDITED) 1997 1996 1995 1994(A) 1994 1993
------------- ----------- ---------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.59 $15.89 $15.56 $14.10 $14.30 $14.92 $15.51
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .10(c) .28(c) .16(c) .22 .03 .06 .23
Net realized and unrealized gain
(loss) on investment transactions (.12) 3.02 .98 1.40 (.23) .63 .53
Net increase (decrease) in net asset
value from operations (.02) 3.30 1.14 1.62 (.20) .69 .76
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.27) (.27) (.20) (.12) -0- (.14) (.25)
Distributions in excess of net
investment income (.05) -0- -0- -0- -0- -0- -0-
Distributions from net realized gains (1.45) (2.33) (.61) (.04) -0- (1.17) (1.10)
Total dividends and distributions (1.77) (2.60) (.81) (.16) -0- (1.31) (1.35)
Net asset value, end of period $14.80 $16.59 $15.89 $15.56 $14.10 $14.30 $14.92
TOTAL RETURN
Total investment return based on net
asset value (d) (.01)% 23.01% 7.41% 11.63% (1.40)% 4.29% 4.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $25,476 $28,037 $28,492 $37,301 $43,578 $43,616 $36,155
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 2.10%(e) 2.12%(f) 2.10% 2.10% 2.10%(e) 2.10% 2.15%
Expenses, before waivers/
reimbursements 2.78%(e) 2.76% 2.47% 2.49% 2.64%(e) 2.42% 2.56%
Net investment income (b) 1.21%(e) 1.78% .99% 1.38% .92%(e) .93% 1.55%
Portfolio turnover rate 69% 170% 173% 172% 21% 139% 98%
Average commission rate (g) $.0412 $.0395 -- -- -- -- --
</TABLE>
See footnote summary on page 21.
19
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------------------
SIX MONTHS MAY 1, AUGUST 2,
ENDED 1994 1993(H)
JANUARY 31, YEAR ENDED JULY 31, TO TO
1998 ------------------------------------- JULY 31, APRIL 30,
(UNAUDITED) 1997 1996 1995 1994(A) 1994
------------- ------------ ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.59 $15.89 $15.57 $14.11 $14.31 $15.64
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .10(c) .28(c) .14(c) .16 .03 .15
Net realized and unrealized gain
(loss) on investment transactions (.12) 3.02 .99 1.46 (.23) (.17)
Net increase (decrease) in net asset
value from operations (.02) 3.30 1.13 1.62 (.20) (.02)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.28) (.27) (.20) (.12) -0- (.14)
Distributions in excess of
net investment income (.04) -0- -0- -0- -0- -0-
Distributions from net realized gains (1.45) (2.33) (.61) (.04) -0- (1.17)
Total dividends and distributions (1.77) (2.60) (.81) (.16) -0- (1.31)
Net asset value, end of period $14.80 $16.59 $15.89 $15.57 $14.11 $14.31
TOTAL RETURN
Total investment return based on
net asset value (d) (.01)% 23.01% 7.34% 11.62% (1.40)% .45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $3,116 $3,045 $3,157 $4,113 $4,317 $4,289
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 2.10%(e) 2.12%(f) 2.10% 2.10% 2.10%(e) 2.10%(e)
Expenses, before waivers/
reimbursements 2.78%(e) 2.76% 2.48% 2.50% 2.64%(e) 2.07%(e)
Net investment income (b) 1.21%(e) 1.78% .99% 1.38% .93%(e) .69%(e)
Portfolio turnover rate 69% 170% 173% 172% 21% 139%
Average commission rate (g) $.0412 $.0395 -- -- -- --
</TABLE>
See footnote summary on page 21.
20
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
ADVISOR CLASS
---------------------------
SIX MONTHS OCTOBER 2,
ENDED 1996(H)
JANUARY 31, TO
1998 JULY 31,
(UNAUDITED) 1997
------------ ------------
Net asset value, beginning of period $19.79 $19.49
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .22 .42
Net realized and unrealized loss on
investment transactions (.19) (.12)
Net increase in net asset value from operations .03 .30
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.45) -0-
Distributions in excess of net investment income (.05) -0-
Distributions from net realized gains (1.45) -0-
Total dividends and distributions (1.95) -0-
Net asset value, end of period $17.87 $19.79
TOTAL RETURN
Total investment return based on
net asset value (d) .23% 1.54%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $348 $50
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements (e) 1.10% 1.10%(f)
Expenses, before waivers/
reimbursements (e) 2.20% 2.35%
Net investment income (b)(e) 6.39% 3.40%
Portfolio turnover rate 69% 170%
Average commission rate $.0412 $.0395
(a) The Fund changed its fiscal year end from April 30 to July 31.
(b) Net of fees waived and expenses reimbursed by the Adviser.
(c) Based on average shares outstanding.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment returns calculated for periods of less than one year
are not annualized.
(e) Annualized.
(f) Ratio reflects expenses grossed up for expense offset arrangement with the
transfer agent. For the year ended July 31, 1997, the ratios of expenses net of
waivers/reimbursements would have been 1.40%, 2.10%, 2.10% and 1.10% for Class
A, B, C and Advisor Class shares, respectively.
(g) For fiscal year beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
(h) Commencement of distribution.
21
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
Description of the bond ratings of Moody's Investors
Services, Inc. are as follows:
Aaa-- Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest payments
are protected by a large or by an exceptionally stable margin,
?]and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa-- Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are
rated lower than the best bond because margins of protection may
not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
greater than the Aaa securities.
A-- Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper-medium-
grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the
future.
Baa-- Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba-- Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments
may be very moderate and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B-- Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
A-1
<PAGE>
interest and principal payments or of maintenance of other terms
of the contract over any long period of time may be small.
Caa-- Bonds which are rated Caa are of poor standing.
Such issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca-- Bonds which are rated Ca represent obligations
which are speculative to a high degree. Such issues are often in
default or have other marked shortcomings.
C-- Bonds which are rated C are the lowest class of
bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Moody's applies modifiers to each rating classification
from Aa through B to indicate relative ranking within its rating
categories. The modifier "1" indicates that a security ranks in
the higher end of its rating category; the modifier "2" indicates
a mid-range ranking; and the modifier "3" indicates that the
issue ranks in the lower end of its rating category.
Descriptions of the bond ratings of Standard & Poor's
are as follows:
AAA-- Debt rated AAA has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA-- Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from the higher rated
issues only in small degree.
A-- Debt rated A has a strong capacity to pay interest
and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB-- Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher rated
categories.
BB, B, CCC, CC, or C -- Debt rated BB, B, CCC, CC or C
is regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. While
such debt will likely have some quality and protective
A-2
<PAGE>
characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse debt conditions.
C1-- The rating C1 is reserved for income bonds on which
no interest is being paid.
D-- Debt rated D is in default and payment of interest
and/or repayment of principal is in arrears.
The ratings from AAA to CC may be modified by the
addition of a plus (+) or minus (-) sign to show relative
standing within the major rating categories.
Descriptions of the bond ratings of Fitch Investors
Service, Inc. are as follows:
AAA-- Securities of this rating are regarded as strictly
high-grade, broadly marketable, suitable for investment by
trustees and fiduciary institutions, and liable to but slight
market fluctuation other than through changes in the money rate.
The factor last named is of importance varying with the length of
maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public
utility fields, though some industrial obligations have this
rating. The prime feature of an AAA rating is showing of
earnings several times or many times interest requirements with
such stability of applicable earnings that safety is beyond
reasonable question whatever changes occur in conditions. Other
features may enter in, such as stability of applicable earnings
conditions. Other features may enter in, such as a wide margin
of protection through collateral security or direct lien on
specific property as in the case of high class equipment
certificates or bonds that are first mortgages on valuable real
estate. Sinking funds or voluntary reduction of the debt by call
or purchase are often factors, while guarantee or assumption by
parties other than the original debtor may also influence the
rating.
AA-- Securities in this group are of safety virtually
beyond question, and as a class are readily salable while many
are highly active. Their merits are not greatly unlike those of
the AAA class, but a security so rated may be of junior though
strong lien -- in many cases directly following an AAA security -
- - or the margin of safety is less strikingly broad. The issue may
be the obligation of a small company, strongly secured but
influenced as to ratings by the lesser financial power of the
enterprise and more local type of market.
A-- A securities are strong investments and in many
cases of highly active market, but are not so heavily protected
as the two upper classes or possibly are of similar security but
A-3
<PAGE>
less quickly salable. As a class they are more sensitive in
standing and market to material changes in current earnings of
the company. With favoring conditions such securities are likely
to work into a high rating, but in occasional instances changes
cause the rating to be lowered.
BBB-- BBB rated bonds are considered to be investment
grade and of satisfactory quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to weaken this ability than bonds with
higher ratings.
BB-- BB rated bonds are considered speculative. The
obligor's ability to pay interest and repay principal may be
affected over time by adverse economic changes. However, business
and financial alternatives can be identified which could assist
the obligor in satisfying its debt service requirements.
B-- B rated bonds are considered highly speculative.
While bonds in this class are currently meeting debt service
requirements, the probability of continued timely payment of
principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC-- CCC rated bonds have certain identifiable
characteristics that, if not remedied, may lead to default. The
ability to meet obligations requires an advantageous business and
economic environment.
CC-- CC rated bonds are minimally protected. Default in
payment of interest and/or principal seems probable over time.
C-- C rated bonds are in imminent default in payment of
interest or principal.
DDD, DD and D-- These bonds are in default on interest
and/or principal payments. Such bonds are extremely speculative
and should be valued on the basis of their ultimate recovery
value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and
"D" represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating
symbol to indicate the relative position of a credit within the
rating agency. Plus and minus signs, however, are not used in
the "AAA" and "D" categories.
Descriptions of the bond ratings of Duff & Phelps Credit
A-4
<PAGE>
Rating Co. are as follows:
AAA-- Highest credit quality. The risk factors are
negligible.
AA+, AA, AA-: High credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A+, A, A-: Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of
economic stress.
BBB+, BBB, BBB-: Below average protection factors but
still considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
BB+, BB, BB-: Below investment grade but deemed likely
to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or
company fortunes. Overall quality may move up or down frequently
within this category.
B+, B, B-: Below investment grade and possessing risk
that obligations will not be met when due. Financial protection
factors will fluctuate widely according to economic cycles,
industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a
higher or lower rating grade.
CCC: Well below investment grade securities.
Considerable uncertainty exists as to timely payment of
principal, interest or preferred dividends. Protection factors
are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company
developments.
DD: Defaulted debt obligations. Issuer failed to meet
scheduled principal and/or interest payments.
A-5
<PAGE>
[LOGO]
ALLIANCE INCOME BUILDER FUND, INC.
___________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
___________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
February 2, 1998
___________________________________________________________
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the current
Prospectus for the Alliance Income Builder Fund, Inc. (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, the "Prospectuses"). Copies of such
Prospectuses may be obtained by contacting Alliance Fund Services,
Inc. at the address or the "For Literature" telephone number shown
above.
TABLE OF CONTENTS
Page
Investment Policies and Restrictions.............
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: Description of Obligations
Issued or Guaranteed By U.S. Government
Agencies or Instrumentalities..................A-1
Appendix B: Bond and Commercial Paper Ratings...B-1
Appendix C: Options.............................C-1
Appendix D: Futures Contracts, Options on
Futures Contracts and Options on Foreign
Currencies.....................................D-1
______________________________________________________
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
______________________________________________________
INVESTMENT POLICIES AND RESTRICTIONS
______________________________________________________
The following investment policies and restrictions
supplement, and should be read in conjunction with, the
information set forth in the Prospectus of the Fund under the
heading "Description of the Fund." The Fund's investment
objectives may not be changed without shareholder approval. The
Fund's investment policies described below are not designated
"fundamental policies" within the meaning of the Investment
Company Act of 1940, as amended (the "1940 Act") and, therefore,
may be changed by the Directors of the Fund without a shareholder
vote. However, the Fund will not change its investment policies
without contemporaneous written notice to shareholders.
Investment Policies
The Fund is a non-diversified, open-end management
investment company that seeks both an attractive level of current
income and long-term growth of income and capital by investing
substantially all of its assets in dividend-paying equity
securities and U.S. Dollar denominated debt securities. The Fund
seeks investment opportunities in foreign, as well as domestic
securities markets. The Fund will invest in equity securities of
companies with a historical or projected pattern of paying rising
dividends. Under normal circumstances, at least 65% of the Fund's
total assets will be invested in income-producing debt and equity
securities.
The Fund will invest in equity securities, such as common
stocks, securities convertible into common stocks and rights and
warrants to subscribe for the purchase of common stocks and in
fixed-income securities, such as U.S. and non-U.S. Government and
corporate bonds and preferred stocks. The Fund may vary the
percentage of assets invested in any one type of security based
upon the evaluation by Alliance Capital Management L.P., the
Fund's adviser, (the "Adviser") as to the appropriate portfolio
structure for achieving the Fund's investment objective under
prevailing market, economic and financial conditions. Certain
securities (such as fixed-income securities) will be selected on
the basis of their current yield, while other securities may be
purchased for their growth potential. The values of fixed-income
securities change as the general levels of interest rates
fluctuate. When interest rates decline, the values of fixed-
income securities can be expected to increase, and when interest
rates rise, the values of fixed-income securities can be expected
to decrease.
2
<PAGE>
Certificates of Deposit and Bankers' Acceptances.
Certificates of deposit are receipts issued by a depository
institution in exchange for the deposit of funds. The issuer
agrees to pay the amount deposited plus interest to the bearer of
the receipt on the date specified on the certificate. The
certificate usually can be traded in the secondary market prior to
maturity. Bankers' acceptances typically arise from short-term
credit arrangements designed to enable businesses to obtain funds
to finance commercial transactions. Generally, an acceptance is a
time draft drawn on a bank by an exporter or an importer to obtain
a stated amount of funds to pay for specific merchandise. The
draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument
on its maturity date. The acceptance may then be held by the
accepting bank as an earning asset or it may be sold in the
secondary market at the going rate of discount for a specific
maturity. Although maturities for acceptances can be as long as
270 days, most acceptances have maturities of six months or less.
Commercial Paper. Commercial paper consists of short-
term (usually from 1 to 270 days) unsecured promissory notes
issued by corporations in order to finance their current
operations. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement
involving periodically fluctuating rates of interest under a
letter agreement between a commercial paper issuer and an
institutional lender pursuant to which the lender may determine to
invest varying amounts. For a description of commercial paper
ratings, see Appendix B.
Convertible Securities. Convertible securities include
bonds, debentures, corporate notes and preferred stocks that are
convertible at a stated exchange rate into common stock. Prior to
their conversion, convertible securities have the same general
characteristics as non-convertible debt securities, which provide
a stable stream of income with generally higher yields than those
of equity securities of the same or similar issuers. As with all
debt securities, the market value of convertible securities tends
to decline as interest rates increase and, conversely, to increase
as interest rates decline. While convertible securities generally
offer lower interest or dividend yields than non-convertible debt
securities of similar quality, they do enable the investor to
benefit from increases in the market price of the underlying
common stock. When the market price of the common stock
underlying a convertible security increases, the price of the
convertible security increasingly reflects the value of the
underlying common stock and may rise accordingly. As the market
price of the underlying common stock declines, the convertible
security tends to trade increasingly on a yield basis, and thus
may not depreciate to the same extent as the underlying common
stock. Convertible securities rank senior to common stocks on an
3
<PAGE>
issuer's capital structure. They are consequently of higher
quality and entail less risk than the issuer's common stock,
although the extent to which such risk is reduced depends in large
measure upon the degree to which the convertible security sells
above its value as a fixed income security.
Rights or Warrants. The Fund may invest up to 5% of its
net assets in rights or warrants which entitle the holder to buy
equity securities at a specific price for a specific period of
time, but will do so only if the equity securities themselves are
deemed appropriate by the Adviser for inclusion in the Fund's
portfolio. Rights and warrants may be considered more speculative
than certain other types of investments because 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. In addition, the value of a
right or warrant does not necessarily change with the value of the
underlying securities. A right or warrant ceases to have value if
it is not exercised prior to the expiration date.
U.S. Government Securities. For a general description of
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities, see Appendix A.
Options. For additional information on the use, risks
and costs of options, see Appendix C.
Options on Securities Indices. The Fund may purchase and
sell exchange-traded index options on any securities index
composed of the types of securities in which the Fund may invest.
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.
There are no specific limitations on the Fund's purchasing and
selling of options on securities indices.
Through the purchase of listed index options, the Fund
could achieve many of the same objectives as through the use of
options on individual securities. Price movements in the Fund's
portfolio securities probably will not correlate perfectly with
movements in the level of the index and, therefore, the Fund would
bear a risk of loss on index options purchased by it if favorable
price movements of the hedged portfolio securities do not equal or
exceed losses on the options or if adverse price movements of the
hedged portfolio securities are greater than gains realized from
the options.
4
<PAGE>
Futures Contracts and Options on Futures Contracts. The
Fund may enter into futures contracts and options on futures
contracts as described in the Prospectus. The successful use of
such instruments draws upon the Adviser's special skills and
experience with respect to such instruments and usually depends on
the Adviser's ability to forecast interest rate and currency
exchange rate movements correctly. Should interest or exchange
rates move in an unexpected manner, the Fund may not achieve the
anticipated benefits of futures contracts or options on futures
contracts or may realize losses and thus will be in a worse
position than if such strategies had not been used. In addition,
the correlation between movements in the price of futures
contracts or options on futures contracts 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 Board of Directors has adopted the requirement that
futures contracts and options on futures contracts only be used as
a hedge and not for speculation. In addition to this requirement,
the Board of Directors has also restricted the Fund's use of
futures contracts so that the aggregate of the market value of the
outstanding futures contracts purchased by the Fund and the market
value of the currencies and futures contracts subject to
outstanding options written by the Fund may not exceed 50% of the
market value of the total assets of the Fund. These restrictions
will not be changed by the Fund's Board of Directors without
considering the policies and concerns of the various applicable
federal and state regulatory agencies.
For additional information on the use, risks and costs of
futures contracts and options on futures contracts, see
Appendix D.
Options on Foreign Currencies. For additional
information on the use, risks and costs of options on foreign
currencies, see Appendix D.
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
of adverse changes in the relationship between the U.S. Dollar and
foreign currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a
future date which is individually negotiated and privately traded
by currency traders and their customers. The Fund may enter into
a forward contract, for example, when it enters into a contract
for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the
security ("transaction hedge"). The Fund may not engage in
transaction hedges with respect to the currency of a particular
country to an extent greater than the aggregate amount of the
5
<PAGE>
Fund's transactions in that currency. Additionally, for example,
when the 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"). In this situation the Fund may, in the
alternative, enter into a forward contract to sell a different
foreign currency for a fixed U.S. Dollar amount where the Fund
believes that the U.S. Dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a
decline in the U.S. Dollar value of the currency in which
portfolio securities of the Fund are denominated ("cross-hedge").
To the extent required by applicable law, the 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
under forward contracts entered into with respect to position
hedges and cross-hedges. If the value of the assets placed in a
separate account declines, additional liquid assets or securities
will be placed in the account on a daily basis so that the value
of the account will equal the amount of the Fund's commitments
with respect to such contracts. As an alternative to maintaining
all or part of the separate account, the Fund may purchase a call
option permitting the Fund to purchase the amount of foreign
currency being hedged by a forward sale contract at a price no
higher than the forward contract price or the Fund may purchase a
put option permitting the Fund to sell the amount of foreign
currency subject to a forward purchase contract at a price as high
or higher than the forward contract price. In addition, the Fund
may use such other methods of "cover" as are permitted by
applicable law. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had
not entered into 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 than 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.
6
<PAGE>
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 contract 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.
Foreign Securities. Investing in securities of non-
United States companies which are generally denominated in foreign
currencies involves certain considerations comprising both risk
and opportunity not typically associated with investing in United
States companies. These considerations include changes in
exchange rates and exchange control regulation, political and
social instability, expropriation, imposition of foreign taxes,
less liquid markets and less available information than are
generally the case in the United States, higher transaction costs,
less government supervision of exchanges and brokers and issuers,
difficulty in enforcing contractual obligations, lack of uniform
accounting and auditing standards and greater price volatility.
Additional risks may be incurred in investing in particular
countries.
Repurchase Agreements. The Fund may invest in repurchase
agreements pertaining to the types of securities in which it
invests. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at
an agreed-upon future date, normally one day or a few days later.
The resale price is greater than the purchase price, reflecting an
agreed-upon market rate which is in effect for the period of time
the buyer's money is invested in the security and which is not
related to the coupon rate on the purchased security. Such
agreements permit the Fund to keep all of its assets at work while
retaining "overnight" flexibility in pursuit of investments of a
longer-term nature. The Fund maintains procedures for evaluating
and monitoring the creditworthiness of vendors of repurchase
agreements. In addition, the Fund requires continual maintenance
of collateral held by the Fund's Custodian in an amount equal to,
or in excess of, the market value of the securities which are the
subject of the agreement. In the event that a vendor defaulted on
its repurchase obligation, the Fund might suffer a loss to the
extent that the proceeds from the sale of the collateral were less
than the repurchase price. In the event of a vendor's bankruptcy,
7
<PAGE>
the Fund might be delayed in, or prevented from, selling the
collateral for its benefit. Repurchase agreements may be entered
into with member banks of the Federal Reserve System including the
Fund's Custodian or "primary dealers" (as designated by the
Federal Reserve Bank of New York) in United States Government
securities.
Illiquid Securities. The Fund will not maintain more
than 15% of its net assets (taken at market value) in illiquid
securities. For this purpose, illiquid securities include, among
others, direct placements or other securities which are subject to
legal or contractual restrictions on resale or for which there is
no readily available market (e.g. trading in the security is
suspended or, in the case of unlisted securities, market makers do
not exist or will not entertain bids or offers).
Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of
1933, as amended ("Securities Act") and securities which are
otherwise not readily marketable. Securities which have not been
registered under the Securities Act are referred to as private
placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not
typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale
and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a
mutual fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions within seven
days. A mutual fund might also have to register such restricted
securities in order to dispose of them, resulting in additional
expense and delay. Adverse market conditions could impede such a
public offering of securities.
In recent years, however, a large institutional market
has developed for certain securities that are not registered under
the Securities Act, including foreign securities. Institutional
investors depend on an efficient institutional market in which the
unregistered security can be readily resold or on an issuer's
ability to honor a demand for repayment. The fact that there are
contractual or legal restrictions on resale to the general public
or to certain institutions may not be indicative of the liquidity
of such investments.
During the coming year, the Fund may invest up to 5% of
its net assets (taken at market value) in restricted securities
issued under Section 4(2) of the Securities Act, which exempts
from registration "transactions by an issuer not involving any
public offering." Section 4(2) instruments are restricted in the
8
<PAGE>
sense that they can only be resold through the issuing dealer and
only to institutional investors and in private transactions; they
cannot be resold to the general public without registration.
Rule 144A under the Securities Act allows a broader
institutional trading market for securities otherwise subject to
restrictions on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of
the Securities Act for resales of certain securities to qualified
institutional buyers. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
securities held by the Fund, however, could affect adversely the
marketability of such portfolio securities and the Fund might be
unable to dispose of such securities promptly or at reasonable
prices. Rule 144A has already produced enhanced liquidity for
many restricted securities, and market liquidity for such
securities may continue to expand as a result of this regulation
and the consequent inception of the PORTAL System sponsored by the
National Association of Securities Dealers, Inc., an automated
system for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers. The Funds investments
in Rule 144A eligible securities are not subject to the
limitations described above on securities issued under
Section 4(2).
The Adviser, acting under the supervision of the Board of
Directors, will monitor the liquidity of restricted securities in
the Fund's portfolio that are eligible for resale pursuant to
Rule 144A. In reaching liquidity decisions, the Adviser will
consider, among others, the following factors: (1) the frequency
of trades and quotes for the security; (2) the number of dealers
making quotations to purchase or sell the security; (3) the number
of other potential purchasers of the security; (4) the number of
dealers undertaking to make a market in the security; (5) the
nature of the security (including its unregistered nature) and the
nature of the marketplace for the security (e.g., the time needed
to dispose of the security, the method of soliciting offers and
the mechanics of the transfer); and (6) any applicable Securities
and Exchange Commission (the "Commission") interpretation or
position with respect to such type of securities.
Investment in Closed-End Investment Companies
The Fund may invest in closed-end companies whose
investment objectives and policies are consistent with those of
the Fund. The Fund may invest up to 5% of its net assets in
securities of closed-end investment companies. However, the Fund
may not own more than 3% of the total outstanding voting stock of
any closed- end investment company. If the Fund acquires shares
in closed-end investment companies, shareholders would bear both
their proportionate share of expenses in the Fund (including
9
<PAGE>
advisory fees) and, indirectly, the expenses of such closed-end
investment companies (including management and advisory fees).
Certain Risk Considerations
Investments in Lower-Rated Fixed-Income Securities.
Adverse publicity and investor perceptions about lower-rated
securities, whether or not based on fundamental analysis, may tend
to decrease the market value and liquidity of such lower- rated
securities. The Adviser 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, the
Adviser's research and credit analysis are a correspondingly
important aspect of its program for managing the Fund's securities
than would be the case if the Fund did not invest in lower-rated
securities. In considering investments for the Fund, the Adviser
will attempt to identify those high-risk, high-yield securities
whose financial condition is adequate to meet future obligations,
has improved or is expected to improve in the future. The
Adviser's analysis focuses on relative values based on such
factors as interest or dividend coverage, asset coverage, earnings
prospects, and the experience and managerial strength of the
issuer.
Non-rated securities will also be considered for
investment by the Fund when the Adviser believes that the
financial condition of the issuers of such securities, or the
protection afforded by the terms of the securities themselves,
limits the risk to the Fund to a degree comparable to that of
rated securities that are consistent with the Fund's objective and
policies.
In seeking to achieve the Fund's objective, there will be
times, such as during periods of rising interest rates, when
depreciation and realization of capital losses on securities in
the 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 the Fund.
Portfolio Turnover. The Adviser anticipates that the
Fund's annual rate of portfolio turnover will not be in excess of
100% in future years. A 100% turnover rate would occur, for
example, if all the securities in the Fund's portfolio were
replaced once in a period of one year. A portfolio turnover rate
10
<PAGE>
approximating 100% involves correspondingly greater brokerage
commission expenses than would a lower rate, which must be borne
by the Fund and its shareholders. The annual portfolio turnover
rate of securities for the fiscal years ended in 1996 and 1997
were 108% and 159%, respectively.
Investment Restrictions
The following restrictions, which supplement those set
forth in the Fund's Prospectus, may not be changed without
shareholder approval, which means the affirmative vote of the
holders of (i) 67% or more or the shares represented at a meeting
at which more than 50% of the outstanding shares are represented,
or (ii) more than 50% of the outstanding shares, whichever is
less. The Fund may not:
(1) Make loans except through (i) the purchase of debt
obligations in accordance with its investment objectives
and policies; (ii) the lending of portfolio securities;
or (iii) the use of repurchase agreements; or
(iv) certain call loans upon collateral security;
however, the Fund does not intend to make such call
loans;
(2) Participate on a joint or joint and several basis in
any securities trading account;
(3) Invest in companies for the purpose of exercising
control;
(4) Issue any senior security within the meaning of the
1940 Act;
(5) 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 10% of the Fund's net assets (taken at
market value) is held as collateral for such sales at any
one time (it is the Fund's present intention to make such
sales only for the purpose of deferring realization of
gain or loss for Federal income tax purposes);
(6) 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-
11
<PAGE>
end investment company or more than 5% of the value of
the Fund's total assets would be invested in securities
of any one or more closed-end investment companies;
(7) (i) Purchase or sell real estate, except that it may
purchase and sell securities of companies which deal in
real estate or interests therein; (ii) purchase or sell
commodities or commodity contracts (except currencies,
forward and futures contracts on currencies and related
options forward contracts or contracts for the future
acquisition or delivery of (including futures contracts
on) securities and securities indices and related
options; (iii) invest in interests in oil, gas, or other
mineral exploration or development programs;
(iv) purchase securities on margin, except for such
short-term credits as may be necessary for the clearance
of transactions; and (v) act as an underwriter of
securities, except that the Fund may acquire restricted
securities under circumstances in which, if such
securities were sold, the Fund might be deemed to be an
underwriter for purposes of the Securities Act.
Whenever any investment policy or restriction states a
minimum or maximum percentage of the Fund's assets which may be
invested in any security or other asset, it is intended that such
minimum or maximum percentage limitation be determined immediately
after and as a result of the Fund's acquisition of such security
or other asset. Accordingly, any later increase or decrease in
percentage beyond the specified limitations resulting from a
change in values or net assets will not be considered a violation
of any such maximum.
______________________________________________________________
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 provide
investment advice and, in general, to conduct the management and
investment program of the Fund under the supervision of the Fund's
Board of Directors (see "Management of the Fund" in the
Prospectus).
The Adviser is a leading international investment manager
supervising client accounts with assets as of September 30, 1997
totaling more than $217 billion (of which approximately $81
12
<PAGE>
billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundation and endowment funds. As of September 30, 1997, the
Adviser was an investment manager of employee benefit fund assets
for 28 of the FORTUNE 100 companies. As of that date, the Adviser
and its subsidiaries employed approximately 1,500 employees who
operated out of domestic offices and the offices of subsidiaries
in Bahrain, Bangalore, Chennai, Istanbul, London, Madrid, Mumbai,
Paris, Singapore, Tokyo and Toronto and affiliate offices located
in Vienna, Warsaw, Hong Kong, Sao Paulo and Moscow. The 56
registered investment companies comprising more than 118 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.
Alliance Capital Management Corporation, the sole general
partner of, and the owner of a 1% general partnership interest in,
the 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, a French insurance holding company which at
September 30, 1997, beneficially owned approximately 59% of the
outstanding voting shares of ECI. As of June 30, 1997, ACMC, Inc.
and Equitable Capital Management Corporation, each a wholly- owned
direct or indirect subsidiary of Equitable, together with
Equitable, owned in the aggregate approximately 57% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests in the Adviser.
AXA-UAP is a holding company for an international group
of insurance and related financial services companies. AXA-UAP's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities principally
in Western Europe, North America and the Asia/Pacific area.
AXA-UAP is also engaged in asset management, investment banking,
securities trading, brokerage, real estate and other financial
services activities principally in the United States, as well as
in Western Europe and the Asia/Pacific area.
Based on information provided by AXA-UAP, as of
September 30, 1997 more than 25% of the voting power of AXA-UAP
was controlled directly and indirectly by FINAXA, a French holding
company. As of September 30, 1997 more than 25% of the voting
power of FINAXA was controlled directly and indirectly by four
French mutual insurance companies (the "Mutuelles AXA"), one of
which, AXA Assurances I.A.R.D. Mutuelle, itself controlled
directly and indirectly more than 25% of the voting power of
13
<PAGE>
FINAXA. Acting as a group, the Mutuelles AXA control AXA-UAP and
FINAXA.
Under the Advisory Agreement, the Adviser furnishes
advice and recommendations with respect to the Fund's portfolio of
securities and investments and provides persons satisfactory to
the Board of Directors to act as officers and employees of the
Fund. Such officers and employees, as well as certain Directors
of the Fund may be employees of the Adviser or its affiliates.
The Adviser is, under the Advisory Agreement, responsible
for the following expenses incurred by the Fund: (i) the
compensation of any of the Fund's directors, officers and
employees who devote less than all of their time to its affairs
and who devote part of their time to the affairs of the Adviser or
its affiliates, (ii) expenses of computing the net asset value of
the Fund's shares to the extent such computation is required under
applicable Federal securities laws, (iii) expenses of office
rental, and (iv) clerical and bookkeeping expenses.
The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or by other subsidiaries of Equitable. In such event, the
services will be provided to the Fund at cost and the payments
therefor specifically approved by the Fund's Board of Directors.
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser a monthly fee at an
annualized rate of .75 of 1% of the average daily value of the
Fund's net assets. The advisory fees for the fiscal years of the
Fund ended October 31, 1995, October 31, 1996 and October 31, 1997
amounted to $433,843, $396,063 and $414,735, respectively.
The Advisory Agreement became effective on July 22, 1992.
The Advisory Agreement was approved by the unanimous vote, cast in
person, of the Fund's Directors, including the Directors who are
not parties to the Advisory Agreement or interested persons as
defined in the 1940 Act of any such party, at a meeting called for
that purpose and held on September 10, 1991. At a meeting held on
June 11, 1992, a majority of the outstanding voting securities of
the Fund approved the Advisory Agreement.
The Advisory Agreement continues in effect for successive
twelve-month periods (computed from each November 1), provided
that such continuance is specifically approved at least annually
by the Fund's Directors or by a majority vote of the holders of
the outstanding voting securities of the Fund, and, in either
case, by a majority of the Directors who are not parties to the
14
<PAGE>
Advisory Agreement or interested persons as defined in the 1940
Act of any such party. Most recently, the continuance of the
Advisory Agreement until October 31, 1998 was approved by a vote,
cast in person, of the Directors, including a majority of the
Directors who are not parties to the Advisory Agreement or
interested persons of any such party, at a meeting called for that
purpose and held on September 9, 1997.
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 Directors, or by the Adviser on 60 days' written notice,
and will automatically terminate in the event of its assignment.
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the
Adviser, or of reckless disregard of its obligations thereunder,
the Adviser shall not be liable for any action or failure to act
in accordance with its duties thereunder.
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 following registered investment
companies: ACM Institutional Reserves, AFD Exchange Reserves, The
Alliance Fund, Inc., Alliance All-Asia Investment Fund, Inc.,
Alliance Balanced Shares, Inc., Alliance Bond Fund, Inc., Alliance
Capital Reserves, Alliance Developing Markets Fund, Inc., Alliance
Global Dollar Government Fund, Inc., Alliance 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
Institutional Funds, Inc., Alliance International Fund, Alliance
International Premier Growth Fund, Inc., Alliance Limited Maturity
Government Fund, Inc., Alliance Money Market Fund, Alliance
Mortgage Securities Income Fund, Inc., Alliance Multi-Market
Strategy Trust, Inc., Alliance Municipal Income Fund, Inc.,
15
<PAGE>
Alliance Municipal Income Fund II, Alliance Municipal Trust,
Alliance New Europe Fund, Inc., Alliance North American Government
Income Trust, Inc., Alliance Premier Growth Fund, Inc., Alliance
Quasar Fund, Inc., Alliance Real Estate Investment Fund, Inc.,
Alliance/Regent Sector Opportunity Fund, Inc., Alliance Short-Term
Multi-Market Trust, Inc., Alliance Technology Fund, Inc., Alliance
Utility Income Fund, Inc., Alliance Variable Products Series Fund,
Inc., Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., The Alliance Portfolios, Fiduciary
Management Associates and The Hudson River Trust, all registered
open-end investment companies; and to ACM Government Income Fund,
Inc., ACM Government Securities Fund, Inc., ACM Government
Spectrum Fund, Inc., ACM Government Opportunity Fund, Inc., ACM
Managed Income Fund, Inc., ACM Managed Dollar Income Fund, Inc.,
ACM Municipal Securities Income Fund, Inc., Alliance All-Market
Advantage Fund, Inc., Alliance World Dollar Government Fund, Inc.,
Alliance World Dollar Government Fund II, Inc., The Austria Fund,
Inc., The Korean Investment Fund, Inc., The Southern Africa Fund,
Inc. and The Spain Fund, Inc., all registered closed-end
investment companies.
Directors and Officers
The Directors and principal officers of the Fund, their
ages and their principal occupations during the past five years
are set forth below. Each such Director and officer is also a
director, trustee or officer of other registered investment
companies sponsored by the Adviser. Unless otherwise specified,
the address of each of the following persons is 1345 Avenue of
the Americas, New York, New York 10105.
Directors
JOHN D. CARIFA,6 52, Chairman and President of the
Fund, is the President and Chief Operating Officer and a Director
of Alliance Capital Management Corporation ("ACMC"), with which he
has been associated since prior to 1993.
RUTH BLOCK, 67, was formerly an Executive Vice President
and the Chief Insurance Officer of Equitable. She is a Director
of Ecolab Incorporated (specialty chemicals) and Amoco Corporation
(oil and gas). Her address is P.O. Box 4653, Stamford,
Connecticut 06903.
DAVID H. DIEVLER, 68, was formerly a Senior Vice
President of ACMC, with which he had been associated since prior
to 1993. He is currently an independent consultant. His address
is P.O. Box 167, Spring Lake, New Jersey 07762.
____________________
6. An "interested person" of the Fund as defined in the 1940 Act.
16
<PAGE>
JOHN H. DOBKIN, 55, 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 Historic Hudson Valley, 150 White Plains Road.,
Tarrytown, New York 10591.
WILLIAM H. FOULK, JR., 65, is an investment adviser and
an independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1993. His address is
Suite 100, 2 Greenwich Plaza, Greenwich, Connecticut 06830.
DR. JAMES M. HESTER, 73, is President of the Harry Frank
Guggenheim Foundation with which he has been associated since
prior to 1993. He was formerly President of New York University,
the New York Botanical Garden and Rector of the United Nations
University. His address is 45 East 89th Street, New York, New
York 10128.
CLIFFORD L. MICHEL, 58, is a partner in the law firm of
Cahill Gordon & Reindel with which he has been associated since
prior to 1993. He is President, Chief Executive Officer and a
Director of Wenonah Development Company (investments and a
Director of Placer Dome, Inc. (mining)). His address is 80 Pine
Street, New York, NY 10005.
DONALD J. ROBINSON, 63, was formerly a senior partner in
the law firm of Orrick, Herrington & Sutcliffe and is currently of
counsel to that firm. His address is 666 Fifth Avenue, 19th
Floor, New York, New York 10103.
Officers
JOHN D. CARIFA, see biography under "Directors" section,
above.
ANDREW M. ARAN, 40, Senior Vice President, is a Senior
Vice President of ACMC with which he has been associated since
prior to 1993.
KATHLEEN A. CORBET, 37, Senior Vice President, 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.
WAYNE D. LYSKI, 56, Senior Vice President, is an
Executive Vice President of ACMC with which he has been associated
since prior to 1993.
17
<PAGE>
THOMAS M. PERKINS, 52, Senior Vice President, is a Senior
Vice President of ACMC with which he has been associated since
prior to 1993.
CORINNE MOLOF HILL, 33, Vice President, is a Vice
President of ACMC with which she has been associated since prior
to 1993.
VITA M. PIKE, 38, Vice President, is a Vice President of
ACMC with which she has been associated since prior to 1993.
EDMUND P. BERGAN, JR., 47, Secretary, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD"), with which he has been associated since prior to
1993.
ANDREW L. GANGOLF, 43, Assistant Secretary, is Vice
President and Assistant General Counsel of AFD since December
1994. Prior thereto, he was a Vice President and Assistant
Secretary of Delaware Management Co., Inc. since prior to 1993.
DOMENICK PUGLIESE, 36, Assistant Secretary, is a Vice
President and Assistant General Counsel of AFD with which he has
been associated since May 1995. Previously, he was Vice President
and Counsel of Concord Holding Corporation since 1994 and Vice
President and Associate General Counsel of Prudential Securities
since prior to 1993.
EMILIE D. WRAPP, 41, Assistant Secretary, is a Vice
President and Special Counsel of AFD, with which she has been
associated since prior to 1993.
MARK D. GERSTEN, 47, Treasurer and Chief Financial
Officer, is a Senior Vice President of Alliance Fund Services,
Inc. ("AFS") with which he has been associated since prior to
1993.
VINCENT S. NOTO, 33, Controller, is a Vice President of
AFS with which he has been associated since prior to 1993.
JOSEPH J. MANTINEO, 38, Assistant Controller, is a Vice
President of AFS with which he has been associated since prior to
1993.
PHYLLIS CLARKE, 37, Assistant Controller, is an
Accounting Manager of Mutual Funds for AFS with which she has been
associated since prior to 1993.
JUAN J. RODRIGUEZ, 40, Assistant Controller, is an
Assistant Vice President of AFS with which he has been associated
since prior to 1993.
18
<PAGE>
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended October 31, 1997, the
aggregate compensation paid to each of the Directors during
calendar year 1997 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex"), and the total number
of registered investment companies (and separate investment
portfolios within those companies) in the Alliance Fund Complex
with respect to which each of the Directors serves as a director
or trustee, are set forth below. Neither the registered
investment company nor any fund in the Alliance Fund Complex
provides compensation in the form of pension or retirement
benefits to any of its directors or trustees. Each of the
Directors is a director or trustee of one or more other registered
investment companies in the Alliance Fund Complex.
19
<PAGE>
Total Number
Total Number Investment
of Investment Portfolios
Companies in within the
Total the Alliance Funds,
Compensation Complex, Including
From the including the the Fund, as
Aggregate Alliance Fund Fund, as to to which the
Compensation Complex, which Director Director is
from the Including the is a Director a Director
Name of Director Fund Fund or Trustee or Trustee
________________ ____________ _____________ ____________ ____________
John D. Carifa $0 $0 54 118
Ruth Block $3,039 $163,997 40 80
David H. Dievler $3,046 $188,526 47 83
John H. Dobkin $3,030 $127,775 44 80
William H. Foulk, Jr. $3,106 $174,996 48 113
Dr. James M. Hester $3,006 $156,499 40 76
Clifford L. Michel $2,775 $194,499 41 92
Donald J. Robinson $2,971 $235,500 41 94
As of January 12, 1998, the Directors and officers of the
Fund as a group owned 6.84% of the Advisor Class shares of the
Fund and less than 1% of the shares of any other class of shares
of the Fund.
________________________________________________________________
EXPENSES OF THE FUND
________________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors, Inc.,
the Fund's principal underwriter (the "Principal Underwriter"), to
permit the Principal Underwriter to distribute the Fund's shares
and to permit the Fund to pay distribution services fees to defray
expenses associated with distribution of its Class A, Class B and
Class C shares in accordance with a plan of distribution which is
included in the Agreement and has been duly adopted and approved
in accordance with Rule 12b-1 adopted by the Commission under the
1940 Act (the "Rule 12b-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
20
<PAGE>
sale of such shares. In this regard the purpose and function of
the combined contingent deferred sales charge and distribution
services fee on the Class B shares and the Class C shares are the
same as those of the initial sales charge and distribution
services fee with respect to the Class A shares in that in each
case the sales charge and distribution services fee provide for
the financing of the distribution of the relevant class of the
Fund's shares.
Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the Fund
for their review on a quarterly basis. Also, the Agreement
provides that the selection and nomination of Directors who are
not "interested persons" of the Fund (as defined in the 1940 Act)
are committed to the discretion of such disinterested Directors
then in office.
The Agreement will continue in effect for successive
twelve-month periods (computed from each November 1) with respect
to each class of the Fund, provided, however, that such
continuance is specifically approved at least annually by the
Directors of the Fund or by vote of the holders of a majority of
the outstanding voting securities (as defined in the 1940 Act) of
that class, and in either case, by a majority of the Directors of
the Fund who are not parties to this Agreement or interested
persons, as defined in the 1940 Act, of any such party (other than
as Directors of the Fund) and who have no direct or indirect
financial interest in the operation of the Rule 12b-1 Plan or any
agreement related thereto. Most recently, continuance of the
Agreement until October 31, 1998 was approved by a vote, cast in
person, of the Directors including a majority of the Directors who
are not "interested persons", as defined in the 1940 Act, at their
Regular Meeting held on September 9, 1997.
The Agreement became effective on May 3, 1993 and was
amended as of March 22, 1994 to permit the distribution of two
additional classes of shares, Class B and Class C shares. The
Agreement was amended as of June 4, 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 October 31, 1997,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class A shares, in amounts
21
<PAGE>
aggregating $6,194, which constituted approximately .30 of 1% of
the average daily net assets attributable to Class A shares during
the period, and the Adviser made payments from its own resources,
as described above, aggregating $50,954. Of the $57,148 paid by
the Fund and the Adviser under the Agreement, $8,462 was spent on
advertising, $93 on the printing and mailing of prospectuses for
persons other than current shareholders, $28,410 for compensation
to broker-dealers and other financial intermediaries (including,
$18,924 to the Fund's Principal Underwriter), $1,562 for
compensation to sales personnel and $18,621 was spent on the
printing of sales literature, travel, entertainment, due diligence
and other promotional expenses.
During the Fund's fiscal year ended October 31, 1997, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class B shares, in amounts aggregating
$75,635, which constituted approximately 1% of the average daily
net assets attributable to the Class B shares during the period,
and the Adviser made payments from its own resources, as described
above, aggregating $347,872. Of the $423,507 paid by the Fund and
the Adviser under the Agreement, $52,385 was spent on advertising,
$3,494 on the printing and mailing of prospectuses for persons
other than current shareholders, $237,329 for compensation to
broker-dealers and other financial intermediaries (including,
$104,193 to the Fund's Principal Underwriter), $4,209 for
compensation to sales personnel, $117,047 was spent on the
printing of sales literature, travel, entertainment, due diligence
and other promotional expenses, and $9,043 for interest on Class B
shares financing.
During the Fund's fiscal year ended October 31, 1997, the
Fund paid distribution services fees for expenditures under the
Agreement with respect to Class B shares, in amounts aggregating
$454,253, which constituted approximately 1% of the average daily
net assets attributable to the Class C shares during the period,
and the Adviser made payments from its own resources, as described
above, aggregating $115,352. Of the $569,605 paid by the Fund and
the Adviser under the Agreement, $15,139 was spent on advertising,
$714 on the printing and mailing of prospectuses for persons other
than current shareholders, $466,408 for compensation to broker-
dealers and other financial intermediaries (including, $32,262 to
the Fund's Principal Underwriter), $4,380 for compensation to
sales personnel and $40,004 was spent on the printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses and $42,960 for interest on Class C shares.
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
22
<PAGE>
(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 Directors or the holders of the Fund's
outstanding voting securities, voting separately by class, and in
either case, by a majority of the disinterested Directors, cast in
person at a meeting called for the purpose of voting on such
approval; and the Agreement may not be amended in order to
increase materially the costs that the Fund may bear pursuant to
the Agreement without the approval of a majority of the holders of
the outstanding voting shares of the class or classes affected.
