<PAGE>
File No. 33-12988
811-05088
Securities and Exchange Commission
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 19
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 21
THE ALLIANCE PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, N.Y. 10105
(800) 221-5672
(Registrant's Telephone Number, including Area Code)
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas, New York, N.Y. 10105
(Name and address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
X immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i)
on (date) pursuant to paragraph (a)(i)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule 485.
The Registrant has previously registered an indefinite
number or amount of its shares of beneficial interest pursuant to
Rule 24f-2. The Registrant filed a Rule 24f-2 Notice with respect
to the Alliance Growth Fund's fiscal year ended October 31, 1995
<PAGE>
on December 27, 1995 and the Alliance Strategic Balanced Fund's
fiscal year ended July 31, 1995 on September 28, 1995.
<PAGE>
Cross Reference Sheet for
Alliance Strategic Balanced Fund
Alliance Growth Fund
ITEM NUMBER OF FORM N-1A PROSPECTUS LOCATION
PART A OR CAPTION
1. Cover Page......................... Front Cover Page
2. Synopsis........................... Expense Information
3. Condensed Financial Information.... Financial Highlights
4. General Description of Registrant.. General Information;
Description
of the Funds
5. Management of the Trust............ Management of the Funds
5A. Management's Discussion of
Fund's Performance................. Not Applicable
6. Capital Stock and Other Securities. General Information;
Dividends, Distributions
and Taxes
7. Purchase of Securities Purchase and Sale of
Being Offered...................... Shares; Management
of the Funds
8. Redemption or Repurchase........... Purchase and Sale of
Shares
9. Pending Legal Proceedings.......... Not Applicable
<PAGE>
STATEMENT OF
ITEM NUMBER OF FORM N-1A ADDITIONAL
PART A INFORMATION CAPTION
10. Cover Page......................... Cover Page
11. Table of Contents.................. Table of Contents
12. General Information and History.... Not Applicable
13. Investment Objectives and
Policies........................... Investment Objectives
and Policies; Investment
Techniques; Investment
14. Management of the Fund............. Management of the Trust
15. Control Persons and Principal
Holders of Securities.............. General Information
16. Investment Advisory Management of the
and Other Services................. Trust; Expenses of the
Funds
17. Brokerage Allocation Portfolio
and Other Practices................ Transactions;
Expenses of the Funds
18. Capital Stock and Other Securities. General Information
19. Purchase, Redemption and Pricing Purchase and Redemption
of Securities Being Offered........ of Shares; Net Asset
Value
20. Tax Status......................... Dividends,
Distribution and Taxes
21. Underwriters....................... Expenses of the Funds;
Purchase and Redemption
of Shares
22. Calculation of Performance Data.... General Information
23. Financial Statements............... Financial Statements
<PAGE>
_____________________
The following documents are incorporated herein by reference:
1. The Trust's Prospectus relating to the Alliance Short-Term
U.S. Government Fund, contained in Post-Effective Amendment
No. 18 to the Trust's Registration Statement (File Nos. 33-
12988, 811-05088) filed on October 31, 1995;
2. The Trust's Statement of Additional Information (including
the reports of independent accountants and financial
statements contained therein), relating to the Alliance
Short-Term U.S. Government Fund, contained in Post-Effective
No. 18 to the Trust's Registration Statement (File Nos. 33-
12988, 811-05088) filed on October 31, 1995.
3. The Trust's Prospectus relating to the Alliance Conservative
Investors Fund and the Growth Investors Fund, contained in
Post-Effective Amendment No. 17 to the Trust's Registration
Statement (File Nos. 33-12988, 811-05088) filed on August
30, 1995;
4. The Trust's Statement of Additional Information (including
the reports of independent accountants and financial
statements contained therein), relating to the Alliance
Conservative Investors Fund and the Alliance Growth
Investors Fund, contained in Post-Effective No. 17 to the
Trust's Registration Statement (File Nos. 33-12988, 811-
05088) filed on August 30, 1995.
<PAGE>
<PAGE>
THE ALLIANCE
------------------------------------------------------------
STOCK FUNDS
------------------------------------------------------------
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 1, 1996
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
Total Return Funds
--Alliance Strategic Balanced Fund
--Alliance Balanced Shares
--Alliance Income Builder Fund
--Alliance Utility Income Fund
--Alliance Growth and Income Fund
TABLE OF CONTENTS PAGE
The Funds at a Glance............................................ 2
Expense Information.............................................. 4
Financial Highlights............................................. 7
Glossary......................................................... 17
Description of the Funds......................................... 18
Investment Objectives and Policies.......................... 18
Additional Investment Practices............................. 26
Certain Fundamental Investment Policies..................... 33
Risk Considerations......................................... 36
Purchase and Sale of Shares...................................... 39
Management of the Funds.......................................... 41
Dividends, Distributions and Taxes............................... 44
General Information.............................................. 45
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 "Literature" telephone number.
Each Fund offers three classes of shares which 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 (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.
Alliance(R)
Mutual funds 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 107 mutual funds. Since 1971, Alliance has earned
a reputation as a leader in the investment world with over $140 billion in
assets under management as of September 30, 1995. Alliance provides investment
management services to 29 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 non-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.
2
<PAGE>
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.
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.
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. 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
Alliance (R)
Mutual funds 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% None
during the
first year,
decreasing 1.0%
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 39.
(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 39.