The Agreement may be terminated (a) by the Fund without penalty at
any time by a majority vote of the holders of the outstanding
voting securities of the Fund, voting separately by class or by a
majority vote of the Directors who are not "interested persons" as
defined in the 1940 Act, or (b) by the Principal Underwriter. To
terminate the Agreement, any party must give the other 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
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each of the Class A, Class B, Class C and
Advisor Class shares of the Fund, plus reimbursement for out-of-
pocket expenses. The transfer agency fee with respect to the
Class B and Class C shares is higher than the transfer agency fee
with respect to the Class A and Advisor Class shares, reflecting
the additional costs associated with the Class B and Class C
contingent deferred sales charges. For the fiscal year ended
October 31, 1997, the Fund paid AFS $35,806 pursuant to the
Transfer Agency Agreement.
_______________________________________________________________
PURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How to Buy Shares."
23
<PAGE>
General
Shares of the Fund are offered on a continuous basis at a
price equal to their net asset value plus an initial sales charge
at the time of purchase ("Class A shares"), with a contingent
deferred sales charge ("Class B shares"), without any initial
sales charge and, as long as the shares are held for one year or
more, without any contingent deferred sales charge ("Class C
shares"), or, to investors eligible to purchase Advisor Class
shares, without any initial, contingent deferred or asset-based
sales charge, in each case as described below. Shares of the Fund
that are offered subject to a sales charge are offered through
(i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered
into selected agent agreements with the Principal Underwriter
("selected agents") and (iii) the Principal Underwriter.
Advisor Class shares of the Fund may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers or
other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, (iii) by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares), or (iv) by
directors and present or retired full-time employees of CB
Commercial Real Estate Group, Inc.
Generally, a fee-based program must charge an asset-based
or other similar fee and must invest at least $250,000 in Advisor
Class shares of the Fund in order to be approved by the Principal
Underwriter for investment in Advisor Class shares.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or other
financial representatives or directly through the Principal
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent, financial
intermediary or other financial representative with respect to the
purchase, sale or exchange of Class A, Class B, Class C or Advisor
Class shares made through such financial representative. Such
financial representative may also impose requirements with respect
24
<PAGE>
to the purchase, sale or exchange of shares that are different
from, or in addition to, those imposed by the Fund, including
requirements as to the minimum initial and subsequent investment
amounts. Sales personnel of selected dealers and agents
distributing the Fund's shares may receive differing compensation
for selling Class A, Class B, Class C or Advisor Class shares.
The Fund may refuse any order for the purchase of shares.
The Fund reserves the right to suspend the sale of its shares to
the public in response to conditions in the securities markets or
for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under "-
Class A Shares". On each Fund business day on which a purchase or
redemption order is received by the Fund and trading in the types
of securities in which the Fund invests might materially affect
the value of Fund shares, the per share net asset value is
computed in accordance with the Fund's Articles of Incorporation
and By-Laws as of the next close of regular trading on the New
York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern
time) by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any day on which the Exchange is open for
trading.
The respective per share net asset values of the Class A,
Class B, Class C and Advisor Class shares are expected to be
substantially the same. Under certain circumstances, however, the
per share net asset values of the Class B and Class C shares may
be lower than the per share net asset values of the Class A and
Advisor Class shares, as a result of the differential daily
expense accruals of the distribution and transfer agency fees
applicable with respect to those classes of shares. Even under
those circumstances, the per share net asset values of the four
classes eventually will tend to converge immediately after the
payment of dividends, which will differ by approximately the
amount of the expense accrual differential among the classes.
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the net
asset value computed as of the close of regular trading on the
Exchange on that day (plus applicable Class A sales charges). In
the case of orders for purchase of shares placed through selected
dealers, agents or financial representatives, as applicable, the
25
<PAGE>
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 is responsible for transmitting
such orders by 5:00 p.m. If the selected dealer, agent or
financial representative, as applicable, 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 a
convenience to the subscriber, and to avoid unnecessary expense to
the Fund, stock certificates representing shares of the Fund are
not issued except upon written request to the Fund by the
shareholder or his or her authorized selected dealer or agent.
This facilitates later redemption and relieves the shareholder of
the responsibility for and inconvenience of lost or stolen
certificates. No certificates are issued for fractional shares,
although such shares remain in the shareholder's account on the
books of the Fund.
In addition to the discount or commission paid to dealers
or agents, the Principal Underwriter from time to time pays
additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., formerly Equico
Securities, Inc., an affiliate of the Principal Underwriter, in
26
<PAGE>
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part, to provide
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, cash or other incentives
will be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other Alliance Mutual
Funds, as defined below, during a specific period of time. On
some occasions, such cash or other incentives may take the form of
payment for attendance at seminars, meals, sporting events or
theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel taken by persons
associated with a dealer or agent and their immediate family
members to urban or resort locations within or outside the United
States. Such dealer or agent may elect to receive cash incentives
of equivalent amount in lieu of such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of the
deferred sales charge, (ii) Class B shares and Class C shares each
bear the expense of a higher distribution services fee than that
borne by Class A shares, and Advisor Class shares do not bear such
a fee, (iii) Class B shares and Class C shares bear higher
transfer agency costs than those borne by Class A shares and
Advisor Class shares; (iv) each of Class A, Class B and Class C
shares has exclusive voting rights with respect to provisions of
the Rule 12b-1 Plan pursuant to which its distribution services
fee is paid and other matters for which separate class voting is
appropriate under applicable law, provided that, if the Fund
submits to a vote of the Class A shareholders, an amendment to the
Rule 12b-1 Plan that would materially increase the amount to be
paid thereunder with respect to the Class A shares, then such
amendment will also be submitted to the Class B shareholders and
Advisor Class shareholders and the Class A, the Class B and the
Advisor Class shareholders will vote separately by class, and
(v) Class B shares and Advisor Class shares are subject to a
conversion feature. Each class has different exchange privileges
and certain different shareholder service options available.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no such
conflict arises.
27
<PAGE>
Alternative Retail Purchase Arrangements -- Class A, Class B and
Class C Shares7
The alternative purchase arrangements available with
respect to Class A, Class B and Class C shares permit an investor
to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their
investment in the Fund, the accumulated distribution services fee
and contingent deferred sales charge on Class B shares prior to
conversion, or the accumulated distribution services fee and
contingent deferred sales charge on Class C shares, would be less
than the initial sales charge and accumulated distribution
services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher return
of Class A shares. Class A shares will normally be more
beneficial than Class B shares to the investor who qualifies for
reduced initial sales charges on Class A shares, as described
below. In this regard, the Principal Underwriter will reject any
order (except orders from certain retirement plans) for more than
$250,000 for Class B shares. Class C shares will normally not be
suitable for the investor who qualifies to purchase Class A shares
at net asset value. For this reason, the Principal Underwriter
will reject any order for more than $1,000,000 for Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time of
purchase, investors purchasing Class A shares would not have 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-
____________________
7. Advisor Class shares are sold only to investors described
above in this section under "--General."
28
<PAGE>
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge on Class A shares would have to hold his or
her investment approximately seven years for the Class C
distribution services fee to exceed the initial sales charge plus
the accumulated distribution services fee of Class A shares. In
this example, an investor intending to maintain his or her
investment for a longer period might consider purchasing Class A
shares. This example does not take into account the time value of
money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in net
asset value or the effect of different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
During the Fund's fiscal years ended in 1997, 1996 and
1995, the aggregate amounts of underwriting commission payable
with respect to shares of the Fund were $17,524, $40,062 and
$5,756, respectively. Of those amounts, the Principal Underwriter
received the amounts of $876, $1,756 and $290, respectively,
representing that portion of the sales charge paid on shares of
the Fund sold during the year which was not reallowed to selected
dealers (and was, accordingly, retained by the Principal
Underwriter). During the Fund's fiscal years ended in 1997, 1996
and 1995, the Principal Underwriter received contingent deferred
sales charges of $-0-, $-0- and $-0-, respectively, on Class A
shares, $13,978, $4,000 and $7,453, respectively, on Class B
shares, and $689, $-0- and $-0-, respectively, on Class C shares.
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
29
<PAGE>
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
_________ ________ ________ ___________
Less than
$100,000. . . 4.44% 4.25% 4.00%
$100,000 but
less than
$250,000. . . 3.36 3.25 3.00
$250,000 but
less than
$500,000. . . 2.30 2.25 2.00
$500,000 but
less than
$1,000,000*. . 1.78 1.75 1.50
____________________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, as described below under "--Class B
Shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the time
they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to the
Principal Underwriter and are used by the Principal Underwriter to
defray the expenses of the Principal Underwriter related to
providing distribution-related services to the Fund in connection
with the sales of Class A shares, such as the payment of
30
<PAGE>
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, (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 on October 31, 1997.
Net Asset Value per Class A
Share at October 31, 1997 $12.57
Per Share Sales Charge - 4.25%
of offering price (4.44% of
net asset value per share) $ .56
31
<PAGE>
Class A Per Share Offering Price
to the public $13.13
======
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but may be subject in most such cases to a
contingent deferred sales charge) or (ii) a reduced initial sales
charge. The circumstances under which such investors may pay a
reduced initial sales charge are described below.
Combined Purchase Privilege. Certain persons may qualify
for the sales charge reductions indicated in the schedule of such
charges above by combining purchases of shares of the Fund into a
single "purchase," if the resulting "purchase" totals at least
$100,000. The term "purchase" refers to: (i) a single purchase by
an individual, or to concurrent purchases, which in the aggregate
are at least equal to the prescribed amounts, by an individual,
his or her spouse and their children under the age of 21 years
purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other fiduciary
purchasing shares for a single trust, estate or single fiduciary
account although more than one beneficiary is involved; or (iii) a
single purchase for the employee benefit plans of a single
employer. The term "purchase" also includes purchases by any
"company," as the term is defined in the 1940 Act, but does not
include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares purchased at the same time through a single selected dealer
or agent, of any other "Alliance Mutual Fund." Currently, the
Alliance Mutual Funds include:
AFD Exchange Reserves
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
32
<PAGE>
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Income Builder 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/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services, Inc.
at the address or the "For Literature" telephone number shown on
the front cover of this Statement of Additional Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
33
<PAGE>
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 the
Statement of Intention; however, the 13-month period during which
the Statement of Intention is in effect will begin on the date of
the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at least
$100,000 in Class A shares of the Fund, the investor and the
34
<PAGE>
investor's spouse each purchase shares of the Fund worth $20,000
(for a total of $40,000), it will only be necessary to invest a
total of $60,000 during the following 13 months in shares of the
Fund or any other Alliance Mutual Fund, to qualify for the 3.25%
sales charge on the total amount being invested (the sales charge
applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5% of
such amount. Shares purchased with the first 5% of such amount
will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount
indicated is not purchased, and such escrowed shares will be
involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow will
be released. To the extent that an investor purchases more than
the dollar amount indicated on the Statement of Intention and
qualifies for a further reduced sales charge, the sales charge
will be adjusted for the entire amount purchased at the end of the
13-month period. The difference in the sales charge will be used
to purchase additional shares of the Fund subject to the rate of
the sales charge applicable to the actual amount of the aggregate
purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of this
Statement of Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund or
any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
under the schedule of sales charges set forth in this Statement of
Additional Information, to an investment 13 times larger than such
initial purchase. The sales charge applicable to each succeeding
monthly purchase will be that normally applicable, under such
schedule, to an investment equal to the sum of (i) the total
purchase previously made during the 13-month period and (ii) the
current month's purchase multiplied by the number of months
(including the current month) remaining in the 13-month period.
35
<PAGE>
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 Directors of the
Fund; present or former directors and trustees of
other investment companies managed by the Adviser;
present or retired full-time employees of the
Adviser, the Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates; officers and
directors of ACMC, the Principal Underwriter,
Alliance Fund Services, Inc. and their affiliates;
officers, directors and present full-time employees
of selected dealers or agents; or the spouse,
sibling, direct ancestor or direct descendant
(collectively "relatives") of any such person; or
any trust, individual retirement account or
retirement plan account for the benefit of any such
person or relative; or the estate of any such person
or relative if such shares are purchased for
investment purposes (such shares may not be resold
except to the Fund);
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(iii) the Adviser, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates; and
certain employee benefit plans for employees of the
Adviser, the Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates;
(iv) registered investment advisers or other financial
intermediaries who charge a management, consulting
or other fee for their services and who purchase
shares through a broker or agent approved by the
Principal Underwriter and clients of such registered
investment advisers or financial intermediaries
whose accounts are linked to the master account of
such investment adviser or financial intermediary on
the books of such approved broker or agent;
(v) persons participating in a fee-based program,
sponsored and maintained by a registered broker-
dealer or other financial intermediary and approved
by the Principal Underwriter, pursuant to which such
persons pay an asset-based fee to such broker-
dealer, or financial intermediary or its affiliates
or agents, for services in the nature of investment
advisory or administrative services;
(vi) persons who establish to the Principal Underwriter's
satisfaction that they are investing, within such
time period as may be designated by the Principal
Underwriter, proceeds of redemption of shares of
such other registered investment companies as may be
designated from time to time by the Principal
Underwriter; and
(vii) employer-sponsored qualified pension or profit-
sharing plans (including Section 401(k) plans),
custodial accounts maintained pursuant to
Section 403(b)(7) retirement plans and individual
retirement accounts (including individual retirement
accounts to which simplified employee pension
("SEP") contributions are made), if such plans or
accounts are established or administered under
programs sponsored by administrators or other
persons that have been approved by the Principal
Underwriter.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of a
sales charge at the time of purchase. The Class B shares are sold
37
<PAGE>
without an initial sales charge so that the Fund will receive the
full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on the
Class B shares are paid to the Principal Underwriter and are used
by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services fee
enables the Fund to sell the Class B shares without a sales charge
being deducted at the time of purchase. The higher distribution
services fee incurred by Class B shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
To illustrate, assume that an investor purchased 100
Class B shares at $10 per share (at a cost of $1,000) and in the
second year after purchase, the net asset value per share is $12
and, during such time, the investor has acquired 10 additional
Class B shares upon dividend reinvestment. If at such time the
investor makes his or her first redemption of 50 Class B shares
(proceeds of $600), 10 Class B shares will not be subject to the
charge because of dividend reinvestment. With respect to the
remaining 40 Class B shares, the charge is applied only to the
original cost of $10 per share and not to the increase in net
asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds will be charged at a rate of 3.0% (the
applicable rate in the second year after purchase as set forth
below).
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.
38
<PAGE>
Contingent Deferred
Sales Charge as a %
of Dollar Amount
Years Since Purchase Subject to Charge
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth and thereafter None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services-Systematic Withdrawal Plan" below).
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
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
39
<PAGE>
be considered to be held in a separate sub-account. Each time any
Class B shares in the shareholder's account (other than those in
the sub-account) convert to Class A, an equal pro-rata portion of
the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel to
the effect that the conversion of Class B shares to Class A shares
does not constitute a taxable event under federal income tax law.
The conversion of Class B shares to Class A shares may be
suspended if such an opinion is no longer available at the time
such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee for
an indefinite period which may extend beyond the period ending
eight years after the end of the calendar month in which the
shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of a
sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee
enables the Fund to sell Class C shares without either an initial
or contingent deferred sales charge, as long as the shares are
held for one year or more. Class C shares do not convert to any
other class of shares of the Fund and incur higher distribution
services fees and transfer agency costs than Class A shares and
Advisor Class shares, and will thus have a higher expense ratio
and pay correspondingly lower dividends than Class A shares and
Advisor Class shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
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
40
<PAGE>
waived on certain redemptions, as described above under "--Class B
Shares." In determining the contingent deferred sales charge
applicable to a redemption of Class C shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because the
shares have been held beyond the period during which the charge
applies or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the time
they are subject to the sales charge.
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for selling
Class C shares. The combination of the contingent deferred sales
charge and the distribution services fee enables the Fund to sell
the Class C shares without a sales charge being deducted at the
time of purchase. The higher distribution services fee incurred
by Class C shares will cause such shares to have a higher expense
ratio and to pay lower dividends than those related to Class A
shares and Advisor Class shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts, employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--General," and by
investment advisory clients of, and by certain other persons
associated with, the Adviser and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan, or to be associated with the investment
adviser or financial intermediary, in each case, that satisfies
the requirements to purchase shares set forth under "Purchase of
Shares--General" or (ii) the holder is otherwise no longer
eligible to purchase Advisor Class shares as described in the
Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
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
41
<PAGE>
currently bear a .30% distribution services fee and have a higher
expense ratio than Advisor Class shares. As a result, Class A
shares may pay correspondingly lower dividends and have a lower
net asset value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Advisor Class shares to
Class A shares does not constitute a taxable event under federal
income tax law. The conversion of Advisor Class shares to Class A
shares may be suspended if such an opinion is no longer available
at the time such conversion is to occur. In that event, the
Advisor Class shareholder would be required to redeem his Advisor
Class shares, which would constitute a taxable event under federal
income tax law.
_______________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares-How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund 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
42
<PAGE>
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during which
an emergency (as determined by the Commission) exists as a result
of which disposal by the Fund of securities owned by it is not
reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission may
by order permit for the protection of security holders of the
Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or repurchase.
Redemption proceeds on Class A, Class B and Class C shares will
reflect the deduction of the contingent deferred sales charge, if
any. Payment received by a shareholder upon redemption or
repurchase of his shares, assuming the shares constitute capital
assets in his hands, will result in long-term or short-term
capital gains (or loss) depending upon the shareholder's holding
period and basis in respect of the shares redeemed.
To redeem shares of the Fund for which no stock
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
To redeem shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank stock
powers attached, to the Fund with the request that the shares
represented thereby, or a specified portion thereof, be redeemed.
The stock assignment form on the reverse side of each stock
certificate surrendered to the Fund for redemption must be signed
by the registered owner or owners exactly as the registered name
appears on the face of the certificate or, alternatively, a stock
power signed in the same manner may be attached to the stock
certificate or certificates or, where tender is made by mail,
separately mailed to the Fund. The signature or signatures on the
assignment form must be guaranteed in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer of shares for which no stock certificates have been
issued by telephone at (800) 221-5672 by a shareholder who has
completed the appropriate portion of the Subscription Application
or, in the case of an existing shareholder, an "Autosell"
43
<PAGE>
application obtained from Alliance Fund Services, Inc. Prior to
March 1, 1998, this service can be employed only once in any 30-
day period (except for certain omnibus accounts). A telephone
redemption request by electronic funds transfer may not exceed
$100,000 (except for certain omnibus accounts), and must be made
by 4:00 p.m. Eastern time on a Fund business day as defined above.
Proceeds of telephone redemptions will be sent by electronic funds
transfer to a shareholder's designated bank account at a bank
selected by the shareholder that is a member of the NACHA.
Telephone Redemption By Check. Each Fund shareholder is
eligible to request redemption by check of Fund shares for which
no stock certificates have been issued by telephone at (800) 221-
5672 before 4:00 p.m. Eastern time on a Fund business day in an
amount not exceeding $50,000. Proceeds of such redemptions are
remitted by check to the shareholder's address of record. A
shareholder otherwise eligible for telephone redemption by check
may cancel the privilege by written instruction to Alliance Fund
Services, Inc., or by checking the appropriate box on the
Subscription Application found in the Prospectus.
Telephone Redemptions - General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information. The
Fund reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Telephone
redemption by check is not available with respect to shares
(i) for which certificates have been issued, (ii) held in nominee
or "street name" accounts, (iii) held by a shareholder who has
changed his or her address of record within the preceding 30
calendar days or (iv) held in any retirement plan account.
Neither the Fund nor the Adviser, the Principal Underwriter or
Alliance Fund Services, Inc. will be responsible for the
authenticity of telephone requests for redemptions that the Fund
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.
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<PAGE>
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected dealers
or agents. The repurchase price will be the net asset value next
determined after the Principal Underwriter receives the request
(less the contingent deferred sales charge, if any, with respect
to the Class A, Class B and Class C shares), except that requests
placed through selected dealers or agents before the close of
regular trading on the Exchange on any day will be executed at the
net asset value determined as of such close of regular trading on
that day if received by the Principal Underwriter prior to its
close of business on that day (normally 5:00 p.m. Eastern time).
The financial intermediary or selected dealer or agent is
responsible for transmitting the request to the Principal
Underwriter by 5:00 p.m. If the financial intermediary or
selected dealer or agent fails to do so, the shareholder's right
to receive that day's closing price must be settled between the
shareholder and the dealer or agent. A shareholder may offer
shares of the Fund to the Principal Underwriter either directly or
through a selected dealer or agent. Neither the Fund nor the
Principal Underwriter charges a fee or commission in connection
with the repurchase of shares (except for the contingent deferred
sales charge, if any, with respect to Class A, Class B and Class C
shares). Normally, if shares of the Fund are offered through a
financial intermediary or selected dealer or agent, the repurchase
is settled by the shareholder as an ordinary transaction with or
through the selected dealer or agent, who may charge the
shareholder for this service. The repurchase of shares of the
Fund as described above is a voluntary service of the Fund and the
Fund may suspend or terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
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.
45
<PAGE>
_______________________________________________________________
SHAREHOLDER SERVICES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares-Shareholder Services." The shareholder services set forth
below are applicable to Class A, Class B, Class C and Advisor
Class shares unless otherwise indicated. If you are an Advisor
Class shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing electronic funds transfer
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives the
proceeds from the investor's bank. In electronic form, drafts can
be made on or about a date each month selected by the shareholder.
Investors wishing to establish an automatic investment program in
connection with their initial investment should complete the
appropriate portion of the Subscription Application found in the
Prospectus. Current shareholders should contact Alliance Fund
Services, Inc. at the address or telephone numbers shown on the
cover of this Statement of Additional Information to establish an
automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the 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, Alliance Fund Services, Inc.
and their affiliates may, on a tax-free basis, exchange Class A
shares of the Fund for Advisor Class shares of the Fund.
Exchanges of shares are made at the net asset value next
determined and without sales or service charges. Exchanges may be
made by telephone or written request. Telephone exchange requests
46
<PAGE>
must be received by Alliance Fund Services, Inc. by 4:00 p.m.
Eastern time on a Fund business day in order to receive that day's
net asset value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request. Call
Alliance Fund Services, Inc. at (800) 221-5672 to exchange
uncertificated shares. Except with respect to exchanges of
Class A shares of the Fund for Advisor Class shares of the Fund,
exchanges of shares as described above in this section are taxable
transactions for federal income tax purposes. The exchange
service may be changed, suspended, or terminated on 60 days'
written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose shares
have been tendered for exchange is reasonably assured that the
check has cleared, normally up to 15 calendar days following the
purchase date.
Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc., receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates. Shares acquired pursuant to a telephone
47
<PAGE>
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange should
telephone Alliance Fund Services, Inc. with their account number
and other details of the exchange, at (800) 221-5672 before
4:00 p.m., Eastern time, on a Fund business day as defined above.
Telephone requests for exchange received before 4:00 p.m. Eastern
time on a Fund business day will be processed as of the close of
business on that day. During periods of drastic economic or
market developments, such as the market break of October 1987, it
is possible that shareholders would have difficulty in reaching
Alliance Fund Services, Inc. by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares of
another Alliance Mutual Fund. Auto Exchange transactions normally
occur on the 12th day of each month, or the Fund business day
prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or fraudulent
telephone instructions. Selected dealers, agents or financial
representatives, as applicable, may charge a commission for
handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
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<PAGE>
Retirement Plans
The Fund may be a suitable investment vehicle for part or
all of the assets held in various types of retirement plans, such
as those listed below. The Fund has available forms of such plans
pursuant to which investments can be made in the Fund and other
Alliance Mutual Funds. Persons desiring information concerning
these plans should contact Alliance Fund Services, Inc. at the
"For Literature" telephone number on the cover of this Statement
of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment, are
entitled to establish and make contributions to an IRA. Taxation
of the income and gains paid to an IRA by the Fund is deferred
until distribution from the IRA. An individual's eligible
contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan investing through
the Alliance Premier Retirement Program 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.
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403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay period)
may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the Fund,
charges certain nominal fees for establishing an account and for
annual maintenance. A portion of these fees is remitted to
Alliance Fund Services, Inc. as compensation for its services to
the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on the shareholder's Class A, Class B,
Class C or Advisor Class Fund shares be automatically reinvested,
in any amount, without the payment of any sales or service
charges, in shares of the same class of such other Alliance Mutual
Fund(s). Further information can be obtained by contacting
Alliance Fund Services, Inc. at the address or the "For
Literature" telephone number shown on the cover of this Statement
of Additional Information. Investors wishing to establish a
dividend direction plan in connection with their initial
investment should complete the appropriate section of the
Subscription Application found in the Prospectus. Current
shareholders should contact Alliance Fund Services, Inc. to
establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares of
the Fund having a current net asset value of at least $4,000 (for
quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less 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.
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Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such payments will be subject to any taxes
applicable to redemptions and, except as discussed below, any
applicable contingent deferred sales charge. Shares acquired with
reinvested dividends and distributions will be liquidated first to
provide such withdrawal payments and thereafter other shares will
be liquidated to the extent necessary, and depending upon the
amount withdrawn, the investor's principal may be depleted. A
systematic withdrawal plan may be terminated at any time by the
shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level. Therefore,
redemptions of shares under the plan may reduce or even liquidate
a shareholder's account and may subject the shareholder to the
Fund's involuntary redemption provisions. See "Redemption and
Repurchase of Shares-General." Purchases of additional shares
concurrently with withdrawals are undesirable because of sales
charges when purchases are made. While an occasional lump-sum
investment may be made by a holder of Class A shares who is
maintaining a systematic withdrawal plan, such investment should
normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application form
by contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone number shown on the cover of this
Statement of Additional Information.
CDSC Waiver for Class B and Class C Shares. Under a
systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3%
quarterly of the value at the time of redemption of the Class B or
Class C shares in a shareholder's account may be redeemed free of
any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
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.
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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 Alliance Fund Services, Inc., a shareholder can
arrange for copies of his or her account statements to be sent to
another person.
_______________________________________________________________
NET ASSET VALUE
_______________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange (ordinarily 4:00 p.m.
Eastern time) following receipt of purchase or redemption order by
the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors of the
Fund deems appropriate or necessary in order to comply with Rule
22c-1 under the 1940 Act. The Fund's per share net asset value is
calculated by dividing the value of the Fund's total assets, less
its liabilities, by the total number of its shares then
outstanding. A Fund business day is any weekday on which the
Exchange is open for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at fair
value as determined in good faith by the Board of Directors. The
Board of Directors has delegated to the Adviser certain of the
Board's duties with respect to the following procedures. Readily
marketable securities listed on the Exchange or on a foreign
securities exchange (other than foreign securities exchanges whose
operations are similar to those of the United States over-the-
counter market) are valued, except as indicated below, at the last
sale price reflected on the consolidated tape at the close of the
Exchange or, in the case of a foreign securities exchange, at the
last quoted sale price, in each case on the business day as of
which such value is being determined. If there has been no sale
on such day, the securities are valued at the quoted bid prices on
such day. If no bid prices are quoted on such day, then the
security is valued at the mean of the bid and asked prices at the
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close of the Exchange on such day as obtained from one or more
dealers regularly making a market in such security. Where a bid
and asked price can be obtained from only one such dealer, such
security is valued at the mean of the bid and asked price obtained
from such dealer unless it is determined that such price does not
represent current market value, in which case the security shall
be valued in good faith at fair value by, or pursuant to
procedures established by, the Board of Directors. Securities for
which no bid and asked price quotations are readily available are
valued in good faith at fair value by, or in accordance with
procedures established by, the Board of Directors. Readily
marketable securities not listed on the Exchange or on a foreign
securities exchange are valued in like manner. Portfolio
securities traded on the Exchange and on one or more other foreign
or other national securities exchanges, and portfolio securities
not traded on the Exchange but traded on one or more foreign or
other national securities exchanges are valued in accordance with
these procedures by reference to the principal exchange on which
the securities are traded.
Readily marketable securities traded only in the over-
the-counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and debt securities listed on a
U.S. national securities exchange whose primary market is believed
to be over-the-counter, are valued at the mean of the bid and
asked prices at the close of the Exchange on such day as obtained
from two or more dealers regularly making a market in such
security. Where a bid and asked price can be obtained from only
one such dealer, such security is valued at the mean of the bid
and asked price obtained from such dealer unless it is determined
that such price does not represent current market value, in which
case the security shall be valued in good faith at fair value by,
or in accordance with procedures established by, the Board of
Directors.
Listed put and call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be valued
using the closing settlement price or, in the absence of such a
price, the most recent quoted bid price. If there are no
quotations available for the day of valuations, the last available
closing settlement price will be used.
U.S. Government Securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
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maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that this
method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed
to reflect the fair market value of such securities. The prices
provided by a pricing service take into account many factors,
including institutional size trading in similar groups of
securities and any developments related to specific securities.
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place in
various foreign markets on days that are not Fund business days.
The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities in
these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are determined
in accordance with the above procedure and the close of the
Exchange will not be reflected in the Fund's calculation of net
asset value unless these prices do not reflect current market
value, in which case the securities will be valued in good faith
at fair value by, or in accordance with procedures established by,
the Board of Directors.
The Board of Directors may suspend the determination of
the Fund's net asset value (and the offering and sales of shares),
subject to the rules of the Commission and other governmental
rules and regulations, at a time when: (1) the Exchange is
closed, other than customary weekend and holiday closings, (2) an
emergency exists as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by it or
to determine fairly the value of its net assets, or (3) for the
protection of shareholders, the Commission by order permits a
suspension of the right of redemption or a postponement of the
date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. Dollar at the mean of
the current bid and asked prices of such currency against the U.S.
Dollar last quoted by a major bank that is a regular participant
in the relevant foreign exchange market or on the basis of a
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pricing service that takes into account the quotes provided by a
number of such major banks. If such quotations are not available
as of the close of the Exchange, the rate of exchange will be
determined in good faith by, or under the direction of, the Board
of Directors.
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
_______________________________________________________________
General
The Fund intends for each taxable year to qualify as a
"regulated investment company" under the Code. Investors should
consult their own counsel for a complete understanding of the
requirements the Fund must meet to qualify for such treatment.
The information set forth in the Prospectus and the following
discussion relate solely to 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 and for the application of state and
local tax laws to his or her particular situation.
Each dividend and capital gains distribution, if any,
declared by the Fund on its outstanding shares will, at the
election of each shareholder, be paid in cash or reinvested in
additional full or fractional shares of the same class of common
stock of the Fund having an aggregate net asset value as of the
payment date of such dividend or distribution equal to the cash
amount of such dividend or distribution. Election to receive
dividends and distributions in cash or full or fractional shares
is made at the time the 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. It is
the present policy of the Fund to distribute to shareholders all
net investment income quarterly and to distribute net realized
capital gains, if any, annually. The amount of any such
distributions must necessarily depend upon the realization by the
Fund of income and capital gains from investments. Dividends paid
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by the 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 and
on the same day and will be in the same amount, except that the
higher distribution services fees applicable to Class B and
Class C shares, and any incremental transfer agency costs relating
to Class B shares, will be borne exclusively by the class to which
they relate.
Dividends of net ordinary income and distributions of net
short-term capital gains are taxable to shareholders as ordinary
income. The dividends-received deduction for corporations should
also be applicable to the Fund's dividends of net investment
income and distributions of net realized short-term capital gains.
The amount of such dividends and distributions eligible for the
dividends-received deduction is limited to the amount of dividends
from domestic corporations received by the Fund during the fiscal
year. Under provisions of the tax law, a corporation's dividends-
received deduction will be disallowed unless the corporation holds
shares in the Fund at least 46 days during the 90-day period
beginning 45 days before the date on which the shareholder becomes
entitled to receive the dividend. In determining the holding
period of such shares for this purpose, any period during which a
shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted. Furthermore,
provisions of the tax law disallow the dividends-received
deduction to the extent a corporation's investment in shares of
the Fund is financed with indebtedness.
Pursuant to the Taxpayer Relief Act of 1997, two
different tax rates apply to net capital gains---that is, the
excess of net gains from capital assets held for more than one
year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on
capital assets held for more than one year but not more than 18
months ("mid-term gains"), and a second rate (generally 20%)
applies to the balance of such net capital gains ("adjusted net
capital gains"). Distributions of net capital gains will be
treated in the hands of shareholders as mid-term gains to the
extent designated by the Fund as deriving from net gains from
assets held for more than one year but not more than 18 months,
and the balance will be treated as adjusted net capital gains,
regardless of how long a shareholder has held shares in the Fund.
Capital gains distributions are not eligible for the dividends
received deduction referred to above. Any dividend or distribution
received by a shareholder on shares of the Fund will have the
effect of reducing the net asset value of such shares by the
amount of such dividend or distribution. Furthermore, a dividend
or distribution made shortly after the purchase of such shares by
a shareholder, although in effect a return of capital to that
particular shareholder, would be taxable to him as described
above.
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Dividends and distributions are taxable in the manner
described above regardless of whether they are paid to the
shareholder in cash or are reinvested in additional shares of the
Fund's common stock.
Any gain or loss arising from a sale or redemption of
Fund shares generally will be capital gain or loss except in the
case of a dealer or a financial institution, and will be long-term
capital gain or loss if such shareholder has held such shares for
more than one year at the time of the sale or redemption;
otherwise it will be short-term capital gain or loss. In the case
of an individual shareholder, the applicable tax rate imposed on
long-term capital gains differs depending on whether the shares
were held at the time of the sale or redemption for more than 18
months, or for more than one year but not more than 18 months. If
a shareholder has held shares in the Fund for six months or less
and during that period has received a distribution of net capital
gains, any loss recognized by the shareholder on the sale of those
shares during the six-month period will be treated as a long-term
capital loss to the extent of the distribution. In determining
the holding period of such shares for this purpose, any period
during which a shareholder's risk of loss is offset by means of
options, short sales or similar transactions is not counted.
Foreign Tax Credits
Income received by the Fund may also be subject to
foreign income taxes, including withholding taxes. 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. If more than 50% of the
value of the Fund's total assets at the close of its taxable year
consists of stocks or securities of foreign corporations, the Fund
will be eligible and intends to file an election with the Internal
Revenue Service to pass through to its shareholders the amount of
foreign taxes paid by the Fund. However, there can be no
assurance that the Fund will be able to do so. Pursuant to this
election a shareholder will be required to (i) include in gross
income (in addition to taxable dividends actually received) 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 deduct such pro rata share of foreign taxes in
computing his taxable income or treat such foreign taxes as a
credit against United States federal income taxes. 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 taxes by the Fund. No
deduction for foreign taxes may be claimed by an individual
shareholder who does not itemize deductions. In addition, certain
shareholders may be subject to rules which limit or reduce their
ability to fully deduct, or claim a credit for, their pro rata
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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.
Each shareholder will be notified within 60 days after the close
of the Fund's taxable year whether the foreign taxes paid by the
Fund will pass through for that year and, if so, such notification
will designate (i) the shareholder's portion of the foreign taxes
paid to each such country and (ii) the portion of dividends that
represents income derived from sources within each such country.
The federal income tax status of each year's
distributions by the Fund will be reported to shareholders and to
the Internal Revenue Service. The foregoing is only a general
description of the treatment of foreign taxes under the United
States federal income tax laws. Because the availability of a
foreign tax credit or deduction will depend on the particular
circumstances of each shareholder, potential investors are advised
to consult their own tax advisers.
The foregoing discussion relates only to U.S. federal
income tax law as it affects shareholders who are U.S. citizens or
residents or U.S. corporations. The effects of federal income tax
law on shareholders who are non-resident aliens or foreign
corporations may be substantially different. Foreign investors
should consult their counsel for further information as to the
U.S. tax consequences of receipt of income from the Fund.
United States Federal Income Taxation of the Fund
The following discussion relates to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.
Passive Foreign Investment Companies. If the Fund owns
shares in a foreign corporation that constitutes a "passive
foreign investment company" (a "PFIC") for federal income tax
purposes and the Fund does not elect to treat the foreign
corporation as a "qualified electing fund" within the meaning of
the Code, the Fund may be subject to United States federal income
taxation on a portion of any "excess distribution" it receives
from the PFIC or any gain it derives from the disposition of such
shares, even if such income is distributed as a taxable dividend
by the Fund to its shareholders. The Fund may also be subject to
additional interest charges in respect of deferred taxes arising
from such distributions or gains. Any tax paid by the Fund as a
result of its ownership of shares in a PFIC will not give rise to
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any deduction or credit to the Fund or to any shareholder. A PFIC
means any foreign corporation if, for the taxable year involved,
either (i) it derives at least 75% of its gross income from
"passive income" (including, but not limited to, interest,
dividends, royalties, rents and annuities), or (ii) on average, at
least 50% of the value (or adjusted tax basis, if elected) of the
assets held by the corporation produce "passive income." Pursuant
to the Taxpayer Relief Act of 1997, the Fund could elect for
taxable years beginning after 1997 to "mark-to-market" stock in a
PFIC. Under such an election, the Fund would include in income
each year an amount equal to the excess, if any, of the fair
market value of the PFIC stock as of the close of the taxable year
over the Fund's adjusted basis in the PFIC stock. The Fund would
be allowed a deduction for the excess, if any, of the adjusted
basis of the PFIC stock over the fair market value of the PFIC
stock as of the close of the taxable year, but only to the extent
of any net mark-to-market gains included by the Fund for prior
taxable years. The Fund's adjusted basis in the PFIC stock would
be adjusted to reflect the amounts included in, or deducted from,
income under this election. Amounts included in income pursuant
to this election, as well as gain realized on the sale or other
disposition of the PFIC stock, would be treated as ordinary
income. The deductible portion of any mark-to-market loss, as
well as loss realized on the sale or other disposition of the PFIC
stock to the extent that such loss does not exceed the net mark-
to-market gains previously included by the Fund, would be treated
as ordinary loss. The Fund generally would not be subject to the
deferred tax and interest charge provisions discussed above with
respect to PFIC stock for which a mark-to-market election has been
made. If the Fund purchases shares in a PFIC and the Fund does
elect to treat the foreign corporation as a "qualified electing
fund" under the Code, the Fund may be required to include in its
income each year a portion of the ordinary income and net capital
gains of the foreign corporation, even if this income is not
distributed to 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,
or from the disposition of a forward contract denominated in a
foreign currency which are attributable to fluctuations in the
value of the foreign currency between the date of acquisition of
the asset and the date of disposition also are treated as ordinary
gain or loss. These gains or losses, referred to under the Code
as "section 988" gains or losses, increase or decrease the amount
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of 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. If such distributions exceed such shareholder's
basis, such excess distribution will be treated as a gain from the
sale of shares.
Options, Futures and Forward Contracts. Certain listed
options, regulated futures contracts, and forward foreign currency
contracts are considered "section 1256 contracts" for federal
income tax purposes. Section 1256 contracts held by the Fund at
the end of each taxable year will be "marked to market" and
treated for federal income tax purposes as though sold for fair
market value on the last business day of such taxable year. Gain
or loss realized by the Fund on section 1256 contracts other than
forward foreign currency contracts will be considered 60% long-
term and 40% short-term capital gain or loss. Gain or loss
realized by the Fund on forward foreign currency contracts
generally will be treated as section 988 gain or loss and will
therefore be characterized as ordinary income or loss and will
increase or decrease the amount of the Fund's net investment
income available to be distributed to shareholders as ordinary
income, as described above. 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.
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. The
regulations issued under this authority generally should not apply
to the type of hedging transactions in which the Fund intends to
engage.
With respect to equity options or options traded over-
the-counter or on certain foreign exchanges, gain or loss realized
by the Fund upon the lapse or sale of such options held by the
Fund will be either long-term or short-term capital gain or loss
depending upon the Fund's holding period with respect to such
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 an option that the Fund has written is
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exercised, gain or loss on the option will not be separately
recognized but the premium received or paid will be included in
the calculation of gain or loss upon disposition of the property
underlying the option.
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 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.
The foregoing rules will also apply to other put and call options
which have as their underlying property foreign currency and which
are traded over- the-counter or on certain foreign exchanges to
the extent gain or loss with respect to such options is
attributable to fluctuations in foreign currency exchange rates.
Tax Straddles. Any option, futures contract, forward
foreign currency 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
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(v) the deduction of interest and carrying charges attributable to
certain straddle positions may be deferred. The Treasury
Department is authorized to issue regulations providing for the
proper treatment of a mixed straddle where at least one position
is ordinary and at least one position is capital. No such
regulations have yet been issued. Various elections are available
to the Fund which may mitigate the effects of the straddle rules,
particularly with respect to mixed straddles. In general, the
straddle rules described above do not apply to any straddles held
by the Fund all of the offsetting positions of which consist of
section 1256 contracts.
_______________________________________________________________
BROKERAGE AND PORTFOLIO TRANSACTIONS
_______________________________________________________________
Subject to the general supervision of the Board of
Directors of the Fund, the Adviser is responsible for the
investment decisions and the placing of orders for portfolio
transactions for the Fund. The Adviser determines the broker to
be used in each specific transaction with the objective of
negotiating a combination of the most favorable commission and the
best price obtainable on each transaction (generally defined as
best execution). When consistent with the objective of obtaining
best execution, brokerage may be directed to persons or firms
supplying investment information to the Adviser. There may be
occasions where the transaction cost charged by a broker may be
greater than that which another broker may charge if the Fund
determines in good faith that the amount of such transaction cost
is reasonable in relation to the value of the brokerage, research
and statistical services provided by the executing broker.
Neither the Fund nor the Adviser has entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research services
they provide. To the extent that such persons or firms supply
investment information to the Adviser for use in rendering
investment advice to the Fund, such information may be supplied at
no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the
Fund. While it is impossible to place an actual dollar value on
such investment information, its receipt by the Adviser probably
does not reduce the overall expenses of the Adviser to any
material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e)(3) of the Exchange Act and is
designed to augment the Adviser's own internal research and
investment strategy capabilities. Research services furnished by
brokers through which the Fund effects securities transactions are
62
<PAGE>
used by the Adviser in carrying out its investment management
responsibilities with respect to all its client accounts.
The Fund may deal in some instances in securities which
are not listed on a national stock exchange but are traded in the
over-the-counter market. The Fund may also purchase listed
securities through the third market, i.e., from a dealer which is
not a member of the exchange on which a security is listed. Where
transactions are executed in the over-the-counter market or third
market, the Fund will seek to deal with the primary market makers;
but when necessary in order to obtain the best price and
execution, it will utilize the services of others. In all cases,
the Fund will attempt to negotiate best execution.
The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise bear.
Research services furnished by broker-dealers could be useful and
of value to the Adviser in servicing its other clients as well as
the Fund; but, on the other hand, certain research services
obtained by the Adviser as a result of the placement of portfolio
brokerage of other clients could be useful and of value to it in
serving the Fund. Consistent with the Conduct Rules of the
National Association of Securities Dealers, Inc. and subject to
seeking best execution, the Fund may consider sales of shares of
the Fund or other investment companies managed by the Adviser as a
factor in the selection of brokers to execute portfolio
transactions for the Fund.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, and with brokers which may have their
transactions cleared or settled, or both, by the Pershing Division
of DLJ, for which DLJ may receive a portion of the brokerage
commissions. In such instances, the placement of orders with such
brokers would be consistent with the Fund's objective of obtaining
best execution and would not be dependent upon the fact that DLJ
is an affiliate of the Adviser. With respect to orders placed with
DLJ for execution on a national securities exchange, commissions
received must conform to Section 17(e)(2)(A) of the 1940 Act and
Rule 17e-1 thereunder, which permit an affiliated person of a
registered investment company (such as the Fund), or any
affiliated person of such person, to receive a brokerage
commission from such registered investment company provided that
such commission is reasonable and fair compared to the commissions
received by other brokers in connection with comparable
63
<PAGE>
transactions involving similar securities during a comparable
period of time.
During the fiscal years ended October 31, 1997, 1996 and
1995 the Fund incurred brokerage commissions amounting in the
aggregate to $21,506, $33,301 and $31,374, respectively. During
the fiscal years ended October 31, 1997, 1996 and 1995 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 $70, respectively, were paid to
brokers utilizing the Pershing Division of DLJ. During the fiscal
year ended October 31, 1997, 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 October 31, 1997, of
the Fund's aggregate dollar amount of brokerage transactions
involving the payment of commissions, 0% were effected through DLJ
and 0% were effected through brokers utilizing the Pershing
Division of DLJ. During the fiscal year ended October 31, 1997,
transactions in portfolio securities of the Fund aggregating
$13,567,957 with associated brokerage commissions of approximately
$13,574 were allocated to persons or firms supplying research
services to the Fund or the Adviser.
_______________________________________________________________
GENERAL INFORMATION
_______________________________________________________________
Capitalization
The Fund was originally organized under the name Alliance
Multi-Market Income and Growth Trust, Inc. as a Maryland
corporation on August 2, 1991 and, effective March 22, 1994,
changed its name to "Alliance Income Builder Fund, Inc." The
authorized capital stock of the Fund currently consists of
2,000,000,000 shares of Class A Common Stock, 2,000,000,000 shares
of Class B Common Stock and 2,000,000,000 shares of Class C Common
Stock and 2,000,000,000 shares of Advisor Class Common Stock, each
having a par value of $.001 per share.
All shares of the Fund, when issued, are fully paid and
non-assessable. The Directors are authorized to reclassify and
issue any unissued shares to any number of additional series and
classes without shareholder approval. Accordingly, the Directors
in the future, for reasons such as the desire to establish one or
more additional portfolios with different investment objectives,
policies or restrictions, may create additional classes or series
of shares. Any issuance of shares of another class or series
would be governed by the 1940 Act and the law of the State of
64
<PAGE>
Maryland. If shares of another series were issued in connection
with the creation of a second portfolio, each share of either
portfolio would normally be entitled to one vote for all purposes.
Generally, shares of both portfolios would vote as a single series
on matters, such as the election of Directors, 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 a separate series. Procedures for
calling a shareholders' meeting for the removal of Directors of
the Fund, similar to those set forth in Section 16(c) of the 1940
Act will be available to shareholders of the Fund. The rights of
the holders of shares of a series may not be modified except by
the vote of a majority of the outstanding shares of such series.
At close of business on January 12, 1998 there were
11,466,373 shares of common stock of the Fund outstanding,
including 218,415 Class A shares, 814,108 Class B shares,
3,788,438 Class C shares and 6,645,412 Advisor Class shares. To
the knowledge of the Fund, the following persons owned of record
or beneficially 5% or more of a class of the outstanding shares of
the Fund as of January 12, 1998:
No. of
Shares % of
Name and Address Of Class Class
Class A
Marie Platt C/F
Jens Christian Platt
8505 Old Town Ct.
Knoxville, TN
37923-6361 12,311 5.64%
McCuistion Family Trust
U/W Jack H. McCuistion
4 Bent Tree Court
Lufkin, TX
75901-7702 17,614 8.06%
Merrill Lynch
For the Sole Benefit of
Its Customers
Attn: Fund Administration
4800 Deer Lake Dr., East
3rd Floor
Jacksonville, FL
32246-6486 14,680 6.72%
65
<PAGE>
Class B
Merrill Lynch
For the Sole Benefit of
Its Customers
4800 Deer Lake Dr., East
3rd Floor
Jacksonville, FL
32246-6486 142,042 17.45%
Class C
Merrill Lynch
For the Sole Benefit of
Its Customers
4800 Deer Lake Drive East
3rd Floor
Jacksonville, FL
32246-6484 1,961,897 51.79%
Advisor Class
Alliance Plans Div./F.T.C.
C/F Gonzalo N. Aran IRA
122 Tunison Road
New Brunswick, NJ 08901-1653 934 14.06%
Alliance Plans Div./F.T.C.
C/F Andrew Aran
102 Morley Drive
Wyckoff, NJ 07481-3335 454 6.84%
Valesca E. Brewer
109 Roxbury Road
Garden City, NY 11530-2623 4,945 74.41%
Custodian
Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts 02109, acts as the Fund's custodian for the assets
of the Fund but plays no part in deciding the purchase or sale of
portfolio securities. Subject to the supervision of the Fund's
Directors, Brown Brothers Harriman & Co. may enter into sub-
custodial agreements for the holding of the Fund's foreign
securities.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's Principal
Underwriter, and 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,
66
<PAGE>
gross negligence or reckless disregard of its obligations
thereunder, against certain civil liabilities, including
liabilities under the Securities Act.
Counsel
Legal matters in connection with the issuance of the
shares of common stock offered hereby are passed upon by Seward &
Kissel, New York, New York. Seward & Kissel has relied upon the
opinion of Venable, Baetjer and Howard, LLP, Baltimore, Maryland,
for matters relating to Maryland law.
Independent Auditors
Ernst & Young LLP, New York, New York, have been
appointed as independent auditors for the Fund.
Performance Information
From time to time the Fund advertises its "total return."
Computed separately for each class, the Fund's "total return" is
its average annual compounded total return for its most recently
completed one, five, and ten-year periods (or the period since the
Fund's inception). The Fund's total return for such a period is
computed by finding, through the use of a formula prescribed by
the 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 paid and the maximum sales charge applicable
to purchases of Fund shares is assumed to have been paid.
The average annual total returns for Class A and Class B
shares for the one-year period ended October 31, 1997 were 19.36%
and 18.53%, respectively; and for the period March 25, 1994
(commencement of distribution) through October 31, 1997 were
13.59% and 12.80%, respectively. The average annual total return
for Class C shares for the one-year period ended October 31, 1997,
the five-year period ended October 31, 1997 and for the period
from October 25, 1991 (commencement of operations) through
October 31, 1997 were 18.50%, 10.75% and 9.35%, respectively. The
average annual total return for Advisor Class Shares for the
period from November 1, 1996 (commencement of distribution)
through October 31, 1997 was _21.05%.
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 its
67
<PAGE>
expenses. Total return information is useful in reviewing the
Fund's performance but such information may not provide a basis
for comparison with bank deposits or other investments which pay a
fixed yield for a stated period of time. An investor's principal
invested in the Fund is not fixed and will fluctuate in response
to prevailing market conditions.
Advertisements quoting performance 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 or magazines such as The New
York Times, The Wall Street Journal, Barrons, Business Week,
Changing Times, Forbes, Investor's Daily, Money Magazine, or other
media on behalf of the Fund. The Fund has been ranked by Lipper
in the category known as "specialty and miscellaneous funds."
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or or to Alliance Fund Services, Inc. at the
address or telephone numbers shown on the front cover of this
Statement of Additional Information. This Statement of Additional
Information does not contain all the information set forth in the
Registration Statement filed by the Fund with the Commission under
the Securities Act. Copies of the Registration Statement may be
obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in
Washington, D.C.
68
<PAGE>
______________________________________________________________
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
______________________________________________________________
69
<PAGE>
ALLIANCE INCOME BUILDER FUND
ANNUAL REPORT
OCTOBER 31, 1997
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-47.2%
BANKING & FINANCE-6.7%
Arkwright CSN Trust
9.625%, 8/15/26 (a) $1,000 $ 1,158,827
FBOP Capital Trust
10.20%, 2/06/27 (a) 1,000 1,056,131
Greenpoint Capital Trust I Sub Cap
9.10%, 6/01/27 1,000 1,084,050
Renaissance Capital Trust Ser. B
8.54%, 3/01/27 500 520,625
------------
3,819,633
CONSUMER PRODUCTS & SERVICES-7.4%
BTI Telecom Corp.
10.50%, 9/15/07 (a) 1,000 1,015,000
Calenergy Co., Inc.
7.63%, 10/15/07 1,000 999,442
OpTel Inc. Ser. B
13.00%, 2/15/05 1,000 1,035,000
Time Warner, Inc.
9.15%, 2/01/23 1,000 1,191,829
------------
4,241,271
INDUSTRIAL-18.5%
Anchor Glass Corp.
11.25%, 4/01/05 (a) 1,000 1,090,000
Caliber Systems, Inc.
7.80%, 8/01/06 1,000 1,066,442
Chrysler Corp.
7.45%, 3/01/27 1,000 1,044,817
Hyperion Telecommunications, Inc.
12.25%, 9/01/04 (a) 500 532,500
Insilco Corp.
10.25%, 8/15/07 (a) 500 525,000
Interamericas Units
14.00%, 10/27/07 400 381,000
Intermedia Communications, Inc. Ser. B
Zero coupon, 7/15/07 1,000 660,000
Iridium LLC Capital Corp. Ser. B
14.00%, 7/15/05 2,000 2,110,000
Knology Holding, Inc. Units
11.88%, 10/15/07 1,000 535,000
Metronet Communications Units/Priv Pl
12.00%, 8/15/07 500 562,500
Riverwood International Corp.
10.625%, 8/01/07 (a) 1,000 1,041,250
Southwest Royalties, Inc.
10.50%, 10/15/04 (a) 1,000 997,500
------------
10,546,009
YANKEE BONDS-14.5%
Acindar Industries
11.25%, 2/15/04 1,000 1,000,000
Empresa Electrica Del Norte Grande, SA
7.75%, 3/15/06 (a) 1,685 1,584,743
Inversora de Electrica
9.00%, 9/16/04 (a) 1,000 940,000
Mc-Cuernavaca Trust
9.25%, 7/25/01 (a) 1,383 1,272,039
OPP Petroquica
11.00%, 10/29/04 1,000 920,000
Perez Companc, SA
9.00%, 1/30/04 (a) 1,000 980,000
RAS Laffan Liquid Natural Gas
8.29%, 3/15/14 (a) 1,000 1,050,756
Vicap, SA
11.375%, 5/15/07 (a) 500 515,000
------------
8,262,538
Total Corporate Debt Obligations
(cost $26,263,787) 26,869,451
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON & PREFERRED STOCKS-42.7%
COMMON STOCKS-40.1%
CONSUMER PRODUCTS & SERVICES-10.6%
BROADCASTING & CABLE-0.9%
Comcast Corp. Cl. A. 10,120 $ 278,300
Vodafone Group Plc. (ADR) 4,000 219,500
------------
497,800
DRUGS, HOSPITALS, SUPPLIES &
MEDICAL SERVICES-4.7%
Abbott Laboratories 9,000 551,812
Health Care Property Investors, Inc. 14,000 537,250
Merck & Co., Inc. 10,500 937,125
Schering-Plough Corp. 12,000 672,750
------------
2,698,937
ENTERTAINMENT & LEISURE-1.6%
Carnival Corp. Cl. A. 7,000 339,500
Eastman Kodak Co. 3,200 191,600
Walt Disney Co. 4,500 370,125
------------
901,225
FOODS, BEVERAGES & TOBACCO-0.2%
McDonald's Corp. 2,500 112,031
HOUSEHOLD PRODUCTS-0.2%
Crown Cork & Seal, Inc. 3,500 157,719
MULTI-INDUSTRY-0.5%
Canadian Pacific, Ltd. 9,000 268,312
RETAILING-1.7%
Dayton Hudson Corp. 7,000 439,687
Gap, Inc. 5,000 265,937
May Department Stores Co. 4,800 258,600
------------
964,224
OTHER-0.8%
Jostens, Inc. 11,200 261,100
Newell Co. 5,000 191,875
------------
452,975
------------
6,053,223
FINANCIAL SERVICES-8.3%
BANKING & FINANCE-3.4%
BankAmerica Corp. 4,000 286,000
Morgan Stanley, Chase Manhattan Corp. 4,000 461,500
Morgan Stanley, Dean Witter Discover & Co. 10,000 490,000
First Union Corp. 5,000 245,312
Household International, Inc. 1,000 113,250
NationsBank Corp. 6,000 359,250
------------
1,955,312
BROKERAGE & MONEY MANAGEMENT-0.8%
Legg Mason, Inc. 4,256 208,810
Merrill Lynch & Co., Inc. 4,000 270,500
------------
479,310
INSURANCE-2.4%
American International Group, Inc. 4,200 428,662
Progressive Corp. 2,000 208,500
Travelers Group, Inc. 10,166 711,620
------------
1,348,782
REALTY-1.0%
IRT Property Co. 9,000 110,250
JP Realty, Inc. 8,000 195,000
Storage USA, Inc. 3,000 113,812
Weingarten Realty Investors, Inc. 4,000 159,250
------------
578,312
OTHER-0.7%
American Express Co. 5,000 390,000
------------
4,751,716
6
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
CAPITAL GOODS-6.7%
ELECTRICAL EQUIPMENT-2.6%
Emerson Electric Co. 8,000 $ 419,500
General Electric Co. 16,000 1,033,000
------------
1,452,500
MACHINERY-1.2%
Allied Signal, Inc. 11,000 396,000
United Technologies Corp. 4,500 315,000
------------
711,000
TECHNOLOGY-2.9%
Boeing Co. 6,000 287,250
Hewlett Packard Co. 4,500 277,594
Intel Corp. 10,000 770,000
Texas Instruments, Inc. 3,000 320,063
------------
1,654,907
------------
3,818,407
CONSUMER STAPLES-6.6%
COSMETICS-1.2%
Avon Products, Inc. 3,000 196,500
Gillette Co. 5,500 489,844
------------
686,344
FOODS, BEVERAGES & TOBACCO-4.6%
Anheuser Busch, Inc. 5,000 199,688
Campbell Soup Co. 6,500 335,156
General Mills, Inc. 3,000 198,000
Heinz (H.J.) Co. 7,000 325,063
Hershey Foods Corp. 5,000 276,250
Philip Morris Cos., Inc. 21,300 844,013
Sara Lee Corp. 8,000 409,000
------------
2,587,170
HOUSEHOLD PRODUCTS-0.8%
Proctor & Gamble Co. 7,000 476,000
------------
3,749,514
ENERGY-4.3%
OIL & GAS-4.3%
Chevron Corp. 10,000 829,375
Exxon Corp. 8,000 491,500
Royal Dutch Petroleum Co. 16,000 842,000
Shell Transport & Trading Co. (ADR) 6,000 256,125
------------
2,419,000
UTILITIES-2.0%
ELECTRIC-0.6%
FPL Group, Inc. 5,000 258,438
Houston Industries, Inc. 5,000 108,750
------------
367,188
TELECOMMUNICATION-1.4%
GTE Corp. 9,715 412,280
Southern New England
Telecommunications, Inc. Cl. A 6,000 257,250
U.S. West Communications Group 3,000 119,438
------------
788,968
------------
1,156,156
BASIC INDUSTRIES-0.8%
CHEMICAL-0.8%
Du Pont (EI) De Nemours 6,000 341,250
Monsanto Co. 3,000 128,250
------------
469,500
TRANSPORTATION-0.5%
Knightsbridge Tankers, Ltd. 10,000 300,000
INDUSTRIAL-0.3%
Waste Management, Inc. 6,000 140,250
Total Common Stocks
(cost $15,953,673) 22,857,766
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
PREFERRED STOCKS-2.6%
CONSUMER PRODUCTS & SERVICES-0.1%
Cablevision
pfd., 11.13% 300 $ 33,075
INSURANCE-0.5%
Penncorp Financial Group
pfd., 6.75% 4,000 301,000
REALTY-2.0%
Excel Realty Trust
pfd., 2.13% 5,200 150,800
Pinto Totta International Finance
Cl. A., pfd. (a) 1,000 1,021,482
------------
1,172,282
Total Preferred Stocks
(cost $1,432,632) 1,506,357
Total Common & Preferred Stocks
(cost $17,386,305) 24,364,123
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
CONVERTIBLE BONDS-3.1%
Global Telesystems
8.75%, 6/30/00 $1,000 $ 1,010,000
IRT Property Co.
7.30%, 8/15/03 200 218,000
Liberty Property
8.20%, 7/01/01 200 277,750
Magna International, Inc.
5.00%, 10/15/02 200 256,000
Total Convertible Bonds
(cost $1,634,500) 1,761,750
TIME DEPOSIT-8.4%
Dresdner Bank
5.65%, 11/03/97
(cost $4,700,000) 4,700 4,700,000
TOTAL INVESTMENTS -101.4%
(cost $49,984,592) 57,695,324
Other assets less liabilities-(1.4%) (770,284)
NET ASSETS-100% $ 56,925,040
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31, 1997,
these securities amounted to $14,780,228 or 26.0% of net assets.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements
8
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997 ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $49,984,592) $ 57,695,324
Receivable for investment securities sold 2,166,693
Interest and dividends receivable 520,806
Receivable for capital stock sold 210,712
Total assets 60,593,535
LIABILITIES
Due to custodian 1,880,004
Payable for investment securities purchased 1,463,906
Payable for capital stock redeemed 89,301
Distribution fee payable 48,505
Advisory fee payable 37,494
Accrued expenses 149,285
Total liabilities 3,668,495
NET ASSETS $ 56,925,040
COMPOSITION OF NET ASSETS
Capital stock, at par $ 4,553
Additional paid-in capital 43,865,909
Undistributed net investment income 306,225
Accumulated net realized gain on investments 5,037,621
Net unrealized appreciation of investments 7,710,732
$ 56,925,040
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($2,367,158/
188,377 shares of capital stock issued and outstanding) $12.57
Sales charge--4.25% of public offering price .56
Maximum offering price $13.13
CLASS B SHARES
Net asset value and offering price per share ($8,712,837/
695,180 shares of capital stock issued and outstanding) $12.53
CLASS C SHARES
Net asset value and offering price per share ($45,765,096/
3,663,171 shares of capital stock issued and outstanding) $12.49
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($79,949/6,364 shares of capital stock issued
and outstanding) $12.56
See notes to financial statements.
9
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997 ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest (net of foreign taxes
withheld of $9,994) $ 2,817,674
Dividends 659,528 $ 3,477,202
EXPENSES
Advisory fee 414,735
Distribution fee - Class A 6,194
Distribution fee - Class B 75,635
Distribution fee - Class C 454,253
Administrative 132,000
Custodian 128,528
Audit and legal 102,246
Transfer agency 88,248
Registration 80,731
Directors' fees 23,500
Printing 13,172
Amortization of organization expenses 657
Miscellaneous 11,307
Total expenses 1,531,206
Net investment income 1,945,996
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 5,081,676
Net change in unrealized appreciation
of investments 2,282,273
Net gain on investments 7,363,949
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 9,309,945
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
OCTOBER 31 OCTOBER 31,
1997 1996
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 1,945,996 $ 2,199,994
Net realized gain on investments 5,081,676 3,052,921
Net change in unrealized appreciation
of investments 2,282,273 1,674,306
Net increase in net assets from operations 9,309,945 6,927,221
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (86,312) (76,978)
Class B (271,520) (201,924)
Class C (1,648,855) (2,021,377)
Advisor Class (13,598) -0-
Net realized gain on investments
Class A (100,177) (14,802)
Class B (327,329) (42,369)
Class C (2,292,629) (508,039)
Advisor Class (3,688) -0-
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 86,769 (6,063,958)
Total increase (decrease) 4,652,606 (2,002,226)
NET ASSETS
Beginning of year 52,272,434 54,274,660
End of year (including undistributed net
investment income of $306,225 and $378,639,
respectively) $ 56,925,040 $ 52,272,434
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997 ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Income Builder Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-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 1.00%. Class B shares are currently sold
with a contingent deferred sales charge which declines from 4.00% 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 1.00% 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 an ongoing distribution expense. Advisor Class
shares are offered solely to investors participating in certain fee based
programs and retirement plans. All four classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that each class bears different distribution expenses and
has exclusive voting rights with respect to its distribution plan.
1. SECURITY VALUATION
Investments are stated at value. Portfolio securities traded on a national
securities exchange are valued at the last sale price, or if no sale occurred,
the mean of the bid and asked price at the regular close of the New York Stock
Exchange. Investments for which market quotations are readily available are
valued at the closing price on day of valuation, which are obtained through
market makers. Securities which mature in 60 days or less are valued at
amortized cost which approximates market value, unless this method does not
represent fair value. Securities for which market quotations are not readily
available and restricted securities are valued in good faith at fair value
using methods determined by the Board of Directors.
2. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Dividend income is recorded on the
ex-dividend date. 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 as an adjustment to
interest income.
4. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the shares of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisory Class shares have no distribution fees.
5. 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
resulted in a net increase in undistributed net investment income and a
corresponding decrease in additional paid-in capital. This reclassification had
no effect on net assets.
12
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser") an advisory fee at an annual rate of
.75 of 1% of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly.
Pursuant to the advisory agreement, the Fund may reimburse the Adviser for
certain legal and accounting services provided to the Fund by the Adviser. For
the year ended October 31, 1997, the Fund reimbursed the Adviser for $132,000
of such expenses.
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 $35,806 for the year ended October 31, 1997.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $876 from the sale of Class A shares and $13,978 and
$689 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B and Class C shares, respectively, for the year ended
October 31, 1997.
Brokerage commissions paid on securities transactions for the year ended
October 31, 1997 amounted to $21,506, none of which was paid to affiliated
brokers.
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.)
Such fee is accrued daily and paid monthly. The Agreement provides that the
Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amount of
$1,096,845 and $1,904,160 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 obligations) aggregated $77,643,776 and $81,297,657 respectively,
for the year ended October 31, 1997. There were purchases of $5,112,344 and
sales of $5,065,547 of U.S. government and government agency obligations for
the year ended October 31, 1997.
At October 31, 1997, the cost of investments for federal income tax purposes
was $49,989,792. Accordingly, gross unrealized appreciation of investments was
$8,382,815, and gross unrealized depreciation of investments was $677,283
resulting in net unrealized appreciation of $7,705,532.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 8,000,000,000 shares of $0.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class. Each class consists of 2,000,000,000 authorized shares. Transactions in
capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCT. 31, OCT. 31, OCT. 31, OCT. 31,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 36,302 71,054 $ 548,745 $ 780,984
Shares issued in
reinvestment of
dividends and
distributions 11,880 6,505 137,199 70,930
Shares converted
from Class B 22,644 3,979 163,914 44,062
Shares redeemed (60,181) (34,458) (704,898) (385,149)
Net increase 10,645 47,080 $ 144,960 $ 510,827
CLASS B
Shares sold 288,703 186,705 $ 3,468,817 $ 2,057,991
Shares issued in
reinvestment of
dividends and
distributions 36,947 14,453 427,310 157,642
Shares converted
to Class A (22,677) (3,979) (163,914) (44,062)
Shares redeemed (107,669) (49,596) (1,420,340) (546,791)
Net increase 195,304 147,583 $ 2,311,873 $ 1,624,780
CLASS C
Shares sold 262,637 151,540 $ 3,110,877 $ 1,653,774
Shares issued in
reinvestment of
dividends and
distributions 138,731 90,197 1,592,491 980,210
Shares redeemed (595,288) (985,774) (7,083,061) (10,833,549)
Net decrease (193,920) (744,037) $ (2,379,693) $ (8,199,565)
NOV. 1, 1996* NOV. 1, 1996*
TO TO
OCT. 31, 1997 OCT. 31, 1997
------------- --------------
ADVISOR CLASS
Shares sold 82,970 $ 974,826
Shares issued in
reinvestment of
dividends and
distributions 950 11,604
Shares redeemed (77,556) (976,801)
Net increase 6,364 $ 9,629
* Commencement of distribution
14
FINANCIAL HIGHLIGHTS ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
MARCH 25,
1994(A)
YEAR ENDED OCTOBER 31, TO
------------------------------------- OCTOBER 31,
1997 1996 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.57 $10.70 $ 9.69 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .50(b) .56(b) .93(b) .96
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions 1.62 .98 .59 (1.02)
Net increase (decrease) in net asset
value from operations 2.12 1.54 1.52 (.06)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.51) (.55) (.51) (.04)
Tax return of capital -0- -0- -0- (.01)
Distributions from net realized gains (.61) (.12) -0- (.20)
Total dividends and distributions (1.12) (.67) (.51) (.25)
Net asset value, end of period $12.57 $11.57 $10.70 $ 9.69
TOTAL RETURN
Total investment return based on net
asset value(c) 19.36% 14.82% 16.22% (.54)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $2,367 $2,056 $1,398 $600
Ratio of expenses to average net assets 2.09% 2.20% 2.38% 2.52%(d)
Ratio of net investment income to
average net assets 4.18% 4.92% 5.44% 6.11%(d)
Portfolio turnover rate 159% 108% 92% 126%
Average commission rate (e) $.0513 $.0600 -- --
</TABLE>
See footnote summary on page 18.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------
MARCH 25,
1994(A)
YEAR ENDED OCTOBER 31, TO
------------------------------------- OCTOBER 31,
1997 1996 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.55 $10.70 $ 9.68 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .42(b) .47(b) .63(b) .88
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions 1.61 .98 .83 (.98)
Net increase (decrease) in net asset
value from operations 2.03 1.45 1.46 (.10)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.44) (.48) (.44) (.05)
Tax return of capital -0- -0- -0- (.01)
Distributions from net realized gains (.61) (.12) -0- (.16)
Total dividends and distributions (1.05) (.60) (.44) (.22)
Net asset value, end of period $12.53 $11.55 $10.70 $ 9.68
TOTAL RETURN
Total investment return based on
net asset value(c) 18.53% 13.92% 15.55% (.99)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $8,713 $5,775 $3,769 $1,998
Ratio of expenses to average net assets 2.80% 2.92% 3.09% 3.09%(d)
Ratio of net investment income to
average net assets 3.48% 4.19% 4.73% 5.07%(d)
Portfolio turnover rate 159% 108% 92% 126%
Average commission rate (e) $.0513 $.0600 -- --
</TABLE>
See footnote summary on page 18.
16
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.52 $10.67 $ 9.66 $10.47 $ 9.80
INCOME FROM INVESTMENT OPERATIONS
Net investment income .42(b) .46(b) .40(b) .50 .52
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions 1.60 .99 1.05 (.85) .51
Net increase (decrease) in net asset
value from operations 2.02 1.45 1.45 (.35) 1.03
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.44) (.48) (.44) (.09) (.36)
Tax return of capital -0- -0- -0- (.02) -0-
Distributions from net realized gains (.61) (.12) -0- (.35) -0-
Total dividends and distributions (1.05) (.60) (.44) (.46) (.36)
Net asset value, end of year $12.49 $11.52 $10.67 $ 9.66 $10.47
TOTAL RETURN
Total investment return based on
net asset value(c) 18.50% 13.96% 15.47% (3.44)% 10.65%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $45,765 $44,441 $49,107 $64,027 $106,034
Ratio of expenses to average net assets 2.80% 2.93% 3.02% 2.67% 2.32%
Ratio of net investment income to
average net assets 3.49% 4.13% 4.81% 3.82% 6.85%
Portfolio turnover rate 159% 108% 92% 126% 101%
Average commission rate (e) $.0513 $.0600 -- -- --
</TABLE>
See footnote summary on page 18.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING FOR THE PERIOD
ADVISOR CLASS
---------------------
NOVEMBER 1, 1996(A)
TO
OCTOBER 31, 1997
---------------------
Net asset value, beginning of period $11.57
INCOME FROM INVESTMENT OPERATIONS
Net investment income .61(b)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 1.53
Net increase (decrease) in net asset value
from operations 2.14
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.54)
Distributions from net realized gains (.61)
Total dividends and distributions (1.15)
Net asset value, end of period $12.56
TOTAL RETURN
Total investment return based on net asset value(c) 19.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $80
Ratio of expenses to average net assets 1.68%
Ratio of net investment income to average net assets 4.55%
Portfolio turnover rate 159%
Average commission rate (e) $.0513
(a) Commencement of distribution.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or charge or
contingent deferred sales charge is not reflected in the calculation of total
investment return. Total investment return calculated for a period of less than
one year is not annualized.
(d) Annualized.
(e) For fiscal years beginning on or after September 1, 1995, a Fund is
required to disclose its average commission rate per share for trades on which
commissions are charged. This amount includes commissions paid to foreign
brokers which may materially affect the rate shown. Amounts paid in foreign
currencies have been converted into US dollars using the prevailing exchange
rate on the date of the transaction.
18
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCE INCOME BUILDER FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance Income Builder Fund, Inc. (the "Fund"), including the portfolio of
investments, as of October 31, 1997, 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
October 31, 1997, 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 Income Builder Fund, Inc. at October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the indicated periods, in conformity with generally accepted accounting
principles.
New York, New York
December 10, 1997
19
<PAGE>
ALLIANCE INCOME BUILDER FUND
SEMI-ANNUAL REPORT
APRIL 30, 1998
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
APRIL 30, 1998 (UNAUDITED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- ---------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-45.8%
BANKING & FINANCE-6.0%
Advanta Capital Trust 8.99%, 12/17/26 $ 1,000 $ 801,250
Arkwright CSN TR 9.63%, 8/15/26 (a) 1,000 1,148,258
DTI Holdings, Inc., Units 12.50%, 3/01/08 1,000 572,500
FBOP Capital Trust 10.20%, 2/06/27 (a) 1,000 1,078,746
------------
3,600,754
CONSUMER PRODUCTS & SERVICES-3.5%
OpTel Inc., Series B 13.00%, 2/15/05 (b) 1,000 1,122,500
TCI Communications, Inc. 7.13%, 2/15/28 1,000 991,778
------------
2,114,278
INDUSTRIAL-20.8%
American Banknote Corp. 11.25%, 12/01/07 (a) 1,000 1,007,500
American Mobile Units 12.25%, 4/01/08 1,000 1,020,000
Caliber Systems, Inc. 7.80%, 8/01/06 1,000 1,075,578
Econophone, Inc. Zero Coupon, 2/15/08 (a) 2,000 1,140,000
Facilicom International
10.50%, 1/15/08 (a) 500 517,500
Firstworld Communication Units
13.00%, 4/15/08 (a) 1,000 510,000
Insilco Corp. 10.25%, 8/15/07 500 527,500
Interamericas Units 14.00%, 10/27/07 400 409,000
Iridium LLC Capital Corp. Series B
14.00%, 7/15/05 1,000 1,140,000
KMC Telecom Holdings, Inc. Units
12.50%, 2/15/08 (a) 1,000 610,000
Long Distance International Units
12.25%, 4/15/08 (a) 1,000 1,005,000
Louis Dreyfus Natural Gas 6.88%,
12/01/07 1,000 988,120
Riverwood International Corp. 10.63%, 8/01/07 1,000 1,057,500
Southwest Royalties, Inc. Series B
10.50%, 10/15/04 1,000 900,000
Viatel, Inc. Units 12.50%, 4/15/08 1,000 610,000
------------
12,517,698
UTILITIES-3.4%
Calenergy Co., Inc. 7.63%, 10/15/07 1,000 1,002,179
Comed Financing II Series B 8.50%, 1/15/27 1,000 1,068,723
------------
2,070,902
YANKEE BONDS-10.4%
Acindar Industries 11.25%, 2/15/04 1,000 1,052,500
Dao Heng Bank, Ltd. 7.75%, 1/24/07 (a) 500 440,625
Empresa Electrica Del Norte Grande, SA
7.75%, 3/15/06 (a) 1,685 1,492,472
Mc-Cuernavaca Trust 9.25%, 7/25/01 (a) 1,237 1,181,332
Perez Companc, SA 9.00%, 1/30/04 (a) 500 510,000
Tevecap, SA 12.63%, 11/26/04 1,000 1,017,500
Vicap, SA 11.38%, 5/15/07 (a) 500 550,000
------------
6,244,429
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
OTHER-1.7%
SB Treasury Co. LLC Series A, pfd.
9.40%, 12/29/49 (a) $1,000 $ 1,016,978
Total Corporate Debt Obligations
(cost $27,045,168) 27,565,039
COMMON STOCKS & OTHER INVESTMENTS-41.9%
COMMON STOCKS-39.2%
CONSUMER PRODUCTS & SERVICES-10.8%
BROADCASTING & CABLE-0.4%
Comcast Corp. Cl. A 7,120 254,985
DRUGS, HOSPITALS, SUPPLIES &
MEDICAL SERVICES-5.2%
Abbott Laboratories 5,000 365,625
Becton, Dickinson & Co. 2,000 139,250
Bristol-Myers Squibb Co. 6,000 635,250
Health Care Property Investors, Inc. 14,000 472,500
Merck & Co., Inc. 7,000 843,500
Schering-Plough Corp. 8,500 681,062
------------
3,137,187
ENTERTAINMENT & LEISURE-1.5%
Carnival Corp. Cl. A 5,000 347,812
Walt Disney Co. 4,500 559,406
------------
907,218
MULTI-INDUSTRY-0.3%
Canadian Pacific, Ltd. 5,000 147,188
PACKAGING-0.3%
Crown Cork & Seal, Inc. 3,500 182,219
RETAILING-1.7%
Dayton Hudson Corp. 5,000 436,563
Gap, Inc. 1,500 77,156
May Department Stores Co. 1,500 92,531
Wal-Mart Stores, Inc. 8,000 404,500
------------
1,010,750
OTHER-1.4%
Jostens, Inc. 14,700 348,206
Newell Co. 5,000 241,563
Donnelley (R.R.) & Sons Co. 5,500 242,344
------------
832,113
------------
6,471,660
FINANCIAL SERVICES-8.2%
BANKING & FINANCE-2.3%
BankAmerica Corp. 4,000 340,000
Chase Manhattan Corp. 3,500 484,969
NationsBank Corp. 7,000 530,250
------------
1,355,219
BROKERAGE & MONEY MANAGEMENT-1.9%
Legg Mason, Inc. 4,256 251,104
Merrill Lynch & Co., Inc. 4,500 394,875
Morgan Stanley, Dean Witter & Co. 6,500 512,687
------------
1,158,666
INSURANCE-2.6%
American International Group, Inc. 4,200 552,562
Progressive Corp. 2,000 270,875
Travelers Group, Inc. 12,249 749,486
------------
1,572,923
REALTY-1.2%
Excel Legacy Corp. (c) 4,988 26,187
Excel Realty Trust, Inc. 4,988 133,429
IRT Property Co. 9,000 104,625
6
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
JP Realty, Inc. 8,000 $ 193,500
Storage USA, Inc. 3,000 113,625
Weingarten Realty Investors, Inc. 4,000 170,500
------------
741,866
OTHER-0.2%
American Banknote Corp.
warrants, expiring 12/01/02 (a)(c) 1,000 1,000
American Express Co. 1,000 102,000
------------
103,000
------------
4,931,674
CAPITAL GOODS-6.5%
AEROSPACE-0.4%
Boeing Co. 4,000 200,250
ELECTRICAL EQUIPMENT-2.6%
Emerson Electric Co. 6,200 394,475
General Electric Co. 14,000 1,191,750
------------
1,586,225
MACHINERY-1.4%
Allied Signal, Inc. 11,000 481,938
United Technologies Corp. 3,500 344,531
------------
826,469
POLLUTION CONTROL-0.3%
Waste Management, Inc. 6,000 201,000
TECHNOLOGY-1.8%
Hewlett Packard Co. 4,500 338,906
Intel Corp. 7,000 565,687
Texas Instruments, Inc. 3,000 192,188
------------
1,096,781
------------
3,910,725
CONSUMER STAPLES-6.5%
COSMETICS-1.5%
Avon Products, Inc. 4,000 328,750
Gillette Co. 5,000 577,187
------------
905,937
FOODS, BEVERAGES & TOBACCO-4.1%
Campbell Soup Co. 8,000 $410,500
Heinz (H.J.) Co. 6,000 327,000
Hershey Foods Corp. 5,000 366,250
McDonald's Corp. 2,500 154,688
Philip Morris Cos., Inc. 21,300 794,756
Sara Lee Corp. 7,000 416,938
------------
2,470,132
HOUSEHOLD PRODUCTS-0.9%
Proctor & Gamble Co. 6,500 534,219
------------
3,910,288
ENERGY-4.1%
OIL & GAS-3.6%
Chevron Corp. 8,000 661,500
Exxon Corp. 8,000 583,500
Royal Dutch Petroleum Co. 12,000 678,750
Shell Transport & Trading Co. (ADR) 6,000 266,625
------------
2,190,375
TRANSPORTATION-0.5%
Knightsbridge Tankers, Ltd. 10,000 287,500
------------
2,477,875
UTILITIES-2.4%
ELECTRIC-0.7%
FPL Group, Inc. 5,000 310,312
Houston Industries, Inc. 5,000 145,313
------------
455,625
TELECOMMUNICATIONS-1.7%
GTE Corp. 9,715 567,720
Southern New England Telecommunications,
Inc. Cl. A 4,000 280,000
U.S. West Communications Group 3,000 158,250
------------
1,005,970
------------
1,461,595
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
BASIC INDUSTRIES-0.7%
CHEMICAL-0.7%
Du Pont (Ei) De Nemours 4,000 $ 291,250
Praxair, Inc. 3,000 150,938
------------
442,188
Total Common Stocks
(cost $14,475,534) 23,606,005
PREFERRED STOCKS-2.7%
BANKING & FINANCE-0.6%
NB Capital Trust I pfd., 7.84% 15,000 383,437
INDUSTRIAL-0.1%
CSC Holdings, Inc., pfd., Series M 11.13% 316 36,340
INSURANCE-0.3%
Penncorp Financial Group pfd., 3.38% 3,000 180,750
REALTY-1.7%
Pinto Totta International Finance
Cl. A, pfd. (a) 1,000 1,019,890
Total Preferred Stocks
(cost $1,619,638) 1,620,417
Total Common Stocks & Other Investments
(cost $16,095,172) 25,226,422
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
GOVERNMENT OBLIGATION-1.6%
Republic of Colombia 8.63%, 4/01/08
(cost $998,554) $1,000 $ 1,000,000
CONVERTIBLE BONDS-1.2%
IRT Property Co. 7.30%, 8/15/03 200 206,500
Liberty Property 8.20%, 7/01/01 200 257,500
Magna International, Inc. 5.00%, 10/15/02 200 277,250
Total Convertible Bonds (cost $624,500) 741,250
TIME DEPOSIT-8.8%
Rabobank 5.44%, 5/01/98 (cost $5,300,000) 5,300 5,300,000
TOTAL INVESTMENTS-99.3%
(cost $50,063,394) 59,832,711
Other assets less liabilities-0.7% 396,842
NET ASSETS-100% $ 60,229,553
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30, 1998,
these securities amounted to $13,229,301 or 22.0% of net assets.
(b) Consists of $1,000,000 senior notes and 1,000 shares of common stock.
(c) Non-income producing security.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $50,063,394) $ 59,832,711
Cash 129,841
Receivable for investment securities sold 5,365,303
Interest and dividends receivable 618,152
Receivable for capital stock sold 64,501
Other assets 3,675
Total assets 66,014,183
LIABILITIES
Payable for investment securities purchased 5,364,992
Payable for capital stock redeemed 191,667
Distribution fee payable 47,944
Advisory fee payable 37,287
Accrued expenses 142,740
Total liabilities 5,784,630
NET ASSETS $ 60,229,553
COMPOSITION OF NET ASSETS
Capital stock, at par $ 4,784
Additional paid-in capital 46,405,681
Undistributed net investment income 268,536
Accumulated net realized gain on investments 3,781,235
Net unrealized appreciation of investments 9,769,317
$ 60,229,553
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($3,008,588 / 237,487 shares of capital stock
issued and outstanding) $12.67
Sales charge--4.25% of public offering price 0.56
Maximum offering price $13.23
CLASS B SHARES
Net asset value and offering price per share
($11,131,907 / 881,916 shares of capital stock
issued and outstanding) $12.62
CLASS C SHARES
Net asset value and offering price per share
($45,988,045 / 3,656,122 shares of capital stock
issued and outstanding) $12.58
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($101,013 / 7,975 shares of capital stock
issued and outstanding) $12.67
See notes to financial statements.
9
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 1,488,697
Dividends (net of foreign taxes
withheld of $889) 287,185 $ 1,775,882
EXPENSES
Advisory fee 216,552
Distribution fee - Class A 3,955
Distribution fee - Class B 48,675
Distribution fee - Class C 226,449
Custodian 78,100
Administrative 63,235
Registration 49,848
Audit and legal 45,886
Transfer agency 19,583
Directors' fees 16,916
Printing 9,264
Miscellaneous 18,038
Total expenses 796,501
Net investment income 979,381
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 3,660,643
Net change in unrealized appreciation of investments 2,058,585
Net gain on investments 5,719,228
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,698,609
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997
---------------- -----------
INCREASE IN NET ASSETS
FROM OPERATIONS
Net investment income $979,381 $1,945,996
Net realized gain on
investment transactions 3,660,643 5,081,676
Net change in unrealized appreciation
of investments 2,058,585 2,282,273
Net increase in net assets
from operations 6,698,609 9,309,945
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (52,626) (86,312)
Class B (170,009) (271,520)
Class C (792,604) (1,648,855)
Advisor Class (1,831) (13,598)
Net realized gain on investments
Class A (209,838) (100,177)
Class B (797,991) (327,329)
Class C (3,902,121) (2,292,629)
Advisor Class (7,079) (3,688)
CAPITAL STOCK TRANSACTIONS
Net increase 2,540,003 86,769
Total increase 3,304,513 4,652,606
NET ASSETS
Beginning of year 56,925,040 52,272,434
End of period (including
undistributed net investment
income of $268,536 and $306,225,
respectively) $60,229,553 $56,925,040
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Income Builder Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-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 1.00%. Class B shares are currently sold
with a contingent deferred sales charge which declines from 4.00% 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 1.00% 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 an ongoing distribution expense. 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 and the same terms and
conditions, 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 sale price, if there was no sale on such
day, the last bid price quoted on such day. If no bid prices are quoted, then
the security is valued at the mean of the bid and asked prices as obtained on
that day from one or more dealers regularly making a market in that security.
Securities traded on the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the United States
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 closing bid and asked price provided by two or more dealers regularly
making a market in such securities. U.S. government securities and other debt
securities which mature in 60 days or less are valued at amortized cost unless
this method does not represent fair value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by, or in accordance with procedures approved by, the Board of
Directors. 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.
2. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Dividend income is recorded on the
ex-dividend date. 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 as an adjustment to
interest income.
4. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the shares of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisor Class shares have no distribution fees.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
12
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
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.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser") an advisory fee at an annual rate of
.75 of 1% of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly.
Pursuant to the advisory agreement, the Fund may reimburse the Adviser for
certain legal and accounting services provided to the Fund by the Adviser. For
the six months ended April 30, 1998, the Fund reimbursed the Adviser for
$63,235 of such expenses.
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 $19,704 for the six months ended April 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
front-end sales charges of $1,282 from the sale of Class A shares and $12,540
and $3,521 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B and Class C shares, respectively, for the six months
ended April 30, 1998.
Brokerage commissions paid on securities transactions for the six months ended
April 30, 1998 amounted to $8,953 none of which was paid to affiliated brokers.
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. Such
fee is accrued daily and paid monthly. The Agreement provides that the
Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amount of
$1,964,822 and $1,358,381 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 obligations) aggregated $19,949,612 and $24,194,633 respectively,
for the six months ended April 30, 1998. There were purchases of $1,589,453 and
sales of $1,605,820 of U.S. government and government agency obligations for
the six months ended April 30, 1998.
At April 30, 1998, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $10,217,575 and
gross unrealized depreciation of investments was $448,258 resulting in net
unrealized appreciation of $9,769,317.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 8,000,000,000 shares of $0.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class. Each class consists of 2,000,000,000 authorized shares. Transactions in
capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
------------ ------------ -------------- --------------
CLASS A
Shares sold 38,151 36,302 $ 599,942 $ 548,745
Shares issued in
reinvestment of
dividends and
distributions 15,685 11,880 185,538 137,199
Shares converted
from Class B 18,854 22,644 100,015 163,914
Shares redeemed (23,580) (60,181) (294,541) (704,898)
Net increase 49,110 10,645 $590,954 $144,960
CLASS B
Shares sold 219,686 288,703 $ 2,714,861 $ 3,468,817
Shares issued in
reinvestment of
dividends and
distributions 60,149 36,947 709,031 427,310
Shares converted
to Class A (18,876) (22,677) (100,015) (163,914)
Shares redeemed (74,223) (107,669) (1,053,975) (1,420,340)
Net increase 186,736 195,304 $ 2,269,902 $ 2,311,873
CLASS C
Shares sold 212,270 262,637 $ 2,511,429 $ 3,110,877
Shares issued in
reinvestment of
dividends and
distributions 167,811 138,731 1,971,096 1,592,491
Shares redeemed (387,130) (595,288) (4,823,152) (7,083,061)
Net decrease (7,049) (193,920) $(340,627) $ (2,379,693)
NOVEMBER 1, 1996* NOVEMBER 1, 1996*
TO TO
OCTOBER 31, 1997 OCTOBER 31, 1997
------------ ------------ -------------- --------------
ADVISOR CLASS
Shares sold 1,437 82,970 $ 17,709 $ 974,826
Shares issued in
reinvestment of
dividends and
distributions 174 950 2,065 11,604
Shares redeemed -0- (77,556) -0- (976,801)
Net increase 1,611 6,364 $ 19,774 $ 9,629
* Commencement of distribution.
14
FINANCIAL HIGHLIGHTS ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
MARCH 25,
SIX MONTHS 1994(A)
ENDED YEAR ENDED OCTOBER 31, TO
APRIL 30,1998 ------------------------------------- OCTOBER 31,
(UNAUDITED) 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.57 $11.57 $10.70 $ 9.69 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .38(b) .50(b) .56(b) .93(b) .96
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.08 1.62 .98 .59 (1.02)
Net increase (decrease) in net asset
value from operations 1.46 2.12 1.54 1.52 (.06)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.25) (.51) (.55) (.51) (.04)
Tax return of capital -0- -0- -0- -0- (.01)
Distributions from net realized gains (1.11) (.61) (.12) -0- (.20)
Total dividends and distributions (1.36) (1.12) (.67) (.51) (.25)
Net asset value, end of period $12.67 $12.57 $11.57 $10.70 $ 9.69
TOTAL RETURN
Total investment return based on net
asset value (c) 12.55% 19.36% 14.82% 16.22% (.54)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,009 $2,367 $2,056 $1,398 $600
Ratio of expenses to average net assets 2.09%(d) 2.09% 2.20% 2.38% 2.52%(d)
Ratio of net investment income to
average net assets 6.17%(d) 4.18% 4.92% 5.44% 6.11%(d)
Portfolio turnover rate 140% 159% 108% 92% 126%
</TABLE>
See footnote summary on page 18.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
MARCH 25,
SIX MONTHS 1994(A)
ENDED YEAR ENDED OCTOBER 31, TO
APRIL 30, 1998 ------------------------------------- OCTOBER 31,
(UNAUDITED) 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.53 $11.55 $10.70 $ 9.68 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .38(b) .42(b) .47(b) .63(b) .88
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.04 1.61 .98 .83 (.98)
Net increase (decrease) in net asset
value from operations 1.42 2.03 1.45 1.46 (.10)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.22) (.44) (.48) (.44) (.05)
Tax return of capital -0- -0- -0- -0- (.01)
Distributions from net realized gains (1.11) (.61) (.12) -0- (.16)
Total dividends and distributions (1.33) (1.05) (.60) (.44) (.22)
Net asset value, end of period $12.62 $12.53 $11.55 $10.70 $ 9.68
TOTAL RETURN
Total investment return based on net
asset value (c) 12.20% 18.53% 13.92% 15.55% (.99)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $11,132 $8,713 $5,775 $3,769 $1,998
Ratio of expenses to average net assets 2.79%(d) 2.80% 2.92% 3.09% 3.09%(d)
Ratio of net investment income to
average net assets 6.17%(d) 3.48% 4.19% 4.73% 5.07%(d)
Portfolio turnover rate 140% 159% 108% 92% 126%
</TABLE>
See footnote summary on page 18.