<TABLE>
<CAPTION>
OPERATING EXPENSES EXAMPLES
- ----------------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE FUND CLASS A CLASS B CLASS C Class A Class B+ Class B++ Class C
------- ------- ------- ------- -------- --------- -------
Management fees .71% .71% .71% After 1 year $ 53 $ 59 $ 19 $ 19
12b-1 fees .19% 1.00% 1.00% After 3 years $ 75 $ 80 $ 60 $ 59
Other expenses (a) .18% .19% .18% After 5 years $100 $103 $103 $102
Total fund ----- ----- ----- After 10 years $169 $201(b) $201(b) $221
operating expense 1.08% 1.90% 1.89%
==== ==== ====
GROWTH FUND CLASS A CLASS B CLASS C Class A Class B+ Class B++ Class C
------- ------- ------- ------- -------- --------- -------
Management fees .75% .75% .75% After 1 year $ 56 $ 61 $ 21 $ 21
12b-1 fees .30% 1.00% 1.00% After 3 years $ 83 $ 84 $ 64 $ 64
Other expenses(a) .30% .30% 1.00% After 5 years $113 $110 $110 $110
Total fund ----- ----- ----- After 10 years $198 $220(b) $220(b) $238
operating expenses 1.35% 2.05% 2.05%
==== ==== ====
PREMIER GROWTH FUND CLASS A CLASS B CLASS C Class A Class B+ Class B++ Class C
------- ------- ------- ------- -------- --------- -------
Management fees 1.00% 1.00% 1.00% After 1 year $ 60 $ 65 $ 25 $ 25
12b-1 fees .37% 1.00% 1.00% After 3 years $ 95 $ 96 $ 76 $ 75
Other expenses (a) .38% .43% .42% After 5 years $133 $130 $130 $129
Total fund ----- ----- ----- After 10 years $240 $244(b) $244(b) $276
operating expenses 1.75% 2.43% 2.42%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 6.
4
<PAGE>
<TABLE>
OPERATING EXPENSES EXAMPLES
- --------------------------------------------------------- -----------------------------------------------------------
TECHNOLOGY FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 60 $ 65 $ 25 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 95 $ 97 $ 77 $ 77
Other expenses (a) .45% .48% .47% After 5 years $133 $132 $132 $132
---- ---- ---- After 10 years $240 $264(b) $264(b) $281
Total fund
operating expenses 1.75% 2.48% 2.47%
==== ==== ====
<CAPTION>
QUASAR FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 60 $ 67 $ 27 $ 27
12b-1 fees .21% 1.00% 1.00% After 3 years $ 98 $102 $ 82 $ 82
Other expenses (a) .62% .65% .64% After 5 years $137 $141 $141 $140
---- ---- ---- After 10 years $248 $278(b) $278(b) $297
Total fund
operating expenses 1.83% 2.65% 2.64%
==== ==== ====
<CAPTION>
INTERNATIONAL FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 59 $ 66 $ 26 $ 26
12b-1 fees .18% 1.00% 1.00% After 3 years $ 95 $100 $ 80 $ 79
Other expenses (a) .55% .57% .54% After 5 years $132 $137 $137 $135
---- ---- ---- After 10 years $238 $270(b) $270(b) $288
Total fund
operating expenses 1.73% 2.57% 2.54%
==== ==== ====
<CAPTION>
WORLDWIDE PRIVATIZATION FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 60 $ 65 $ 25 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 96 $ 97 $ 77 $ 77
Other expenses (a) .48% .48% .48% After 5 years $135 $132 $132 $132
---- ---- ---- After 10 years $243 $264(b) $264(b) $282
Total fund
operating expenses 1.78% 2.48% 2.48%
==== ==== ====
<CAPTION>
NEW EUROPE FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.07% 1.07% 1.07% After 1 year $ 63 $ 68 $ 28 $ 28
12b-1 fees .30% 1.00% 1.00% After 3 years $105 $107 $ 87 $ 86
Other expenses (a) .72% .72% .71 % After 5 years $150 $147 $147 $147
---- ---- ---- After 10 years $274 $295(b) $295(b) $311
Total fund
operating expenses 2.09% 2.79% 2.78%
==== ==== ====
<CAPTION>
ALL-ASIA INVESTMENT FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees After 1 year $ 85 $ 92 $ 52 $ 58
after waiver) (c) 0.00% 0.00% 0.00% After 3 years $171 $176 $156 $173
12b-1 fees .30% 1.00% 1.00% After 5 years $257 $259 $259 $286
Other expenses After 10 years $478 $500(b) $500(b) $560
Administration fees
(after waiver) (f) 0.00% 0.00% 0.00%
Other operating
expenses (a)
(after reimbursement) (d) 4.12% 4.20% 4.84%
---- ---- ----
Total other expenses 4.12% 4.20% 4.84%
---- ---- -----
Total fund
operating expenses (d) 4.42% 5.20% 5.84%
==== ==== ====
<CAPTION>
GLOBAL SMALL CAP FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 67 $ 72 $ 32 $ 33
12b-1 fees .30% 1.00% 1.00% After 3 years $118 $119 $ 99 $100
Other expenses (a) 1.24% 1.20% 1.25% After 5 years $172 $167 $167 $170
---- ---- ---- After 10 years $318 $335(b) $335(b) $355
Total fund
operating expenses (g) 2.54% 3.20% 3.25%
==== ==== ====
<CAPTION>
STRATEGIC BALANCED FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees
(after waiver) (c) .45% .45% .45% After 1 year $ 56 $ 61 $ 21 $ 21
12b-1 fees .30% 1.00% 1.00% After 3 years $ 85 $ 86 $ 66 $ 66
Other expenses (a) After 5 years $116 $113 $113 $113
(after reimbursement) (d) .65% .65% .65% After 10 years $203 $225(b) $225(b) $243
---- ---- ----
Total fund
operating expenses (d) 1.40% 2.10% 2.10%
==== ==== ====
</TABLE>
Please refer to the footnotes on page 6.