16
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1998 --------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.49 $11.52 $10.67 $ 9.66 $10.47 $ 9.80
INCOME FROM INVESTMENT OPERATIONS
Net investment income .38(b) .42(b) .46(b) .40(b) .50 .52
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.04 1.60 .99 1.05 (.85) .51
Net increase (decrease) in net asset
value from operations 1.42 2.02 1.45 1.45 (.35) 1.03
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.22) (.44) (.48) (.44) (.09) (.36)
Tax return of capital -0- -0- -0- -0- (.02) -0-
Distributions from net realized gains (1.11) (.61) (.12) -0- (.35) -0-
Total dividends and distributions (1.33) (1.05) (.60) (.44) (.46) (.36)
Net asset value, end of period $12.58 $12.49 $11.52 $10.67 $ 9.66 $10.47
TOTAL RETURN
Total investment return based on net
asset value (c) 12.24% 18.50% 13.96% 15.47% (3.44)% 10.65%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $45,988 $45,765 $44,441 $49,107 $64,027 $106,034
Ratio of expenses to average net assets 2.79%(d) 2.80% 2.93% 3.02% 2.67% 2.32%
Ratio of net investment income to
average net assets 6.15%(d) 3.49% 4.13% 4.81% 3.82% 6.85%
Portfolio turnover rate 140% 159% 108% 92% 126% 101%
</TABLE>
See footnote summary on page 18.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
----------------------------
NOVEMBER 1,
SIX MONTHS 1996(A)
ENDED TO
APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997
-------------- ------------
Net asset value, beginning of period $12.56 $11.57
INCOME FROM INVESTMENT OPERATIONS
Net investment income .38(b) .61(b)
Net realized and unrealized gain
on investment transactions 1.11 1.53
Net increase in net asset
value from operations 1.49 2.14
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.27) (.54)
Distributions from net realized gains (1.11) (.61)
Total dividends and distributions (1.38) (1.15)
Net asset value, end of period $12.67 $12.56
TOTAL RETURN
Total investment return based on net
asset value (c) 12.81% 19.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $101 $80
Ratio of expenses to average net assets 1.79%(d) 1.68%
Ratio of net investment income to
average net assets 6.18%(d) 4.55%
Portfolio turnover rate 140% 159%
(a) Commencement of distribution.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(d) Annualized.
18
<PAGE>
_______________________________________________________________
APPENDIX A: DESCRIPTION OF OBLIGATIONS ISSUED OR
GUARANTEED BY U.S. GOVERNMENT AGENCIES OR INSTRUMENTALITIES
_______________________________________________________________
Federal Farm Credit System Notes and Bonds -- are bonds
issued by a cooperatively owned nationwide system of banks and
associations supervised by the Farm Credit Administration, an
independent agency of the U.S. Government. These bonds are not
guaranteed by the U.S. Government.
Maritime Administration Bonds -- are bonds issued and
provided by the Department of Transportation of the U.S.
Government and are guaranteed by the U.S. Government.
FHA Debentures -- are debentures issued by the Federal
Housing Administration of the U.S. Government and are guaranteed
by the U.S. Government.
GNMA Certificates are mortgage-backed securities which
represent a partial ownership interest in a pool of mortgage loans
issued by lenders such as mortgage bankers, commercial banks and
savings and loan associations. Each mortgage loan included in the
pool is either insured by the Federal Housing Administration or
guaranteed by the Veterans Administration.
FHLMC Bonds -- are bonds issued and guaranteed by the
Federal Home Loan Mortgage Corporation.
FNMA Bonds -- are bonds issued and guaranteed by the
Federal National Mortgage Association.
Federal Home Loan Bank Notes and Bonds -- are notes and
bonds issued by the Federal Home Loan Bank System and are not
guaranteed by the U.S. Government.
Student Loan Marketing Association ("Sallie Mae") Notes
and Bonds -- are notes and bonds issued by the Student Loan
Marketing Association.
Although this list includes a description of the primary
types of U.S. Government agency or instrumentality obligations in
which the Fund intends to invest, the Fund may invest in
obligations of U.S. Government agencies or instrumentalities other
than those listed above.
A-1
<PAGE>
________________________________________________________________
APPENDIX B: BOND AND COMMERCIAL PAPER RATINGS
________________________________________________________________
Standard & Poor's Bond Ratings
A Standard & Poor's municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a
specific obligation. Debt rated "AAA" has the highest rating
assigned by Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong. Debt rated "AA" has a very strong
capacity to pay interest and to repay principal and differs from
the highest rated issues only in small degree. Debt rated "A" has
a strong capacity to pay interest and repay principal although it
is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than a debt of a higher
rated category. Debt rated "BBB" is regarded as having an
adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and to repay principal for debt
in this category than for higher rated categories.
Debt rated "BB", "B", "CCC" or "CC" is regarded, on
balance, as predominately speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of
the obligation. "BB" indicates the lowest degree of speculation
and "CC" the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to
adverse conditions. The rating "C" is reserved for income bonds
on which no interest is being paid. Debt rated "D" is in default
and payments of interest and/or repayment of principal are in
arrears.
The ratings from "AAA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within
the major rating categories.
Moody's Bond Ratings
Excerpts from Moody's description of its municipal bond
ratings: Aaa - judged to be the best quality, carry the smallest
degree of investment risk; Aa - judged to be of high quality by
all standards; A - possess many favorable investment attributes
and are to be considered as higher medium grade obligations; Baa -
considered as medium grade obligations, i.e., they are neither
highly protected nor poorly secured and have speculative
characteristics as well; Ba, B, Caa, Ca, C - protection of
interest and principal payments is questionable; Ba indicates some
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speculative elements while Ca represents a high degree of
speculation and C represents the lowest rated class of bonds; Caa,
Ca and C bonds may be in default. Moody's applies numerical
modifiers 1, 2 and 3 in each generic rating classification from Aa
to B in its corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks at the lower end of
its generic rating category.
Duff & Phelps Long-Term Rating Scale
AAA: Highest credit quality. The risk factors are
negligible.
AA+, AA, AA-: High credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A+, A, A-: Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of
economic stress.
BBB+, BBB, BBB-: Below average protection factors but
still considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
BB+, BB, BB-: Below investment grade but deemed likely
to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or
company fortunes. Overall quality may move up or down frequently
within this category.
B+, B, B-: Below investment grade and possessing risk
that obligations will not be met when due. Financial protection
factors will fluctuate widely according to economic cycles,
industry conditions and/or company fortunes. Potential exists for
frequent changes in the rating within this category or into a
higher or lower rating grade.
CCC: Well below investment grade securities.
Considerable uncertainty exists as to timely payment of principal,
interest or preferred dividends. Protection factors are narrow
and risk can be substantial with unfavorable economic/industry
conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet
scheduled principal and/or interest payments.
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Fitch IBCA, Inc. Bond Ratings
AAA. Securities of this rating are regarded as strictly
high-grade, broadly marketable, suitable for investment by
trustees and fiduciary institutions, and liable to but slight
market fluctuation other that through changes in the money rate.
The factor last named is of importance varying with the length of
maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public utility
fields, though some industrial obligations have this rating. The
prime feature of an AAA rating is showing of earnings several
times or many times interest requirements with such stability of
applicable earnings that safety is beyond reasonable question
whatever changes occur in conditions. Other features may enter
in, such as a wide margin of protection through collateral
security or direct lien on specific property as in the case of
high class equipment certificates or bonds that are first
mortgages on valuable real estate. Sinking funds or voluntary
reduction of the debt by call or purchase are often factors, while
guarantee or assumption by parties other than the original debtor
may also influence the rating.
AA. Securities in this group are of safety virtually
beyond question, and as a class are readily salable while many are
highly active. Their merits are not greatly unlike those of the
AAA class, but a security so rated may be of junior though strong
lien -- in many cases directly following an AAA security -- or the
margin of safety is less strikingly broad. The issue may be the
obligation of a small company, strongly secured but influenced as
to ratings by the lesser financial power of the enterprise and
more local type of market.
A. A securities are strong investments and in many cases
of highly active market, but are not so heavily protected as the
two upper classes or possibly are of similar security but less
quickly salable. As a class they are more sensitive in standing
and market to material changes in current earnings of the company.
With favoring conditions such securities are likely to work into a
high rating, but in occasional instances changes cause the rating
to be lowered.
BBB. BBB rated bonds are considered to be investment
grade and of satisfactory quality. The obligor's ability to pay
interest and repay principal is considered to be adequate. Adverse
changes in economic conditions and circumstances, however, are
more likely to weaken this ability than bonds with higher ratings.
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Fitch Commercial Paper and
Certificate of Deposit Ratings
Fitch Commercial Paper Ratings are assigned at the
request of an issuer to debt obligations with an original maturity
not in excess of 270 days. The ratings reflect Fitch current
appraisal of the degree of assurance of timely payment of such
debt. Fitch compensated for this service by an annual fee paid by
the issuer under a contractual agreement which specifies among
other things that ratings may be changed or withdrawn at any time
if, in Fitch's sole judgment, changing circumstances warrant such
action.
Fitch Certificate of Deposit Ratings are assigned at the
request of the issuer to deposits with maturities of up to three
years. Ratings apply to uninsured principal and interest and
reflect only those credit characteristics inherent in certificates
of deposit. Such ratings should be considered only in the context
of ratings assigned to certificates of deposit and not to ratings
which may be assigned to non-deposit liabilities. Ratings for CDs
with maturities over 3 years will be assigned bond rating symbols.
For definitions refer to page 1 of the Rating Register.
Fitch commercial paper ratings are grouped into four
categories, two of which are defined below:
Fitch-1 (Highest Grade) Commercial paper assigned this
rating is regarded as having the strongest degree of assurance for
timely payment.
Fitch-2 (Very Good Grade) issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than the strongest issues.
Fitch Investment Note Ratings
Fitch investment Note Ratings are grouped into four
categories with the indicated symbols. The ratings on notes with
maturities generally up to three years reflect Fitch's current
appraisal of the degree of assurance of timely payment, whatever
the source.
FIN-1 -- Notes assigned this rating are regarded as
having the strongest degree of assurance for timely payment.
FIN-2 -- Notes assigned this rating reflect a degree of
assurance for timely payment only slightly less in degree than the
highest category.
A plus symbol may be used in the three highest categories
to indicate relative standing. The Note Ratings will usually
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correspond with Bond Ratings, although certain security
enhancements or market access may mean that notes will not track
bond.
Further Rating Distinctions
While ratings provide an assessment of the obligor's
capacity to pay debt service, it should be noted that the
definition of obligor expands as layers of security are added. If
municipal securities are guaranteed by third parties then the
"underlying" issuers as well as the "primary" issuer will be
evaluated during the rating process. In some cases, depending on
the scope of the guaranty, such as bond insurance, bank letters of
credit or collateral, the credit enhancement will provide the sole
basis for the rating given.
Minimum Rating(s) Requirements
For minimum rating(s) requirements for the Fund's
securities, please refer to "Description of the Fund" in the
Prospectus.
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_______________________________________________________________
APPENDIX C: OPTIONS
_______________________________________________________________
Options
The Fund will only write "covered" put and call options,
unless such options are written for cross-hedging purposes. The
manner in which such options will be deemed "covered" is described
in the Prospectus under the heading "Investment Objective and
Policies -- Investment Practices -- Options."
The writer of an option may have no control over when the
underlying securities must be sold, in the case of a call option,
or purchased, in the case of a put option, since with regard to
certain options, the writer may be assigned an exercise notice at
any time prior to the termination of the obligation. Whether or
not an option expires unexercised, the writer retains the amount
of the premium. This amount, of course, may, in the case of a
covered call option, be offset by a decline in the market value of
the underlying security during the option period. If a call
option is exercised, the writer experiences a profit or loss from
the sale of the underlying security. If a put option is
exercised, the writer must fulfill the obligation to purchase the
underlying security at the exercise price, which will usually
exceed the then market value of the underlying security.
The writer of a listed option that wishes to terminate
its obligation may effect a "closing purchase transaction." This
is accomplished by buying an option of the same series as the
option previously written. The effect of the purchase is that the
writer's position will be canceled by the clearing corporation.
However, a writer may not effect a closing purchase transaction
after being notified of the exercise of an option. Likewise, an
investor who is the holder of a listed option may liquidate its
position by effecting a "closing sale transaction." This is
accomplished by selling an option of the same series as the option
previously purchased. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
Effecting a closing transaction in the case of a written
call option will permit the Fund to write another call option on
the underlying security with either a different exercise price or
expiration date or both, or in the case of a written put option
will permit the Fund to write another put option to the extent
that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction will
permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other Fund
investments. If the Fund desires to sell a particular security
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from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale
of the security.
The Fund will realize a profit from a closing transaction
if the price of the transaction is less than the premium received
from writing the option or is more than the premium paid to
purchase the option; the Fund will realize a loss from a closing
transaction if the price of the transaction is more than the
premium received from writing the option or is less than the
premium paid to purchase the option. Because increases in the
market price of a call option will generally reflect increases in
the market price of the underlying security, any loss resulting
from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned
by the Fund.
An option position may be closed out only where there
exists a secondary market for an option of the same series. If a
secondary market does not exist, it might not be possible to
effect closing transactions in particular options with the result
that the Fund would have to exercise the options in order to
realize any profit. If the Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able to
sell the underlying security until the option expires or it
delivers the underlying security upon exercise. Reasons for the
absence of a liquid secondary market include the following:
(i) there may be insufficient trading interest in certain options,
(ii) restrictions may be imposed by a national securities exchange
("Exchange") on opening transactions or closing transactions or
both, (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options
or underlying securities, (iv) unusual or unforeseen circumstances
may interrupt normal operations on an Exchange, (v) the facilities
of an Exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume, or (vi) one or
more Exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of
options (or a particular class or series of options), in which
event the secondary market on that Exchange (or in that class or
series of options) would cease to exist, although outstanding
options on that Exchange that had been issued by the Options
Clearing Corporation as a result of trades on that Exchange would
continue to be exercisable in accordance with their terms.
The Fund may write options in connection with buy-and-
write transactions; that is, the Fund may purchase a security and
then write a call option against that security. The exercise
price of the call the Fund determines to write will depend upon
the expected price movement of the underlying security. The
exercise price of a call option may be below ("in-the-money"),
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equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option is
written. Buy-and-write transactions using in-the-money call
options may be used when it is expected that the price of the
underlying security will remain flat or decline moderately during
the option period. Buy-and-write transactions using at-the-money
call options may be used when it is expected that the price of the
underlying security will remain fixed or advance moderately during
the option period. Buy-and-write transactions using out- of-the-
money call options may be used when it is expected that the
premiums received from writing the call option plus the
appreciation in the market price of the underlying security up to
the exercise price will be greater than the appreciation in the
price of the underlying security alone. If the call options are
exercised in such transactions, the Fund's maximum gain will be
the premium received by it for writing the option, adjusted
upwards or downwards by the difference between the Fund's purchase
price of the security and the exercise price. If the options are
not exercised and the price of the underlying security declines,
the amount of such decline will be offset in part, or entirely, by
the premium received.
The writing of covered put options is similar in terms of
risk/return characteristics to buy-and-write transactions. If the
market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless and
the Fund's gain will be limited to the premium received. If the
market price of the underlying security declines or otherwise is
below the exercise price, the Fund may elect to close the position
or take delivery of the security at the exercise price and the
Fund's return will be the premium received from the put option
minus the amount by which the market price of the security is
below the exercise price. Out-of-the-money, at-the-money, and in-
the-money put options may be used by the Fund in the same market
environments that call options are used in equivalent buy- and-
write transactions.
The Fund may purchase put options to hedge against a
decline in the value of its portfolio. By using put options in
this way, the Fund will reduce any profit it might otherwise have
realized in the underlying security by the amount of the premium
paid for the put option and by transaction costs.
The Fund may purchase call options to hedge against an
increase in the price of securities that the Fund anticipates
purchasing in the future. The premium paid for the call option
plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise of the option, and, unless the
price of the underlying security rises sufficiently, the option
may expire worthless to the Fund.
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_______________________________________________________________
APPENDIX D: FUTURES CONTRACTS, OPTIONS ON FUTURES
CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES
________________________________________________________________
Futures Contracts
The Fund may enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial or stock indices
including any index of U.S. Government Securities, Foreign
Government Securities, corporate debt securities or common stocks.
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 1/2% to 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 price or
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 contracts
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are traded, the Fund will incur brokerage fees when it purchases
or sells futures contracts.
Interest Rate Futures
The purpose of the acquisition or sale of a futures
contract, in the case of a portfolio, such as the portfolio of the
Fund, which holds or intends to acquire fixed-income securities,
is to attempt to protect the Fund from fluctuations in interest or
foreign exchange rates without actually buying or selling fixed-
income securities or foreign currency. For example, if interest
rates were expected to increase, the Fund might enter into futures
contracts for the sale of debt securities. Such a sale would have
much the same effect as selling an equivalent value of the debt
securities owned by the Fund. If interest rates did increase, the
value of the debt securities in the portfolio would decline, but
the value of the futures contracts to the Fund would increase at
approximately the same rate, thereby keeping the net asset value
of the Fund from declining as much as it otherwise would have.
The Fund could accomplish similar results by selling debt
securities and investing in bonds with short maturities when
interest rates are expected to increase. However, since the
futures market is more liquid than the cash market, the use of
futures contracts as an investment technique allows the Fund to
maintain a defensive position without having to sell its portfolio
securities.
Similarly, when it is expected that interest rates may
decline, futures contracts may be purchased to attempt to hedge
against anticipated purchases of debt securities at higher prices.
Since the fluctuations in the value of futures contracts should be
similar to those of debt securities, the Fund could take advantage
of the anticipated rise in the value of debt securities without
actually buying them until the market had stabilized. At that
time, the futures contracts could be liquidated and the Fund could
then buy debt securities on the cash market. To the extent the
Fund enters into futures contracts for this purpose, the assets in
the segregated account maintained to cover the Fund's obligations
with respect to such futures contracts will consist of cash, cash
equivalents or high- grade liquid debt securities from its
portfolio in an amount equal to the difference between the
fluctuating market value of such futures contracts and the
aggregate value of the initial and variation margin payments made
by the Fund with respect to such 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
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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 about the general
direction of interest rates is incorrect, 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 an increase in interest rates which would adversely
affect the price of debt securities held in its portfolio and
interest rates decrease instead, the Fund will lose part or all of
the benefit of the increased value of its debt securities which 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 debt securities from its
portfolio to meet daily variation margin requirements. Such sales
of bonds 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.
Stock Index Futures
The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several
risks in connection with the use of stock index futures by the
Fund as a hedging device. One risk arises because of the
imperfect correlation between movements in the price of the stock
index futures and movements in the price of the securities which
are the subject of the hedge. The price of the stock index
futures may move more than or less than the price of the
securities being hedged. If the price of the stock index futures
moves less than the price of the securities which are the subject
of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had
not hedged at all. If the price of the securities being hedged
has moved in a favorable direction, this advantage will be
partially offset by the loss on the index future. If the price of
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the future moves more than the price of the stock, the Fund will
experience either a loss or gain on the future which will not be
completely offset by movements in the price of the securities
which are subject to the hedge. To compensate for the imperfect
correlation of movements in the price of securities being hedged
and movements in the price of the stock index futures, the Fund
may buy or sell stock index futures contracts in a greater dollar
amount than the dollar amount of securities being hedged if the
volatility over a particular time period of the prices of such
securities has been greater than the volatility over such time
period of the index, or if otherwise deemed to be appropriate by
the Adviser. Conversely, the Fund may buy or sell fewer stock
index futures contracts if the volatility over a particular time
period of the prices of the securities being hedged is less than
the volatility over such time period of the stock index, or it is
otherwise deemed to be appropriate by the Adviser. It is also
possible that, where the Fund has sold futures to hedge its
portfolio against a decline in the market, the market may advance
and the value of securities held in the Fund may decline. If this
occurred, the Fund would lose money on the futures and also
experience a decline in value in its portfolio securities.
However, over time the value of a diversified portfolio should
tend to move in the same direction as the market indices upon
which the futures are based, although there may be deviations
arising from differences between the composition of the Fund and
the stocks comprising the index.
Where futures are purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest
its cash (or cash equivalents) in stocks (or options) in an
orderly fashion, it is possible that the market may decline
instead. If the Fund then concludes not to invest in stock or
options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss
on the futures contract that is not offset by a reduction in the
price of securities purchased.
In addition the possibility that there may be an
imperfect correlation, or no correlation at all, between movements
in the stock index futures and the portion of the portfolio being
hedged, the price of stock index futures may not correlate
perfectly with movement in the stock index due to certain market
distortions. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through
offsetting transactions which could distort the normal
relationship between the index and futures markets. Secondly,
from the point of view of speculators, the deposit requirements in
the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price
distortions. Due to the possibility of price distortion in the
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futures market, and because of the imperfect correlation between
the movements in the stock index and movements in the price of
stock index futures, a correct forecast of general market trends
by the investment adviser may still not result in a successful
hedging transaction over a short time frame.
Positions in stock index futures may be closed out only
on an exchange or board of trade which provides a secondary market
for such futures. Although the Fund intends to purchase or sell
futures only on exchanges or boards of trade where there appear to
be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for
any particular contract or at any particular time. In such event,
it may not be possible to close a futures investment position, and
in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin.
However, in the event futures contracts have been used to hedge
portfolio securities, such securities will not be sold until the
futures contract can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or
completely offset losses on the futures contract. However, as
described above, there is no guarantee that the price of the
securities will in fact correlate with the price movements in the
futures contract and thus provide an offset on a futures contract.
The Adviser intends to purchase and sell futures
contracts on the stock index for which it can obtain the best
price with due consideration to liquidity.
Options on Futures Contracts
The Fund intends to purchase and write options on futures
contracts for hedging purposes. The Fund is not a commodity pool
and all transactions in futures contracts and options on futures
contracts engaged in by the Fund must constitute bona fide hedging
or other permissible transactions in accordance with the rules and
regulations promulgated by the CFTC. 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 debt securities, it may or may not be less risky than
ownership of the futures contract or underlying debt securities.
As with the purchase of futures contracts, when the Fund is not
fully invested it may purchase a call option on a futures contract
to hedge against adverse market conditions.
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 or securities comprising an index. If the
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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 or securities
comprising an index. 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 rising interest rates.
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 for hedging purposes in a manner similar to that in
which futures contracts on foreign currencies, or forward
contracts, will be utilized. For example, a decline in the dollar
value of a foreign currency in which portfolio securities are
denominated will reduce the dollar value of such securities, even
if their value in the foreign currency remains constant. In order
to protect against such diminutions in the value of portfolio
securities, 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 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
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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 write options on foreign currencies for the
same types of hedging 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
consideration (or for additional cash consideration held in a
segregated account by its Custodian) upon conversation 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
D-7
<PAGE>
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 and other high-
grade liquid debt securities in a segregated account with its
Custodian.
The Fund also intends to write call options on foreign
currencies for cross-hedging purposes. An option that is cross-
hedged 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 high- grade
liquid debt 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 Commission regulation. Similarly,
options on securities 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.
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
D-8
<PAGE>
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 exercise, 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.
D-9
<PAGE>
Pro Forma Combined Financial
Information as of June 30, 1998
The following unaudited pro forma combined financial
information relates to the acquisition of the assets and
liabilities of Alliance Strategic Balanced Fund, a series of The
Alliance Portfolios ("Strategic") and Alliance Income Builder
Fund, Inc. ("Income Builder") by and in exchange for shares of
Alliance Balanced Shares, Inc. ("Balanced Shares") (the
"Transactions"). The information gives effect to the
Transactions as if they had occurred as of July 1, 1998 and
consists of a statement of the pro forma combined portfolio of
investments, a statement of assets and liabilities and a
statement of operations. The pro forma combined results of
operations are not indicative of future operations or actual
results had the combination been consummated as of July 1, 1998.
This unaudited information should be read in conjunction with the
separate financial statements of Strategic, Income Builder and
Balanced Shares.
<PAGE>
ALLIANCE PRO-FORMA COMBINED
ALLIANCE STRATEGIC BALANCED FUND
ALLIANCE BALANCED SHARES
JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
PRO-FORMA COMBINED ALLIANCE STRATEGIC BALANCED FUND
JUNE 30, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON & PREFERRED STOCKS-55.0%
UNITED STATES INVESTMENTS-52.2%
FINANCE-10.5%
BANKING - MONEY CENTER-4.7%
BankAmerica Corp. 7,000 $ 605,062
Chase Manhattan Corp. 78,000 5,889,000
Citicorp 28,300 4,223,775
------------
10,717,837
BROKERAGE & MONEY MANAGEMENT-0.7%
Merrill Lynch & Co., Inc. 7,600 701,100
Morgan Stanley, Dean Witter &Co. 19,000 1,736,125
------------
2,437,225
INSURANCE-1.3%
American International Group, Inc. 4,500 657,000
Hartford Life, Inc. Cl. A 11,000 626,312
Travelers Group, Inc. (a) 27,086 1,642,150
------------
2,925,462
MORTGAGE BANKING-0.9%
Federal National Mortgage Assn. 36,000 2,187,000
MISCELLANEOUS-2.9%
Associates First Capital Corp. Cl. A 13,500 1,037,813
Household International, Inc. 23,700 1,179,075
MBNA Corp. 138,125 4,558,125
------------
6,775,013
------------
25,042,537
HEALTH CARE-7.1%
BIOTECHNOLOGY-0.4%
Centocor, Inc. (a) 16,000 580,500
Genzyme Corp. (a) 15,000 381,562
------------
962,062
DRUGS-3.6%
Bristol-Myers Squibb Co. 51,600 5,930,775
Merck & Co., Inc. 19,100 2,554,625
------------
8,485,400
MEDICAL PRODUCTS-0.9%
Abbott Laboratories 42,000 1,716,750
Medtronic, Inc. (a) 5,000 318,750
------------
2,035,500
MEDICAL SERVICES-2.2%
Columbia HCA/Healthcare Corp. 36,000 1,048,500
PacifiCare Health Systems, Inc. Cl. B (a) 28,000 2,473,625
United Healthcare Corp. 24,500 1,555,750
------------
5,077,875
------------
16,560,837
TECHNOLOGY-6.9%
COMMUNICATIONS EQUIPMENT-1.1%
Nokia Corp. (ADR) (b) 32,000 2,322,000
Tellabs, Inc. (a) 4,000 286,500
------------
2,608,500
COMPUTER HARDWARE-0.7%
Compaq Computer Corp. 59,800 1,696,825
COMPUTER SERVICES-1.9%
Electronic Data Systems Corp. 27,700 1,108,000
First Data Corp. 98,400 3,277,950
------------
4,385,950
COMPUTER SOFTWARE-0.5%
Microsoft Corp. (a) 2,000 216,750
Oracle Corp. (a) 40,000 981,250
------------
1,198,000
NETWORKING SOFTWARE-0.9%
Cisco Systems, Inc. (a) 23,000 2,117,875
SEMI-CONDUCTOR COMPONENTS-1.3%
Altera Corp. (a) 32,500 959,985
Atmel Corp. (a) 51,300 698,962
Intel Corp. (a) 5,000 370,625
Xilinx, Inc. (a) 27,000 918,844
------------
2,948,416
MISCELLANEOUS-0.5%
Solectron Corp. (a) 26,800 1,127,275
------------
16,082,841
1
PORTFOLIO OF INVESTMENTS
PRO-FORMA COMBINED ALLIANCE STRATEGIC BALANCED FUND
(CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
CONSUMER STAPLES-6.5%
COSMETICS-1.0%
Avon Products, Inc. 19,000 $ 1,472,500
Gillette Co. 8,200 464,837
The Estee Lauder Co., Inc. Cl. A 5,000 348,438
------------
2,285,775
FOOD-2.9%
Campbell Soup Co. 23,200 1,232,500
General Mills, Inc. 15,000 1,025,625
Tyson Foods, Inc. Cl. A 211,000 4,576,062
------------
6,834,187
HOUSEHOLD PRODUCTS-0.6%
Viad Corp. 48,000 1,332,000
RETAIL - FOOD & DRUG-0.3%
Kroger Co. (a) 15,000 643,125
TOBACCO-1.7%
Loews Corp. 10,000 871,250
Philip Morris Cos., Inc. 26,500 1,043,438
RJR Nabisco Holdings Corp. 84,000 1,995,000
------------
3,909,688
------------
15,004,775
CONSUMER SERVICES-6.5%
AIRLINES-0.2%
Northwest Airlines Corp. Cl. A (a) 10,800 416,813
APPAREL-0.4%
Nautica Enterprises, Inc. (a) 31,000 833,125
BROADCASTING & CABLE-1.4%
A.H. Belo Corp. Series A 57,000 1,389,375
Cox Communications, Inc. Cl. A (a) 12,000 581,250
Scripps E.W. Co. Cl.A 9,000 493,312
Tele-Communications, Inc. -
Liberty Media Group Cl. A (a) 20,000 776,250
------------
3,240,187
ENTERTAINMENT & LEISURE-1.4%
Harley-Davidson, Inc. 57,000 2,208,750
Mirage Resorts, Inc. (a) 20,000 426,250
Walt Disney Co. 6,000 630,375
------------
3,265,375
PRINTING & PUBLISHING-0.6%
Gannett Co., Inc. 19,000 1,350,187
RETAIL - GENERAL MERCHANDISE-2.5%
CompUSA, Inc. 20,200 364,862
Dayton Hudson Corp. 54,700 2,652,950
Federated Department Stores, Inc. (a) 40,800 2,195,550
Home Depot, Inc. 8,000 664,500
------------
5,877,862
------------
14,983,549
ENERGY-5.0%
DOMESTIC INTEGRATED-1.3%
USX-Marathon Group 87,000 2,985,187
DOMESTIC PRODUCERS-1.3%
Apache Corp. 45,500 1,433,250
Enron Oil & Gas Co. 24,000 486,000
Murphy Oil Corp. 15,000 760,313
Union Pacific Resources Group, Inc. 20,000 351,250
------------
3,030,813
OIL SERVICES-2.2%
Dresser Industries, Inc. 25,000 1,101,562
Halliburton Co. (a) 10,000 445,625
Nabors Industries, Inc. (a) 33,900 671,644
Noble Drilling Corp. (a) 81,500 1,961,094
Santa Fe International Corp. 20,500 620,125
Transocean Offshore, Inc. 9,800 436,100
------------
5,236,150
MISCELLANEOUS-0.2%
AES Corp. (a) 9,400 494,088
------------
11,746,238
UTILITIES-4.5%
ELECTRIC & GAS UTILITY-2.0%
Consolidated Edison, Inc. 23,400 1,077,863
FPL Group, Inc. 50,000 3,150,000
Pinnacle West Capital Corp. 12,000 540,000
------------
4,767,863
2
ALLIANCE STRATEGIC BALANCED FUND
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
TELEPHONE UTILITY-2.5%
Teleport Communications
Group, Inc. Cl. A (a) 21,100 $ 1,144,016
WorldCom, Inc. (a) 95,350 4,611,451
------------
5,755,467
------------
10,523,330
MULTI INDUSTRY COMPANIES-2.1%
Tyco International, Ltd. 62,000 3,906,000
U.S. Industries, Inc. 43,000 1,064,250
------------
4,970,250
CAPITAL GOODS-1.3%
MISCELLANEOUS-1.3%
Allied-Signal, Inc. 23,000 1,020,625
United Technologies Corp. 22,300 2,062,750
------------
3,083,375
BASIC INDUSTRIES-0.9%
CHEMICALS-0.9%
Dow Chemical Co. 11,000 1,063,563
Praxair, Inc. 21,600 1,011,150
------------
2,074,713
CONTAINERS-0.0%
Sealed Air Corp. (a) 2,700 99,225
------------
2,173,938
AEROSPACE & DEFENSE-0.7%
AEROSPACE-0.7%
General Dynamics Corp. 34,200 1,590,300
CONSUMER MANUFACTURING-0.2%
TEXTILE PRODUCTS-0.2%
Tommy Hilfiger Corp. (a) 9,000 562,500
Total United States Investments
(cost $96,068,611) 122,324,470
FOREIGN INVESTMENTS-2.8%
BRAZIL-0.1%
Telebras, SA (ADR) 2,000 218,375
DENMARK-0.2%
Ratin Cl. A (a) 2,000 423,612
FINLAND-0.3%
Nokia AB OY Corp. pfd. 8,000 588,938
Orion-Yhtymae OY Cl. B 7,000 215,835
------------
804,773
FRANCE-0.3%
Sanofi, SA 2,000 235,209
SEITA 4,000 181,286
Total, SA Cl. B 3,000 390,029
------------
806,524
GERMANY-0.2%
Adidas AG 1,300 226,705
ProSieben Media AG (a) 4,000 207,380
------------
434,085
HONG KONG-0.1%
Cheung Kong Holdings, Ltd. 25,000 122,935
Hutchison Whampoa, Ltd. 20,000 105,575
------------
228,510
JAPAN-0.2%
Canon, Inc. 5,000 113,908
Fuji Photo Film Co. 3,000 104,795
Honda Motor Co. 6,000 214,363
------------
433,066
NETHERLANDS-0.5%
AKZO Nobel NV 2,000 444,915
ASM Lithography Holding NV 6,000 177,690
ING Groep NV 7,000 458,689
------------
1,081,294
SPAIN-0.1%
Telefonica de Espana 4,000 184,936
SWEDEN-0.1%
Astra AB, Series A 10,000 204,363
SWITZERLAND-0.3%
Nestle, SA 200 428,713
Zurich Versicherungsgesellschaft 600 383,543
------------
812,256
UNITED KINGDOM-0.4%
BPB Plc 40,000 242,440
Compass Group Plc 30,000 345,127
Tomkins Plc 30,000 162,921
United News Media Plc 9,000 125,929
------------
876,417
Total Foreign Investments
(cost $5,147,944) 6,508,211
Total Common & Preferred Stocks
(cost $101,216,555) 128,832,681
3
PORTFOLIO OF INVESTMENTS
PRO-FORMA COMBINED ALLIANCE STRATEGIC BALANCED FUND
(CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
DEBT OBLIGATIONS-35.6%
U.S. GOVERNMENT & AGENCY OBLIGATIONS-26.5%
Federal Home Loan Bank
7.00%, 9/01/11 $ 3,109 $ 3,175,502
Federal National Mortgage Association
6.00%, 4/01/11 328 325,045
6.50%, 5/01/11 532 535,344
6.50%, 6/01/11 598 601,869
6.50%, 9/01/11 370 373,018
7.00%, 5/01/26 861 873,124
7.00%, 5/01/27 422 428,129
7.00%, 12/01/27 1,035 1,049,103
7.00%, 5/01/28 2,944 2,985,278
Government National Mortgage Association
6.50%, 3/15/28 1,281 1,277,769
7.00%, 2/15/28 1,089 1,106,031
7.00%, 3/15/28 2,858 2,903,698
7.50%, 6/15/27 610 626,717
U.S. Treasury Bonds
6.125%, 11/15/27 11,105 11,899,674
6.375%, 8/15/27 3,740 4,106,969
U.S. Treasury Notes
6.125%, 8/15/07 60 62,428
6.25%, 4/30/01 10,825 11,026,237
6.375%, 5/15/99 3,200 3,223,008
6.50%, 8/31/01 4,900 5,033,230
6.50%, 5/31/02 7,810 8,069,917
6.625%, 5/15/07 25 26,852
6.875%, 5/15/06 2,000 2,165,620
------------
61,874,562
CORPORATE DEBT OBLIGATIONS-6.7%
AUTOMOTIVE-0.6%
Federal Mogul Corporation
7.75%, 7/01/06 1,500 1,500,000
BANKING-1.8%
Chase Manhattan Corp.
6.375%, 4/01/08 1,555 1,562,627
6.75%, 8/15/08 530 548,315
William Hill Plc
10.625%, 4/30/08 (c)(d) 1,300 2,159,757
------------
4,270,699
ELECTRIC & GAS UTILITY-0.2%
Texas Utilities Co.
6.375%, 1/01/08 (c) 425 417,787
INDUSTRIAL-4.1%
Beckman Instruments, Inc.
7.45%, 3/04/08 (c) 1,500 1,524,311
Caliber Systems, Inc.
7.80%, 8/01/06 800 870,041
Clearnet Communications, Inc.
7.20%, 5/15/08 (c)(e) 3,000 1,202,813
Computer Associates International, Inc.
6.375%, 4/15/05 (c) 650 653,750
ICG Services, Inc.
4.44%, 5/01/08 (c) 975 578,906
Tele-Communications, Inc.
9.80%, 2/01/12 1,650 2,122,412
The Williams Cos., Inc.
6.125%, 2/01/01 2,000 1,994,820
Time Warner, Inc.
8.375%, 3/15/23 600 702,785
------------
9,649,838
------------
15,838,324
YANKEE BONDS-2.4%
Australian Gas Light Co.
6.40%, 4/15/08 (c) 2,000 2,031,684
Fugi LLC pfd.
9.87%, 12/31/49 (c) 1,200 1,056,390
Reliance Industries, Inc.
10.375%, 6/24/16 (c) 1,650 1,559,996
St. George Bank, Ltd.
7.15%, 10/15/05 (c) 850 882,190
------------
5,530,260
Total Debt Obligations
(cost $84,395,247) 83,243,146
SHORT-TERM INVESTMENTS-8.9%
U.S. GOVERNMENT AGENCY-2.4%
Federal Home Loan Bank
4.91%, 7/27/98 2,000 1,992,085
5.85%, 7/01/98 3,600 3,600,000
------------
5,592,085
4
ALLIANCE STRATEGIC BALANCED FUND
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
COMMERCIAL PAPER-6.5%
Ford Motor Credit Corp.
5.62%, 7/06/98 $ 6,290 $ 6,285,090
5.63%, 7/09/98 430 429,462
Prudential Funding Corp.
5.67%, 7/07/98 8,475 8,466,991
-------------
15,181,543
Total Short-Term Investments
(amortized cost $20,773,628) 20,773,628
TOTAL INVESTMENTS-99.5%
(cost $206,385,430) $232,849,455
Other assets less liabilities-0.5% 1,078,405
NET ASSETS-100% $233,927,860
(a) Non-income producing security.
(b) Country of origin--Finland
(c) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to certain qualified institutional buyers. At June 30,
1998, these securities amounted to $12,067,584 representing 5.2% of net assets.
(d) Country of origin--United Kingdom
(e) Canadian holding
Glossary:
ADR - American Depositary Receipt
See notes to pro-forma combined financial statements.
5
STATEMENTS OF ASSETS AND LIABILITIES ALLIANCE STRATEGIC BALANCED FUND
JUNE 30, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE
STRATEGIC BALANCED PRO-FORMA
BALANCED SHARES ADJUSTMENT(S) COMBINED
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value $52,819,435 $180,030,020 $232,849,455
Cash, at value 180,848 9,969 190,817
Receivable for investment securities sold -0- 37,133 37,133
Dividends and interest receivable 261,722 802,638 1,064,360
Receivable for capital stock -0- 692,349 692,349
Foreign taxes receivable 15,765 -0- 15,765
Prepaid expense -0- 1,008 1,008
Total assets 53,277,770 181,573,117 -0- 234,850,887
LIABILITIES
Distribution fee payable 28,597 67,181 95,778
Advisory fee payable 20,072 91,195 111,267
Unrealized depreciation of forward
exchange currency contracts -0- 51,670 51,670
Payable for capital stock redeemed 7,103 100,189 107,292
Accrued expenses and other liabilities 228,600 328,420 557,020
Total liabilities 284,372 638,655 -0- 923,027
NET ASSETS $52,993,398 $180,934,462 -0- $233,927,860
</TABLE>
See notes to pro-forma combined financial statements.
6
STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED JUNE 30, 1998 ALLIANCE STRATEGIC BALANCED FUND
(UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE
STRATEGIC BALANCED PRO-FORMA
BALANCED SHARES ADJUSTMENT(S) COMBINED
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends and interest (net of
foreign taxes withheld) $ 1,814,409 $ 5,277,523 $ -0- $ 7,091,932
EXPENSES
Advisory fee 383,456 983,041 (74,427) 1,292,070(a)
Distribution fee - Class A 66,003 283,837 826 350,666(b)
Distribution fee - Class B 261,277 302,457 -0- 563,734(c)
Distribution fee - Class C 29,984 70,201 -0- 100,185(c)
Custodian 180,938 108,461 (169,399) 120,000(d)
Administrative fee -0- 117,813 11,187 129,000(e)
Audit and legal 50,014 87,085 (47,099) 90,000(f)
Transfer agency 111,030 209,475 -0- 320,505(f)
Directors fees 31,099 27,779 (28,878) 30,000(f)
Printing 30,988 65,792 (21,780) 75,000(f)
Registration 45,299 75,707 (33,460) 87,546(f)
Miscellaneous 23,505 21,530 (18,435) 26,600(f)
Total expenses 1,213,593 2,353,178 (381,465) 3,185,306
Less: expenses waived and assumed
by the adviser (293,763) -0- 293,763 -0-(g)
Net expenses 919,830 2,353,178 (87,702) 3,185,306
Net investment income 894,579 2,924,345 87,702 3,906,626
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investments 4,859,699 29,528,894 -0- 34,388,593
Net realized gain (loss) on foreign
currency transactions (73,962) 39,764 (34,198)
Net change in unrealized appreciation
(depreciation) of:
Investments 1,919,164 1,276,155 3,195,319
Foreign currency 1,364 (51,198) (49,834)
Net gain on investments and foreign
currency transactions 6,706,265 30,793,615 -0- 37,499,880
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 7,600,844 $33,717,960 $ 87,702 $41,406,506
</TABLE>
(a) Advisory fee for the total combine average net assets for the year ended
June 30, 1998:
$200 mm @ .625%
next $200 mm @ .50%
(b) Distribution fee based on an annual rate of .25% of the total combined
average net assets for the twelve months ended June 30, 1998.
(c) Distribution fee based on an annual rate of 1.00% of the total combined
average net assets for the twelve months ended June 30, 1998.
(d) Custodian fees are based on monthly fixed fees and on average net assets.
(e) Actual fee per year.
(f) Expenses are based on one fund.
(g) Expenses will not be waived by the adviser.
See notes to pro-forma combined financial statements.
7
NOTES TO PRO-FORMA COMBINED
FINANCIAL STATEMENTS ALLIANCE STRATEGIC BALANCED FUND
JUNE 30, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
NOTE A: GENERAL
The Pro-Forma Financial Statements give effect to the proposed acquisition of
the assets of Alliance Strategic Balanced Fund by Alliance Balanced Shares
("the Fund") pursuant to a plan of reorganization. The acquisition would be
accomplished by a tax-free exchange of the assets of Alliance Strategic
Balanced Fund for shares of Alliance Balanced Shares.
The Pro-Forma Statements of Investments, of Assets and Liabilities and of
Operations should be read in conjunction with the historical financial
statements of the Fund, included in the Statement of Additional Information.
The Pro-Forma Statements of Operations has been prepared under the assumptions
set forth therein.
NOTE B: SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sales price, or if no sale occurred, at
the mean of the closing bid and asked prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors. Fixed income securities may be valued on the basis of
prices obtained from a pricing service when such prices are believed to reflect
the fair value of such securities.
1. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized foreign currency gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities, currency gains and
losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of interest recorded on
the Fund's books and the U.S. dollar equivalent of the amounts actually
received or paid. The Fund does not isolate the effect of fluctuations in
foreign currency exchange rates when determining the gain or loss upon the sale
of equity securities. Net currency gains and losses from valuing foreign
currency denominated assets and liabilities at period end exchange rates are
reflected as a component of net unrealized appreciation on investments and
foreign currency denominated assets and liabilities.
2. 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. The Fund accretes discounts and amortizes premiums as
adjustments to interest income.
3. 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 income tax regulations and may differ from those determined in
accordance with generally accepted accounting principles.
4. 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. At June 30, 1998, the Fund's cost of investments for federal income
tax purposes was, on a pro-forma combined basis, substantially the same as for
financial reporting purposes.
8
<PAGE>
ALLIANCE PRO-FORMA COMBINED
ALLIANCE INCOME BUILDER FUND
ALLIANCE BALANCED SHARES
JUNE 30, 1998
PORTFOLIO OF INVESTMENTS
PRO-FORMA COMBINED ALLIANCE INCOME BUILDER FUND
JUNE 30, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-53.0%
COMMON STOCKS-52.5%
FINANCE-10.7%
BANKING - MONEY CENTER-4.8%
BankAmerica Corp. 4,000 $ 345,750
Chase Manhattan Corp. 84,200 6,357,100
Citicorp 28,300 4,223,775
NationsBank Corp. 7,000 535,500
------------
11,462,125
BROKERAGE & MONEY MANAGEMENT-0.7%
Legg Mason, Inc. 1 58
Merrill Lynch & Co., Inc. 2,500 230,625
Morgan Stanley, Dean Witter & Co. 16,200 1,480,275
------------
1,710,958
INSURANCE-1.4%
American International Group, Inc. 4,200 613,200
Hartford Life, Inc. Cl. A 11,000 626,312
Progressive Corp. 2,000 282,000
Travelers Group, Inc. (a) 30,335 1,839,060
------------
3,360,572
MORTGAGE BANKING-0.9%
Federal National Mortgage Assn. 36,000 2,187,000
REAL ESTATE-0.3%
Excel Legacy Corp. (b) 4,988 21,823
Excel Realty Trust, Inc. 4,988 143,717
IRT Property Co. 9,000 99,000
JP Realty, Inc. 8,000 188,500
Storage USA, Inc. 3,000 105,000
Weingarten Realty Investors, Inc. 4,000 167,250
------------
725,290
MISCELLANEOUS-2.6%
American Banknote Corp.
warrants, expiring 12/01/02 (a)(c) 1,000 1,000
Associates First Capital Corp. Cl. A 13,500 1,037,813
Household International, Inc. 27,200 1,353,200
MBNA Corp. 118,125 3,898,125
------------
6,290,138
------------
25,736,083
HEALTH CARE-7.1%
BIOTECHNOLOGY-0.4%
Centocor, Inc. (a) 16,000 580,500
Genzyme Corp. (a) 15,000 381,562
------------
962,062
DRUGS-3.5%
Bristol-Myers Squibb Co. 51,600 5,930,775
Merck & Co., Inc. 19,100 2,554,625
------------
8,485,400
MEDICAL PRODUCTS-0.8%
Abbott Laboratories 50,000 2,043,750
MEDICAL SERVICES-2.4%
Becton, Dickinson & Co. 2,000 155,250
Columbia HCA/Healthcare Corp. 36,000 1,048,500
Health Care Property Investors, Inc. 14,000 504,875
PacifiCare Health Systems, Inc. Cl. B (a) 28,000 2,473,625
United Healthcare Corp. 24,500 1,555,750
------------
5,738,000
------------
17,229,212
CONSUMER STAPLES-6.6%
COSMETICS-0.8%
Avon Products, Inc. 19,000 1,472,500
Gillette Co. 10,000 566,875
------------
2,039,375
FOOD-3.3%
Campbell Soup Co. 31,200 1,657,500
General Mills, Inc. 15,000 1,025,625
Heinz (H.J.) Co. 6,000 336,750
Hershey Foods Corp. 5,000 345,000
Tyson Foods, Inc. Cl. A 211,000 4,576,062
------------
7,940,937
HOUSEHOLD PRODUCTS-0.8%
Proctor & Gamble Co. 6,500 591,906
Viad Corp. 48,000 1,332,000
------------
1,923,906
TOBACCO-1.7%
Loews Corp. 10,000 871,250
Philip Morris Cos., Inc. 32,800 1,291,501
RJR Nabisco Holdings Corp. 84,000 1,995,000
------------
4,157,751
------------
16,061,969
1
PORTFOLIO OF INVESTMENTS
PRO-FORMA COMBINED ALLIANCE INCOME BUILDER FUND
(CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
TECHNOLOGY-6.3%
COMMUNICATIONS EQUIPMENT-1.0%
Nokia Corp. (ADR) (d) 32,000 $ 2,322,000
COMPUTER HARDWARE-0.7%
Compaq Computer Corp. 44,800 1,271,200
Hewlett-Packard Co. 4,500 269,438
Texas Instruments, Inc. 3,000 174,937
------------
1,715,575
COMPUTER SERVICES-2.0%
Electronic Data Systems Corp. 36,000 1,440,000
First Data Corp. 104,200 3,471,162
------------
4,911,162
COMPUTER SOFTWARE-0.4%
Oracle Corp. (a) 40,000 981,250
NETWORKING SOFTWARE-0.5%
Cisco Systems, Inc. (a) 14,000 1,289,313
SEMI-CONDUCTOR COMPONENTS-1.2%
Altera Corp. (a) 25,500 753,047
Atmel Corp. (a) 51,300 698,962
Intel Corp. 7,000 518,875
Xilinx, Inc. (a) 27,000 918,844
------------
2,889,728
MISCELLANEOUS-0.5%
Solectron Corp. (a) 26,800 1,127,275
------------
15,236,303
ENERGY-5.8%
DOMESTIC INTEGRATED-1.5%
USX-Marathon Group 104,100 3,571,931
DOMESTIC PRODUCERS-2.0%
Apache Corp. 39,500 1,244,250
Chevron Corp. 8,000 664,500
Enron Oil & Gas Co. 24,000 486,000
Murphy Oil Corp. 15,000 760,313
Royal Dutch Petroleum Co. 12,000 657,750
Shell Transport & Trading Co. (ADR) 6,000 254,250
Texaco, Inc. 5,100 304,406
Union Pacific Resources Group, Inc. 20,000 351,250
------------
4,722,719
OIL SERVICES-2.0%
CMS Energy Corp. 5,300 233,200
Dresser Industries, Inc. 25,000 1,101,562
Halliburton Co. (a) 6,300 280,744
Nabors Industries, Inc. (a) 33,900 671,644
Noble Drilling Corp. (a) 56,500 1,359,531
Santa Fe International Corp. 20,500 620,125
Transocean Offshore, Inc. 9,800 436,100
------------
4,702,906
TRANSPORTATION-0.1%
Knightbridge Tankers, Ltd. 10,000 267,500
MISCELLANEOUS-0.2%
AES Corp. (a) 9,400 494,088
------------
13,759,144
CONSUMER SERVICES-5.5%
AIRLINES-0.2%
Northwest Airlines Corp. Cl. A (a) 10,800 416,813
APPAREL-0.3%
Nautica Enterprises, Inc. (a) 31,000 833,125
BROADCASTING & CABLE-0.7%
A.H. Belo Corp. Series A 71,000 1,730,625
OpTel, Inc. (a)(c) 1,000 -0-
------------
1,730,625
ENTERTAINMENT & LEISURE-1.1%
Carnival Corp. Cl. A 10,000 396,250
Harley-Davidson, Inc. 35,000 1,356,250
Mirage Resorts, Inc. (a) 20,000 426,250
Walt Disney Co. 4,500 472,781
------------
2,651,531
PACKAGING-0.1%
Crown Cork & Seal, Inc. 3,500 166,250
PRINTING & PUBLISHING-0.7%
Donnelley (R.R.) & Sons Co. 5,500 251,625
Gannett Co., Inc. 19,000 1,350,187
------------
1,601,812
2
ALLIANCE INCOME BUILDER FUND
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
RETAIL - GENERAL MERCHANDISE-2.1%
CompUSA, Inc. 20,200 $ 364,862
Dayton Hudson Corp. 50,700 2,458,950
Federated Department Stores, Inc. (a) 40,800 2,195,550
May Department Stores Co. 1,500 98,250
------------
5,117,612
OTHER-0.3%
Jostens, Inc. 14,700 350,962
Newell Co. 6,000 298,875
------------
649,837
------------
13,167,605
UTILITIES-4.7%
ELECTRIC & GAS UTILITY-2.3%
Consolidated Edison, Inc. 23,400 1,077,863
FPL Group, Inc. 58,500 3,685,500
Houston Industries, Inc. 5,000 154,375
Pinnacle West Capital Corp. 12,000 540,000
------------
5,457,738
TELEPHONE UTILITY-2.4%
GTE Corp. 9,715 540,397
Southern New England
Telecommunications, Inc. Cl. A 4,000 262,000
Teleport Communications Group,
Inc. Cl. A (a) 21,100 1,144,016
U.S. West Communications Group 3,000 141,000
WorldCom, Inc. (a) 75,350 3,642,701
------------
5,730,114
------------
11,187,852
CAPITAL GOODS-2.2%
ELECTRICAL EQUIPMENT-0.7%
Emerson Electric Co. 6,200 374,325
General Electric Co. 14,000 1,274,000
------------
1,648,325
POLLUTION CONTROL-0.1%
Waste Management, Inc. 6,000 210,000
MISCELLANEOUS-1.4%
Allied-Signal, Inc. 34,000 1,508,750
United Technologies Corp. 20,800 1,924,000
------------
3,432,750
------------
5,291,075
MULTI INDUSTRY COMPANIES-1.8%
Tyco International, Ltd. 56,000 3,528,000
U.S. Industries, Inc. 33,000 816,750
------------
4,344,750
BASIC INDUSTRIES-0.9%
CHEMICALS-0.9%
Dow Chemical Co. 11,000 1,063,564
Praxair, Inc. 24,600 1,151,587
------------
2,215,151
CONTAINERS-0.0%
Sealed Air Corp. (a) 2,700 99,225
------------
2,314,376
AEROSPACE & DEFENSE-0.7%
AEROSPACE-0.7%
Boeing Co. 4,000 178,250
General Dynamics Corp. 34,200 1,590,300
------------
1,768,550
CONSUMER MANUFACTURING-0.2%
TEXTILE PRODUCTS-0.2%
Tommy Hilfiger Corp. (a) 9,000 562,500
PREFERRED STOCKS-0.5%
INDUSTRIAL-0.0%
CSC Holdings, Inc.
pfd., Series M, 11.13% 324 37,341
INSURANCE-0.1%
Penncorp Financial Group
pfd., 3.38% 3,000 156,000
REALTY-0.4%
Pinto Totta International
Finance Cl. A, pfd. (c) 1,000 989,200
Total Common Stocks & Other Investments
(cost $101,617,428) 127,841,960
3
PORTFOLIO OF INVESTMENTS
PRO-FORMA COMBINED ALLIANCE INCOME BUILDER FUND
(CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
DEBT OBLIGATIONS-37.9%
U.S. GOVERNMENT & AGENCY OBLIGATIONS-18.7%
Federal Home Loan Bank
7.00%, 9/01/11 $ 2,317 $ 2,366,834
Federal National Mortgage Association
7.00%, 5/01/28 2,944 2,985,278
Government National Mortgage Association
6.50%, 3/15/28 997 994,373
7.00%, 3/15/28 2,858 2,903,698
U.S. Treasury Bonds
6.125%, 11/15/27 8,275 8,867,159
6.375%, 8/15/27 3,740 4,106,969
U.S. Treasury Notes
6.125%, 8/15/07 60 62,428
6.25%, 4/30/01 8,925 9,090,916
6.50%, 8/31/01 3,650 3,749,243
6.50%, 5/31/02 7,400 7,646,272
6.875%, 5/15/06 2,000 2,165,620
------------
44,938,790
CORPORATE DEBT OBLIGATIONS-13.6%
AUTOMOTIVE-0.6%
Federal Mogul Corporation
7.75%, 7/01/06 1,500 1,500,000
BANKING & FINANCE-3.1%
Advanta Capital Trust
8.99%, 12/17/26 1,000 792,500
Arkwright CSN TR
9.63%, 8/15/26 (c) 1,000 1,189,566
Chase Manhattan Corp.
6.375%, 4/01/08 1,555 1,562,627
DTI Holdings, Inc., Units
12.50%, 3/01/98 1,000 545,000
FBOP Capital Trust
10.20%, 2/06/27 (c) 1,000 1,114,557
William Hill Plc
10.625%, 4/30/08 (b)(c) 1,300 2,159,757
------------
7,364,007
CONSUMER PRODUCTS & SERVICES-0.9%
OpTel Inc., Series B
13.00%, 2/15/05 (e) 1,000 1,105,000
TCI Communications, Inc.
7.13%, 2/15/28 1,000 1,055,157
------------
2,160,157
INDUSTRIAL-8.1%
American Banknote Corp.
11.25%, 12/01/07 1,000 985,000
American Mobile Units
12.25%, 4/01/08 1,000 945,000
Beckman Instruments, Inc.
7.45%, 3/04/08 (c) 1,500 1,524,311
Caliber Systems, Inc.
7.80%, 8/01/06 1,000 1,087,551
Clearnet Communications, Inc.
7.20%, 5/15/08 (c)(f) 3,000 1,202,813
Econophone, Inc.
6.78%, 2/15/08 2,000 1,130,000
Facilicom International
10.50%, 1/15/08 (c) 500 495,000
Firstworld Communication Units
8.48%, 4/15/08 (c) 1,000 445,000
ICG Services, Inc.
4.44%, 5/01/08 (c) 975 578,906
Insilco Corp.
10.25%, 8/15/07 500 525,000
Interamericas Units
14.00%, 10/27/07 400 396,000
Iridium LLC Capital Corp. Series B
14.00%, 7/15/05 1,000 1,117,500
KMC Telecom Holdings, Inc. Units
7.98%, 2/15/08 (c) 1,000 585,000
Long Distance International Units
12.25%, 4/15/08 (c) 1,000 995,000
Louis Dreyfus Natural Gas
6.88%, 12/01/07 1,000 984,470
Riverwood International Corp.
10.63%, 8/01/07 1,000 1,045,000
Southwest Royalties, Inc. Series B
10.50%, 10/15/04 1,000 820,000
Tele-Communications, Inc.
9.80%, 2/01/12 1,650 2,122,412
The Williams Cos., Inc.
6.125%, 2/01/01 2,000 1,994,820
Viatel, Inc. Units
1.00%, 4/15/08 1,000 610,000
------------
19,588,783
4
ALLIANCE INCOME BUILDER FUND
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
UTILITIES-0.9%
Calenergy Co., Inc.
7.63%, 10/15/07 $ 1,000 $ 1,004,204
Comed Financing II Series B
8.50%, 1/15/27 1,000 1,109,327
------------
2,113,531
------------
32,726,478
YANKEE BONDS-4.8%
Acindar Industries
11.25%, 2/15/04 1,000 1,005,000
Australian Gas Light Co.
6.40%, 4/15/08 (c) 2,000 2,031,684
Dao Heng Bank, Ltd.
7.75%, 1/24/07 (c) 500 404,945
Empresa Electrica Del Norte Grande, SA
7.75%, 3/15/06 (c) 1,685 1,426,774
Fugi LLC pfd.
9.87%, 12/31/49 (c) 1,200 1,056,390
Mc-Cuernavaca Trust
9.25%, 7/25/01 (c) 1,237 1,138,037
Perez Companc, SA
9.00%, 1/30/04 (c) 500 491,250
Reliance Industries, Inc.
10.375%, 6/24/16 (c) 1,650 1,559,996
Tevecap, SA
12.63%, 11/26/04 1,000 930,000
Vicap, SA
11.38%, 5/15/07 (c) 500 538,125
------------
10,582,201
OTHER-0.4%
SB Treasury Co. LLC Series A, pfd.
9.40%, 12/29/49 (c) 1,000 985,625
Total Yankee Bonds 11,567,826
GOVERNMENT OBLIGATION-0.4%
COLOMBIA-0.4%
Republic of Colombia
8.63%, 4/01/08 1,000 950,998
Total Debt Obligations
(cost $89,930,087) 90,184,092
CONVERTIBLE BONDS-0.4%
IRT Property Co.
7.30%, 8/15/03 200 202,500
Liberty Property
8.20%, 7/01/01 200 257,000
Magna International, Inc.
5.00%, 10/15/02 200 255,250
Total Convertible Bonds
(cost $624,500) 714,750
SHORT-TERM INVESTMENTS-8.5%
COMMERCIAL PAPER-6.3%
Ford Motor Credit Corp.
5.62%, 7/06/98 6,290 6,285,090
5.63%, 7/09/98 430 429,462
Prudential Funding Corp.
5.67%, 7/07/98 8,475 8,466,991
------------
15,181,543
TIME DEPOSIT-2.2%
Royal Bank of Canada
5.75%, 7/01/98 5,200 5,200,000
Total Short-Term Investments
(amortized cost $20,381,543) 20,381,543
TOTAL INVESTMENTS-99.4%
(cost $212,553,558) 239,122,345
Other assets less liabilities-0.6% 1,406,010
NET ASSETS-100% $240,528,355
(a) Non-income producing security.
(b) Country of origin--United Kingdom
(c) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to certain qualified institutional buyers. At June 30,
1998, these securities amounted to $20,912,936 representing 8.7% of net assets.
(d) Country of origin--Finland
(e) Consists of $1,000,000 senior notes and 1,000 shares of common stock.
(f) Canadian holding
Glossary:
ADR - American Depositary Receipt
See notes to pro-forma combined financial statements.
5
STATEMENTS OF ASSETS AND LIABILITIES ALLIANCE INCOME BUILDER FUND
JUNE 30, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE
INCOME BALANCED PRO-FORMA
BUILDER SHARES ADJUSTMENT(S) COMBINED
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value $59,092,325 $180,030,020 $239,122,345
Cash, at value 223,345 9,969 233,314
Receivable for investment securities sold 5,000,790 37,133 5,037,923
Dividends and interest receivable 764,416 802,638 1,567,054
Receivable for capital stock 59,195 692,349 751,544
Prepaid expense 2,460 1,008 3,468
Total assets 65,142,531 181,573,117 -0- 246,715,648
LIABILITIES
Payable for investment securities purchased 5,200,000 -0- 5,200,000
Distribution fee payable 46,978 67,181 114,159
Advisory fee payable 36,633 91,195 127,828
Unrealized depreciation of forward exchange
currency contracts -0- 51,670 51,670
Payable for capital stock redeemed 70,611 100,189 170,800
Accrued expenses and other liabilities 194,416 328,420 522,836
Total liabilities 5,548,638 638,655 -0- 6,187,293
NET ASSETS $59,593,893 $180,934,462 -0- $240,528,355
</TABLE>
See notes to pro-forma combined financial statements.
6
STATEMENT OF OPERATIONS ALLIANCE INCOME BUILDER FUND
TWELVE MONTHS ENDED JUNE 30, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE
INCOME BALANCED PRO-FORMA
BUILDER SHARES ADJUSTMENT(S) COMBINED
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends and interest (net of foreign
taxes withheld) $ 3,515,804 $ 5,277,523 $ -0- $ 8,793,327
EXPENSES
Advisory fee 438,517 983,041 (92,781) 1,328,777(a)
Distribution fee - Class A 7,840 283,837 10,520 302,197(b)
Distribution fee - Class B 96,594 302,457 -0- 399,051(c)
Distribution fee - Class C 460,765 70,201 -0- 530,966(c)
Custodian 129,499 108,461 (122,960) 115,000(d)
Administrative fee 123,245 117,813 (112,058) 129,000(e)
Audit and legal 96,665 87,085 (93,750) 90,000(f)
Transfer agency 79,414 209,475 -0- 288,889(f)
Directors fees 27,389 27,779 (25,168) 30,000(f)
Printing 17,022 65,792 (7,814) 75,000(f)
Registration 82,370 75,707 (70,077) 88,000(f)
Miscellaneous 9,007 21,530 (3,437) 27,100(f)
Total expenses 1,568,327 2,353,178 (517,525) 3,403,980
Net investment income 1,947,477 2,924,345 517,525 5,389,347
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investments 8,076,511 29,528,894 -0- 37,605,405
Net realized gain on foreign currency transactions -0- 39,764 -0- 39,764
Net change in unrealized appreciation
(depreciation) of:
Investments (1,597,213) 1,276,155 -0- (321,058)
Foreign currency -0- (51,198) -0- (51,198)
Net gain on investments and foreign currency
transactions 6,479,298 30,793,615 -0- 37,272,913
NET INCREASE IN NET ASSETS FROM OPERATIONS $8,426,775 $33,717,960 $ 517,525 $42,662,260
</TABLE>
(a) Advisory fee for the total combine average net assets for the year ended
June 30, 1998:
$200 mm @ .625%
next $200 mm @ .50%
(b) Distribution fee based on an annual rate of .25% of the total combined
average net assets for the twelve months ended June 30, 1998.
(c) Distribution fee based on an annual rate of 1.00% of the total combined
average net assets for the twelve months ended June 30, 1998.
(d) Custodian fees are based on monthly fixed fees and on average net assets.
(e) Actual fee per year.
(f) Expenses are based on one fund.
See notes to pro-forma combined financial statements.
7
NOTES TO PRO-FORMA COMBINED
FINANCIAL STATEMENTS ALLIANCE INCOME BUILDER FUND
JUNE 30, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
NOTE A: GENERAL
The Pro-Forma Financial Statements give effect to the proposed acquisition of
the assets of Alliance Income Builder Fund by Alliance Balanced Shares ("the
Fund") pursuant to a plan of reorganization. The acquisition would be
accomplished by a tax-free exchange of the assets of Alliance Income Builder
Fund for shares of Alliance Balanced Shares.
The Pro-Forma Statements of Investments, of Assets and Liabilities and of
Operations should be read in conjunction with the historical financial
statements of the Fund, included in the Statement of Additional Information.
The Pro Forma-Statement of Operations has been prepared under the assumptions
set forth therein.
NOTE B: SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sales price, or if no sale occurred, at
the mean of the closing bid and asked prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors. Fixed income securities may be valued on the basis of
prices obtained from a pricing service when such prices are believed to reflect
the fair value of such securities.
1. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized foreign currency gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities, currency gains and
losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of interest recorded on
the Fund's books and the U.S. dollar equivalent of the amounts actually
received or paid. The Fund does not isolate the effect of fluctuations in
foreign currency exchange rates when determining the gain or loss upon the sale
of equity securities. Net currency gains and losses from valuing foreign
currency denominated assets and liabilities at period end exchange rates are
reflected as a component of net unrealized appreciation on investments and
foreign currency denominated assets and liabilities.
2. 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. The Fund accretes discounts and amortizes premiums as
adjustments to interest income.
3. 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 income tax regulations and may differ from those determined in
accordance with generally accepted accounting principles.
4. 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. At June 30, 1998, the Fund's cost of investments for federal income
tax purposes was, on a pro-forma combined basis, substantially the same as for
financial reporting purposes.
8
<PAGE>
ALLIANCE PRO-FORMA COMBINED
ALLIANCE STRATEGIC BALANCED FUND
ALLIANCE INCOME BUILDER FUND
ALLIANCE BALANCED SHARES
JUNE 30, 1998
PORTFOLIO OF INVESTMENTS ALLIANCE STRATEGIC BALANCED FUND
PRO-FORMA COMBINED ALLIANCE INCOME BUILDER FUND
JUNE 30, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-52.7%
UNITED STATES INVESTMENTS-50.0%
FINANCE-10.3%
BANKING - MONEY CENTER-4.4%
BankAmerica Corp. 11,000 $ 950,812
Chase Manhattan Corp. 94,200 7,112,100
Citicorp 28,300 4,223,775
NationsBank Corp. 7,000 535,500
------------
12,822,187
BROKERAGE & MONEY MANAGEMENT-1.0%
Legg Mason, Inc. 1 58
Merrill Lynch & Co., Inc. 10,100 931,725
Morgan Stanley, Dean Witter & Co. 22,200 2,028,525
------------
2,960,308
INSURANCE-1.6%
American International Group, Inc. 8,700 1,270,200
Hartford Life, Inc. Cl. A 11,000 626,312
Progressive Corp. 2,000 282,000
Travelers Group, Inc. (a) 39,335 2,384,746
------------
4,563,258
MORTGAGE BANKING-0.7%
Federal National Mortgage Assn. 36,000 2,187,000
REAL ESTATE-0.2%
Excel Legacy Corp. (b) 4,988 21,823
Excel Realty Trust, Inc. 4,988 143,717
IRT Property Co. 9,000 99,000
JP Realty, Inc. 8,000 188,500
Storage USA, Inc. 3,000 105,000
Weingarten Realty Investors, Inc. 4,000 167,250
------------
725,290
MISCELLANEOUS-2.4%
American Banknote Corp.
warrants, expiring 12/01/02 (a)(c) 1,000 1,000
Associates First Capital Corp. Cl. A 13,500 1,037,813
Household International, Inc. 27,200 1,353,200
MBNA Corp. 138,125 4,558,125
------------
6,950,138
------------
30,208,181
HEALTH CARE-6.6%
BIOTECHNOLOGY-0.3%
Centocor, Inc. (a) 16,000 580,500
Genzyme Corp. (a) 15,000 381,562
------------
962,062
DRUGS-3.5%
Bristol-Myers Squibb Co. 59,600 6,850,275
Merck & Co., Inc. 26,100 3,490,875
------------
10,341,150
MEDICAL PRODUCTS-0.8%
Abbott Laboratories 50,000 2,043,750
Medtronic, Inc. (a) 5,000 318,750
------------
2,362,500
MEDICAL SERVICES-2.0%
Becton, Dickinson & Co. 2,000 155,250
Columbia HCA/Healthcare Corp. 36,000 1,048,500
Health Care Property Investors, Inc. 14,000 504,875
PacifiCare Health Systems, Inc. Cl. B (a) 28,000 2,473,625
United Healthcare Corp. 24,500 1,555,750
------------
5,738,000
------------
19,403,712
CONSUMER STAPLES-6.3%
COSMETICS-1.1%
Avon Products, Inc. 23,000 1,782,500
Gillette Co. 18,200 1,031,712
The Estee Lauder Co., Inc. Cl. A 5,000 348,438
------------
3,162,650
FOOD-2.7%
Campbell Soup Co. 31,200 1,657,500
General Mills, Inc. 15,000 1,025,625
Heinz (H.J.) Co. 6,000 336,750
Hershey Foods Corp. 5,000 345,000
Tyson Foods, Inc. Cl. A 211,000 4,576,062
------------
7,940,937
HOUSEHOLD PRODUCTS-0.7%
Proctor & Gamble Co. 6,500 591,906
Viad Corp. 48,000 1,332,000
------------
1,923,906
RETAIL - FOOD & DRUG-0.2%
Kroger Co. (a) 15,000 643,125
1
PORTFOLIO OF INVESTMENTS ALLIANCE STRATEGIC BALANCED FUND
PRO-FORMA COMBINED ALLIANCE INCOME BUILDER FUND
(CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
TOBACCO-1.6%
Loews Corp. 10,000 $ 871,250
Philip Morris Cos., Inc. 47,800 1,882,126
RJR Nabisco Holdings Corp. 84,000 1,995,000
------------
4,748,376
------------
18,418,994
TECHNOLOGY-6.1%
COMMUNICATIONS EQUIPMENT-0.9%
Nokia Corp. (ADR) (d) 32,000 2,322,000
Tellabs, Inc. (a) 4,000 286,500
------------
2,608,500
COMPUTER HARDWARE-0.7%
Compaq Computer Corp. 59,800 1,696,825
Hewlett-Packard Co. 4,500 269,438
Texas Instruments, Inc. 3,000 174,937
------------
2,141,200
COMPUTER SERVICES-1.8%
Electronic Data Systems Corp. 36,000 1,440,000
First Data Corp. 116,200 3,870,913
------------
5,310,913
COMPUTER SOFTWARE-0.4%
Microsoft Corp. (a) 2,000 216,750
Oracle Corp. (a) 40,000 981,250
------------
1,198,000
NETWORKING SOFTWARE-0.7%
Cisco Systems, Inc. (a) 23,000 2,117,875
SEMI-CONDUCTOR COMPONENTS-1.2%
Altera Corp. (a) 32,500 959,985
Atmel Corp. (a) 51,300 698,962
Intel Corp. (a) 5,000 370,625
National Semiconductor Corp. (a) 7,000 518,875
Xilinx, Inc. (a) 27,000 918,844
------------
3,467,291
MISCELLANEOUS-0.4%
Solectron Corp. (a) 26,800 1,127,275
------------
17,971,054
CONSUMER SERVICES-6.0%
AIRLINES-0.1%
Northwest Airlines Corp. Cl. A (a) 10,800 416,813
APPAREL-0.3%
Nautica Enterprises, Inc. (a) 31,000 833,125
BROADCASTING & CABLE-1.2%
A.H. Belo Corp. Series A 71,000 1,730,625
Cox Communications, Inc. Cl. A (a) 12,000 581,250
OpTel, Inc. (a)(c) 1,000 -0-
Scripps E.W. Co. Cl.A 9,000 493,312
Tele-Communications, Inc. -
Liberty Media Group Cl. A (a) 20,000 776,250
------------
3,581,437
ENTERTAINMENT & LEISURE-1.4%
Carnival Corp. Cl. A 10,000 396,250
Harley-Davidson, Inc. 57,000 2,208,750
Mirage Resorts, Inc. (a) 20,000 426,250
Walt Disney Co. 10,500 1,103,156
------------
4,134,406
PACKAGING-0.1%
Crown Cork & Seal, Inc. 3,500 166,250
PRINTING & PUBLISHING-0.5%
Donnelley (R.R.) & Sons Co. 5,500 251,625
Gannett Co., Inc. 19,000 1,350,187
------------
1,601,812
RETAIL - GENERAL MERCHANDISE-2.2%
CompUSA, Inc. 20,200 364,862
Dayton Hudson Corp. 64,700 3,137,950
Federated Department Stores, Inc. (a) 40,800 2,195,550
Home Depot, Inc. 8,000 664,500
May Department Stores Co. 1,500 98,250
------------
6,461,112
OTHER-0.2%
Jostens, Inc. 14,700 350,962
Newell Co. 6,000 298,875
------------
649,837
------------
17,844,792
2
ALLIANCE STRATEGIC BALANCED FUND
ALLIANCE INCOME BUILDER FUND
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
ENERGY-5.2%
DOMESTIC INTEGRATED-1.2%
USX-Marathon Group 104,100 $ 3,571,931
DOMESTIC PRODUCERS-1.7%
Apache Corp. 45,500 1,433,250
Chevron Corp. 8,000 664,500
Enron Oil & Gas Co. 24,000 486,000
Murphy Oil Corp. 15,000 760,313
Royal Dutch Petroleum Co. 12,000 657,750
Shell Transport & Trading Co. (ADR) 6,000 254,250
Texaco, Inc. 5,100 304,406
Union Pacific Resources Group, Inc. 20,000 351,250
------------
4,911,719
OIL SERVICES-2.0%
CMS Energy Corp. 5,300 233,200
Dresser Industries, Inc. 25,000 1,101,562
Halliburton Co. (a) 16,300 726,369
Nabors Industries, Inc. (a) 33,900 671,644
Noble Drilling Corp. (a) 81,500 1,961,094
Santa Fe International Corp. 20,500 620,125
Transocean Offshore, Inc. 9,800 436,100
------------
5,750,094
TRANSPORTATION-0.1%
Knightbridge Tankers, Ltd. 10,000 267,500
MISCELLANEOUS-0.2%
AES Corp. (a) 9,400 494,088
------------
14,995,332
UTILITIES-4.2%
ELECTRIC & GAS UTILITY-1.9%
Consolidated Edison, Inc. 23,400 1,077,863
FPL Group, Inc. 58,500 3,685,500
Houston Industries, Inc. 5,000 154,375
Pinnacle West Capital Corp. 12,000 540,000
------------
5,457,738
TELEPHONE UTILITY-2.3%
GTE Corp. 9,715 540,397
Southern New England
Telecommunications, Inc. Cl. A 4,000 262,000
Teleport Communications
Group, Inc. Cl. A (a) 21,100 1,144,016
U.S. West Communications Group 3,000 141,000
WorldCom, Inc. (a) 95,350 4,611,451
------------
6,698,864
------------
12,156,602
CAPITAL GOODS-2.0%
ELECTRICAL EQUIPMENT-0.6%
Emerson Electric Co. 6,200 374,325
General Electric Co. 14,000 1,274,000
------------
1,648,325
POLLUTION CONTROL-0.1%
Waste Management, Inc. 6,000 210,000
MISCELLANEOUS-1.3%
Allied-Signal, Inc. 34,000 1,508,750
United Technologies Corp. 25,800 2,386,500
------------
3,895,250
------------
5,753,575
MULTI INDUSTRY COMPANIES-1.7%
Tyco International, Ltd. 62,000 3,906,000
U.S. Industries, Inc. 43,000 1,064,250
------------
4,970,250
BASIC INDUSTRIES-0.8%
CHEMICALS-0.8%
Dow Chemical Co. 11,000 1,063,563
Praxair, Inc. 24,600 1,151,587
------------
2,215,150
CONTAINERS-0.0%
Sealed Air Corp. (a) 2,700 99,225
------------
2,314,375
AEROSPACE & DEFENSE-0.6%
AEROSPACE-0.6%
Boeing Co. 4,000 178,250
General Dynamics Corp. 34,200 1,590,300
------------
1,768,550
CONSUMER MANUFACTURING-0.2%
TEXTILE PRODUCTS-0.2%
Tommy Hilfiger Corp. (a) 9,000 562,500
Total United States Investments
(cost $114,470,892) 146,367,917
3
PORTFOLIO OF INVESTMENTS ALLIANCE STRATEGIC BALANCED FUND
PRO-FORMA COMBINED ALLIANCE INCOME BUILDER FUND
(CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
FOREIGN INVESTMENTS-2.3%
BRAZIL-0.1%
Telebras, SA (ADR) 2,000 $ 218,375
DENMARK-0.1%
Ratin Cl. A (a) 2,000 423,612
FINLAND-0.3%
Nokia AB OY Corp. pfd. 8,000 588,938
Orion-Yhtymae OY Cl. B 7,000 215,835
------------
804,773
FRANCE-0.3%
Sanofi, SA 2,000 235,209
SEITA 4,000 181,286
Total, SA Cl. B 3,000 390,029
------------
806,524
GERMANY-0.1%
Adidas AG 1,300 226,705
ProSieben Media AG (a) 4,000 207,380
------------
434,085
HONG KONG-0.1%
Cheung Kong Holdings, Ltd. 25,000 122,935
Hutchison Whampoa, Ltd. 20,000 105,575
------------
228,510
JAPAN-0.1%
Canon, Inc. 5,000 113,908
Fuji Photo Film Co. 3,000 104,795
Honda Motor Co. 6,000 214,363
------------
433,066
NETHERLANDS-0.4%
AKZO Nobel NV 2,000 444,915
ASM Lithography Holding NV 6,000 177,690
ING Groep NY 7,000 458,689
------------
1,081,294
SPAIN-0.1%
Telefonica de Espana 4,000 184,936
SWEDEN-0.1%
Astra AB, Series A 10,000 204,363
SWITZERLAND-0.3%
Nestle, SA 200 428,713
Zurich Versicherungsgesellschaft 600 383,543
------------
812,256
UNITED KINGDOM-0.3%
BPB Plc 40,000 242,440
Compass Group Plc 30,000 345,127
Tomkins Plc 30,000 162,921
United News Media Plc 9,000 125,929
------------
876,417
Total Foreign Investments
(cost $5,147,944) 6,508,211
PREFERRED STOCKS-0.4%
INDUSTRIAL-0.0%
CSC Holdings, Inc.
pfd., Series M, 11.13% 324 37,341
INSURANCE-0.1%
Penncorp Financial Group
pfd., 3.38% 3,000 156,000
REALTY-0.3%
Pinto Totta International
Finance Cl. A, pfd. (c) 1,000 989,200
Total Preferred Stocks
(cost $1,235,263) 1,182,541
Total Common Stocks & Other Investments
(cost $120,854,099) 154,058,669
DEBT OBLIGATIONS-38.0%
U.S. GOVERNMENT & AGENCY OBLIGATIONS-21.1%
Federal Home Loan Bank
7.00%, 9/01/11 $ 3,109 3,175,502
Federal National Mortgage Association
6.00%, 4/01/11 328 325,045
6.50%, 5/01/11 532 535,344
6.50%, 6/01/11 598 601,869
6.50%, 9/01/11 370 373,018
7.00%, 5/01/26 861 873,124
7.00%, 5/01/27 422 428,129
7.00%, 12/01/27 1,035 1,049,103
7.00%, 5/01/28 2,944 2,985,278
Government National Mortgage Association
6.50%, 3/15/28 1,281 1,277,769
7.00%, 2/15/28 1,089 1,106,031
7.00%, 3/15/28 2,858 2,903,698
7.50%, 6/15/27 610 626,717
U.S. Treasury Bonds
6.125%, 11/15/27 11,105 11,899,674
6.375%, 8/15/27 3,740 4,106,969
4
ALLIANCE STRATEGIC BALANCED FUND
ALLIANCE INCOME BUILDER FUND
ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
U.S. Treasury Notes
6.125%, 8/15/07 $ 60 $ 62,428
6.25%, 4/30/01 10,825 11,026,237
6.375%, 5/15/99 3,200 3,223,008
6.50%, 8/31/01 4,900 5,033,230
6.50%, 5/31/02 7,810 8,069,917
6.625%, 5/15/07 25 26,852
6.875%, 5/15/06 2,000 2,165,620
------------
61,874,562
CORPORATE DEBT OBLIGATIONS-12.1%
AUTOMOTIVE-0.5%
Federal Mogul Corporation
7.75%, 7/01/06 1,500 1,500,000
BANKING & FINANCE-2.7%
Advanta Capital Trust
8.99%, 12/17/26 1,000 792,500
Arkwright CSN TR
9.63%, 8/15/26 (c) 1,000 1,189,566
Chase Manhattan Corp.
6.375%, 4/01/08 1,555 1,562,627
6.75%, 8/15/08 530 548,315
DTI Holdings, Inc., Units
12.50%, 3/01/98 1,000 545,000
FBOP Capital Trust
10.20%, 2/06/27 (c) 1,000 1,114,557
William Hill Plc
10.625%, 4/30/08 (b)(c) 1,300 2,159,757
------------
7,912,322
CONSUMER PRODUCTS & SERVICES-0.7%
OpTel Inc., Series B
13.00%, 2/15/05 (f) 1,000 1,105,000
TCI Communications, Inc.
7.13%, 2/15/28 1,000 1,055,157
------------
2,160,157
ELECTRIC & GAS UTILITY-0.1%
Texas Utilities Co.
6.375%, 1/01/08 (c) 425 417,787
INDUSTRIAL-7.4%
American Banknote Corp.
11.25%, 12/01/07 1,000 985,000
American Mobile Units
12.25%, 4/01/08 1,000 945,000
Beckman Instruments, Inc.
7.45%, 3/04/08 (c) 1,500 1,524,311
Caliber Systems, Inc.
7.80%, 8/01/06 1,800 1,957,592
Clearnet Communications, Inc.
7.20%, 5/15/08 (c)(e) 3,000 1,202,813
Computer Associates International, Inc.
6.375%, 4/15/05 (c) 650 653,750
Econophone, Inc.
6.78%, 2/15/08 2,000 1,130,000
Facilicom International
10.50%, 1/15/08 (c) 500 495,000
Firstworld Communication Units
8.48%, 4/15/08 (c) 1,000 445,000
ICG Services, Inc.
4.44%, 5/01/08 (c) 975 578,906
Insilco Corp.
10.25%, 8/15/07 500 525,000
Interamericas Units
14.00%, 10/27/07 400 396,000
Iridium LLC Capital Corp. Series B
14.00%, 7/15/05 1,000 1,117,500
KMC Telecom Holdings, Inc. Units
7.98%, 2/15/08 (c) 1,000 585,000
Long Distance International Units
12.25%, 4/15/08 (c) 1,000 995,000
Louis Dreyfus Natural Gas
6.88%, 12/01/07 1,000 984,470
Riverwood International Corp.
10.63%, 8/01/07 1,000 1,045,000
Southwest Royalties, Inc. Series B
10.50%, 10/15/04 1,000 820,000
Tele-Communications, Inc.
9.80%, 2/01/12 1,650 2,122,412
The Williams Cos., Inc.
6.125%, 2/01/01 2,000 1,994,820
Time Warner, Inc.
8.375%, 3/15/23 600 702,786
Viatel, Inc. Units
1.00%, 4/15/08 1,000 610,000
------------
21,815,360
UTILITIES-0.7%
Calenergy Co., Inc.
7.63%, 10/15/07 1,000 1,004,204
Comed Financing II Series B
8.50%, 1/15/27 1,000 1,109,327
------------
2,113,531
------------
35,919,157
5
PORTFOLIO OF INVESTMENTS ALLIANCE STRATEGIC BALANCED FUND
PRO-FORMA COMBINED ALLIANCE INCOME BUILDER FUND
(CONTINUED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
YANKEE BONDS-4.2%
Acindar Industries
11.25%, 2/15/04 $ 1,000 $ 1,005,000
Australian Gas Light Co.
6.40%, 4/15/08 (c) 2,000 2,031,684
Dao Heng Bank, Ltd.
7.75%, 1/24/07 (c) 500 404,945
Empresa Electrica Del Norte Grande, SA
7.75%, 3/15/06 (c) 1,685 1,426,774
Fugi LLC pfd.
9.87%, 12/31/49 (c) 1,200 1,056,390
Mc-Cuernavaca Trust
9.25%, 7/25/01 (c) 1,237 1,138,037
Perez Companc, SA
9.00%, 1/30/04 (c) 500 491,250
Reliance Industries, Inc.
10.375%, 6/24/16 (c) 1,650 1,559,996
St. George Bank, Ltd.
7.15%, 10/15/05 (c) 850 882,190
Tevecap, SA
12.63%, 11/26/04 1,000 930,000
Vicap, SA
11.38%, 5/15/07 (c) 500 538,125
------------
11,464,391
OTHER-0.3%
SB Treasury Co. LLC Series A, pfd.
9.40%, 12/29/49 (c) 1,000 985,625
Total Yankee Bonds 12,450,016
GOVERNMENT OBLIGATION-0.3%
COLOMBIA-1.6%
Republic of Colombia
8.63%, 4/01/08 1,000 950,998
Total Debt Obligations
(cost $110,439,793) 111,194,733
CONVERTIBLE BONDS-0.2%
IRT Property Co.
7.30%, 8/15/03 200 202,500
Liberty Property
8.20%, 7/01/01 200 257,000
Magna International, Inc.
5.00%, 10/15/02 200 255,250
Total Convertible Bonds
(cost $624,500) 714,750
SHORT-TERM INVESTMENTS-8.9%
U.S. GOVERNMENT AGENCY-1.9%
Federal Home Loan Bank
4.91%, 7/27/98 2,000 1,992,085
5.85%, 7/01/98 3,600 3,600,000
------------
5,592,085
COMMERCIAL PAPER-5.2%
Ford Motor Credit Corp.
5.62%, 7/06/98 6,290 6,285,090
5.63%, 7/09/98 430 429,462
Prudential Funding Corp.
5.67%, 7/07/98 8,475 8,466,991
------------
15,181,543
TIME DEPOSIT-1.8%
Royal Bank of Canada
5.75%, 7/01/98 5,200 5,200,000
Total Short-Term Investments
(amortized cost $25,973,628) 25,973,628
TOTAL INVESTMENTS-99.5%
(cost $257,892,020) 291,941,780
Other assets less liabilities-0.5% 1,579,973
NET ASSETS-100% $293,521,753
(a) Non-income producing security.
(b) Country of origin--United Kingdom
(c) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to certain qualified institutional buyers. At June 30,
1998, these securities amounted to $21,810,273 representing 7.4% of net assets.
(d) Country of origin-Finland
(e) Canadian holding
(f) Consists of $1,000,000 senior notes and 1,000 shares of common stock.
Glossary:
ADR - American Depositary Receipt
See notes to pro-forma combined financial statements.
6
ALLIANCE STRATEGIC BALANCED FUND
STATEMENTS OF ASSETS AND LIABILITIES ALLIANCE INCOME BUILDER FUND
JUNE 30, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE ALLIANCE
INCOME STRATEGIC BALANCED PRO-FORMA
BUILDER BALANCED SHARES ADJUSTMENT(S) COMBINED
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value $59,092,325 $52,819,435 $180,030,020 $291,941,780
Cash, at value 223,345 180,848 9,969 414,162
Receivable for investment securities sold 5,000,790 -0- 37,133 5,037,923
Dividends and interest receivable 764,416 261,722 802,638 1,828,776
Receivable for capital stock sold 59,195 -0- 692,349 751,544
Foreign taxes receivable -0- 15,765 -0- 15,765
Prepaid expenses 2,460 -0- 1,008 3,468
Total assets 65,142,531 53,277,770 181,573,117 -0- 299,993,418
LIABILITIES
Payable for investment securities purchased 5,200,000 -0- -0- 5,200,000
Distribution fee payable 46,978 28,597 67,181 142,756
Advisory fee payable 36,633 20,072 91,195 147,900
Unrealized depreciation of forward exchange
currency contracts -0- -0- 51,670 51,670
Payable for capital stock redeemed 70,611 7,103 100,189 177,903
Accrued expenses and other liabilities 194,416 228,600 328,420 751,436
Total liabilities 5,548,638 284,372 638,655 -0- 6,471,665
NET ASSETS $59,593,893 $52,993,398 $180,934,462 -0- $293,521,753
</TABLE>
See notes to pro-forma combined financial statements.
7
ALLIANCE STRATEGIC BALANCED FUND
STATEMENT OF OPERATIONS ALLIANCE INCOME BUILDER FUND
TWELVE MONTHS ENDED JUNE 30, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE ALLIANCE
INCOME STRATEGIC BALANCED PRO-FORMA
BUILDER BALANCED SHARES ADJUSTMENT(S) COMBINED
------------- ------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends and interest
(net of foreign taxes withheld) $ 3,515,804 $ 1,814,409 $ 5,277,523 $ -0- $10,607,736
EXPENSES
Advisory fee 438,517 383,456 983,041 (220,899) 1,584,115(a)
Distribution fee - Class A 7,840 66,003 283,837 (481) 357,199(b)
Distribution fee - Class B 96,594 261,277 302,457 -0- 660,328(c)
Distribution fee - Class C 460,765 29,984 70,201 -0- 560,950(c)
Custodian 129,499 180,938 108,461 (293,898) 125,000(d)
Administrative fee 123,245 -0- 117,813 (112,058) 129,000(e)
Audit and legal 96,665 50,014 87,085 (143,764) 90,000(f)
Transfer agency 79,414 111,030 209,475 -0- 399,919(f)
Directors fees 27,389 31,099 27,779 (56,267) 30,000(f)
Printing 17,022 30,988 65,792 (28,972) 84,830(f)
Registration 82,370 45,299 75,707 (116,230) 87,146(f)
Miscellaneous 9,007 23,505 21,530 (23,042) 31,000(f)
Total expenses 1,568,327 1,213,593 2,353,178 (995,611) 4,139,487
Less: expenses waived and assumed by the adviser -0- (293,763) -0- 293,763 -0-(g)
Net expenses 1,568,327 919,830 2,353,178 (701,848) 4,139,487
Net investment income 1,947,477 894,579 2,924,345 701,848 6,468,249
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investments 8,076,511 4,859,699 29,528,894 -0- 42,465,104
Net realized gain (loss) on foreign currency
transactions -0- (73,962) 39,764 (34,198)
Net change in unrealized appreciation
(depreciation) of:
Investments (1,597,213) 1,919,164 1,276,155 1,598,106
Foreign currency -0- 1,364 (51,198) (49,834)
Net gain on investments and foreign
currency transactions 6,479,298 6,706,265 30,793,615 -0- 43,979,178
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 8,426,775 $ 7,600,844 $33,717,960 $ 701,848 $50,447,427
</TABLE>
(a) Advisory fee for the total combined average net assets for the year ended
June 30, 1998:
$200 mm @ .625%
next $200 mm @ .50%
(b) Distribution fee based on an annual rate of .25% of the total combined
average net assets for the twelve months ended June 30, 1998.
(c) Distribution fee based on an annual rate of 1.00% of the total combined
average net assets for the twelve months ended June 30, 1998.
(d) Custodian fees are based on monthly fixed fees and on average net assets.
(e) Actual fee per year.
(f) Expenses are based on one fund.
(g) Expenses will not be waived by the adviser.
See notes to pro-forma combined financial statements.