5
<PAGE>
<TABLE>
<CAPTION>
OPERATING EXPENSES EXAMPLES
- -------------------------------------------------------- --------------------------------------------------------------
BALANCED SHARES CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .63% .63% .63% After 1 year $ 55 $ 61 $ 21 $ 21
12b-1 fees .24% 1.00% 1.00% After 3 years $ 83 $ 86 $ 66 $ 65
Other expenses (a) .45% .48% .46% After 5 years $112 $113 $113 $112
----- ----- ----- After 10 years $195 $224(b) $224(b) $242
Total fund
operating expenses 1.32% 2.11% 2.09%
===== ===== =====
<CAPTION>
INCOME BUILDER FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .75% .75% .75% After 1 year $ 66 $ 71 $ 31 $ 30
12b-1 fees .30% 1.00% 1.00% After 3 years $114 $115 $ 95 $ 93
Other expenses (a) 1.33% 1.34% 1.27% After 5 years $164 $162 $162 $159
----- ----- ----- After 10 years $303 $324(b) $324(b) $334
Total fund
operating expenses 2.38% 3.09% 3.02%
===== ===== =====
<CAPTION>
UTILITY INCOME FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C
------- ------- ------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .75% .75% .75% After 1 year $ 57 $ 62 $ 22 $ 22
12b-1 fees .30% 1.00% 1.00% After 3 years $ 88 $ 89 $ 69 $ 69
Other expenses (a) .45% .45% .45% After 5 years $121 $118 $118 $118
----- ----- ----- After 10 years $214 $236(b) $236(b) $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
------- ------- ------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .53% .53% .53% After 1 year $ 53 $ 59 $ 19 $ 19
12b-1 fees .20% 1.00% 1.00% After 3 years $ 74 $ 78 $ 58 $ 58
Other expenses (a) .32% .33% .31% After 5 years $ 98 $101 $101 $100
----- ----- ----- After 10 years $165 $197(b) $197(b) $216
Total fund
operating expenses 1.05% 1.86% 1.84%
===== ===== =====
- -------------------------------------------------------------------------------------------------------------------------------
</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, based on a fixed dollar amount
charged to the Fund for each shareholder's account.
(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 1.00% for ALL-ASIA
INVESTMENT FUND.
(d) Net of voluntary fee waiver and expense reimbursement. In the absence of
such waiver and reimbursement, other expenses for STRATEGIC BALANCED FUND
would have been .76%, .74% and .75%, respectively, for Class A, Class B
and Class C shares, and total fund operating expenses for STRATEGIC
BALANCED FUND would have been 1.81%, 2.49% and 2.50%, respectively, for
Class A, Class B and Class C shares. In the absence of such waiver and
reimbursements, other expenses for ALL-ASIA INVESTMENT FUND would
have been 5.79%, 9.32% and 9.38%, respectively for Class A, Class B and
Class C shares, and total fund operating expenses for ALL-ASIA INVESTMENT
FUND would have been 9.79%, 11.32% and 11.38%, respectively, for Class A,
Class B and Class C shares annualized.
(e) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for UTILITY INCOME FUND would be 4.44%, 6.52% and
4.08%, respectively, for Class A, Class B and Class C shares.
(f) Reflects the fees payable by ALL-ASIA INVESTMENT FUND to Alliance
pursuant to an administration agreement net of voluntary fee waiver. In
the absence of such fee waiver, the administration fee would be .15%.
(g) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for GLOBAL SMALL CAP FUND would be 2.61%, 3.27% and
3.31%, respectively, for Class A, Class B and Class C shares.
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 Rules of Fair Practice of the National
Association of Securities Dealers, Inc. See "Management of the
Funds--Distribution Services Agreements." The Rule 12b-1 fee for each class
comprises a service fee not exceeding .25% of the aggregate average daily net
assets of the Fund attributable to the class and an asset-based sales charge
equal to the remaining portion of the Rule 12b-1 fee. The information shown in
the table for ALLIANCE FUND, GROWTH FUND and TECHNOLOGY FUND reflects
annualized expenses based on the Fund's most recent fiscal periods. The
information shown in the table for PREMIER GROWTH FUND reflects estimated
annualized expenses for that Fund's current fiscal period. "Total Fund
Operating Expenses" for UTILITY INCOME FUND are based on estimated amounts
for the Fund's current fiscal year. See "Management of the Funds."
"Other Expenses" for Class A, Class B and Class C shares of ALL-ASIA
INVESTMENT FUND and WORLDWIDE PRIVATIZATION FUND are based on estimated
amounts for each Fund's current fiscal year. The management fee rates of
GROWTH FUND, PREMIER GROWTH FUND, STRATEGIC BALANCED FUND, TECHNOLOGY FUND,
INTERNATIONAL FUND, WORLDWIDE PRIVATIZATION FUND, NEW EUROPE FUND, ALL-ASIA
INVESTMENT FUND, INCOME BUILDER FUND, UTILITY INCOME FUND and GLOBAL SMALL
CAP FUND are higher than those paid by most other investment companies, but
Alliance believes the fees are comparable to those paid by investment
companies of similar investment orientation. The expense ratios for Class B
and Class C shares of TECHNOLOGY FUND and QUASAR FUND, and for each Class of
shares of GLOBAL SMALL CAP FUND and WORLDWIDE PRIVATIZATION FUND, are higher
than the expense ratios of most other mutual funds, but are comparable to the
expense ratios of mutual funds whose shares are similarly priced. 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.
6
<PAGE>
- -------------------------------------------------------------------------------
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. 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 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 "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 11/30/95.... $ 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)
Year ended 12/31/87.... 6.87 .08 .27 .35 (.13) (1.94)
Year ended 12/31/86.... 11.15 .11 .87 .98 (.10) (5.16)
Year ended 12/31/85.... 9.18 .20 2.51 2.71 (.23) (.51)
CLASS B
Year ended 11/30/95.... $ 6.50 $ (.01) $ 2.00 $ 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 11/30/95..... $ 6.50 $ (.02) $ 2.02 $ 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 10/31/95..... $ 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 10/31/95..... $ 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 10/31/95..... $ 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 11/30/95..... $ 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 11/30/95..... $ 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 11/30/95..... $ 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
TECHNOLOGY FUND
CLASS A
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) .16 .13 0.00 0.00
Year ended 12/31/87..... 23.11 (.10) 4.54 4.44 0.00 (7.33)
Year ended 12/31/86..... 20.64 (.14) 2.62 2.48 (.01) 0.00
Year ended 12/31/85..... 16.52 .02 4.30 4.32 (.20) 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 16.
8
<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)
And End Of on Net Asset (000's To Average To Average Portfolio
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate
- ------------- --------- ------------ ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$(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
(2.07) 5.15 4.90 695,812 .76 1.03 100
(5.26) 6.87 12.60 652,009 .61 1.39 46
(.74) 11.15 31.52 710,851 .59 1.96 62
$(1.00) $ 7.49 36.61% $ 31,738 1.90% (.53)% 81%
0.00 6.50 (3.85) 18,138 1.89* (.60)* 63
(.76) 6.76 13.28 12,402 1.90 (.64) 66
(.49) 6.64 13.75 3,825 1.64 (.04) 58
(.67) 6.27 13.10 852 1.64* .10* 74
$(1.00) $ 7.50 36.79% $ 10,078 1.89% (.51)% 81%
0.00 6.50 (3.99) 6,230 1.87* (.59)* 63
(.76) 6.77 13.95 4,006 1.94* (.74)* 66
$ (.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 (f) 1.44 137
(.06) 17.94 32.40 713 1.40*(f) 1.99* 130
$ (.42) $24.78 19.33% $1,052,020 2.05% (.15)% 61%
0.00 21.21 4.64 751,521 2.05* .16* 24
(2.32) 20.27 14.79 394,227 2.10 (f) (.36) 87
(1.65) 19.68 18.16 56,704 2.15 (f) (.53) 124
(2.56) 18.16 22.75 37,845 2.15 (f) .78 137
(.80) 16.88 24.72 22,710 2.10 (f) .56 130
(1.02) 14.38 8.81 15,800 2.00 (f) .07 165
(1.06) 14.13 20.31 7,672 2.00 (f) (.03) 139
0.00 12.76 27.60 1,938 2.00*(f) (.40)* 52
$ (.42) $24.79 19.32% $ 226,662 2.05% (.15)% 61%
0.00 21.22 4.64 114,455 2.05* .16* 24
(2.32) 20.28 5.27 64,030 2.10*(f) (.31)* 87
$ (.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*(f) .91*(f) 0
$ (.67) $15.81 49.01% $ 238,088 2.43% (.95)% 114%
0.00 11.29 (3.67) 139,988 2.47 (1.19) 98
0.00 11.72 8.64 151,600 2.70 (1.14) 68
0.00 10.79 7.90 19,941 2.68*(f) .35*(f) 0
$ (.67) $15.82 48.96% $ 20,679 2.42% (.97)% 114%
0.00 11.30 (3.58) 7,332 2.47 (1.16) 98
0.00 11.72 11.83 3,899 2.79* (1.35)* 68
$(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 (f) (.16)(f) 139
(7.33) 20.22 19.16 167,608 1.31 (f) (.56)(f) 248
(.01) 23.11 12.03 147,733 1.13 (f) (.57)(f) 141
(.20) 20.64 26.24 147,114 1.14 (f) .07 (f) 259
</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 (CONTINUED)
CLASS B
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 11/30/95...... $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 9/30/95....... $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)
Year ended 9/30/87(d).... 21.80 (.14) 5.88 5.74 0.00 (3.07)
Year ended 9/30/86(d).... 17.25 0.00 5.54 5.54 (.03) (.96)
Year ended 9/30/85(d).... 14.67 .04 2.87 2.91 (.11) (.22)
CLASS B
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 9/30/95....... $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 6/30/95....... $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)
Year ended 6/30/87....... 22.02 .15 4.31 4.46 (.03) (2.75)
Year ended 6/30/86....... 11.94 .02 10.50 10.52 (.03) (.41)
CLASS B
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 6/30/95....... $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
WORLDWIDE PRIVITIZATION FUND
CLASS A
Year ended 6/30/95....... $ 9.75 $ .06 $ .37 $ .43 $0.00 $ 0.00
6/2/94+ to 6/30/94....... 10.00 .01 (.26) (.25) 0.00 0.00
CLASS B
Year ended 6/30/95....... $ 9.74 $ .02 $ .34 $ .36 $0.00 $ 0.00
6/2/94+ to 6/30/94....... 10.00 .00 (.26) (.26) 0.00 0.00
CLASS C
2/8/95++ to 6/30/95...... $ 9.53 $ .05 $ .52 $ .57 $0.00 $ 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 16.
10
<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)
And End Of on Net Asset (000's To Average To Average Portfolio
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate
- ------------- --------- ------------ ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$(3.17) $45.76 60.95% $277,111 2.48% (1.47)% 55%
0.00 31.61 21.67 18,397 2.43* (1.95)* 55
(8.18) 25.98 24.49 1,645 2.57* (2.30)* 64
$(3.17) $45.77 60.98% $ 43,161 2.47% (1.46)% 55%
0.00 31.61 21.67 7,470 2.41* (1.94)* 55
(8.18) 25.98 24.49 1,096 2.52* (2.25)* 64
$(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(f) (.40)(f) 58
(3.07) 24.47 29.61 134,676 1.18(f) (.56)(f) 76