8
NOTES TO PRO-FORMA COMBINED ALLIANCE STRATEGIC BALANCED FUND
FINANCIAL STATEMENTS ALLIANCE INCOME BUILDER FUND
JUNE 30, 1998 (UNAUDITED) ALLIANCE BALANCED SHARES
_______________________________________________________________________________
NOTE A: GENERAL
The Pro-Forma Financial Statements give effect to the proposed acquisition of
the assets of Alliance Strategic Balanced Fund and Alliance Income Builder Fund
by Alliance Balanced Shares ("the Fund") pursuant to a plan of reorganization.
The acquisition would be accomplished by a tax-free exchange of the assets of
Alliance Strategic Balanced Fund and Alliance Income Builder Fund for shares of
Alliance Balanced Shares.
The Pro-Forma Statements of Investments, of Assets and Liabilities and of
Operations should be read in conjunction with the historical financial
statements of the Fund, included in the Statement of Additional Information.
The Pro-Forma Statement of Operations has been prepared under the assumptions
set forth therein.
NOTE B: SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sales price, or if no sale occurred, at
the mean of the closing bid and asked prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors. Fixed income securities may be valued on the basis of
prices obtained from a pricing service when such prices are believed to reflect
the fair value of such securities.
1. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized foreign currency gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities, currency gains and
losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of interest recorded on
the Fund's books and the U.S. dollar equivalent of the amounts actually
received or paid. The Fund does not isolate the effect of fluctuations in
foreign currency exchange rates when determining the gain or loss upon the sale
of equity securities. Net currency gains and losses from valuing foreign
currency denominated assets and liabilities at period end exchange rates are
reflected as a component of net unrealized appreciation on investments and
foreign currency denominated assets and liabilities.
2. 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. The Fund accretes discounts and amortizes premiums as
adjustments to interest income.
3. 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 income tax regulations and may differ from those determined in
accordance with generally accepted accounting principles.
4. 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. At June 30, 1998, the Fund's cost of investments for federal income
tax purposes was, on a pro-forma combined basis, substantially the same as for
financial reporting purposes.
9
<PAGE>
ALLIANCE BALANCED SHARES, INC.
PART C
Item 15. Indemnification.
__________________________
Incorporated by reference to Item 27 of Post Effective
Amendment No. 88 to Registrant's Registration Statement on Form
N-1A (File Nos. 2-10988 and 811-00134), filed October 31, 1997.
Item 16. Exhibits.
___________________
(1)(a) Restatement Incorporated by reference to
of Articles of Exhibit 1(a) to Post-Effective
Incorporation of Amendment No. 88 to Registrant's
the Registrant Registration Statement on Form
N-1A, (File Nos. 2-10988 and
811-00134) (the "Registrant's
Form N-1A") filed October 31,
1997.
(1)(b) Articles of Filed herewith.
Amendment to
Articles of
Incorporation, dated
April 9, 1993
(1)(c) Certificate of Filed herewith.
Correction, dated
April 20, 1993
(1)(d) Articles Filed herewith.
Supplementary to
Articles of
Incorporation, dated
April 29, 1993
(1)(e) Articles Filed herewith.
Supplementary to
Articles of
Incorporation, dated
May 3, 1994
(1)(f) Articles Filed herewith.
Supplementary to
Articles of
C-1
<PAGE>
Incorporation, dated
September 30, 1996
(1)(g) Articles of Filed herewith.
Amendment to Articles
of Incorporation,
dated September 9,
1997
(1)(h) Articles Filed herewith.
Supplementary to
Articles of
Incorporation, dated
May 21, 1998
(2) By-Laws Incorporated by reference to
Exhibit 2 to Post-Effective
Amendment No. 88 to the
Registrant's Form N-1A filed
October 31, 1997.
(3) Not applicable
(4)(a) Plan of Filed herewith as Exhibit A to
Reorganization and Part A.
Liquidation relating
to The Alliance
Portfolios --
Alliance Strategic
Balanced Fund
(4)(b) Plan of Liquidation Filed herewith.
and Reorganization
relating to Alliance
Income Builder Fund,
Inc.
(6) Investment Advisory Filed herewith.
Agreement between the
Registrant and
Alliance Capital
Management L.P.
(7)(a) Distribution Services Filed herewith.
Agreement between the
Registrant and
Alliance Fund
Distributors, Inc.
("AFD")
Amendment to Incorporated by reference to
C-2
<PAGE>
Distribution Services Exhibit 6(a) to Post-Effective
Agreement between the No. 86 to the Registrant's
Registrant and AFD Form N-1A, filed October 1, 1996
(7)(b) Form of Selected Incorporated by reference to
Dealer Agreement Exhibit 6(b) to Post-Effective
between AFD and Amendment No. 88 to Registrant's
selected dealers Form N-1A filed October 31,
offering shares of 1997.
the Registrant
(7)(c) Form of Selected Incorporated by reference to
Agent Agreement Post-Effective Amendment
between AFD and No. 88 to Exhibit 6(c) to
selected agents the Registrant's Form N-1A
making available filed October 31, 1997.
shares of the
Registrant
(8) Not applicable
(9)(a) Custodian Contract Filed herewith.
between the
Registrant and
State Street Bank
and Trust Company
(10) Rule 12b-1 Plan Incorporated in Exhibit 7(a)
above.
Amended and Restated Filed herewith.
18f-3 plan
(11)(a) Opinion of Seward & Filed herewith.
Kissel as to the
legality of the
securities being
registered
(11)(b) Opinion of Venable, Filed herewith.
Baetjer and Howard,
LLP as to the
legality of the
securities being
registered
C-3
<PAGE>
(12)(a) Opinions of Seward & To be filed by means of a
Kissel as to tax post-effective amendment
consequences hereto.
(b) Opinion of Ropes & To be filed by means of a
Gray as to tax post-effective amendment
consequences hereto.
(13) Transfer Agency Filed herewith.
Agreement between
the Registrant and
Alliance Fund
Services, Inc.
(14)(a) Consent of Price- Filed herewith.
waterhouseCoopers
LLP, independent
accountants for
Balanced Shares
(14)(b) Consent of Price- Filed herewith.
waterhouseCoopers
LLP, independent
accountants for
Strategic
(14)(c) Consent of Ernst Filed herewith.
& Young LLP,
independent auditors
for Income Builder
(15) Not applicable
(16) Powers of Attorney Filed herewith.
C-4
<PAGE>
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any
public reoffering of the securities registered through
the use of a prospectus which is a part of this
Registration Statement by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c) under the Securities Act of 1933 (17
CFR 230.145c), the reoffering prospectus will contain
the information called for by the applicable
registration form for reofferings by persons who may be
deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed
as a part of an amendment to the Registration Statement
and will not be used until the amendment is effective,
and that, in determining any liability under the 1933
Act, each post-effective amendment shall be deemed to
be a new registration statement for the securities
offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide
offering of them.
(3) The undersigned Registrant agrees to file a copy of
each tax opinion required to be filed as an exhibit to
the Registration Statement by Item 16(12) of Form N-14
under the Securities Act of 1933, as amended, by means
of a post-effective amendment to the Registration
Statement.
C-5
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this
Registration Statement has been signed on behalf of the
Registrant in the City and State of New York, on the 27th day of
July, 1998.
ALLIANCE BALANCED SHARES, INC.
By: /s/ John D. Carifa
John D. Carifa
Chairman and President
As required by the Securities Act of 1933, this
Registration Statement has been signed by the following persons
in the capacities and on the dates indicated:
Signature Title Date
_________ _____ ____
1) Principal
Executive Officer
Chairman July 27, 1998
/s/ John D. Carifa and President
John D. Carifa
2) Principal Financial
and Accounting Officer
/s/ Mark D. Gersten Treasurer July 27, 1998
Mark D. Gersten
3) Directors
Ruth Block
John D. Carifa
David H. Dievler
John H. Dobkin
William H. Foulk, Jr.
James M. Hester
Clifford L. Michel
Donald J. Robinson
/s/ Edmund P. Bergan, Jr. July 27, 1998
By: Edmund P. Bergan, Jr.
(Attorney-in-fact)
C-6
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
(1)(b) Articles of Amendment to
Articles of Incorporation,
dated April 9, 1993
(1)(c) Certificate of Correction,
dated April 20, 1993
(1)(d) Articles Supplementary to
Articles of Incorporation,
dated April 29, 1993
(1)(e) Articles Supplementary to
Articles of Incorporation,
dated May 3, 1994
(1)(f) Articles Supplementary to
Articles of Incorporation,
dated September 30, 1996
(1)(g) Articles of Amendment to
Articles of Incorporation,
dated September 9, 1997
(1)(h) Articles Supplementary to
Articles of Incorporation,
dated May 21, 1998
(4)(b) Plan of Reorganization and
Liquidation relating to
Alliance Income Builder
Fund, Inc.
(6) Investment Advisory
Agreement between the
Registrant and Alliance
Capital Management L.P.
(7)(a) Distribution Services
Agreement between the
Registrant and Alliance
Fund Distributors, Inc.
(9)(a) Custodian Contract between
the Registrant and Alliance
Fund Services, Inc.
C-7
<PAGE>
(10) Amended and Restated 18f-3
Plan
(11)(a) Opinion of Seward & Kissel
as to the legality of the
securities being registered
(11)(b) Opinion of Venable, Baetjer
and Howard, LLP as to the
legality of the securities
being registered
(13) Transfer Agency Agreement
between the Registrant and
Alliance Fund Services,
Inc.
(14)(a) Consent of Pricewaterhouse-
Coopers LLP, independent
accountants for Balanced
Shares
(14)(b) Consent of Pricewaterhouse-
Coopers LLP, independent
accountants for Strategic
(14)(c) Consent of Ernst & Young
LLP, independent auditors
for Income Builder
(16) Powers of Attorney
C-8
00250236.AA7
<PAGE>
EXHIBIT (1)(b)
ARTICLES OF AMENDMENT
ALLIANCE BALANCED SHARES, INC.
Alliance Balanced Shares, Inc., a Maryland corporation
having its principal office in the State of Maryland in Baltimore
City (hereinafter called the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation of Maryland that:
FIRST: The Articles of Incorporation of the Corporation
are hereby amended in Article FIFTH by deleting Section (1)(a) and
inserting in lieu thereof a new Section (1)(a) as set forth below:
(1)(a) The total number of shares which the Corporation
has authority to issue is 90 million (90,000,000) shares
of capital stock of the par value of $.01 per share and
of the aggregate par value of $900,000. The capital
stock shall be initially classified into three classes,
consisting of 30 million (30,000,000) shares of Class A
Common Stock, 30 million (30,000,000) shares of Class B
Common Stock, and 30 million (30,000,000) shares of
Class C Common Stock. The shares of the Corporation's
capital stock which were issued and outstanding at the
effective time of the amendment to the Charter filed on
February 1, 1991 were reclassified as "Class A Common
Stock."
SECOND: The Articles of Incorporation of the Corporation
are further amended in Article FIFTH by deleting Section (1)(c)
and inserting in lieu thereof a new Section (1)(c) as set forth
below:
(c) All consideration received by the Corporation for
the issue or sale of shares of a class of the
Corporation's stock, together with all funds derived from
any investment and reinvestment thereof and, in the case
of Class A Common Stock, all assets attributable to
shares of Class B Common Stock converted to shares of
<PAGE>
Class A Common Stock, shall irrevocably belong to that
class for all purposes, subject only to the automatic
conversion of Class B Common Stock into Class A Common
Stock and the rights of creditors, and shall be so
recorded upon the books of account of the Corporation.
Such consideration and such assets attributable to shares
that have been converted as well as any funds derived
from any investment and reinvestment are herein referred
to as "assets belonging to" that class. The assets
belonging to the Class A Common Stock, the assets
belonging to the Class B Common Stock, and the assets
belonging to the Class C Common Stock shall be invested
in the same investment portfolio of the Corporation and
may be invested in the same investment portfolio of the
Corporation with the assets of other classes of Common
Stock of the Corporation hereafter created. Income or
gain from investments by the Corporation will be
allocated to each class based on the net asset value of
each class. The assets belonging to a class of the
Corporation's stock shall be charged with the liabilities
of the Corporation not attributable to any particular
class, in the latter case in the proportion that the net
asset value of all classes of the Corporation's stock
(determined without regard to such liabilities). The
determination of the Board of Directors shall be
conclusive as to the allocation of liabilities, including
accrued expenses and reserves, and assets to a particular
class or classes.
THIRD: The Articles of Incorporation of the Corporation
are further amended in Article FIFTH by adding a new Section
(1)(e) as set forth below:
(e) The Board of Directors is authorized to classify or
to reclassify from time to time, any unissued shares of
stock of the Corporation, whether now or hereafter
authorized, by setting, changing or eliminating the
preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications
or terms and conditions of or rights to require
redemption of the stock. The provisions of Article FIFTH
of these Articles of Incorporation other than those
provisions which by their terms are applicable solely to
the Class A Common Stock, Class B Common Stock or Class C
Common Stock) and the other provisions of the Articles of
Incorporation relating to the stock of the Corporation
2
<PAGE>
generally, as they may be amended from time to time,
shall apply to each class of stock unless otherwise
provided by the Board of Directors prior to issuance of
any shares of that class.
FOURTH: The Articles of Incorporation of the Corporation
are further amended in Article FIFTH by deleting Section (2) and
inserting in lieu thereof a new Section (2) as set forth below:
(2) Each holder of a share of capital stock of the
Corporation shall be entitled to one vote for each share
standing in such holder's name on the books of the
Corporation, irrespective of the class thereof, and all
shares of all classes shall vote together as a single
class; provided, however, that (i) as to any matter with
respect to which a separate vote of any class or of any
classes voting together as a single class is required by
law pursuant to any applicable order, rule or
interpretation issued by the Securities Exchange
Commission, or otherwise, such requirement as to a
separate vote by that class or those classes voting
together as a single class, as the case may be, shall
apply in lieu of a general vote of all classes as
described above, (ii) in the event that the separate vote
requirements referred to in (i) above apply with respect
to one or more classes, voting separately or as a single
class, then subject to paragraph (iii) below, the shares
of all other classes not entitled to a vote of a separate
class or of separate classes voting together as a single
class as aforesaid shall bote as a single class, and
(iii) as to any matter which does not affect the interest
of a particular class, such class shall not be entitled
to any vote and only the holders of shares of the one or
more affected classes shall be entitled to vote.
FIFTH: The Articles of Incorporation of the Corporation
are further amended in Article FIFTH by deleting Section (3)(c)
and inserting in lieu thereof a new Section (3)(c) as set forth
below:
(c) Shares of each class of stock shall be entitled to
such dividends or distributors, in stock or in cash or
both, as may be declared from time to time by the Board
3
<PAGE>
of Directors with respect to such class. Dividends or
distributions shall be paid on shares of a class of
stock only out of the assets belonging to that class.
Specifically, and without limiting the generality of the
foregoing, the dividends and distributions of investment
income and capital gains with respect to the Class A
Common Stock, the Class B Common Stock, and the Class C
Common Stock and any other class hereafter created may
vary among the classes to reflect differing allocations
of expenses of the Corporation among the holders of the
various classes of Common Stock and any resultant
differences among the net stock value of the various
classes of Common Stock to such extent and for purposes
as the Board of Directors may deem appropriate.
SIXTH: The Articles of Incorporation of the Corporation
are further amended in Article FIFTH by deleting Section (5) and
inserting in lieu thereof a new Section (5) as set forth below:
(5) Notwithstanding any provision of law requiring
any action to be taken or authorized by the affirmative
vote of the holders of a majority or other designated
proportion of the shares or of the shares of each class,
or to be otherwise taken or authorized by a vote of the
stockholders, such action shall be effective and valid
if taken or authorized by the affirmative vote of the
holders of a majority of the total number of shares of
all classes outstanding and entitled to vote thereon
pursuant to the provisions of this certificate of
incorporation or any amendment hereto.
SEVENTH: The Articles of Incorporation of the
Corporation are further amended in Article SEVENTH by deleting
Section (8)(a), renumbering Section 8(b), (c) and (d) as Sections
8(a), (b) and (c), and deleting the words "and subdivision (a) of
this section 8" in the first sentence of Section 8(a) and (b) as
renumbered herein).
4
<PAGE>
EIGHTH: The Articles of Incorporation of the
Corporation are further amended by deleting Article EIGHTH and
inserting in lieu thereof a new Article EIGHTH as set forth
below:
EIGHTH: The Corporation reserves the right, from
time to time, to make any amendment of the provisions of
its certificate of incorporation, including any
amendment changing the terms of its outstanding stock by
classification, reclassification or otherwise; and all
rights at any time conferred upon the stockholders of
the Corporation by its certificate of incorporation are
granted subject to the provisions of this Article
EIGHTH.
NINTH: The foregoing amendments to the charter were
advised by the board of directors and approved by the
stockholders.
TENTH: Immediately before the foregoing amendments the
total number of shares of stock of all classes which the
Corporation had authority to issue was 60 million (60,000,000)
shares, the par value of each class of stock being $1.00 per
share, 30 million (30,000,000) of which shares were classified as
Class A Common Stock and 30 million (30,000,000) of which shares
were reclassified as Class B Common Stock. The aggregate par
value of all the shares of all classes was $60,000,000. As
amended, the total number of shares of stock of all classes which
the Corporation has authority to issue is 90 million (90,000,000)
shares, the par value of each class of stock being $.01 per
share, with 30 million (30,000,000) shares classified as Class A
5
<PAGE>
Common Stock, 30 million (30,000,000) shares classified as
Class B Common Stock, and 30 million (30,000,000) shares
classified as Class C Common Stock. The aggregate par value of
all shares of all classes of the Corporation is $900,000.
The undersigned Chairman of the Board acknowledges these
Articles of Amendment to be the corporate act of the Corporation
and states to the best of his knowledge, information and belief
that the matters and facts set forth in these Articles with
respect to authorization and approval hereof are true in all
material respects and that this statement is made under the
penalties of perjury.
6
<PAGE>
IN WITNESS WHEREOF, Alliance Balanced Shares, Inc. has
caused these Articles of Amendment to be signed and filed in its
name and on its behalf by its Chairman of the Board and witnesses
by its Secretary on April 9, 1993.
ALLIANCE BALANCED SHARES, INC.
By: /s/ David H. Dievler
---------------------------
David H. Dievler, Chairman
of the Board
Witness:
/s/ Edmund P. Bergan, Jr.
- ------------------------------
Edmund P. Bergan, Jr., Secretary
7
00250236.AB0
<PAGE>
Exhibit 1(c)
CERTIFICATE OF CORRECTION
ALLIANCE BALANCED SHARES, INC.
Alliance Balanced Shares, Inc. a Maryland corporation
having its principal office in the State of Maryland in the City
of Baltimore (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of
Maryland that:
1. The title of the document being corrected is:
"ALLIANCE BALANCED SHARES, INC.
ARTICLES OF AMENDMENT"
2. Alliance Balanced Shares, Inc. is the only party to
the Articles of Amendment.
3. The Articles of Amendment were filed with and
accepted by the State Department of Assessments and Taxation of
Maryland ("SDAT") on February 1, 1991.
4. The Articles of Amendment were filed at the same
time as Articles of Amendment for The Alliance Fund, Inc. and
Alliance Growth and Income Fund, Inc. The Corporation believes
that the pages of these three documents were filed in the correct
order but were subsequently inadvertently microfilmed by SDAT in
the wrong order, with the result that the current SDAT records
reflect the first page of each of the Articles of Amendment
attached to the remaining pages of one of the other sets of
Articles of Amendment. Attached as Exhibit A are the correct
<PAGE>
Articles of Amendment for the Corporation and attached as
Exhibit B are the Articles of Amendment for the Corporation as
reflected in SDAT's current records.
The undersigned Chairman of the Corporation hereby
acknowledges this Certificate of Correction to be the corporate
act of the Corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set
forth herein (and in the Articles of Amendment attached as
Exhibit A, hereto) with respect to authorization and approval are
true in all material respects and that this statement is made
under the penalties of perjury.
IN WITNESS WHEREOF, Alliance Balanced Shares, Inc.
caused this Certificate of Correction to be signed in its name
and on its behalf by its Chairman and its corporate seal to be
hereunto affixed and attested by its Secretary on April 20, 1993.
ATTEST: ALLIANCE BALANCED SHARES, INC.
/s/ Edmund P. Bergan, Jr. By: /s/ David H. Dievler (SEAL)
__________________________ _____________________
Edmund P. Bergan, Jr. David H. Dievler
Secretary Chairman
2
00250236.AE2
<PAGE>
EXHIBIT (1)(d)
ALLIANCE BALANCED SHARES, INC.
ARTICLES SUPPLEMENTARY
Alliance Balanced Shares, Inc., a Maryland
corporation having its principal office in the State of
Maryland in Baltimore City (hereinafter called the
"Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Corporation's Board of Directors hereby
reclassifies the 30,000,000 authorized but unissued shares
of Class C Common Stock by setting or changing the
preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications,
or terms or conditions of redemption thereof as hereinafter
set forth.
SECOND: The shares of the Class C Common Stock as
so reclassified shall continue to be designated as Class C
Common Stock and have the preferences, conversion and other
rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of
redemption as currently set forth in the charter of the
Corporation with respect to the Class C Common Stock, and
shall also be subject to the following:
The proceeds of the redemption of a share
(including a fractional share) of Class C Common
Stock shall be reduced by the amount of any
contingent deferred sales charge payable on such
redemption pursuant to the terms of issuance of
such shares.
THIRD: The shares have been reclassified herein by
the board of directors under the authority contained in the
charter of the Corporation.
IN WITNESS WHEREOF, Alliance Balanced Shares, Inc.
has caused these Articles Supplementary to be executed by
its Chairman of the Board of Directors and attested by its
Secretary on this 29th day of April, 1993. The Chairman of
the Board of Directors of the Corporation who signed these
Articles Supplementary acknowledges them to be the act of
the Corporation and states under the penalties of perjury
that, to the best of his knowledge, information and belief,
the matters and facts set forth herein relating to
<PAGE>
authorization and approval hereof are true in all material
respects.
ALLIANCE BALANCED SHARES, INC.
By: /s/ David H. Dievler
--------------------------
David H. Dievler
Chairman of the Board
of Directors
Attested: /s/ Edmund P. Bergan, Jr.
----------------------------
Edmund P. Bergan, Jr.
Secretary
2
00250236.AB2
<PAGE>
EXHIBIT (1)(e)
ALLIANCE BALANCED SHARES, INC.
ARTICLES SUPPLEMENTARY
ALLIANCE BALANCED SHARES, INC., a Maryland
corporation having its principal office in the City of
Baltimore, certifies that:
FIRST: The total number of shares of capital stock
that the Corporation has authority to issue has
been increased to One Hundred Eighty Million
(180,000,000) shares of Common Stock, par value
$.01 per share, by the Corporation's Board of
Directors in accordance with Section 2-105(c) of
the Maryland General Corporation Law.
SECOND: Immediately before the increase, the
Corporation was authorized to issue a total of
Ninety Million (90,000,000) shares of Common Stock,
par value $.01 per share, Thirty Million
(30,000,000) of which were designated as "Class A
Common Stock," Thirty Million (30,000,000) of which
were designated as "Class B Common Stock," and
Thirty Million (30,000,000) of which were
designated as "Class C Common Stock," having an
aggregate par value of Nine Hundred Thousand
Dollars ($900,000). As increased, the Corporation
is authorized to issue a total of One Hundred
Eighty Million (180,000,000) shares of Common
Stock, par value $.01 per share, Sixty Million
(60,000,000) of which shall be designated "Class A
Common Stock," Sixty Million (60,000,000) of which
shall be designated "Class B Common Stock," and
Sixty Million (60,000,000) of which shall be
designated "Class C Common Stock," having an
aggregate par value of One Million Eight Hundred
Thousand Dollars ($1,800,000).
THIRD: The Corporation is registered as an
open-end investment company under the Investment
Company Act of 1940, as amended.
IN WITNESS WHEREOF, Alliance Balanced Shares, Inc.
has caused these Articles Supplementary to be executed by
its President and its corporate seal to be affixed and
attested by its Secretary on this 3rd day of May, 1994. The
President of the Corporation who signed these Articles
Supplementary acknowledges them to be the act of the
Corporation and states under the penalties for perjury that
to the best of his knowledge, information and belief the
<PAGE>
matters and facts relating to authorization and approval
hereof are true in all material respects.
ALLIANCE BALANCED SHARES, INC.
By: /s/ David H. Dievler
---------------------------
David H. Dievler
President
Attest: /s/ Edmund P. Bergan, Jr.
------------------------------
Edmund P. Bergan, Jr.
Secretary
2
00250236.AB1
<PAGE>
EXHIBIT (1)(f)
ALLIANCE BALANCED SHARES, INC.
ARTICLES SUPPLEMENTARY
Alliance Balanced Shares, Inc., a Maryland
corporation having its principal office in the City of
Baltimore (hereinafter called the "Corporation"), certifies
that:
FIRST: The Board of Directors of the Corporation
hereby increases the aggregate number of shares of capital
stock that the Corporation has authority to issue by
30,000,000 shares and hereby classifies such shares as
30,000,000 shares of Advisor Class Common Stock.
SECOND: The shares of the Advisor Class Common
Stock as so classified by the Corporation's Board of
Directors shall have the preferences, conversion and other
rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of
redemption set forth in Article FIFTH of the Corporation's
Articles of Incorporation (other than those provisions of
Article FIFTH which by their terms are applicable solely to
other classes of the Corporation's Common Stock) and shall
be subject to all provisions of the Articles of
Incorporation relating to stock of the Corporation
generally, and those set forth as follows:
(1) The assets attributable to the Advisor
Class Common Stock shall be invested in the same
investment portfolio of the Corporation as the
assets attributable to the Class A Common Stock,
Class B Common Stock and Class C Common Stock.
(2) The dividends and distributions of
investment income and capital gains with respect to
the Advisor Class Common Stock shall be in such
amount as may be declared from time to time by the
Board of Directors, and such dividends and
distributions may vary from dividends and
distributions of investment income and capital
gains with respect to the Class A Common Stock,
Class B Common Stock and Class C Common Stock to
reflect differing allocations of the expenses of
the Corporation among the holders of the four
classes and any resultant differences among the net
<PAGE>
asset values per share of the four classes, to such
extent and for such purposes as the Board of
Directors may deem appropriate. The allocation of
investment income or capital gains and expenses and
liabilities of the Corporation and of amounts
distributable in the event of liquidation or
dissolution of the Corporation among the Class A
Common Stock, the Class B Common Stock, the Class C
Common Stock and the Advisor Class Common Stock
shall be determined by the Board of Directors in a
manner that is consistent with the Investment
Company Act of 1940, the rules and regulations
thereunder, and the interpretations thereof, in
each case as from time to time amended, modified or
superseded.
(3) Except as may otherwise be required by
law pursuant to any applicable order, rule or
interpretation issued by the Securities and
Exchange Commission, or otherwise, the holders of
the Advisor Class Common Stock shall have
(i) exclusive voting rights with respect to any
matter submitted to a vote of stockholders that
affects only holders of the Advisor Class Common
Stock and (ii) no voting rights with respect to the
provisions of any distribution plan adopted by the
Corporation pursuant to Rule 12b-1 under the
Investment Company Act of 1940 applicable solely to
one or more classes of the Corporation's Common
Stock other than Advisor Class Common Stock or with
respect to any other matter submitted to a vote of
stockholders which does not affect holders of the
Advisor Class Common Stock.
(4) At such times (which may vary among
holders of Advisor Class Common Stock) as may be
determined by the Board of Directors (or with the
authorization of the Board of Directors, by the
officers of the Corporation) in accordance with the
Investment Company Act of 1940, applicable rules
and regulations thereunder and applicable rules and
regulations of the National Association of
Securities Dealers, Inc., as memorialized in
resolutions duly adopted by the Board of Directors
and from time to time reflected in the registration
statement of the Corporation (the "Corporation's
Registration Statement"), certain of the shares of
Advisor Class Common Stock of the Corporation may
2
<PAGE>
be automatically converted into shares of another
class of stock of the Corporation based on the
relative net asset values of such classes at the
time of conversion, subject, however, to any terms
or conditions of conversion that may be imposed by
the Board of Directors (or with the authorization
of the Board of Directors, by the officers of the
Corporation) as are memorialized in resolutions
duly adopted by the Board of Directors and
reflected in the Corporation's Registration
Statement.
THIRD: A. Immediately before the increase in
authorized capital stock provided for herein, the total
number of shares of stock of all classes which the
Corporation had authority to issue was 90,000,000 shares,
the par value of each class of stock being $.01 per share,
with an aggregate par value of $900,000, of which 30,000,000
shares were classified as shares of Class A Common Stock,
30,000,000 shares were classified as shares of Class B
Common Stock and 30,000,000 shares were classified as shares
of Class C Common Stock.
B. Immediately after the increase in
authorized capital stock provided for herein, the total
number of shares of stock of all classes which the
Corporation has authority to issue is 120,000,000 shares,
the par value of each class of stock being $.01 per share,
with an aggregate par value of $1,200,000, of which
30,000,000 shares are classified as shares of Class A Common
Stock, 30,000,000 shares are classified as shares of Class B
Common Stock, 30,000,000 shares are classified as shares of
Class C Common Stock and 30,000,000 shares are classified as
shares of Advisor Class Common Stock.
FOURTH: The Corporation is registered as an open-
end company under the Investment Company Act of 1940.
FIFTH: The total number of shares that the
Corporation has authority to issue has been increased by the
Board of Directors in accordance with Section 2-105(c) of
the Maryland General Corporation Law.
SIXTH: The shares aforesaid have been duly
classified by the Corporation's Board of Directors pursuant
to authority and power contained in the Corporation's
Articles of Incorporation.
3
<PAGE>
IN WITNESS WHEREOF, Alliance Balanced Shares, Inc.
has caused these Articles Supplementary to be executed by
its Chairman of the Board and attested by its Secretary and
its corporate seal to be affixed on this 30th day of
September, 1996. The Chairman of the Board of the
Corporation who signed these Articles Supplementary
acknowledges them to be the act of the Corporation and
states under the penalties of perjury that, to the best of
his knowledge, information and belief, the matters and facts
set forth herein relating to authorization and approval
hereof are true in all material respects.
ALLIANCE BALANCED SHARES, INC.
[CORPORATE SEAL] By: /s/ John C. Carifa
------------------------
John D. Carifa
Chairman
Attested: /s/ Edmund P. Bergan, Jr.
-----------------------------
Edmund P. Bergan, Jr.,
Secretary
4
00250236.AB4
<PAGE>
EXHIBIT (1)(g)
ARTICLES OF AMENDMENT
ALLIANCE BALANCED SHARES, INC.
Alliance Balanced Shares, Inc., a Maryland
corporation having its principal office in the State of
Maryland in Baltimore (hereinafter called the
"Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Articles of Incorporation of the
Corporation are hereby amended in Article THIRD by deleting
Section (1) thereof, including subdivisions (a) through (d),
and inserting in lieu thereof a new Section (1) as set forth
below:
(1) To purchase or otherwise acquire,
hold for investment or otherwise, sell,
exchange or otherwise dispose of full or part
paid securities (which term "securities" shall
for the purpose of this Article, without
limitation of the generality thereof, be deemed
to include any stocks, shares, bonds, debentures,
notes, mortgages or other obligations, and any
certificates, receipts, warrants or other
instruments representing rights to receive,
purchase or subscribe for the same, or representing
any other rights or interests therein or in any
property or assets) created or issued by any
persons, firms, associations, corporations,
syndicates, combinations, organizations,
governments or subdivisions thereof; and to
exercise, as owner or holder of any securities, all
rights, powers and privileges in respect thereof.
<PAGE>
SECOND: The foregoing amendment to the Charter was
advised by the Board of Directors and approved by the
stockholders.
The undersigned President of the Corporation
acknowledges these Articles of Amendment to be the corporate
act of the Corporation and states to the best of his
knowledge, information and belief that the matters and facts
set forth in these Articles of Amendment with respect to
authorization and approval hereof are true in all material
respects and that this statement is made under the penalties
of perjury.
IN WITNESS WHEREOF, Alliance Balanced Shares, Inc.
has caused these Articles of Amendment to be signed and
filed in its name and on its behalf by its President and
witnessed by its Secretary on September 9, 1997.
ALLIANCE BALANCED SHARES, INC.
By: /s/ John D. Carifa
-----------------------
John D. Carifa
President
WITNESS:
/s/ Edmund P. Bergan, Jr.
------------------------
Edmund P. Bergan, Jr.
Secretary
2
00250236.AB3
<PAGE>
Exhibit 1(h)
ALLIANCE BALANCED SHARES, INC.
ARTICLES SUPPLEMENTARY
Alliance Balanced Shares, Inc., a Maryland corporation
having its principal office in the City of Baltimore (hereinafter
called the "Corporation"), certifies that:
FIRST: The Board of Directors of the Corporation hereby
increases the aggregate number of shares of capital stock that
the Corporation has authority to issue by 11,880,000,000 shares
and hereby classifies 2,970,000,000 of such shares as Class A
Common Stock, 2,970,000,000 of such shares as Class B Common
Stock, 2,970,000,000 of such shares as Class C Common Stock and
2,970,000,000 of such shares as Advisor Class Common Stock of the
Corporation.
SECOND: The Class A Common Stock, Class B Common Stock,
Class C Common Stock and Advisor Class Common Stock,
respectively, of the Corporation, as so classified herein, shall
have the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption as currently set forth in the
Charter of the Corporation with respect to the Class A Common
Stock, Class B Common Stock, Class C Common Stock and Advisor
Class Common Stock, respectively, of the Corporation.
THIRD: A. Immediately before the increase in
authorized capital stock provided for herein, the total number of
shares of stock of all classes which the Corporation had
authority to issue was 120,000,000 shares, the par value of each
class of stock being $.01 per share, with an aggregate par value
of $1,200,000.
B. Immediately after the increase in
authorized capital stock provided for herein, the total number of
shares of stock of all classes which the Corporation has
authority to issue is 12,000,000,000 the par value of each class
of stock being $.01 per share, with an aggregate par value of
$120,000,000.
FOURTH: The Corporation is registered as an open-end
company under the Investment Company Act of 1940.
FIFTH: The total number of shares that the Corporation
has authority to issue has been increased by the Board of
Directors of the Corporation in accordance with Section 2-105(c)
of the Maryland General Corporation Law.
<PAGE>
SIXTH: The shares aforesaid have been duly classified
by the Corporation's Board of Directors pursuant to authority and
power contained in the Corporation's Charter.
IN WITNESS WHEREOF, Alliance Balanced Shares, Inc. has
caused these Articles Supplementary to be executed by the
Chairman of the Board of Directors of the Corporation and
witnessed by its Secretary as of this 21st day of May, 1998. The
Chairman of the Board of Directors of the Corporation who signed
these Articles Supplementary acknowledges them to be the act of
the Corporation and states under the penalties of perjury that,
to the best of his knowledge, information and belief, the matters
and facts set forth herein relating to authorization and approval
hereof are true in all material respects.
ALLIANCE BALANCED SHARES, INC.
By: /s/ John D. Carifa
__________________________
John D. Carifa
Chairman
WITNESS: /s/ Edmund P. Bergan, Jr.
_________________________
Edmund P. Bergan, Jr.
Secretary
2
00250236.AE3
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
dated as of [ ], 1998 between Alliance Balanced Shares,
Inc. ("Balanced Shares") and Alliance Income Builder Fund, Inc.
("Income Builder"), each, a Maryland corporation.
In consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. Shareholder Approval
A meeting of the shareholders of Income Builder shall be
called and held for the purpose of acting upon this Agreement and
the transactions contemplated herein. Balanced Shares shall
furnish to Income Builder such data and information relating to
Balanced Shares as shall be reasonably requested by Income
Builder for inclusion in the information to be furnished to
shareholders of Income Builder in connection with the meeting for
the purpose of acting upon this Agreement and the transactions
contemplated herein. Approval by the shareholders of Income
Builder of this Agreement and the transactions contemplated
herein shall, to the extent necessary to permit the consummation
of the transactions contemplated herein without violating any
investment objective, policy or restriction of Income Builder, be
deemed to constitute approval by the shareholders of a temporary
amendment of any investment objective, policy or restriction that
would otherwise be inconsistent with or violated upon the
consummation of such transactions solely for the purpose of
consummating such transactions.
2. Reorganization
The transactions described in this section are
hereinafter collectively referred to as the "Reorganization."
(a) Plan of Reorganization and Liquidation.
(i) Income Builder agrees to and will grant,
bargain, sell, convey, assign, transfer and deliver to
Balanced Shares at the closing provided for in Section 2(b)
(the "Closing") all of the assets, rights, claims and
businesses of every kind, character and description (whether
tangible or intangible, whether real, personal or mixed,
whether absolute, accrued, contingent or otherwise, whether
or not determinable at the time of the Closing, and wherever
located) of Income Builder to the extent they exist on or
after the Closing. In consideration thereof, at the
<PAGE>
Closing, Balanced Shares agrees to and will (A) assume and
pay, to the extent that they exist on the Closing, all
liabilities of Income Builder and (B) deliver to Income
Builder the number of full and fractional Class A shares,
Class B shares, Class C shares and Advisor Class share of
Balanced Shares, par value $.01 per share (the "Balanced
Shares shares"), equal to the number of full and fractional
Class A shares, Class B shares, Class C shares and Advisor
Class shares of Income Builder, par value $.001 per share
(the "Income Builder shares"), determined by multiplying the
number of Income Builder shares of that class by the
exchange ratio as computed as set forth below, the product
of such multiplication to be carried to the third decimal
place. For purposes of this section, Class A, Class B,
Class C and Advisor Class Income Builder shares will
correspond to Class A, Class B, Class C and Advisor Class
shares, respectively, of Balanced Shares. The exchange
ratio for each class of Income Builder shares shall be the
number determined by dividing the net asset value per share
of that class of Income Builder shares by the net asset
value per share of the corresponding class of the Balanced
Shares shares. In each case such net asset values are to be
determined on a consistent basis by the appropriate officers
of Income Builder or Balanced Shares, as the case may be, as
of the close of regular trading on the New York Stock
Exchange, Inc. (the "Exchange") next preceding the Closing.
The exchange ratio shall be carried to the fourth decimal
place.
(ii) At the Closing, Income Builder will
liquidate and distribute pro rata to the holders of record
of each class of Income Builder shares as of the Closing the
Balanced Shares shares of the corresponding class received
by Income Builder pursuant to this Section 2(a). Such
liquidation and distribution will be accompanied by the
establishment of an open account on the share records of
Balanced Shares in the name of each holder of a class of
Income Builder shares and representing the number of
Balanced Shares shares of the corresponding class due such
shareholder. Fractional Balanced Shares shares will be
carried to the third decimal place. Simultaneously with
such crediting of the Balanced Shares shares to the
shareholders, the Income Builder shares held by such
shareholders shall be canceled. Certificates representing
Balanced Shares shares will be issued in accordance with the
then-current Balanced Shares prospectus; provided, however,
that any certificate representing Balanced Shares shares to
be issued in replacement of a certificate representing
Income Builder shares shall be issued only upon the
surrender of such latter certificate.
2
<PAGE>
(iii) Following the Closing, Income Builder
will dissolve.
(b) Closing. The Closing shall occur at the later of
(i) the final adjournment of the meeting of the holders of Income
Builder shares at which this Agreement and the transactions
contemplated hereby will be considered and (ii) such later time
as the parties hereto may mutually agree.
3. Articles of Incorporation; By-Laws; Board of Directors;
Officers
Balanced Shares hereby covenants and agrees as follows:
(a) Charter. The Charter of Balanced Shares in effect
at the Closing shall continue to be the Charter of Balanced
Shares until altered, amended or repealed as provided by law.
(b) By-Laws. The By-laws of Balanced Shares in effect
at the Closing shall continue to be the By-laws of Balanced
Shares until the same shall thereafter be altered, amended or
repealed in accordance with the Articles of Incorporation or
By-laws of Balanced Shares
(c) Directors. The directors of Balanced Shares at the
Closing shall continue to be the directors of Balanced Shares
until they resign or their successors shall have been elected and
qualified.
(d) Officers. Subject to the provisions of the By-laws
of Balanced Shares the officers of Balanced Shares at the Closing
shall continue to be the officers of Balanced Shares until they
resign or their successors shall have been elected and qualified.
(e) Vacancies. If at the Closing a vacancy shall exist
on the Board of Directors or in any of the offices of Balanced
Shares, such vacancy may thereafter be filled in the manner
provided by the By-laws of Balanced Shares, consistent with the
provisions of Section 16 of the Investment Company Act of 1940,
as amended (the "Act").
4. Representations, Warranties and Covenants of
Balanced Shares
Balanced Shares represents and warrants to, and
covenants with, Income Builder as follows:
(a) Organization, Existence, Etc. Balanced Shares is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Maryland and has the power to
carry on its business as it is now being conducted and as
3
<PAGE>
described in its currently effective Registration Statement on
Form N-1A. Balanced Shares is qualified to do business under the
laws of every jurisdiction in which such qualification is
required, except where the failure to so qualify would not have a
material adverse effect on Balanced Shares. Balanced Shares has
all necessary federal, state and local authorizations to own all
of its properties and assets and to carry on its business as now
being conducted and as described in its currently effective
Registration Statement on Form N-1A.
(b) Registration as Investment Company. Balanced
Shares is registered under the Act as an open-end investment
company of the management type; such registration has not been
revoked or rescinded and is in full force and effect.
(c) Capitalization. The authorized capital stock of
Balanced Shares consists of 3,000,000,000 shares of Class A
Common Stock, 3,000,000,000 shares of Class B Common Stock,
3,000,000,000 shares of Class C Common Stock and 3,000,000,000
shares of Advisor Class Common Stock, each having a par value
$.01 per share. As of [ ], 1998, there were outstanding
[ ] shares of Class A Common Stock, [ ] shares of
Class B Common Stock, [ ] shares of Class C Common Stock
and [ ] shares of Advisor Class Common Stock. All of the
outstanding shares of common stock of Balanced Shares have been
duly authorized and are validly issued, fully paid and
nonassessable. Because Balanced Shares is an open-end investment
company engaged in the continuous offering and redemption of its
shares, the number of outstanding shares of Balanced Shares may
change prior to the Closing.
(d) Financial Statements. The financial statements of
Balanced Shares for the year ended July 31, 1997, which are
audited, and for the six months ended January 31, 1998, which are
unaudited (the "Balanced Shares Financial Statements"),
previously delivered to Income Builder, fairly present the
financial position of Balanced Shares as of the dates thereof and
the results of its operations and changes in its net assets for
the periods indicated.
(e) Shares to be Issued Upon Reorganization. The
Balanced Shares shares to be issued in connection with the
Reorganization have been duly authorized and upon consummation of
the Reorganization will be validly issued, fully paid and
nonassessable, and no shareholder of Balanced Shares has any
preemptive right to subscribe or purchase in respect thereof.
(f) Authority Relative to this Agreement. Balanced
Shares has the power to enter into this Agreement and to carry
out its obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions
4
<PAGE>
contemplated hereby have been duly authorized by Balanced Shares'
Board of Directors and no other action by Balanced Shares is
necessary to authorize its officers to effectuate this Agreement
and the transactions contemplated hereby. Balanced Shares is not
subject to any provision of its Charter or By-laws, nor is
Balanced Shares a party to or obligated under any charter,
by-law, indenture or contract provision or any other commitment
or obligation, or subject to any order or decree, that would be
violated by its executing and carrying out this Agreement and the
transactions contemplated hereby.
(g) Liabilities. There are no liabilities of Balanced
Shares, whether or not determined or determinable, other than
liabilities disclosed or provided for in the Balanced Shares
Financial Statements and liabilities incurred in the ordinary
course of business or otherwise previously disclosed in writing
to Income Builder.
(h) Litigation. To the knowledge of Balanced Shares,
there are no claims, actions, suits or proceedings pending
against Balanced Shares. In addition, to the knowledge of
Balanced Shares, there are no claims, actions, suits or
proceedings threatened against Balanced Shares that would
materially adversely affect Balanced Shares or its assets or
business or which would prevent or hinder consummation of the
transactions contemplated hereby.
(i) Contracts. Except for contracts, agreements,
franchises, licenses or permits entered into or granted in the
ordinary course of its business or disclosed in its current
Registration Statement on Form N-1A filed under the Act, in each
case under which no default exists, Balanced Shares is not a
party to or subject to any material contract, debt instrument,
employee benefit plan, lease, franchise, license or permit of any
kind or nature whatsoever.
(j) Taxes. The federal income tax returns of Balanced
Shares have been filed for all taxable years to and including the
taxable year ended July 31, 1997 and all taxes payable pursuant
to such returns have been paid. The federal income tax return of
Balanced Shares for the taxable year ending July 31, 1998 will be
filed, and any taxes payable pursuant thereto will be paid, prior
to their due date. Balanced Shares has qualified as a regulated
investment company under the Internal Revenue Code of 1986, as
amended (the "Code"), in respect of each taxable year since the
commencement of its operations and has no reason to believe that
it will not so qualify in respect of its current fiscal year.
(k) Registration Statement. Balanced Shares shall file
with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form N-14 (the "Registration
5
<PAGE>
Statement") under the Securities Act of 1933 (the "Securities
Act") relating to the Balanced Shares shares issuable hereunder.
At the time it becomes effective, the Registration Statement
(i) will comply in all material respects with the provisions of
the Securities Act and the rules and regulations of the
Commission thereunder (the "Regulations") and (ii) will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading; and at the time the
Registration Statement becomes effective, at the time of the
shareholders' meeting referred to in Section 1 hereof and at the
Closing, the prospectus (the "Prospectus") and statement of
additional information included therein (the "Statement of
Additional Information"), as amended or supplemented by any
amendments or supplements filed with the Commission by Balanced
Shares and delivered to Income Builder, will not contain an
untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided, however, that none of the representations and
warranties in this subsection (k) shall apply to statements in or
omissions from the Registration Statement, Prospectus or
Statement of Additional Information made in reliance upon and in
conformity with information furnished by Income Builder for use
in the Registration Statement, Prospectus or Statement of
Additional Information as provided in Section 5(k).