(.99) 21.80 33.79 144,959 1.18 .02 84
(.33) 17.25 20.29 77,067 1.18 .22 77
$(3.86) $23.03 29.78% $ 16,604 2.65% (1.88)% 160%
(.82) 21.92 (4.92) 13,901 2.50 (1.98) 110
(.88) 23.88 30.53 16,779 2.46 (1.81) 102
(.16) 19.07 (9.05) 9,454 2.42 (1.67) 128
(.06) 21.14 35.54 7,346 2.41 (1.28) 118
0.00 15.66 (8.79) 71 2.09* (.26)* 90
$(3.86) $23.05 29.87% $ 1,611 2.64%* (1.76)%* 160%
(.82) 21.92 (4.92) 1,220 2.48 (1.96) 110
0.00 23.88 17.46 118 2.49* (1.90)* 102
$(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
(2.78) 23.70 23.05 194,716 1.30 .77 58
(.44) 22.02 90.87 139,326 1.29 .16 62
$(1.62) $16.19 (.22)% $ 48,998 2.57% (.62)% 119%
(.56) 17.90 17.65 29,943 2.78 (1.15) 97
(.09) 15.74 6.98 6,363 2.70 (.96) 94
(.03) 14.81 6.54 5,585 2.68 (.70) 72
(.50) 13.93 (6.97) 3,515 3.39* .84* 71
$(1.62) $16.20 (.22)% $ 19,395 2.54% (.88)% 119%
(.56) 17.91 17.72 13,503 2.78 (1.12) 97
0.00 15.74 (1.19) 229 2.57* .08* 94
$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
$0.00 $10.10 3.70% $ 79,359 3.27% .01% 36%
0.00 9.74 (2.60) 22,859 3.45* .33* 0
$0.00 $10.10 5.98% $ 338 3.27%* 2.65%* 36%
</TABLE>
- --------------------------------------------------------------------------------
11
<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 Period Period Income (Loss) Investments From Operations Income Realized Gains
- ------------------ ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
NEW EUROPE FUND
CLASS A
Year ended 7/31/95.... $12.66 $ .04 $ 2.50 $ 2.54 $ (.09) $ 0.00
Period ended 7/31/94** 12.53 .09 .04 .13 0.00 0.00
Year ended 2/28/94.... 9.37 .02 (b) 3.14 3.16 0.00 0.00
Year ended 2/28/93.... 9.81 .04 (.33) (.29) (.15) 0.00
Year ended 2/29/92.... 9.76 .02 (b) .05 .07 (.02) 0.00
4/2/90+ to 2/28/91.... 11.11 (e) .26 (.91) (.65) (.26) (.44)
CLASS B
Year ended 7/31/95.... $12.41 $(.05) $ 2.44 $ 2.39 $ (.09) $0.00
Period ended 7/31/94** 12.32 .07 .02 .09 0.00 0.00
Year ended 2/28/94.... 9.28 (.05) (b) 3.09 3.04 0.00 0.00
Year ended 2/28/93.... 9.74 (.02) (.33) (.35) (.11) 0.00
3/5/91++ to 2/29/92... 9.84 (.04) (b) (.04) (.08) (.02) 0.00
CLASS C
Year ended 7/31/95.... $12.42 $(.07) $ 2.46 $ 2.39 $ (.09) $ 0.00
Period ended 7/31/94** 12.33 .06 .03 .09 0.00 0.00
5/3/93++ to 2/28/94... 10.21 (.04)(b) 2.16 2.12 0.00 0.00
ALL-ASIA INVESTMENT FUND
CLASS A
11/28/94+ to 10/31/95. $ 10.00 $ (.19)(c) $ .64 $ .45 $ 0.00 $ 0.00
CLASS B
11/28/94+ to 10/31/95. $ 10.00 $ (.25)(c) $ .66 $ .41 $ 0.00 $ 0.00
CLASS C
11/28/94+ to 10/31/95. $ 10.00 $ (.35)(c) $ .76 $ .41 $ 0.00 $ 0.00
GLOBAL SMALL CAP FUND
CLASS A
Year ended 7/31/95.... $ 11.08 $ (.09) $ 1.50 $ 1.41 $ 0.00 $ (2.11)(k)
Period ended 7/31/94** 11.24 (.15) (.01) (.16) 0.00 0.00
Year ended 9/30/93.... 9.33 (.15) 2.49 2.34 0.00 (.43)
Year ended 9/30/92.... 10.55 (.16) (1.03) (1.19) 0.00 (.03)
Year ended 9/30/91.... 8.26 (.06) 2.35 2.29 0.00 0.00
Year ended 9/30/90.... 15.54 (.05)(b) (4.12) (4.17) 0.00 (3.11)
Year ended 9/30/89.... 11.41 (.03) 4.25 4.22 0.00 (.09)
Year ended 9/30/88.... 15.07 (.05) (1.83) (1.88) 0.00 (1.78)
Year ended 9/30/87.... 15.47 (.07) 4.19 4.12 (.04) (4.48)
Year ended 9/30/86.... 12.94 .05 3.74 3.79 (.04) (1.22)
CLASS B
Year ended 7/31/95.... $10.78 $(.12) $ 1.40 $ 1.28 $0.00 $ (2.11)(k)
Period ended 7/31/94** 11.00 (.17)(b) (.05) (.22) 0.00 0.00
Year ended 9/30/93.... 9.20 (.15) 2.38 2.23 0.00 (.43)
Year ended 9/30/92.... 10.49 (.20) (1.06) (1.26) 0.00 (.03)
Year ended 9/30/91.... 8.26 (.07) 2.30 2.23 0.00 0.00
9/17/90++ to 9/30/90.. 9.12 (.01) (.85) (.86) 0.00 0.00
CLASS C
Year ended 7/31/95.... $10.79 $(.17) $ 1.45 $ 1.28 $0.00 $ (2.11)(k)
Period ended 7/31/94** 11.00 (.17)(b) (.04) (.21) 0.00 0.00
5/3/93++ to 9/30/93... 9.86 (.05) 1.19 1.14 0.00 0.00
STRATEGIC BALANCED FUND (I)
CLASS A
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 7/31/95.... $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 7/31/95.... $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)
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 16.
12
<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)
And End Of On Net Asset (000's To Average To Average Portfolio
Distributions Period Values(a) omitted) Net Assets Net Assets Turnover Rate
- ------------- --------- ------------ --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ (.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
$ (.09) $14.71 19.42% $ 34,527 2.79% (.33)% 74%
0.00 12.41 .73 31,404 2.76* 1.15* 35
0.00 12.32 32.76 20,729 3.02 (.52) 94
(.11) 9.28 (3.49) 1,732 3.00 (.50) 125
(.02) 9.74 .03 1,423 3.02* (.71)* 34
$ (.09) $14.72 19.40% $ 7,802 2.78% (.33)% 74%
0.00 12.42 .73 11,875 2.76* 1.15* 35
0.00 12.33 20.77 10,886 3.00* (.52)* 94
$ 0.00 $10.45 4.50% $ 2,870 4.42%* (1.87)%*(f) 90%
$ 0.00 $10.41 4.10% $ 5,170 5.20%* (2.64)%*(f) 90%
$ 0.00 $10.41 4.10% $ 597 5.84%* (3.41)%*(f) 90%
$(2.11) $10.38 16.62% $ 60,057 2.54%(f) (1.17)%(f) 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 (f) (.50) (f) 74
(4.52) 15.07 34.11 113,305 1.41 (f) (.44) (f) 98
(1.26) 15.47 31.76 90,354 1.22 (f) .30 (f) 107
$(2.11) $ 9.95 15.77% $ 5,164 3.20%(f) (1.92)%(f) 128%
0.00 10.78 (2.00) 3,889 3.15* (1.93)* 78
(.43) 11.00 24.97 1,150 3.26 (1.85) 97
(.03) 9.20 (12.03) 819 3.11 (1.31) 108
0.00 10.49 27.00 121 2.98 (1.39) 104
0.00 8.26 (9.43) 183 2.61* (1.30)* 89
$(2.11) $ 9.96 15.75% $ 1,407 3.25%(f) (2.10)%(f) 128%
0.00 10.79 (1.91) 1,330 3.13* (1.92)* 78
0.00 11.00 11.56 261 3.75* (2.51)* 97
$ (.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 (f) 1.92 103
(.03) 14.48 16.00 443 1.40*(f) 3.54* 137
$ (.16) $15.56 11.63% $ 37,301 2.10%(f) 1.38% 172%
0.00 14.10 (1.40) 43,578 2.10*(f) .92* 21
(1.31) 14.30 4.29 43,616 2.10 (f) .93 139
(1.35) 14.92 4.96 36,155 2.15 (f) 1.55 98
(1.37) 15.51 20.14 31,842 2.15 (f) 1.34 103
(.47) 13.96 16.73 22,552 2.10 (f) 3.23 137
(.67) 12.40 8.85 19,523 2.00 (f) 3.85 120
(1.07) 11.97 14.66 5,128 2.00 (f) 4.31 103
(.06) 11.45 15.10 2,344 2.00*(f) 2.44* 72
$ (.16) $15.56 11.63% $ 37,301 2.10%(f) 1.38% 172%
0.00 14.10 (1.40) 43,578 2.10*(f) .92* 21
(1.31) 14.30 4.29 43,616 2.10 (f) .93 139
</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>
BALANCED SHARES
CLASS A
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)
Year ended 9/30/87..... 14.64 .67 1.62 2.29 (.60) 0.00
Year ended 9/30/86..... 11.74 .68 3.40 4.08 (.65) (.53)
CLASS B
Year ended 7/31/95..... $ 13.23 $ .30 $ 1.65 $ 1.95 $ (.28) $ (.02)
Period ended 7/3/94**.. 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 7/31/95...... $ 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 10/31/95..... $ 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 10/31/95..... $ 9.68 $ (.63)(b) $ .83 $ 1.46 $ (.44) $ (.41)
3/25/94++ to 10/31/91... 10.00 .88 (.98) (.10) (.06)(g) (.16)
CLASS C
Year ended 10/31/95..... $ 9.66 $ .40 (b) $ 1.05 $ 1.45 $ (.44) $ 0.00
Year ended 10/31/94..... 10.47 .50 (.85) (.35) (.11)(g) (.35)
Year ended 10/31/93..... 9.80 .52 .51 1.03 (.36) 0.00
Year ended 10/31/92..... 10.00 .55 (.28) .27 (.47) 0.00
10/25/91+ to 10/31/91... 10.00 .01 0.00 .01 (.01) 0.00
UTILITY INCOME FUND
CLASS A
Year ended 11/30/95..... $ 8.97 $ .30 (c) $ 1.40 $ 1.70 $ (.45) $ 0.00
Year ended 11/30/94..... 9.92 .42 (c) (.89) (.47) (.48) 0.00
10/18/93+ to 11/30/93... 10.00 .02 (c) (.10) (.08) 0.00 0.00
CLASS B
Year ended 11/30/95..... $ 8.96 $ .27 (c) $ 1.36 $ 1.63 $ (.39) $ 0.00
Year ended 11/30/94..... 9.91 .37 (c) (.91) (.54) (.41) 0.00
10/18/93+ to 11/30/93... 10.00 .01 (c) (.10) (.09) 0.00 0.00
CLASS C
Year ended 11/30/95..... $ 8.97 $ .17 (c) $ 1.47 $ 1.64 $ (.39) $ 0.00
Year ended 11/30/94..... 9.92 .39 (c) (.93) (.54) (.41) 0.00
10/27/93+ to 11/30/93... 10.00 .01 (c) (.09) (.08) 0.00 0.00
GROWTH AND INCOME FUND
CLASS A
Year ended 10/31/95..... $ 2.35 $ .02 $ .52 $ .54 $(.06) $ (.12)
Year ended 10/31/94..... 2.61 .06 (.08) (.02) (.06) (.18)
Year ended 10/31/93..... 2.48 .06 .29 .35 (.06) (.16)
Year ended 10/31/92..... 2.52 .06 .11 .17 (.06) (.15)
Year ended 10/31/91..... 2.28 .07 .56 .63 (.09) (.30)
Year ended 10/31/90..... 3.02 .09 (.30) (.21) (.10) (.43)
Year ended 10/31/89..... 3.05 .10 .43 .53 (.08) (.48)
Year ended 10/31/88..... 3.48 .10 .33 .43 (.08) (.78)
Year ended 10/31/87..... 3.52 .11 (.03) .08 (.12) 0.00
Year ended 10/31/86..... 3.01 .12 .92 1.04 (.13) (.40)
Year ended 10/31/85..... 2.93 .14 .42 .56 (.15) (.33)
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 16.