(l) No Material Adverse Change. Since July 31, 1997,
there has been no material adverse change in the financial
condition, results of operations, business, properties or assets
of Balanced Shares.
(m) Operations in the Ordinary Course. Except as
otherwise contemplated by this Agreement, Balanced Shares will
conduct its business in the ordinary course.
5. Representations, Warranties and Covenants of Income Builder
Income Builder represents and warrants to, and covenants
with, Balanced Shares as follows:
(a) Organization, Existence, Etc. Income Builder is a
corporation duly organized and validly existing under the laws of
the State of Maryland and has the power to carry on its business
as it is now being conducted and as described in its current
effective Registration Statement on Form N-1A. Income Builder is
qualified to do business under the laws of every jurisdiction in
which such qualification is required, except where the failure to
so qualify would not have a material adverse effect on Income
Builder. Income Builder has all necessary federal, state and
local authorizations to own all of its properties and assets and
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<PAGE>
to carry on its business as now being conducted and as described
in its current effective Registration Statement on Form N-1A.
(b) Registration as Investment Company. Income Builder
is registered under the Act as an open-end investment company of
the management type; such registration has not been revoked or
rescinded and is in full force and effect.
(c) Capitalization. The authorized capital stock of
Income Builder consists of 2,000,000,000 shares of Class A Common
Stock, 2,000,000,000 shares of Class B Common Stock,
2,000,000,000 shares of Class C Common Stock and 2,000,000,000
shares of Advisor Class Common Stock, par value $.001. As of
[ ], 1998, there were outstanding [ ] shares of
Class A Common Stock, [ ] shares of Class B Common Stock,
[ ] shares of Class C Common Stock and [ ] shares of
Advisor Class Common Stock. All of the outstanding shares of
Income Builder have been duly authorized and are validly issued,
fully paid and nonassessable. Because Income Builder is an open-
end investment company engaged in the continuous offering and
redemption of its shares, the number of outstanding shares of
Income Builder may change prior to the Closing.
(d) Financial Statements. The financial statements of
Income Builder for the year ended October 31, 1997, which are
audited, and for the six months ended April 30, 1998, which are
unaudited (the "Income Builder Financial Statements"), and were
previously delivered to Balanced Shares, fairly present the
financial position of Income Builder as of the date thereof and
the results of its operations and changes in its net assets for
the periods indicated.
(e) Authority Relative to this Agreement. Income
Builder has the power to enter into this Agreement and to carry
out its obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of
Directors of Income Builder and, except for approval by the
shareholders of Income Builder, no other action by Income Builder
is necessary to authorize its officers to effectuate this
Agreement and the transactions contemplated hereby. Income
Builder is not subject to any provision of its Articles of
Incorporation or its By-laws, nor is Income Builder a party to or
obligated under any charter, by-law, indenture or contract
provision or any other commitment or obligation, or subject to
any order or decree, that would be violated by its executing and
carrying out this Agreement and the transactions contemplated
hereby.
(f) Liabilities. There are no liabilities of Income
Builder, whether or not determined or determinable, other than
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liabilities disclosed or provided for in the Income Builder
Financial Statements and liabilities incurred in the ordinary
course of business subsequent to April 30, 1998 or otherwise
previously disclosed in writing to Balanced Shares.
(g) Litigation. To the knowledge of Income Builder
there are no claims, actions, suits or proceedings pending
against Income Builder. In addition, to the knowledge of Income
Builder, there are no claims, actions, suits or proceedings
threatened against Income Builder that would materially adversely
affect Income Builder or its assets or business or which would
prevent or hinder consummation of the transactions contemplated
hereby.
(h) Contracts. Except for contracts, agreements,
franchises, licenses or permits entered into or granted in the
ordinary course of its business, in each case under which no
default exists, Income Builder is not a party to or subject to
any material contract, debt instrument, employee benefit plan,
lease, franchise, license or permit of any kind or nature
whatsoever.
(i) Taxes. The federal income tax returns of Income
Builder, previously delivered to Balanced Sahres, have been filed
for all taxable years to and including the taxable year ended
October 31, 1997, and all taxes payable pursuant to such returns
have been paid. The federal income tax returns of Income Builder
for the taxable year ending October 31, l998 will be filed, and
any taxes payable pursuant thereto will be paid, prior to their
due date. Income Builder has qualified as a regulated investment
company under the Code in respect of each taxable year since the
commencement of its operations and has no reason to believe that
it will not so qualify in respect of its current fiscal year.
(j) Portfolio Securities. Income Builder will prepare
and deliver to Balanced Shares at the Closing a Schedule of
Investments (the "Schedule") listing all the assets owned by
Income Builder as of the Closing. All assets to be listed on the
Schedule as of the Closing will be owned by Income Builder free
and clear of any liens, claims, charges, options and
encumbrances, except as indicated in the Schedule, and, except as
so indicated, none of such assets is, or after the Reorganization
as contemplated hereby, will be, subject to any restrictions,
legal or contractual, on the disposition thereof (including
restrictions as to the public offering or sale thereof under the
Securities Act) and, except as so indicated, all such assets are
or will be readily marketable.
(k) Registration Statement. In connection with the
Registration Statement, Income Builder will cooperate with
Balanced Shares and will furnish to Balanced Shares, as
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reasonably requested by Balanced Shares, the information relating
to Income Builder required by the Securities Act and the
Regulations to be set forth in the Registration Statement
(including the Prospectus and Statement of Additional
Information). At the time the Registration Statement becomes
effective, the Registration Statement, insofar as it relates to
Income Builder, (i) will comply in all material respects with the
provisions of the Securities Act and the Regulations and
(ii) will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and at
the time the Registration Statement becomes effective, at the
time of the shareholders' meeting referred to in Section 1 hereof
and at the Closing, the Prospectus and Statement of Additional
Information, as amended or supplemented by any amendments or
supplements filed with the Commission by Balanced Shares and
delivered to Income Builder, insofar as they relate to Income
Builder, will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the representations
and warranties in this subsection (k) shall apply only to
statements in or omissions from the Registration Statement,
Prospectus or Statement of Additional Information made in
reliance upon and in conformity with information furnished by
Income Builder for use in the Registration Statement, Prospectus
or Statement of Additional Information as provided in this
subsection (k).
(l) No Material Adverse Change. Since October 31, 1997
there has been no material adverse change in the financial
condition, results of operations, business, properties or assets
of Income Builder.
(m) Operations in the Ordinary Course. Except as
otherwise contemplated by this Agreement, Income Builder will
conduct its business in the ordinary course.
6. Conditions to Obligations of Income Builder
The obligations of Income Builder hereunder with respect
to the consummation of the Reorganization as it relates to Income
Builder are subject to the satisfaction of the following
conditions:
(a) Approval by Shareholders. This Agreement and the
transactions contemplated by the Reorganization shall have been
approved by the affirmative vote of a majority of the outstanding
shares of Income Builder entitled to be voted with respect
thereto.
9
<PAGE>
(b) Covenants, Warranties and Representations.
Balanced Shares shall have complied with each of its covenants
contained herein, each of the representations and warranties of
Balanced Shares contained herein shall be true in all material
respects as of the Closing, there shall have been no material
adverse change in the financial condition, results of operations,
business, properties or assets of Balanced Shares since July 31,
1997 and Income Builder shall have received a certificate of the
President of Balanced Shares satisfactory in form and substance
to Income Builder so stating.
(c) Regulatory Approval. The Registration Statement
shall have been declared effective by the Commission and no stop
order under the Securities Act pertaining thereto shall have been
issued; all necessary orders or exemptions under the Act with
respect to the transactions contemplated hereby shall have been
granted by the Commission; and all necessary approvals,
registrations, and exemptions under federal and state laws shall
have been obtained.
(d) Tax Opinion. Income Builder shall have received
the opinion of Seward & Kissel, dated as of the Closing,
addressed to it and in form and substance satisfactory to Income
Builder, as to certain of the federal income tax consequences of
the Reorganization under the Code to Balanced Shares, Income
Builder and the shareholders of Income Builder. For purposes of
rendering the opinion, Seward & Kissel may rely exclusively and
without independent verification as to factual matters upon the
statements made in this Agreement and the Registration Statement,
and upon such other written representations as to matters of fact
as an executive officer of each of Income Builder and Balanced
Shares will have verified as of the Closing. The opinion of
Seward & Kissel will be to the effect that, based on the facts
and assumptions stated therein, for federal income tax purposes:
(i) the Reorganization will constitute a reorganization within
the meaning of section 368(a)(1)(C) of the Code and that Income
Builder and Balanced Shares will each be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
(ii) Income Builder or Balanced Shares will not recognize any
gain or loss upon the transfer of all the assets of Income
Builder to Balanced Shares in exchange for Balanced Shares shares
and the assumption by Balanced Shares of the liabilities of
Income Builder pursuant to this Agreement and upon distribution
(whether actual or constructive) of Balanced Shares shares to
shareholders of Income Builder in exchange for their Income
Builder shares; (iii) the shareholders of Income Builder who
receive Balanced Shares shares pursuant to the Reorganization
will not recognize any gain or loss upon the exchange (whether
actual or constructive) of their Income Builder shares for
Balanced Shares shares (including any fractional share interests
they are deemed to have received) in the Reorganization; (iv) the
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<PAGE>
aggregate tax basis of the Balanced Shares shares received
(whether actually or constructively) by each shareholder of
Income Builder will be the same as the aggregate tax basis of the
Income Builder shares surrendered in the exchange; (v) the
holding period of Balanced Shares shares received (whether
actually or constructively) by each shareholder of Income Builder
will include the holding period of the Income Builder shares that
are surrendered in exchange therefor, provided that the Income
Builder shares constitute capital assets of such shareholder at
the Closing; (vi) the holding period and tax basis of the assets
of Income Builder acquired by Balanced Shares will be the same as
the holding period and tax basis that Income Builder had in such
assets immediately prior to the Reorganization; and
(vii) Balanced Shares will succeed to the capital loss carryovers
of Income Builder, if any, pursuant to section 381 of the Code,
but the use by Balanced Shares of any such capital loss
carryovers may be subject to limitation under section 383 of the
Code.
(e) Opinion of Counsel. Income Builder shall have
received the opinion of Seward & Kissel, as counsel for Balanced
Shares, dated as of the Closing, addressed to and in form and
substance satisfactory to Income Builder, to the effect that:
(i) Balanced Shares is a corporation duly organized and validly
existing under the laws of the State of Maryland; (ii) Balanced
Shares is a non-diversified, open-end investment company of the
management type registered under the Act; (iii) this Agreement
and the Reorganization provided for herein and the execution of
this Agreement have been duly authorized and approved by
requisite action of Balanced Shares and this Agreement has been
duly executed and delivered by Balanced Shares and is a valid and
binding obligation of Balanced Shares, subject to applicable
bankruptcy, insolvency, fraudulent conveyance and similar laws or
court decisions regarding enforcement of creditors' rights
generally, and to general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in
equity); (iv) the Registration Statement has been declared
effective under the Securities Act and to Seward & Kissel's
knowledge no stop order has been issued or threatened suspending
its effectiveness; (v) to Seward & Kissel's knowledge, no
consent, approval, order or other authorization of any federal or
state court or administrative or regulatory agency, other than
the acceptance of Articles of Transfer by the Maryland State
Department of Assessments and Taxation, is required for Balanced
Shares to enter into this Agreement or carry out its terms that
will not have been obtained by the Closing, other than as may be
required under the securities or "blue sky" laws of any state and
other than where the failure to obtain any such consent,
approval, order or authorization would not have a material
adverse effect on the operations of Balanced Shares; and (vi) the
Class A, Class B, Class C and Advisor Class shares of Balanced
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<PAGE>
Shares to be issued in the Reorganization have been duly
authorized and upon issuance thereof in accordance with this
Agreement will be validly issued, fully paid and nonassessable,
and no shareholder of Balanced Shares has any preemptive right to
subscribe or purchase in respect thereof.
(f) Non-Termination. The parties shall not have
terminated this Agreement pursuant to Section 8(c) hereof.
(g) Further Assurances. Income Builder shall have
received such further assurances, including, but not limited to,
further assurances from Balanced Shares or any other person,
concerning the performance of its obligations hereunder and the
consummation of the Reorganization as it shall deem necessary,
advisable or appropriate.
7. Conditions to Obligations of Balanced Shares
The obligations of Balanced Shares hereunder with
respect to the consummation of the Reorganization are subject to
the satisfaction of the following conditions:
(a) Approval by Shareholders. This Agreement and the
transactions contemplated by the Reorganization shall have been
approved by the affirmative vote of a majority of the outstanding
shares of Income Builder entitled to be voted with respect
thereto.
(b) Covenants, Warranties and Representations. Income
Builder shall have complied with each of its covenants contained
herein. Each of the representations and warranties of Income
Builder contained herein shall be true in all material respects
as of the Closing, there shall have been no material adverse
change in the financial condition, results of operations,
business, properties or assets of Income Builder since
October 31, 1997, and Balanced Shares shall have received a
certificate of the President of Income Builder satisfactory in
form and substance to Balanced Shares so stating.
(c) Portfolio Securities. All securities and other
assets to be acquired by Balanced Shares in the Reorganization
shall have been approved for acquisition by the investment
adviser of Balanced Shares as consistent with the investment
policies of Balanced Shares, and all such securities and other
assets on the books of Income Builder that are not readily
marketable shall be valued on the basis of an evaluation
acceptable to Income Builder and Balanced Shares at the expense
of Income Builder.
(d) Regulatory Approval. The Registration Statement
shall have been declared effective by the Commission and no stop
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<PAGE>
order under the Securities Act pertaining thereto shall have been
issued; all necessary orders of exemption under the Act with
respect to the transactions contemplated hereby shall have been
granted by the Commission, and all necessary approvals,
registrations, and exemptions under federal and state laws shall
have been obtained.
(e) Tax Opinion. Balanced Shares shall have received
the opinion of Seward & Kissel, counsel to Income Builder, dated
as of the Closing, addressed to and in form and substance
satisfactory to Balanced Shares, as to certain of the federal
income tax consequences of the Reorganization under the Code to
Balanced Shares, Income Builder and the shareholders of Income
Builder. For purposes of rendering the opinion, Seward & Kissel
may rely exclusively and without independent verification as to
factual matters upon the statements made in this Agreement and
the Registration Statement, and upon such other written
representations as to matters of fact as an executive officer of
each of Income Builder and Balanced Shares, will have verified as
of the Closing. The opinion of Seward & Kissel will be to the
effect that, based on the facts and assumptions stated therein,
for federal income tax purposes: (i) the Reorganization will
constitute a reorganization within the meaning of section
368(a)(1)(C) of the Code and that Income Builder and Balanced
Shares will each be "a party to a reorganization" within the
meaning of section 368(b) of the Code; (ii) neither Income
Builder nor Balanced Shares will recognize any gain or loss upon
the transfer of all the assets of Income Builder to Balanced
Shares in exchange for Balanced Shares shares and the assumption
by Balanced Shares of the liabilities of Income Builder pursuant
to this Agreement and upon the distribution (whether actual or
constructive) of Balanced Shares shares to shareholders of Income
Builder in exchange for their respective Income Builder shares;
(iii) the holding period and tax basis of the assets of Income
Builder acquired by Balanced Shares will be the same as the
holding period and tax basis that Income Builder had in such
assets immediately prior to the Reorganization; and (iv) Balanced
Shares will succeed to the capital loss carryovers of Income
Builder, if any, pursuant to section 381 of the Code, but the use
by Balanced Shares of any such capital loss carryovers may be
subject to limitation under section 383 of the Code.
(f) Opinion of Counsel. Balanced Shares shall have
received the opinion of Seward & Kissel, as counsel for Income
Builder, dated as of the Closing, addressed to and in form and
substance satisfactory to Balanced Shares, to the effect that
(i) Income Builder is a corporation duly organized under the laws
of the State of Maryland; (ii) Income Builder is a non-
diversified, open-end investment company of the management type
registered under the Act; (iii) this Agreement and the
Reorganization provided for herein and the execution of this
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<PAGE>
Agreement have been duly authorized and approved by requisite
action of Income Builder, and this Agreement has been duly
executed and delivered by Income Builder, and is a valid and
binding obligation of Income Builder, subject to applicable
bankruptcy, insolvency, fraudulent conveyance and similar laws or
court decisions regarding enforcement of creditors' rights
generally, and to general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in
equity); (iv) the Reorganization has been approved by the
requisite vote of the shareholders of Income Builder; and (v) to
Seward & Kissel's knowledge, no consent, approval, order or other
authorization of any federal or state court or administrative or
regulatory agency, other than the acceptance of Articles of
Transfer by the Maryland State Department of Assessments and
Taxation, is required for Income Builder to enter into this
Agreement or carry out its terms that will not have been obtained
by the Closing other than where the failure to obtain any such
consent, approval, order or authorization would not have a
material adverse effect on the operations of Income Builder.
(g) Non-Termination. The parties shall not have
terminated this Agreement pursuant to Section 8(c) hereof.
(h) Further Assurances. Balanced Shares shall have
received such further assurances, including, but not limited to,
further assurances from Income Builder or any other person,
concerning the performance of their obligations hereunder and the
consummation of the Reorganization as it shall deem necessary,
advisable or appropriate.
8. Amendments; Waivers; Termination; Survival; Cooperation
(a) Amendments. Income Builder and Balanced Shares
may, by agreement in writing authorized by their respective
Boards of Directors, amend this Agreement at any time before or
after approval hereof by the shareholders of Income Builder, but
after such approval, no amendment shall be made that materially
alters the obligations of any party hereto.
(b) Waivers. At any time prior to the Closing, any
party may by written instrument signed by it (i) waive the effect
of any inaccuracies in the representations and warranties made to
it contained herein and (ii) waive compliance with any of the
covenants or conditions made for its benefit contained herein.
(c) Termination. Each party may terminate this
Agreement at any time prior to the Closing by notice to the other
party if (i) a material condition to its performance hereunder or
a material covenant of the other party contained herein shall not
be fulfilled on or before the date specified for the fulfillment
thereof or (ii) a material default or material breach of this
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<PAGE>
Agreement shall be made by the other party. This Agreement may
be terminated at any time prior to the Closing, whether before or
after approval by the shareholders of Income Builder, without
liability on the part of either party hereto or its respective
Board of Directors, officers or shareholders, by any party on
notice to the other party in the event that the Board of
Directors of the party giving such notice determines that
proceeding with this Agreement is not in the best interest of
that party's shareholders. Unless the parties hereto shall
otherwise agree in writing, this Agreement shall terminate,
without liability to any party, as of the close of business on
October 31, 1999 if the Closing is not held on or prior to such
date.
(d) Survival. No representations, warranties or
covenants in or pursuant to this Agreement (including
certificates of officers) shall survive the Reorganization.
(e) Cooperation. Each of the parties hereto will
cooperate with the other in fulfilling its obligations under this
Agreement and will provide such information and documentation as
is reasonably requested by the other in carrying out the terms
hereof.
9. Expenses
Alliance Capital Management L.P., the investment adviser
to each party hereto, will bear all expenses incurred in
connection with this Agreement, and all transactions contemplated
hereby, whether or not the Reorganization is consummated;
provided, however, that Income Builder shall bear any cost or
expense incurred through the time of the Closing for purposes of
satisfying the conditions set forth in Section 7(c) above.
10. General
This Agreement supersedes all prior agreements between
the parties (written or oral), is intended as a complete and
exclusive statement of the terms of the Agreement between the
parties and may not be changed or terminated orally. This
Agreement may be executed in counterparts, which shall be
considered one and the same agreement, and shall become effective
when the counterparts have been executed by Income Builder and
Balanced Shares and delivered to each of the parties hereto. The
headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or
interpretation of this Agreement. Nothing in this Agreement,
expressed or implied, is intended to confer upon any other person
any rights or remedies under or by reason of this Agreement.
This Agreement shall be governed by and construed in accordance
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with the law of the State of New York applicable to agreements
made and to be performed in New York.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
ALLIANCE INCOME BUILDER FUND, INC.
By________________________
ALLIANCE BALANCED SHARES, INC.
By________________________
Accepted and agreed to as to Section 9:
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management
Corporation, Its General Partner
By______________________________
16
00250236.AD6
<PAGE>
Exhibit 6
ADVISORY AGREEMENT
ALLIANCE BALANCED SHARES, INC.
1345 Avenue of the Americas
New York, New York 10105
July 22, 1992
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
We herewith confirm our agreement with you as follows:
1. We are an open-end, diversified management
investment company registered under the Investment Company Act of
1940 (the "Act"). We are engaged in the-business of investing and
reinvesting our assets in securities of the type and in
accordance with the limitations specified in our Articles of
Incorporation, By-Laws, Registration Statement filed with the
Securities and Exchange Commission under the Security Act of 1933
and the Act, and any representations made in our Prospectus and
Statement of Additional Information, all in such manner and to
such extent as may from time to time be authorized by our
Directors. We enclose copies of the documents listed above and
will from time to time furnish you with any amendments thereof.
2. (a) We hereby employ you to manage the investment
and reinvestment of our assets as above specified, and, without
limiting the generality of the foregoing, to provide management
and other services specified below.
<PAGE>
(b) You will make decisions with respect to all
purchases and sales of our portfolio securities. To carry out
such decisions, you are hereby authorized, as our agent and
attorney-in-fact, for our account and at our risk and in our
name, to place orders for the investment and reinvestment of our
assets. In all purchases, sales and other transactions in our
portfolio securities you are authorized to exercise full
discretion and act for us in the same manner and with the same
force and effect as we might or could do with respect to such
purchases, sales or other transactions, as well as with respect
to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions.
(c) You will report to our Directors at each
meeting thereof all changes in our portfolio since the prior
report, and will also keep us in touch with important
developments affecting our portfolio and on your own initiative
will furnish us from time to time with such information as you
may believe appropriate for this purpose, whether concerning the
individual companies whose securities are included in our
portfolio, the industries in which they engage, or the conditions
prevailing in the economy generally. You will also furnish us
with such statistical and analytical information with respect to
our portfolio securities as you may believe appropriate or as we
reasonably may request. In making such purchases and sales of
securities, you will bear in mind the policies set from time to
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<PAGE>
time by our Directors as well as the limitations imposed by our
Articles of Incorporation and our Registration Statement under
the Act and the-Securities Act of 1933, the limitations in the
Act and of the Internal Revenue Code in respect of regulated
investment companies and our investment objective, policies and
restrictions.
(d) It is understood that you will from time to
time employ or associate with yourselves such persons as you
believe to be particularly fitted to assist you in the execution
of your duties hereunder, the cost of performance of such duties
to be borne and paid by you. No obligation may be incurred on our
behalf in any such respect. During the continuance of this
agreement at our request you will provide to us persons
satisfactory to our Directors to serve as our officers. You or
your affiliates will also provide persons, who may be our
officers, to render such clerical, accounting and other services
to us as we may from time to time request of you. Such personnel
may be employees of you or your affiliates. We will pay to you or
your affiliates the cost of such personnel for rendering such
services to us at such rates as shall from time to time be agreed
upon between us, provided that all time devoted to the investment
or reinvestment of our portfolio securities shall be for your
account. Nothing contained herein shall be construed to restrict
our right to hire our own employees or to contract for services
to be performed by third parties. Furthermore, you or your
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<PAGE>
affiliates (other than us) shall furnish us without charge with
such management supervision and assistance and such office
facilities as you may believe appropriate or as we may reasonably
request subject to the requirements of any regulatory authority
to which you may be subject to the requirements of any regulatory
authority to which you may be subject. You or your affiliates
(other than us) shall also be responsible for the payment of any
expenses incurred in promoting the sale of our shares (other than
the portion of the promotional expenses to be borne by us in
accordance with an effective plan pursuant to Rule 12b-1 under
the Act and the costs of printing our prospectuses and other
reports to shareholders and fees related to registration with the
Securities and Exchange Commission and with state regulatory
authorities).
3. It is further agreed that you shall be responsible
for the portion of our net expenses (except interest, taxes,
brokerage, distribution service fees paid in accordance with an
effective plan pursuant to Rule 12b-1 under the Act, and
extraordinary expenses, all to the extent permitted by applicable
state law and regulation) incurred by us during each of our
fiscal years or portion thereof that this agreement is in effect
between us which in any such year exceeds the limits applicable
under the laws or regulations of any state in which our shares
are qualified for sale (reduced pro rata for any portion of less
than a year). We hereby confirm that, subject to the foregoing,
4
<PAGE>
we shall be responsible and hereby assume the obligation for
payment of all our other expenses, including: (a) payment of the
fee payable to you under paragraph 5 hereof; (b) custody,
transfer and dividend disbursing expenses; (c) fees of directors
who are not your affiliated persons; (d) legal and auditing
expenses; (e) clerical, accounting and other office costs; (f)
the cost of personnel providing services to us, as provided in
subparagraph (d) of paragraph 2 above; (g) costs of printing our
prospectuses and shareholder reports; (h) cost of maintenance of
our existence as a corporation; (i) interest charges, taxes,
brokerage fees and commissions; (j) costs of stationery and
supplies; (k) expenses and fees related to registration and
filing with the Securities and Exchange Commission and with state
regulatory authorities; and (1) such promotional expenses as may
be contemplated by an effective plan pursuant to Rule 12b-1 under
the Act provided, however, that our payment of such promotional
expenses shall be in the amounts, and in accordance with the
procedures, set forth in such plan.
4. We shall expect of you, and you will give us the
benefit of, your best judgment and efforts in rendering these
services to us, and we agree as an inducement to your undertaking
these services that you shall not be liable hereunder for any
mistake of judgement or in any event whatsoever, except for lack
of good faith, provided that nothing herein shall be deemed to
protect, or purport to protect you against any liability to us or
5
<PAGE>
to our security holders to which you would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence
in the performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder.
5. In consideration of the foregoing we will pay you a
fee at the annual rate of .625 of 1% of the first $200 million,
.50 of 1% of the excess over $200 million up to $400 million and
.45 of 1% of the excess over $400 million of the average daily
value of our net assets. Such fee shall be accrued by us daily
and shall be payable in arrears on the last day of each calendar
month for services performed hereunder during such month. Your
reimbursement, if any, of our expenses as provided in paragraph 3
hereof, shall be estimated and paid to us monthly in arrears, at
the same time as our payment to you for such month. Payment of
the advisory fee will be reduced or postponed, if necessary, with
any adjustments made after the end of the year.
6. This agreement shall become effective on the date
hereof and shall remain in effect until September 30, 1993 and
thereafter for successive twelve-month periods (computed from
each October 1) provided that such continuance is specifically
approved at least annually by our Directors or by majority vote
of the holders of our outstanding voting securities (as defined
in the Act), and, in either case, by a majority of our Directors
who are not parties to this agreement or interested persons, as
defined in the Act, of any such party (other than as directors of
6
<PAGE>
our corporation) provided further, however, that if the
continuation of this agreement is not approved, you may continue
to render to us the services described herein in the manner and
to the extent permitted by the Act and the rules and regulations
thereunder. Upon the effectiveness of this agreement, it shall
supersede all previous agreements between us covering the subject
matter hereof. This agreement may be terminated at any time,
without the payment of any penalty, by vote of a majority of our
outstanding voting securities (as so defined), or by a vote of a
majority of our Directors on sixty days' written notice to you,
or by you on sixty days' written notice to us.
7. This agreement may not be transferred, assigned,
sold or in any manner hypothecated or pledged by you and this
agreement shall terminate automatically in the event of any such
transfer, assignment, sale, hypothecation or pledge by you. 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.
8. (a) Except to the extent necessary to perform your
obligations hereunder, nothing herein shall be deemed to limit or
restrict your right, or the right of any of your employees, or
any of the Directors of Alliance Capital Management Corporation,
general partner, who may also be a Director, officer or employee
7
<PAGE>
of ours, or persons otherwise affiliated with us (within the
meaning of the Act) to engage in any other business or to devote
time and attention to the management or other aspects of any
other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other trust, corporation,
firm, individual or association.
(b) You will notify us of any change in the general
partners of your partnership within a reasonable time after such
change.
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
Alliance Balanced Shares, Inc.
By /s/ David H. Dievler
_____________________________
David H. Dievler
Chairman
Alliance Chairman
Alliance Capital Management L.P.
By Alliance Capital Management Corporation,
General Partner
By /s/ John D. Carifa
___________________________________
John D. Carifa
Executive Vice President
8
00250236.AC4
<PAGE>
Exhibit (7)(a)
DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made as of the 1st day of November, 1986, as
amended and restated as of the 27th day of February, 1987, the
20th day of October, 1987, the 21st day of April, 1988 and the
19th day of July, 1988, between ALLIANCE BALANCED SHARES, INC., a
Maryland corporation (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 an 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 companies either directly to
purchasers or through other securities dealers;
WHEREAS, the Fund and the Underwriter wish to enter into
an 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 shares
of Common Stock of the Fund (sometimes herein referred to as
"shares") to the public and hereby agrees during the term of this
Agreement to sell shares of the Fund 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,
securities dealers or depository institutions 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 or depository institutions
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(s) of the shares, i.e.,
the price per share at which the Underwriter or selected dealers
or agents may sell shares to the public, shall be the public
offering price determined in accordance with the then currently
effective Prospectus of the Fund 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 a sales charge equal to a specified
percentage or percentages of the public offering price as set
forth in the current Prospectus of the Fund. Shares may be sold
to certain classes of persons at reduced sales charges or without
any sales charge as from time to time set forth in the current
Prospectus and Statement of Additional Information of the Fund.
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, 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
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
2
<PAGE>
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 its Articles of Incorporation 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. 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 shares purchased by or through the
Underwriter will not affect the sales charge secured by the
Underwriter, or any selected dealer or agent (unless such
selected dealer or 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 as defined in the above paragraph pursuant
to the instructions of the Underwriter in New York Clearing House
funds on or before the seventh calendar day subsequent to its
having the notice of redemption in proper form.
(b) Redemption of shares or payment may be suspended at
times when the New York Stock Exchange is closed, when trading on
said Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which
disposal by the Fund of 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
3
<PAGE>
the meaning of Rule 12b-1 adopted by the Securities and Exchange
Commission under the Investment Company Act.
(b) The Fund will pay to the Underwriter each month a
distribution services fee which will not exceed, on an annualized
basis, .30 of 1% of the aggregate average daily net assets of the
Fund. Such distribution services fees will be used in their
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 the
Fund, including paying for the preparation, printing and
distribution of prospectuses and sales literature or other
promotional activities, and (iii) to compensate banks and other
institutions for providing administrative and accounting services
with respect to Fund shareholders.
(c) Alliance Capital Management L.P., the Fund's
Adviser (the "Adviser"), may from time to time make payments from
its own resources for the purposes described in Section 5(b)
hereof.
(d) Payments for distribution assistance or
administrative and accounting services are subject to the terms
and conditions of the written agreements between each broker-
dealer or other person and the Underwriter. 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 Directors of the Fund, 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 in
subparagraph (b) hereof, and any expenses of distribution of the
Fund's 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 subsequent fiscal years, and also will not be
used to pay any interest expense, carrying charges or other
financing costs, or allocation of overhead of the Underwriter.
SECTION 6. Duties of the Fund.
(a) The Fund shall furnish to the Underwriter copies of
all information, financial statements and other papers which the
Underwriter may reasonably request for use in connection with the
distribution of shares of the Fund, and this shall include one
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
4
<PAGE>
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 herein contained 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; provided, however,
that so long as this Agreement shall remain in effect neither the
Underwriter nor any other subsidiary of Alliance Capital
Management L.P. shall enter into such arrangements with any other
investment company having investment objectives and fundamental
policies substantially similar to those of the Corporation if
such company is, or would by virtue of such arrangements become,
a competitor of the Corporation, unless Alliance Capital
Management L.P. (or any successor thereto) is the investment
adviser or manager to such company.
(b) In selling shares of the Fund, the Underwriter
shall duly conform with the requirements of all federal and state
laws relating to the sale of such securities. Neither the
Underwriter, nor any selected dealer or 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
5
<PAGE>
Fund's Prospectus and Statement of Additional Information as from
time to time is in effect, or any sales literature specifically
approved in writing by the Fund.
(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 or agents, the collection
of amounts payable by investors and selected dealers or agents on
such sales, and the cancellation of unsettled transactions, as
may be necessary to comply with the requirements of the National
Association of Securities Dealers, Inc. (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 or selected agent agreements with
securities dealers or depository institutions, respectively, of
its choice for the sale of shares and fix therein the portion of
the sales charge which may be allocated to the selected dealers
or agents; provided, that the Fund shall approve the forms of
agreements with such dealers or agents and the 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 of the Fund shall be
resold by such dealers or agents only at the public offering
price(s) 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 securities 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 (but not the
Underwriter) as an issuer or as a broker or dealer, in such
states of the United States or other jurisdictions as shall be
selected by the Fund and the Underwriter pursuant to Section 6(c)
6
<PAGE>
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.
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 or 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
thereof or necessary to make the statements in any thereof not
misleading, except insofar as such claims, demands, liabilities
or expenses arise out of or are based upon any such untrue
statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with information
furnished in writing by the Underwriter to the Fund for use in
the Fund's Registration Statement, Prospectus or Statement of
Additional Information; 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
7
<PAGE>
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 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 and 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
or 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
8
<PAGE>
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 Tight 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 from any
liability which it may have to the Fund, to its officers and
Directors, 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 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 remain in effect until September 30, 1987 and
thereafter for successive twelve-month periods (computed from
each October 1); provided, however, that such continuance is
specifically approved at least annually by the Directors of the
Fund or by majority vote of the holders of the outstanding voting
9
<PAGE>
securities (as defined in the Investment Company Act), 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, the Underwriter
may continue to render the services described herein in the
manner and to the extent permitted by the Act and the rules and
regulations thereunder. Upon the 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 at any time, without the payment of
any penalty, by the vote of a majority of the outstanding voting
securities (as so defined), 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 and have no direct Or
indirect financial interest in the operation of the Plan or any
agreement related thereto; in either 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 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, however, that
(i) any material amendments of the terms hereof will become
effective only upon approval as provided in the first proviso of
Section 12(a) hereof, and (ii) any amendment to increase
materially the amount to be expended for distribution assistance,
administrative and accounting services and other activities
designed to promote the sale of shares of the Fund hereunder will
be effective only upon the additional approval by a vote of a
majority of the outstanding voting securities of the Fund as
defined in the Investment Company Act.
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.
10
<PAGE>
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 giving notice and
unless and until changed pursuant to the foregoing provisions
hereof addressed to the Fund or the Underwriter.
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. Non-interested Directors of the Fund.
While the Plan is in effect, the nomination and
selection 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 BALANCED SHARES, INC.
July 19, 1988 By /s/ Edmund P. Bergan, Jr.
---------------------------
ALLIANCE FUND DISTRIBUTORS, INC.
By /s/ Robert L. Errico
--------------------------
Accepted as to
Sections 5, 12 and 16:
ALLIANCE CAPITAL MANAGEMENT L.P.
By /s/ John D. Carifa
----------------------------
11
00250236.AC2
<PAGE>
EXHIBIT (9)(a)
CUSTODIAN CONTRACT
Between
ALLIANCE BALANCED SHARES, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
1. Employment of Custodian and Property to be Held by
It................................................
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United
States............................................
2.1 Holding Securities...........................
2.2 Delivery of Securities.......................
2.3 Registration of Securities...................
2.4 Bank Accounts................................
2.5 Investment and Availability of Federal Funds
2.6 Collection of Income.........................
2.7 Payment of Fund Moneys.......................
2.8 Liability for payment in Advance of Receipt
of Securities Purchased......................
2.9 Appointment of Agents........................
2.10 Deposit of Securities in Securities Systems..
2.11 Segregated Account...........................
2.12 Ownership Certificates for Tax Purposes......
2.13 Proxies......................................
2.14 Communications Relating to Fund Portfolio
Securities...................................
2.15 Reports to Fund by Independent Public
Accountants..................................
3. Duties of the Custodian with Respect to Property
of the Fund Held Outside of the United States.....
3.1 Appointment of Foreign Sub-Custodians........
3.2 Assets to be Held............................
3.3 Foreign Securities Depositories..............
3.4 Segregation of Securities....................
3.5 Agreements with Foreign Banking Institutions
3.6 Access of Independent Accountants of the Fund
3.7 Reports by Custodian.........................
3.8 Transactions in Foreign Custody Account......
3.9 Liability of Foreign Sub-Custodians..........
3.10 Monitoring Responsibilities..................
3.11 Branches of U.S. Banks.......................
4. Payments for Repurchases or Redemptions and Sales
of Shares of the Fund.............................
5. Proper Instructions...............................
6. Actions Permitted without Express Authority.......
2
<PAGE>
7. Evidence of Authority.............................
8. Duties of Custodian with Respect to the Books of
Account and Calculations of Net Asset Value and
Net Income........................................
9. Records...........................................
10. Opinion of Fund's Independent Accountant..........
11. Compensation of Custodian.........................
12. Responsibility of Custodian.......................
13. Effective Period, Termination and Amendment.......
14. Successor Custodian...............................
15. Interpretive and Additional Provisions............
16. Massachusetts Law to Apply........................
17. Prior Contracts...................................
3
<PAGE>
CUSTODIAN CONTRACT
This Contract between Alliance Balanced Shares
Inc., a corporation organized and exiting under the laws of
Maryland, having its principal place of business at 1345
Avenue of the Americas, New York, New York, 10105,
hereinafter called the "Fund", and State Street Bank and
Trust Company, a Massachusetts corporation, having its
principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH: That in consideration of the mutual
covenants and agreements hereinafter contained, the parties
hereto agree as follows:
1. Employment of Custodian and Property to be Held by
It
The Fund hereby employs the Custodian as the
custodian of its assets, including securities it desires to
be held in places within the United States ("domestic
securities") and securities it desires to be held outside
the United States ("foreign securities") pursuant to the
provisions of the Articles of Incorporation. The Fund agrees
to deliver to the Custodian all securities and cash owned by
it, and all payments of income, payments of principal or
capital distributions received by it with respect to all
securities owned by the Fund from time to time, and the cash
4
<PAGE>
consideration received by it for such new or treasury shares
of capital stock, $ par value, ("Shares") of the Fund as
may be issued or sold from time to time. The Custodian
shall not be responsible for any property of the Fund held
or received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the
meaning of Article 5), the Custodian shall from time to time
employ one or more sub-custodians located in the United
States, but only in accordance with an applicable vote by
the Board of Directors of the Fund, and provided that the
Custodian shall have no more or less responsibility, or
liability to the Fund on account of any actions of omissions
of any sub-custodian so employed than any such sub-custodian
has to the Custodian. The Custodian may employ as sub-
custodians for the Fund's securities and other assets the
foreign banking institutions and foreign securities
depositories designated in Schedule "A" hereto but only in
accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of
the Fund Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of the Fund
all non-cash property, to be held by it in the
United States, including all domestic securities
owned by the Fund, other than securities which are
5
<PAGE>
maintained pursuant to Section 2.10 in a clearing
agency which acts as a securities depository or in
a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred
to herein as "Securities System".
2.2 Delivery of Securities. The Custodian shall
release and deliver domestic securities owned by
the Fund held by the Custodian or in a Securities
System account of the Custodian only upon receipt
of Proper Instructions, which may be continuing
instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the
account of the Fund and receipt of
payment therefor;
2) Upon the receipt of payment in connection
with any repurchase agreement related to
such securities entered into by the Fund;
3) In the case of a sale effected through a
Securities System, in accordance with the
provisions of Section 2.10 hereof;
4) To the depository, agent in connection
with tender or other similar offers for
portfolio securities of the Fund;
6
<PAGE>
5) To the issuer thereof or its agent when
such securities are called, redeemed,
retired or otherwise become payable;
provided that, in any such case, the cash
or other consideration is to be delivered
to the Custodian;
6) To the issuer thereof, or its agent, for
transfer into the name of the Fund or
into the name of any nominee or nominees
of the Custodian or into the name or
nominee name of any agent appointed
pursuant to Section 2.9 or into the name
or nominee name of any sub-custodian
appointed pursuant to Article 1; or for
exchange for a different number of bonds,
certificates or other evidence
representing the same aggregate face
amount or number of units; provided that,
in any such case, the new securities are
to be delivered to the Custodian;
7) Upon the sale of such securities for the
account of the Fund, to the broker or its
clearing agent, against a receipt, for
examination in accordance with "street
delivery" custom; provided that in any
7
<PAGE>
such case, the Custodian shall have no
responsibility, or liability for any loss
arising from the delivery of such
securities prior to receiving payment for
such securities except as may arise from
the Custodian's own negligence or willful
misconduct;
8) For exchange or conversion pursuant to
any plan of merger, consolidation,
recapitalization, reorganization or
readjustment of the securities of the
issuer of such securities, or pursuant to
provisions for conversion contained in
such securities, or pursuant to any
deposit agreement; provided that, in any
such case, the new securities and cash,
if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or
similar securities, the surrender thereof
in the exercise of such warrants, rights
or similar securities or the surrender of
interim receipts or temporary securities
for definitive securities; provided that,
in any such case, the new securities and
8
<PAGE>
cash, if any, are to be delivered to the
Custodian;
10) For delivery in connection with any loans
of securities made by the Fund, but only
against receipt of adequate collateral as
agreed upon from time to time by the
Custodian and the Fund, which may be in
the form of cash or obligations issued by
the United States government, its
agencies or instrumentalities, except
that in connection with any loans for
which collateral is to be credited to the
Custodian's account in the book-entry
system authorized by the U.S. Department
of the Treasury, the Custodian will not
be held liable or responsible for the
deliver, of securities owned by the Fund
prior to the receipt of such collateral;
11) For delivery as security in connection
with any borrowings by the Fund requiring
a pledge of assets by the Fund, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the
provisions of any agreement among among
the Fund, the Custodian and a broker-
9
<PAGE>
dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act")
and a member of The National Association
of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of
The Options Clearing Corporation and of
any registered national securities
exchange, or of any similar organization
or organizations, regarding escrow or
other arrangements in connection with
transactions by Fund;
13) For delivery in accordance with the
provisions of any agreement among the
Fund, the Custodian, and a Futures
Commission Merchant registered under the
Commodity Exchange Act, relating to
compliance with the rules of the
Commodity Futures Trading Commission
and/or any Contract Market, or any
similar organization or organizations,
regarding account deposits in connection
with transactions by the Fund;
14) Upon receipt of instructions from the
transfer agent ("Transfer Agent") for the
fund, for deliver, to such Transfer Agent
10
<PAGE>
or to the holders of shares in connection
with distributions in kind, as may be
described from time to time in the Fund's
currently effective prospectus and
statement of additional information
("prospectus"), in satisfaction of
requests by holders of Shares for
repurchase or redemption; and
15) For any other proper corporate purpose,
but only upon receipt of, in addition to
Proper Instructions, a certified copy of
resolution of the Board of Directors or
of the Executive Committee signed by an
officer of the Fund and certified by the
Secretary or an Assistant Secretary,
specifying the securities to be
delivered, setting forth the purpose for
which such delivery is to be made,
declaring such purpose to be a proper
corporate purpose, and naming the person
or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Domestic securities
held by the Custodian (other than bearer
securities) shall be registered in the name of the
11
<PAGE>
Fund or in the name of any nominee of the Fund or
of any nominee of the Custodian which nominee shall
be assigned exclusively to the Fund, unless the
Fund has authorized in writing the appointment of a
nominee to be used in common with other registered
investment companies having the same investment
adviser as the Fund, or in the name or nominee of
any agent appointed pursuant to Section 2.9 or in
the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Fund
under the terms of this Contract shall be in
"street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and
maintain a separate bank account or accounts in the
United States in the name of the Fund, subject only
to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in
such account or accounts, subject to the provisions
hereof, all cash received by it from or for the
account of the Fund, other than cash maintained by
the Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment
Company Act of 1940. Funds held by the Custodian
for the Fund may be deposited by it to its credit
12
<PAGE>
as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies
as it may in its discretion deem necessary or
desirable; provided, however, that every such bank
or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940
and that each such bank or trust company and the
funds to be deposited with each such bank or trust
company shall be approved by vote of a majority of
the Board of Directors of the Fund. Such funds
shall be deposited by the Custodian in its capacity
as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Investment and Availability of Federal Funds. Upon
mutual agreement between the Fund and the
Custodian, the Custodian shall, upon the receipt of
Proper Instructions, make federal funds available
to the Fund as of specified times agreed upon from
time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of
the Fund which are deposited into the Fund's
account.
2.6 Collection of Income. The Custodian shall collect
on a timely basis all income and other payments
with respect to United States registered securities
13
<PAGE>
held hereunder to which the Fund shall be entitled
either by law or pursuant to custom in the
securities business, and shall collect on a timely
basis all income and other payments with respect to
United States bearer securities if, on the date of
payment by the issuer, such securities are held by
the Custodian or its agent thereof and shall credit
such income, as collected, to the Fund's custodian
account. Without limiting the generality of the
foregoing, the Custodian shall detach and present
for payment all coupons and other income items
requiring presentation as and when they become due
and shall collect interest when due on securities
held hereunder. Income due the Fund on United
States securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of
the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than
to provide the Fund with such information or data
as may be necessary to assist the Fund in arranging
for the timely delivery to the Custodian of the
income to which the Fund is properly entitled.