14
<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)
And End Of on Net Asset (000's To Average To Average Portfolio
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate
- ------------- --------- ------------ ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ (.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
(.60) 16.33 15.80 129,786 1.17 4.14 136
(1.18) 14.64 35.01 78,900 .99 4.78 26
$ (.30) $14.88 15.07% $ 15,080 2.11% 2.30% 179%
(.51) 13.23 (3.80) 14,347 2.05* 1.73* 116
(.37) 14.27 11.65 12,789 2.13 1.72 188
(.39) 13.13 7.32 6,499 2.16 2.46 204
(.28) 12.61 8.96 1,830 2.13* 3.19* 70
$ (.30) $14.89 15.06% $ 5,108 2.09% 2.32% 179%
(.51) 13.24 (3.80) 6,254 2.03* 1.81* 116
(.137) 14.28 6.01 1,487 2.29 1.47* 188
$ (.51) $10.70 16.22% $ 1,398 2.38% 5.44% 92%
(.25) 9.69 (.54) 600 2.52* 6.11* 126
$ (.44) $10.70 15.55% $ 3,769 3.09% 4.73% 92%
(.22) 9.68 (.99) 1,998 3.09* 5.07* 126
$ (.44) $10.67 15.47% $ 49,107 3.02% 4.81% 92%
(.46) 9.66 (3.44) 64,027 2.67 3.82* 126
(.36) 10.47 10.65 106,034 2.32 6.85 101
(.47) 9.80 2.70 152,617 2.33 5.47 108
(.01) 10.00 .11 41,813 0.00*(f) .94* 0
$ (.45) $10.22 19.32% $ 2,748 1.50%(f) 2.48%(f) 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
$ (.39) $10.20 18.40% $ 10,988 2.20%(f) 1.60%(f) 162%
(.41) 8.96 (5.59) 2,353 2.20 (f) 3.53 30
0.00 9.91 (.90) 244 2.20*(f) 2.84* 11
$ (.39) $10.22 18.63% $ 3,500 2.20%(f) 1.88%(f) 162%
(.41) 8.97 (5.58) 2,651 2.20 (f) 3.60 30
0.00 9.92 (.80) 18 2.20*(f) 3.08* 11
$ (.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
(.12) 3.48 2.04 348,375 .86 2.77 60
(.53) 3.52 34.92 347,679 .81 3.31 11
(.48) 3.01 19.53 275,681 .95 3.78 15
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
<TABLE>
<CAPTION>
NET NET NET
ASSET REALIZED AND INCREASE
VALUE UNREALIZED (DECREASE) IN DIVIDENDS FROM DISTRIBUTION
BEGINNING INVESTMENT GAIN (LOSS) ON NET ASSET VALUE NET INVESTMENT FROM NET
FISCAL YEAR OR PERIOD OF PERIOD INCOME (LOSS) INVESTMENTS FROM OPERATIONS INCOME REALIZED GAINS
- ------------------------ --------- ------------- -------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
GROWTH AND INCOME FUND
(CONTINUED)
CLASS B
Year ended 10/31/95... $2.34 $.01 $ .49 $ .50 $(.03) $(.12)
Year ended 10/31/94... 2.60 .04 (.08) (.04) (.04) (.18)
Year ended 10/31/93... 2.47 .05 .28 .33 (.04) (.16)
Year ended 10/31/92... 2.52 .04 .11 .15 (.05) (.15)
2/8/91++ to 10/31/91.. 2.40 .04 .12 .16 (.04) 0.00
CLASS C
Year ended 10/31/95... $2.34 $.01 $ .50 $ .51 $(.03) $(.12)
Year ended 10/31/94... 2.60 .04 (.08) (.04) (.04) (.18)
5/3/93++ to 10/31/93.. 2.43 .02 .17 .19 (.02) 0.00
</TABLE>
- --------------------------------------------------------------------------------
+ Commencement of operations.
++ Commencement of distribution.
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment returns calculated for periods of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and/or expense reimbursement.
(d) Adjusted for a 200% stock dividend paid to shareholders of record on
January 15, 1988.
(e) Net of offering costs of ($.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 would have been as follows:
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
ALL-ASIA INVESTMENT FUND
<S> <C> <C> <C> <C> <C> <C>
Class A _ _ _ _ _ 9.79%#
Class B _ _ _ _ _ 11.32%#
Class C _ _ _ _ _ 11.38%#
<CAPTION>
GROWTH FUND
<S> <C> <C> <C> <C> <C> <C>
Class A _ 8.79%# 1.94% 1.84% 1.46% _
Class B 3.62% 3.06% 2.65% 2.52% 2.13% _
Class C _ _ _ _ 2.13# _
<CAPTION>
PREMIER GROWTH
<S> <C> <C> <C> <C> <C> <C>
Class A _ _ 3.33%# _ _ _
Class B _ _ 3.78%# _ _ _
</TABLE>
Net investment income ratios for Premier Growth would have been
(.25%#) for Class A and (.75%#) for Class B for this same period.
<TABLE>
<CAPTION>
GLOBAL SMALL CAP FUND
<S> <C> <C> <C> <C> <C> <C>
Class A _ _ _ _ _ 2.61%
Class B _ _ _ _ _ 3.27%
Class C _ _ _ _ _ 3.31%
<CAPTION>
STRATEGIC BALANCED FUND
<S> <C> <C> <C> <C> <C> <C>
Class A _ 11.59%# 2.05% 1.85% 1.70%1 1.81%
1.94%#2
Class B 3.59% 2.93% 2.70% 2.56% 2.42%1 2.49%
2.64%#2
Class C _ _ _ _ 2.07%#1 2.50%
2.64%#2
<CAPTION>
INCOME BUILDER FUND
<S> <C> <C> <C> <C> <C> <C>
Class A _ _ _ _ _ _
Class B _ _ _ _ _ _
Class C _ 1.99%# _ _ _ _
<CAPTION>
UTILITY INCOME FUND
<S> <C> <C> <C> <C> <C> <C>
Class A _ _ _ 145.63%# 13.72% 4.44%#
Class B _ _ _ 133.62%# 14.42% 6.52%#
Class C _ _ _ 148.03%# 14.42% 4.08%#
</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 1990,
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) Includes $(.08) distribution from paid-in capital.
(k) "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); with respect to Class
B shares, $(.12); and with respect to Class C shares, $(.12).