2.7 Payment of Fund Moneys. Upon receipt of Proper
Instructions, which may be continuing instructions
when deemed appropriate by the parties, the
14
<PAGE>
Custodian shall pay out moneys of the Fund in the
following cases only:
1) Upon the purchase of domestic securities,
futures contracts or options on futures
contracts for the account of the Fund but
only (a) against the delivery of such
securities, or evidence of title to
futures contracts or options on futures
contracts, to the Custodian (or any bank,
banking firm or trust company doing
business in the United States or abroad
which is qualified under the Investment
Company Act of 1940, as amended, to act
as a custodian and has been designated by
the Custodian as its agent for this
purpose) registered in the name of the
Fund or in the name of a nominee of the
Custodian referred to in Section 2.3
hereof or in proper form for transfer;
(b) in the case of a purchase effected
through a Securities System, in
accordance with the conditions set forth
in Section 2.10 hereof or (c) in the case
of repurchase agreements entered into
between the Fund and the Custodian, or
15
<PAGE>
another bank, or a broker-dealer which is
a member of NASD, (i) against delivery of
the securities either in certificate form
or through an entry crediting the
Custodian's account at the Federal
Reserve Bank with such securities or (ii)
against delivery of the receipt
evidencing purchase by the Fund of
securities owned by the Custodian along
with written evidence of the agreement by
the Custodian to repurchase such
securities from the Fund;
2) In connection with conversion, exchange
or surrender of securities owned by the
Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of
Shares issued by the Fund as set forth in
Article 4 hereof;
4) For the payment of any expense or
liability incurred by the Fund, including
but not limited to the following payments
for the account of the Fund: interest,
taxes, management, accounting, transfer
agent and legal fees, and operating
expenses of the Fund whether or not such
16
<PAGE>
expenses are to be in whole or part
capitalized or treated as deferred
expenses;
5) For the payment of any dividends declared
pursuant to the governing documents of
the Fund;
6) For payment of the amount of dividends
received in respect of securities sold
short;
7) For any other proper purpose, but only
upon receipt of, in addition to Proper
Instructions, a certified copy of a
resolution of the Board of Directors or
of the Executive Committee of the Fund
signed by an officer of the Fund and
certified by its Secretary or an
Assistant Secretary, specifying the
amount of such payment, setting forth the
purpose for which such payment is to be
made, declaring such purpose to be a
proper purpose, and naming the person or
persons to whom such payment is to be
made.
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased. In any and every case where
17
<PAGE>
payment for purchase of domestic securities for the
account of the Fund is made by the Custodian in
advance of receipt of the securities purchased in
the absence of specific written instructions from
the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such
securities to the same extent as if the securities
had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any
time or times in its discretion appoint (and may at
any time remove) any other bank or trust company
which is itself qualified under the Investment
Company Act of 1940, as amended, to act as a
custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may
from time to time direct; provided, however, that
the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities
hereunder.
2.10 Deposit of Securities in Securities Systems. The
Custodian may deposit and/or maintain domestic
securities owned by the Fund in a clearing agency
registered with the Securities and Exchange
Commission under Section 17A of the Securities
Exchange Act of 1934, which acts as a securities
18
<PAGE>
depository, or in the book-entry system authorized
by the U.S. Department of the Treasury and certain
federal agencies, collectively referred to herein
as "Securities System" in accordance with
applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any,
and subject to the following provisions:
1) The Custodian may keep domestic
securities of the Fund in a Securities
System provided that such securities are
represented in an account ("Account") of
the Custodian in the Securities System
which shall not include any assets of the
Custodian other than assets held as a
fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect
to domestic 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 domestic
securities purchased for the account of
the Fund upon (i) receipt of advice from
the Securities System that such
19
<PAGE>
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 domestic 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 advice from the Securities
System of transfers of domestic
securities for the account of the Fund
shall identify the Fund, be maintained
for the Fund by the Custodian and be
provided to the Fund at its request. Upon
request, the Custodian shall furnish the
Fund confirmation of each transfer to or
from the account of the Fund in the form
of a written advice or notice and shall
furnish to the Fund copies of daily
transaction sheets reflecting each day's
20
<PAGE>
transactions in the Securities System for
the account of the Fund.
4) The Custodian shall provide the Fund with
any report obtained by the Custodian on
the Securities System's accounting
system, internal accounting control and
procedures for safeguarding domestic
securities deposited in the Securities
System;
5) The Custodian shall have received the
initial or annual certificate, as the
case may be, required by Article 13
hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be
liable to the Fund for any loss or damage
to the Fund resulting from use of the
Securities System by reason of any
negligence, misfeasance or misconduct of
the Custodian or any of its agents or of
any of its or their employees or from
failure of the Custodian or any such
agent to enforce effectively such rights
as it may have against the Securities
System; at the election of the Fund, it
21
<PAGE>
shall be entitled to be subrogated to the
rights of the Custodian with respect to
any claim against the Securities System
or any other person which the Custodian
may have as a consequence of any such
lose or damage if and to the extent that
the Fund has not been made whole for any
such loss or damage.
2.11 Segregated Account. The Custodian shall upon
receipt of Proper Instructions establish and
maintain a segregated account or accounts for and
on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities,
including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i)
in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer
registered under the Exchange Act and a member of
the NASD (or any futures commission merchant
registered under the Commodity Exchange Act),
relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange (or the Commodity
Futures Trading Commission or any registered
contract market), or of any similar organization or
22
<PAGE>
organizations, regarding escrow or other
arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or
government securities in connection with options
purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or
sold by the Fund, (iii) for the purposes of
compliance by the Fund with the procedures required
by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities
and Exchange Commission relating to the maintenance
of segregated accounts by registered investment
companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of
the Board of Directors or of the Executive
Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of
such segregated account and declaring such purposes
to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The
Custodian shall execute ownership and other
certificates and affidavits for all federal and
23
<PAGE>
state tax purposes in connection with receipt of
income or other payments with respect to domestic
securities of the Fund held by it and in connection
with transfers of such securities.
2.13 Proxies. The Custodian shall, with respect to the
domestic securities held hereunder, cause to be
promptly executed by the registered holder of such
securities, if the securities are registered
otherwise than in the name of the Fund or a nominee
of the Fund, all proxies, without indication of the
manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies,
all proxy soliciting materials and all notices
relating to such securities.
2.14 Communications Relating to Fund Portfolio
Securities.
The Custodian shall transmit promptly to the Fund
all written information (including, without
limitation, pendency of calls and maturities of
domestic securities and expirations of rights in
connection therewith and notices of exercise of
call and put options written by the Fund and the
maturity of futures contracts purchased or sold by
the Fund) received by the Custodian from issuers of
the domestic securities being held for the Fund.
24
<PAGE>
With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund all
written information received by the Custodian from
issuers of the domestic securities whose tender or
exchange is sought and from the party (or his
agents) making the tender or exchange offer. If the
Fund desires to take action with respect to any
tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian at
least three business days prior to the date on
which the Custodian is to take such action.
2.15 Reports to Fund by Independent Public Accountants.
The Custodian shall provide the Fund, at such times
as the Fund may reasonably require, with reports by
independent public accountants on the accounting
system, internal accounting control and procedures
for safeguarding securities, futures contracts and
options on futures contracts, including domestic
securities deposited and/or maintained in a
Securities System, relating to the services
provided by the Custodian under this Contract; such
reports shall be of sufficient scope and in
sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such
25
<PAGE>
examination, and, if there are no such
inadequacies, the reports shall so state.
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians.
The Custodian is authorized and instructed to
employ as sub-custodian for the Fund's securities
and other assets maintained outside of the United
States the foreign banking institutions and foreign
securities depositories designated on Schedule A
hereto ("foreign sub-custodians"). Upon receipt of
"Proper Instructions", together with a certified
resolution of the Fund's Board of Directors, the
Custodian and the Fund may agree to amend Schedule
A hereto from time to time to designate additional
foreign banking institutions and foreign securities
depositories to act as sub-custodians. Upon
receipt of Proper Instructions from the Fund the
Custodian shall cease the employment of any one or
more of such sub-custodians for maintaining custody
of the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the
custody of the foreign sub-custodians to: (a)
"foreign securities, as defined in paragraph (c)(l)
26
<PAGE>
of Rule 17f-5 under the Investment Company Act of
1940, and (b) cash and cash equivalents in such
amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Fund's
foreign securities transactions.
3.3 Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the
Custodian and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only
through arrangements implemented by the foreign
banking institutions serving as sub-custodians
pursuant to the terms hereof.
3.4 Segregation of Securities. The Custodian shall
identify on its books as belonging to the Fund, the
foreign securities of the Fund held by each foreign
sub-custodian. Each agreement pursuant to which the
Custodian employs a foreign banking institution
shall require that such institution establish a
custody account for the Custodian on behalf of the
Fund and physically segregate in that account
securities and other assets of the Fund, and, in
the event that such institution deposits the Fund's
securities in a foreign securities depository, that
it shall identify on its books as belonging to the
Custodian, as agent for the Fund, the securities so
27
<PAGE>
deposited (all collectively referred to as the
"Account").
3.5 Agreements with Foreign Banking Institutions. Each
agreement with a foreign banking institution shall
be substantially in the form set forth in Exhibit 1
hereto and shall provide that: (a) the Fund's
assets will not be subject to any right, charge,
security interest, lien or claim of any kind in
favor of the foreign banking institution or its
creditors, except a claim of payment for their safe
custody or administration; (b) beneficial ownership
for the Fund's assets will be freely transferable
without the payment of money or value other than
for custody or administration; (c) adequate records
will be maintained identifying the assets as
belonging to the Fund; (d) officers of or auditors
employed by, or other representatives of the
Custodian, including to the extent permitted under
applicable law the independent public accountants
for the Fund, will be given access to the books and
records of the foreign banking institution relating
to its actions under its agreement with the
Custodian; and (e) assets of the Fund held by the
foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents.
28
<PAGE>
3.6 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its
best efforts to arrange for the independent
accountants of the Fund to be afforded access to
the books and records of any foreign banking
institution employed as a foreign sub-custodian
insofar as such books and records relate to the
performance of such foreign banking institutions
under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to
the Fund from time to time, as mutually agreed
upon, statements in respect of the securities and
other assets of the Fund held by foreign sub-
custodians, including but not limited to an
identification of entities having possession of the
Fund's securities and other assets and advices or
notifications of any transfers of securities to or
from each custodial account maintained by a foreign
banking institution for the Custodian on behalf of
the Fund indicating, as to securities acquired for
the Fund, the identity of the entity having
physical possession of such securities.
3.8 Transactions in Foreign Custody Account. (a) Upon
receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by
29
<PAGE>
the parties, the Custodian shall make or cause its
foreign sub-custodian to transfer, exchange or
deliver foreign securities owned by the Fund, but
except to the extent explicitly provided herein
only in any of the cases specified in Section 2.2
(b) Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate
by the parties the Custodian shall pay out or cause
its foreign sub-custodians to pay out monies of the
Fund, but except to the extent explicitly provided
herein only in any of the cases specified in
Section 2.7.
(c) Notwithstanding any provision of this Contract
to the contrary, settlement and payment for
securities received for the account of the Fund and
delivery of securities maintained for the account
of the Fund may be effected in accordance with the
customary or established securities trading or
securities processing practices and procedures in
the Jurisdiction or market in which the transaction
occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving
30
<PAGE>
later payment for such securities from such
purchaser or dealer.
(d) Securities maintained in the custody of a
foreign sub-custodian may be maintained in the name
of such entity's; nominee to the same extent as set
forth in Section 2.3 of this Contract and the Fund
agrees to hold any such nominee harmless from any
liability as a holder of record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement
pursuant to which the Custodian employs a foreign
banking institution as a foreign sub-custodian
shall require the institution to exercise
reasonable care in the performance of its duties
and to indemnify, and hold harmless, the Custodian
and Fund from and against any loss, damage, coat,
expense, liability or claim arising out of or in
connection with the institution's performance of
such obligations. At the election of the Fund, it
shall be entitled to be subrogated to the rights of
the Custodian with respect to any claims against a
foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or
claim if and to the extent that the Fund has not
been made whole for any such loss, damage, coat,
expense, liability or claim.
31
<PAGE>
3.10 Monitoring Responsibilities. The Custodian shall
furnish annually to the Fund, during the month of
June, information concerning the foreign sub-
custodians employed by the Custodian. Such
information shall be similar in kind and scope to
that furnished to the Fund in connection with the
initial approval of this Contract. In addition, the
Custodian will promptly - inform the Fund in the
event that the Custodian learns of a material
adverse change in the financial condition of a
foreign sub-custodian or is notified by a foreign
banking institution employed as a foreign sub-
custodian that there appears to be a substantial
likelihood that its shareholders' equity will
decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each
case computed in accordance with generally accepted
U.S. accounting principles).
3.11 Branches of U.S. Banks. Except as otherwise set
forth in this Contract, the provision hereof shall
not apply where the custody of the Fund assets
maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section
2(a) (5) of the Investment Company Act of 1940
32
<PAGE>
which meets the qualification set forth in Section
26(a) of said Act. The appointment of any such
branch as a sub-custodian shall be governed by
Article 1 of this Contract.
4. Payments for Repurchases or Redemptions and Sales
of Shares of the Fund
From such funds as may be available for the purpose but
subject to the limitations of the Articles of Incorporation and
any applicable votes of the Board of Directors of the Fund
pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In
connection with the redemption or repurchase of Shares of the
Fund, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with
the redemption or repurchase of Shares of the Fund, the Custodian
shall honor checks drawn on the Custodian by a holder of Shares,
which checks have been furnished by the Fund to the holder of
Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to
time between the Fund and the Custodian.
The Custodian shall receive from the distributor for the
Fund's Shares or from the Transfer Agent of the Fund and deposit
33
<PAGE>
into the Fund's account such payments as are received for Shares
of the Fund leased or sold from time to time by the Fund. The
Custodian will provide timely notification to the Fund and the
Transfer Agent of any receipt by it of payments for Shares of the
Fund.
5. Proper Instructions
Proper Instructions as used herein means a writing
signed or initialed by one or more person or persons as the Board
of Directors shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of
transaction involved, including a specific statement of the
purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian
reasonably believes them to have been given by a person
authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions
to be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by
the Board of Directors of the Fund accompanied by a detailed
description of procedures approved by the Board of Directors,
Proper Instructions may include communications effected directly
between electro-mechanical or electronic device provided that the
Board of Directors and the Custodian are satisfied that such
procedures afford adequate safeguards for the Fund's assets.
6. Action Permitted without Express Authority
34
<PAGE>
The Custodian may in its discretion, without express
authority from the Fund:
1) make payments to itself or others for minor
expenses of handling securities or other similar items relating
to its duties under this Contract, provided that all such payment
shall be accounted for to the Fund;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details
in connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property of
the Fund except as otherwise directed by the Board of Directors
of the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority
of any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Directors pursuant
to the Articles of Incorporation as described in such vote, and
35
<PAGE>
such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of
Account and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
Directors of the Fund to keep the books of account of the Fund
and/or compute the net asset value per share of the outstanding
shares of the Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account and/or compute such
net asset value per share. If so directed, the Custodian shall
also calculate daily the net income of the Fund as described in
the Fund's currently effective prospectus and shall advise the
Fund and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components. The
calculations of the net asset value per share and the daily
income of the Fund shall be made at the time or times described
from time to time in the Fund's currently effective prospectus.
9. Records
The Custodian shall create and maintain all records
relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the
Investment Company, Act of 1940, with particular attention to
36
<PAGE>
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the
Fund. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund and employees and agents of the
Securities and Exchange Commission. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of securities
owned by the Fund and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall
be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the
Fund may from time to time request, to obtain from year to year
favorable opinions from the Fund's independent accountants with
respect to its activities hereunder in connection with the
preparation of the Fund's Form N-1A, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
11. Compensation of Custodian
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Fund and the Custodian.
37
<PAGE>
12. Responsibility of Custodian
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible for
the title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability
to the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. Notwithstanding the
foregoing, the responsibility of the Custodian with respect to
redemptions effected by check shall be in accordance with a
separate Agreement entered into between the Custodian and the
Fund.
The Custodian shall be liable for the acta or omissions
of a foreign banking institution appointed pursuant to the
provisions of Article 3 to the same extent as set forth in
Article 1 hereof with respect to sub-custodians located in the
United States and, regardless of whether assets are maintained in
38
<PAGE>
the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as contemplated
by paragraph 3.11 hereof, the Custodian shall not be liable for
any loss, damage, coat, expense, liability or claim resulting
from, or caused by, the direction of or authorization by the Fund
to maintain custody or any securities or cash of the Fund in a
foreign country including, but not limited to, losses-resulting
from nationalization, expropriation, currency restrictions, or
acts of war or terrorism.
If the Fund requires the Custodian to take any action
with respect to securities, which action involves the payment of
money or which action may, in the opinion of the Custodian,
result in the Custodian or its nominee assigned to the Fund being
liable for the-payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Fund required the Custodian to advance cash or
securities for any purpose or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the
account of the Fund shall be security therefor and should the
39
<PAGE>
Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement. 13.
Effective Period, Termination and Amendment
This Contract shall become effective as of its
execution, shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take
effect not sooner than thirty (30) days after the date of such
delivery or mailing; provided, however that the Custodian shall
not act under Section -2.10 hereof in the absence of receipt of
an initial certificate of the Secretary or an Assistant Secretary
that the Board of Directors of the Fund have approved the initial
use of a particular Securities System and the receipt of an
annual certificate of the Secretary or an Assistant Secretary
that the Board of Directors have reviewed the use by the Fund of
such Securities System, as required in each case by Rule 17f-4
under the Investment Company Act of 1940, as amended; provided
further, however, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state
regulations, or any provision of the Articles of Incorporation,
and further provided, that the Fund may at any time by action of
its Board of Directors (i) substitute another bank or trust
40
<PAGE>
company for the Custodian by giving notice as described above to
the Custodian, or (ii) immediately terminate this Contract in the
event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the
happening of a like event at the direction of an appropriate
regulatory agency or court of competent Jurisdiction.
Upon termination of the Contract, the Fund shall pay to
the Custodian such compensation as may be due as of the date of
such termination and shall likewise reimburse the Custodian for
its costs, expense and disbursements.
14. Successor Custodian
If a successor custodian shall be appointed by the Board
of Directors of the Fund, the Custodian shall, upon termination,
deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities
held in a Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Directors of the Fund, deliver at the
office of the Custodian and transfer such securities, funds and
other properties in accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the Board of
41
<PAGE>
Directors shall have been delivered to the Custodian on or before
the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company
Act of 1940, doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
S25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative
thereto and all other property held by it under this Contract and
to transfer to an account of such successor custodian all of the
Fund's securities held in any Securities System. Thereafter, such
bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy of the vote referred to or of the Board of
Directors to appoint a successor custodian, the Custodian shall
be entitled to fair compensation for its services during such
period as the Custodian retains possession of such securities,
funds and other properties and the provisions of this Contract
relating to the duties and obligations of the Custodian shall
remain in full force and effect.
42
<PAGE>
15. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund may from time to time agree on such
provisions interpretive of or in addition to the provisions of
this Contract as may in their Joint opinion be consistent with
the general tenor of that Contract. Any such interpretive or
additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Articles of Incorporation of the Fund. No interpretive or
additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
16. Massachusetts Law to Apply
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
17. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund and the Custodian
relating to the custody of the Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 27th day of February, 1987.
43
<PAGE>
ATTEST ALLIANCE BALANCED SHARES, INC.
/s/ Mary Barry /s/ David H. Dievler
- ------------------ ------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/__________________ By /s/__________________________
Assistant Secretary Vice President
44
00250236.AB5
<PAGE>
Exhibit 10
ALLIANCE BALANCED SHARES, INC.
Amended and Restated Plan pursuant to Rule 18f-3
under the Investment Company Act of 1940
Effective as amended and restated September 30, 1996
The Plan (the "Plan") pursuant to Rule 18f-3 under the
Investment Company Act of 1940 (the "Act") of Alliance Balanced
Shares, Inc. (the "Fund"), which sets forth the general
characteristics of, and the general conditions under which the
Fund may offer, multiple classes of shares of its now existing
and hereafter created portfolios,* is hereby amended and
restated in its entirety. This Plan may be revised or amended
from time to time as provided below.
Class Designations
The Fund** may from time to time issue one or more of
the following classes of shares: Class A shares, Class B shares,
Class C shares and Advisor Class shares. Each of the four
classes of shares will represent interests in the same portfolio
of investments of the Fund and, except as described herein, shall
have the same rights and obligations as each other class. Each
class shall be subject to such investment minimums and other
conditions of eligibility as are set forth in the prospectus or
statement of additional information through which such shares are
issued, as from time to time in effect (the "Prospectus").
Class Characteristics
Class A shares are offered at a public offering price
that is equal to their net asset value ("NAV") plus an initial
sales charge, as set forth in the Prospectus. Class A shares may
also be subject to a Rule 12b-1 fee, which may include a service
fee and, under certain circumstances, a contingent deferred sales
charge ("CDSC"), as described in the Prospectus.
____________________
* This Plan is intended to allow the Fund to offer multiple
classes of shares to the full extent and in the manner
permitted by Rule 18f-3 under the Act (the "Rule"), subject
to the requirements and conditions imposed by the Rule.
** For purposes of this Plan, if the Fund has existing more than
one portfolio pursuant to which multiple classes of shares
are issued, then references in this Plan to the "Fund" shall
be deemed to refer instead to each portfolio.
<PAGE>
Class B shares are offered at their NAV, without an
initial sales charge, and may be subject to a CDSC and a Rule
12b-1 fee, which may include a service fee, as described in the
Prospectus.
Class C shares are offered at their NAV, without an
initial sales charge, and may be subject to a CDSC and a Rule
12b-1 fee, which may include a service fee, as described in the
Prospectus.
Advisor Class shares are offered at their NAV, without
any initial sales charge, CDSC or Rule 12b-1 fee.
The initial sales charge on Class A shares and CDSC on
Class A, B and C shares are each subject to reduction or waiver
as permitted by the Act, and as described in the Prospectus.
Allocations to Each Class
Expense Allocations
The following expenses shall be allocated, to the extent
practicable, on a class-by-class basis: (i) Rule 12b-1 fees
payable by the Fund to the distributor or principal underwriter
of the Fund's shares (the "Distributor"), and (ii) transfer
agency costs attributable to each class. Subject to the approval
of the Fund's Board of Directors, including a majority of the
independent Directors, the following "Class Expenses" may be
allocated on a class-by-class basis: (a) printing and postage
expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxy statements to current
shareholders of a specific class,*** (b) SEC registration fees
incurred with respect to a specific class, (c) blue sky and
foreign registration fees and expenses incurred with respect to a
specific class, (d) the expenses of administrative personnel and
services required to support shareholders of a specific class
(including, but not limited to, maintaining telephone lines and
personnel to answer shareholder inquiries about their accounts or
about the Fund), (e) litigation and other legal expenses relating
to a specific class of shares, (f) Directors' fees or expenses
incurred as a result of issues relating to a specific class of
shares, (g) accounting and consulting expenses relating to a
specific class of shares, (h) any fees imposed pursuant to a non-
Rule 12b-1 shareholder services plan that relate to a specific
____________________
*** For Advisor Class shares, the expenses of preparation,
printing and distribution of prospectuses and shareholder
reports, as well as other distribution-related expenses, will
be borne by the investment adviser of the Fund (the
"Adviser") or the Distributor from their own resources.
2
<PAGE>
class of shares, and (i) any additional expenses, not including
advisory or custodial fees or other expenses related to the
management of the Fund's assets, if these expenses are actually
incurred in a different amount with respect to a class, or if
services are provided with respect to a class that are of a
different kind or to a different degree than with respect to one
or more other classes.
All expenses not now or hereafter designated as Class
Expenses ("Fund Expenses") will be allocated to each class on the
basis of the net asset value of that class in relation to the net
asset value of the Fund.
Waivers and Reimbursements
The Adviser or Distributor may choose to waive or
reimburse Rule 12b-1 fees, transfer agency fees or any Class
Expenses on a voluntary, temporary basis. Such waiver or
reimbursement may be applicable to some or all of the classes and
may be in different amounts for one or more classes.
Income, Gains and Losses
Income, and realized and unrealized capital gains and
losses shall be allocated to each class on the basis of the net
asset value of that class in relation to the net asset value of
the Fund.
Conversion and Exchange Features
Conversion Features
Class B shares of the Fund automatically convert to
Class A shares of the Fund after a certain number of months or
years after the end of the calendar month in which the
shareholder's purchase order was accepted as described in the
Prospectus. Class B shares purchased through reinvestment of
dividends and distributions will be treated as Class B shares for
all purposes except that such Class B shares will be considered
held in a separate sub-account. Each time any Class B shares in
the shareholder's account convert to Class A shares, an equal
pro-rata portion of the Class B shares in the sub-account will
also convert to Class A shares.
Advisor Class shares of the Fund automatically convert
to Class A shares of the Fund during the calendar month following
the month in which the Fund is informed that the beneficial owner
of the Advisor Class shares has ceased to participate in a fee-
based program or employee benefit plan that satisfies the
requirements to purchase Advisor Class shares as described in the
3
<PAGE>
Prospectus or is otherwise no longer eligible to purchase Advisor
Class shares as provided in the Prospectus.
The conversion of Class B and Advisor Class shares to
Class A shares may be suspended if the opinion of counsel
obtained by the Fund that the conversion does not constitute a
taxable event under current federal income tax law is no longer
available. Class B and Advisor Class shares will convert into
Class A shares on the basis of the relative net asset value of
the two classes, without the imposition of any sales load, fee or
other charge.
In the event of any material increase in payments
authorized under the Rule 12b-1 Plan (or, if presented to
shareholders, any material increase in payments authorized by a
non-Rule 12b-1 shareholder services plan) applicable to Class A
shares, existing Class B and Advisor Class shares will stop
converting into Class A shares unless the Class B and Advisor
Class shareholders, voting separately as a class, approve the
increase in such payments. Pending approval of such increase, or
if such increase is not approved, the Directors shall take such
action as is necessary to ensure that existing Class B and
Advisor Class shares are exchanged or converted into a new class
of shares ("New Class A") identical in all material respects to
Class A shares as existed prior to the implementation of the
increase in payments, no later than such shares were previously
scheduled to convert to Class A shares. If deemed advisable by
the Directors to implement the foregoing, such action may include
the exchange of all existing Class B and Advisor Class shares for
new classes of shares ("New Class B" and "New Advisor Class,"
respectively) identical to existing Class B and Advisor Class
shares, except that New Class B and New Advisor Class shares
shall convert to New Class A shares. Exchanges or conversions
described in this paragraph shall be effected in a manner that
the Directors reasonably believe will not be subject to federal
income taxation. Any additional cost associated with the
creation, exchange or conversion of New Class A, New Class B and
New Advisor Class shares shall be borne by the Adviser and the
Distributor. Class B and Advisor Class shares sold after the
implementation of the fee increase may convert into Class A
shares subject to the higher maximum payment, provided that the
material features of the Class A plan and the relationship of
such plan to the Class B and Advisor Class shares are disclosed
in an effective registration statement.
Exchange Features
Shares of each class generally will be permitted to be
exchanged only for shares of a class with similar characteristics
in another Alliance Mutual Fund and shares of certain Alliance
money market funds, except that certain holders of Class A shares
4
<PAGE>
of the Fund eligible to purchase and hold Advisor Class shares of
the Fund may also exchange their Class A shares for Advisor Class
shares. If the aggregate net asset value of shares of all
Alliance Mutual Funds held by an investor in the Fund reaches the
minimum amount at which an investor may purchase Class A shares
at net asset value without a front-end sales load on or before
December 15 in any year, then all Class B and Class C shares of
the Fund held by that investor may thereafter be exchanged, at
the investor's request, at net asset value and without any front-
end sales load or CDSC for Class A shares of the Fund. All
exchange features applicable to each class will be described in
the Prospectus.
Dividends
Dividends paid by the Fund with respect to its Class A,
Class B, Class C and Advisor Class shares, to the extent any
dividends are paid, will be calculated in the same manner, at the
same time and will be in the same amount, except that any Rule
12b-1 fee payments relating to a class of shares will be borne
exclusively by that class and any incremental transfer agency
costs or, if applicable, Class Expenses relating to a class shall
be borne exclusively by that class.
Voting Rights
Each share of a Fund entitles the shareholder of record
to one vote. Each class of shares of the Fund will vote
separately as a class with respect to the Rule 12b-1 plan
applicable to that class and on other matters for which class
voting is required under applicable law. Class A, Class B and
Advisor Class shareholders will vote as three separate classes to
approve any material increase in payments authorized under the
Rule 12b-1 plan applicable to Class A shares.
Responsibilities of the Directors
On an ongoing basis, the Directors will monitor the Fund
for the existence of any material conflicts among the interests
of the four classes of shares. The Directors shall further
monitor on an ongoing basis the use of waivers or reimbursement
by the Adviser and the Distributor of expenses to guard against
cross-subsidization between classes. The Directors, including a
majority of the independent Directors, shall take such action as
is reasonably necessary to eliminate any such conflict that may
develop. If a conflict arises, the Adviser and Distributor, at
their own cost, will remedy such conflict up to and including
establishing one or more new registered management investment
companies.
5
<PAGE>
Reports to the Directors
The Adviser and Distributor will be responsible for
reporting any potential or existing conflicts among the four
classes of shares to the Directors. In addition, the Directors
will receive quarterly and annual statements concerning
distributions and shareholder servicing expenditures complying
with paragraph (b)(3)(ii) of Rule 12b-1. In the statements, only
expenditures properly attributable to the sale or servicing of a
particular class of shares shall be used to justify any
distribution or service fee charged to that class. The
statements, including the allocations upon which they are based,
will be subject to the review of the independent Directors in the
exercise of their fiduciary duties. At least annually, the
Directors shall receive a report from an expert, acceptable to
the Directors, (the "Expert"), with respect to the methodology
and procedures for calculating the net asset value, dividends and
distributions for the classes, and the proper allocation of
income and expenses among the classes. The report of the Expert
shall also address whether the Fund has adequate facilities in
place to ensure the implementation of the methodology and
procedures for calculating the net asset value, dividends and
distributions for the classes, and the proper allocation of
income and expenses among the classes. The Fund and the Adviser
will take immediate corrective measures in the event of any
irregularities reported by the Expert.
Amendments
The Plan may be amended from time to time in accordance
with the provisions and requirements of Rule 18f-3 under the Act.
Amended and restated by action of the Board of Directors
this 30th day of September, 1996.
By: /s/ Edmund P. Bergan, Jr.
Edmund P. Bergan, Jr.
Secretary
6
00250236.AE6
<PAGE>
EXHIBIT 11(a)
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
Telephone: (212) 574-1200
Facsimile: (212) 480-8421
July 24, 1998
Alliance Balanced Shares, Inc.
1345 Avenue of the Americas
New York, New York 10105
Ladies and Gentlemen:
We have acted as counsel to Alliance Balanced Shares,
Inc., a Maryland corporation ("Balanced Shares"), in connection
with the proposed transfer of all the assets and liabilities of
Strategic Balanced Shares, a series of The Alliance Portfolios, a
Massachusetts business trust ("Strategic"), and Alliance Income
Builder Fund, Inc., a Maryland corporation ("Income Builder"), to
Balanced Shares and the issuance of shares ("Shares") of Balanced
Share's Class A Common Stock, Class B Common Stock, Class C
Common Stock and Advisor Class Common Stock, each such class
having a $.01 par value per share (each a "Class"), pursuant to
proposed Agreements and Plans of Reorganization and Liquidation
(the "Agreements") between Balanced Shares and Income Builder and
Balanced Shares and Strategic, respectively.
We have examined the Charter and By-Laws of Balanced
Shares, its Registration Statement on Form N-14 to be filed with
the Securities and Exchange Commission (the "Registration
Statement") and the Agreements in the form approved by the Board
of Directors of Balanced Shares. In addition, we have examined
and relied upon a certificate of the Assistant Secretary of
Balanced Shares certifying that the Agreements presented to us
are in the form approved by the Board of Directors of Balanced
Shares and further certifying the resolutions of the Board of
Directors of Balanced Shares approving the Agreements and
authorizing the issuance of the Shares pursuant thereto. We have
also examined and relied upon such corporate records of Balanced
Shares and other documents and certificates with respect to
factual matters as we have deemed necessary to render the opinion
<PAGE>
expressed herein. We have assumed, without independent
verification, the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, and the conformity
with originals of all documents submitted to us as copies.
Based on such examination, we are of the opinion and so
advise you that:
1. Balanced Shares is validly existing as a
corporation in good standing under the laws of the State of
Maryland; and
2. The Shares of Balanced Shares to be issued in
accordance with the terms of the Agreements, to the extent
that the number of Shares of each Class to be issued by
Balanced Shares and distributed to shareholders of Strategic
and Income Builder does not exceed the number of authorized
and unissued shares of the Class on the issuance date, when
so issued, will constitute validly issued, fully paid and
nonassessable shares under the laws of the State of
Maryland.
We hereby consent to the filing of this opinion letter
with the Securities and Exchange Commission as an exhibit to the
Registration Statement and to the reference to our firm under the
captions "Synopsis - Tax Consequences of the Transactions" and
"Information About the Transactions - Federal Income Tax
Consequences of the Transactions" in the Prospectus/Proxy
Statement included therein, and under the caption "General
Information - Counsel" contained in the Statements of Additional
Information of Balanced Shares, Strategic and Income Builder,
each dated October 31, 1997, also included therein.
Please be advised that we are opining as set forth above
as members of the bars of the State of New York. This opinion
does not extend to the securities or "blue sky" laws of any
state. As to the matters of Maryland law underlying the
foregoing opinion, we have relied on the opinion of Venable,
Baetjer and Howard, LLP, dated July 22, 1998, a copy of which is
included in the Registration Statement as Exhibit 11(b).
Very truly yours,
/s/ SEWARD & KISSEL
2
00250236.AA5
<PAGE>
Exhibit 11(b)
Venable, Baetjer and Howard, LLP
2 Hopkins Plaza, Suite 1800
Baltimore, Maryland 21201-2978
Tel: (410) 244-7400
Fax: (410) 244-7742
July 24, 1998
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
Re: Alliance Balanced Shares, Inc.
Ladies and Gentlemen:
We have acted as special Maryland counsel to Alliance
Balanced Shares, Inc., a Maryland corporation ("Balanced Fund"),
in connection with (i) the proposed acquisition of all of the
assets and known liabilities of Alliance Strategic Balance Fund
("Strategic"), a series of The Alliance Portfolios, a
Massachusetts business trust, by Balanced Fund, in exchange for
shares of Class A Common Stock, Class B Common Stock, Class C
Common Stock and Advisor Class Common Stock, each of Balanced
Fund, par value $.01 per share; and (ii) the proposed acquisition
of all of the assets and known liabilities of Alliance Income
Builder Fund, Inc., a Maryland corporation ("Income Builder"), by
Balanced Fund, in exchange for shares of Class A Common Stock,
Class B Common Stock, Class C Common Stock and Advisor Class
Common Stock, each of Balanced Fund, par value $.01 per share.
The aforementioned proposed acquisitions are referred to
herein collectively as the "Reorganization." This opinion
relates only to the Class A Common Stock, Class B Common Stock,
Class C Common Stock and Advisor Class Common Stock, each of
Balanced Fund, par value $.01 per share, to be issued in the
Reorganization (collectively the "Shares").
We have examined the Combined Proxy Statement and
Prospectus contained in Balanced Fund's Registration Statement on
Form N-14 with respect to the Reorganization (the "Registration
Statement") substantially in the form in which it is to become
effective, Balanced Fund's Charter and Bylaws, and the forms of
<PAGE>
Agreement and Plan of Reorganization between Balanced Fund and
The Alliance Portfolios, on behalf of its series Strategic, and
between Balanced Fund and Income Builder (the "Agreements"). We
have further examined and relied upon a certificate of the
Maryland State Department of Assessments and Taxation to the
effect that Balanced Fund is duly incorporated and existing under
the laws of the State of Maryland and is in good standing and
duly authorized to transact business in the State of Maryland.
We have also examined and relied upon such corporate
records of Balanced Fund, a certificate of the Assistant
Secretary of Balanced Fund with respect to the relevant actions
of its Board of Directors and certain factual and other matters,
and such other documents as we have deemed necessary to render
the opinion expressed herein.
We have assumed, without independent verification, the
genuineness of all signatures on documents submitted to us, the
authenticity of all documents submitted to us as originals, and
the conformity with originals of all documents submitted to us as
copies. We have further assumed that upon their execution and
delivery by the Alliance Portfolios, on behalf of its series
Strategic, and Income Builder, each of the Agreements will
constitute legal, valid and binding obligations, enforceable
against The Alliance Portfolios and Income Builder in accordance
with their terms. We have further assumed, that after the
incorporation of Balanced Fund on June 8, 1932, the directors
named in the Charter took all such actions necessary to duly
organize Balanced Fund under the laws of the State of Maryland.
Based upon the foregoing and subject to the
qualifications set forth below, we are of the opinion that:
1. Balanced Fund is a corporation validly existing and
in good standing under the laws of the State of Maryland.
2. Assuming that the issuance of the Shares is in
accordance with the terms of the Agreements and that the number
of Shares to be issued by Balanced Fund and distributed to the
stockholders of Strategic and Income Builder does not exceed the
number of authorized and unissued shares of Balanced Fund on the
issuance date, the Shares, when issued pursuant to the Agreements
and in the manner referred to in the Registration Statement, will
constitute validly issued shares, fully paid and nonassessable,
under the laws of the State of Maryland.
This letter expresses our opinion with respect to the
Maryland General Corporation Law governing matters such as the
authorization and issuance of stock. It does not extend to the
securities or "blue sky" laws of Maryland, to federal securities
laws or to other laws.
2
<PAGE>
You may rely upon our foregoing opinion in rendering
your opinion to Balanced Fund that is to be filed as an exhibit
to the Registration Statement. We consent to the filing of this
opinion as an exhibit to the Registration Statement. This opinion
may not be relied upon by any other person or for any other
purpose without our prior written consent.
Very truly yours,
/s/ Venable, Baetjer and Howard, LLP
3
00250236.AF8
<PAGE>
Exhibit 13
ALLIANCE FUND SERVICES, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of October 18, 1988, between
ALLIANCE BALANCED SHARES, INC., a Maryland Corporation and an
open-end investment company registered with the Securities and
Exchange Commission (the "SEC") under the Investment Company Act
of 1940 (the "Investment Company Act"), having its principal
place of business at 1345 Avenue of Americas, New York, New York
10105 (the "Fund"), and ALLIANCE FUND SERVICES, INC., a Delaware
corporation registered with the SEC as a transfer agent under the
Securities Exchange Act of 1934, having its principal place of
business at 500 Plaza Drive, Secaucus, New Jersey 07094 ("Fund
Services"), provides as follows:
WHEREAS, Fund Services has agreed to act as transfer
agent to the Fund for the purpose of recording the transfer,
issuance and redemption of shares of each series of the common
stock or shares of beneficial interest, as applicable, of the
Fund ("Shares" or "Shares of a Series"), transferring the Shares,
disbursing dividends and other distributions to shareholders of
the Fund, and performing such other services as may be agreed to
pursuant hereto;
NOW THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, the parties do hereby
agree as follows:
<PAGE>
SECTION 1. The Fund hereby appoints Fund Services as
its transfer agent, dividend disbursing agent and shareholder
servicing agent for the Shares, and Fund Services agrees to act
in such capacities upon the terms set forth in this Agreement.
Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings assigned to them in SECTION 30.
SECTION 2.
(a) The Fund shall provide Fund Services with copies of
the following documents:
(1) Specimens of all forms of certificates for Shares;
(2) Specimens of all account application forms and
other documents relating to Shareholders' accounts;
(3) Copies of each Prospectus;
(4) Specimens of all documents relating to withdrawal
plans instituted by the Fund, as described in SECTION 16; and
(5) Specimens of all amendments to any of the foregoing
documents.
(b) The Fund shall furnish to Fund Services a supply of
blank Share Certificates for the Shares and, from time to time,
will renew such supply upon Fund Services' request. Blank Share
Certificates shall be signed manually 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.
2
<PAGE>
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 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
3
<PAGE>
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 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.
4
<PAGE>
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 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
5
<PAGE>
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 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
6
<PAGE>
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 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
7
<PAGE>
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.
(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
8
<PAGE>
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 of1the 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 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,
9
<PAGE>
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 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
10
<PAGE>
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 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.
11
<PAGE>
(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 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,
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
12
<PAGE>
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 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:
13
<PAGE>
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;
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 3la-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;
14
<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
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
15
<PAGE>
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
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
16
<PAGE>
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.
(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
17
<PAGE>
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
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
18
<PAGE>
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, 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,
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
19
<PAGE>
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, including a majority of the Directors who are
not a party to this Agreement or interested persons of any such
20
<PAGE>
party, at a meeting called for such purpose, and thereafter is
approved by the Fund's Shareholders if such approval is required
under the Investment Company Act or the rules and regulations
thereunder. The parties hereto may adopt procedures as may be
appropriate or practical under the circumstances, and Fund
Services may conclusively rely on the determination of the Fund
that any procedure that has been approved by the Fund does not
conflict with or violate any requirement of its Articles of
Incorporation, 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 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 actand 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
21
<PAGE>
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 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 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
23
<PAGE>
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 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 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 of the Fund shall, by
resolution, designate the Fund as its own transfer agent. Upon
24
<PAGE>
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:
Alliance Balanced Shares, Inc.
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
25
<PAGE>
authorized by resolution of the Fund's Board of Directors. Fund
Services represents and warrants to the Fund that the execution
and delivery of this Agreement by the undersigned officer of Fund
Services has also been duly and validly authorized.
SECTION 35. This Agreement may be executed in more than
one counterpart, each of which shall be deemed to be an original,
and shall become effective on the last date of signature below
unless otherwise agreed by the parties. Unless sooner terminated
pursuant to SECTION 32, this Agreement will continue until
September 30, 1989 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 by a vote of the stockholders of the Fund and in either case
by a majority of the Directors 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. 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
26
<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 BALANCED SHARES, INC.
By: /s/ David V. Panker
____________________________
TITLE: Vice President
___________________________
ALLIANCE FUND SERVICES, INC.
By: /s/ Robert H. Joseph
____________________________
TITLE: Vice President
___________________________
27
00250236.AC3
<PAGE>
Exhibit 14(a)
Consent of Independent Accountants
We hereby consent to the incorporation by reference into the
Prospectus/Proxy Statement and Statement of Additional
Information constituting parts of this registration statement on
Form N-14 (the "N-14 Registration Statement") of our report dated
September 17, 1997, relating to the financial statements and
financial highlights of Alliance Balanced Shares, Inc. (the
"Fund"), which is included in the Statement of Additional
Information of the Fund dated October 31, 1997 which is
incorporated by reference into such Prospectus/Proxy Statement
and Statement of Additional Information. We also consent to the
references to us under the headings "Shareholder Services -
Statements and Report" and "General Information - Independent
Accountants" in the Statement of Additional Information of the
Fund dated October 31, 1997. We also consent to the references
to us under the headings "Financial Highlights" in the Alliance
Stock Funds Prospectus and "Financial Highlights" and
"Conversion Feature - Description of Class A Shares" in the
Alliance Advisor Class Stock Funds Prospectus, each dated
February 2, 1998, which are incorporated by reference into the
Prospectus/Proxy Statement of the N-14 Registration Statement.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
July 20, 1998
00250236.AF0
<PAGE>
Exhibit 14(b)
Consent of Independent Accountants
We hereby consent to the incorporation by reference into the
Prospectus/Proxy Statement and Statement of Additional
Information constituting parts of this registration statement on
Form N-14 (the "N-14 Registration Statement") of our report dated
September 17, 1997, relating to the financial statements and
financial highlights of Alliance Strategic Balanced Fund (the
"Fund"), which is included in the Statement of Additional
Information of the Fund dated October 31, 1997 which is
incorporated by reference into such Prospectus/Proxy Statement
and Statement of Additional Information. We also consent to the
references to us under the headings "Shareholder Services -
Statements and Report" and "General Information - Independent
Accountants" in the Statement of Additional Information of the
Fund dated October 31, 1997. We also consent to the references
to us under the headings "Financial Highlights" in the Alliance
Stock Funds Prospectus and "Financial Highlights" and
"Conversion Feature - Description of Class A Shares" in the
Alliance Advisor Class Stock Funds Prospectus, each dated
February 2, 1998, which are incorporated by reference into the
Prospectus/Proxy Statement of the N-14 Registration Statement.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
July 20, 1998
00250236.AF1
<PAGE>
Exhibit 14(c)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights" and "Conversion Feature - Description of
Class A Shares" in the Prospectus and "Shareholder Services -
Statements and Reports" and "General Information - Independent
Auditors" in the Statement of Additional Information, dated
February 2, 1998, and to the use of our report dated December 10,
1997, included in this Registration Statement on Form N-14 of
Alliance Balance Shares, Inc.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
July 23, 1998
00250236.AB6
<PAGE>
Exhibit 16
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
Registration Statement, and any amendments thereto, on Form
N-14 of Alliance Balanced Shares, 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 D. Carifa
___________________________
John D. Carifa
Dated: July 15, 1998
<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
Registration Statement, and any amendments thereto, on Form
N-14 of Alliance Balanced Shares, 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/ Ruth Block
___________________________
Ruth Block
Dated: July 15, 1998
<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
Registration Statement, and any amendments thereto, on Form
N-14 of Alliance Balanced Shares, 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: July 15, 1998
<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
Registration Statement, and any amendments thereto, on Form
N-14 of Alliance Balanced Shares, 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: July 15, 1998
<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
Registration Statement, and any amendments thereto, on Form
N-14 of Alliance Balanced Shares, 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. Foulk, Jr.
___________________________
William H. Foulk, Jr.
Dated: July 15, 1998
<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
Registration Statement, and any amendments thereto, on Form
N-14 of Alliance Balanced Shares, 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/ Dr. James M. Hester
___________________________
Dr. James M. Hester
Dated: July 15, 1998
<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
Registration Statement, and any amendments thereto, on Form
N-14 of Alliance Balanced Shares, 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/ Clifford L. Michel
___________________________
Clifford L. Michel
Dated: July 15, 1998
<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
Registration Statement, and any amendments thereto, on Form
N-14 of Alliance Balanced Shares, 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/ Donald J. Robinson
___________________________
Donald J. Robinson
Dated: July 15, 1998
00250236.AB8