16
<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)
And End Of on Net Asset (000's To Average To Average Portfolio
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate
- ------------- --------- ------------ ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ (.15) $ 2.69 22.84% $136,758 1.86% 1.05% 142%
(.22) 2.34 (1.50) 102,546 1.85 1.56 68
(.20) 2.60 14.22 76,633 1.90 1.58 91
(.20) 2.47 6.22 29,656 1.90 1.69 104
(.04) 2.52 6.83 10,221 1.99* 1.67* 84
$ (.15) $ 2.70 23.30% $ 35,835 1.84% 1.04% 142%
(.22) 2.34 (1.50) 19,395 1.84 1.61 68
(.02) 2.60 7.85 7,774 1.96* 1.45* 91
</TABLE>
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GLOSSARY
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The following terms are frequently used in this Prospectus.
EQUITY SECURITIES 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, 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.
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 Investors Service, 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.
17
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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 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. The Fund's
investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated fixed-
income and convertible securities. See "Risk Considerations-Securities Ratings"
and "-Investment in Lower-Rated Fixed-Income Securities." The Fund generally
will not invest in securities with ratings 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. For the period ended December 31,
1995, the Fund did not invest in any lower-rated 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 on 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 non-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.
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
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<PAGE>
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% 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
19
<PAGE>
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, 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. At
December 31, 1995, approximately 33% 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 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,
20
<PAGE>
and those with developing economies, including Argentina, Mexico, Chile,
Indonesia, Malaysia, Poland and Hungary, are engaged in privatizations.
Although the Fund will invest in any country believed to present attractive
investment opportunities, currently approximately 70% of the Fund's total
assets are invested in countries with established economies.
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 smaller, emerging companies, but will also
invest in larger, established companies in such growing economic sectors as
capital goods, telecommunications, pollution control and consumer services.
The Fund will emphasize investment in companies believed to be the likely
beneficiaries of a program, originally known as the "1992 Program," to remove
substantially all barriers to the free movement of goods, persons, services
and capital within the European Community. Alliance believes that the
beneficial effects of this program upon economies, sectors and companies may
be most pronounced in the decade following 1992. The European Community is a
Western European economic cooperative organization consisting of Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands,
Portugal, Spain and the United Kingdom.
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
21
<PAGE>
such become available, within the former "east bloc," although the Fund will not
invest more than 20% of its total assets in issuers based therein, or more than
10% of its total assets in issuers based in any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country, at times 25% or more of its assets may be
invested in issuers located in a single country. During such times, the Fund
would be subject to a correspondingly greater risk of loss due to adverse
political or regulatory developments, or an economic downturn, within that
country. At December 31, 1995, approximately 27% 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-ASISA 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
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Additional Information for a description of such ratings. The Fund will not
retain a security that is downgraded below C or determined by Alliance to have
undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities;" (iv) invest up to 25% of its net
assets in equity-linked debt securities with the objective of realizing capital
appreciation; (v) invest up to 25% of its net assets in loans and other direct
debt instruments; (vi) write covered put and call options on securities of the
types in which it is permitted to invest and on exchange-traded index options;
(vii) enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, securities issued
by foreign government entities, or common stock and may purchase and write
options on future contracts; (viii) purchase and write put and call options on
foreign currencies for hedging purposes; (ix) purchase or sell forward
contracts; (x) enter into interest rate swaps and purchase or sell interest
rate caps and floors; (xi) enter into forward commitments for the purchase or
sale of securities; (xii) enter into standby commitment agreements; (xiii)
enter into currency swaps for hedging purposes; (xiv) enter into repurchase
agreements pertaining to U.S. Government securities with member banks of the
Federal Reserve System or primary dealers in such securities; (xv) make short
sales of securities or maintain a short position, in each case only if
"against the box;" and (xvi) make secured loans of its portfolio securities
not in excess of 30% of its total assets to entities with which it can enter
into repurchase agreements. For additional information on the use, risks and
costs of these policies and practices see "Additional Investment Practices".
ALLIANCE 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 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."
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
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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 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.
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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 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
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changes in tax laws. To the extent that rates are established or reviewed by
governmental authorities, utility companies are subject to the risk that such
authorities will not authorize increased rates. Because of the Fund's policy
of concentrating its investments in utility companies, the Fund is more
susceptible than most other mutual funds to economic, political or regulatory
occurrences affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval
for rate increases. In addition, because many foreign utility companies use
fuels that cause more pollution than those used in the U.S., such utilities
may yet be required to invest in pollution control equipment. Foreign utility
regulatory systems vary from country to country and may evolve in ways different
from regulation in the U.S. The percentage of the Fund's assets invested in
issuers of particular countries will vary. See "Risk Considerations--Foreign
Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other
than utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate
fixed-income securities of domestic issuers, corporate fixed-income securities
of foreign issuers denominated in foreign currencies or in U.S. dollars (in
each case including fixed-income securities of an issuer in one country
denominated in the currency of another country), qualifying bank deposits and
prime commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii)
invest in depositary receipts, securities of supranational entities denominated
in the currency of any country, securities denominated in European Currency
Units and "semi-governmental securities;" (iv) write covered put and call
options and purchase put and call options on securities of the types in which
it is permitted to invest that are exchange-traded and over-the-counter; (v)
purchase and sell exchange-traded options on any securities index composed of
the types of securities in which it may invest; (vi) enter into contracts for
the purchase or sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indices, including an index of U.S.
Government securities, foreign government securities, corporate fixed-income
securities, or common stock, and may purchase and write options on futures
contracts; (vii) purchase and write put and call options on foreign currencies
traded on U.S. and foreign exchanges or over-the-counter for hedging purposes;
(viii) purchase or sell forward contracts; (ix) enter into interest rate swaps
and purchase or sell interest rate caps and floors; (x) enter 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. See "Additional Investment
Practices--Options." 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. See "Risk Considerations--Foreign Investment."
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 provide
a stable stream of income with generally higher yields 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 decline as interest rates increase 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 enable investors 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."
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<PAGE>
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. The investments of GROWTH FUND, STRATEGIC BALANCED FUND and INCOME
BUILDER FUND 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. The investments of ALL--ASIA
INVESTMENT FUND in 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. 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
27
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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 borrower's 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.
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.
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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 resale 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
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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 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. In connection with the purchase of stock
index futures contracts, a Fund will deposit in a segregated account with its
custodian an amount of cash, U.S. Government securities or other liquid high-
quality debt securities equal to the market value of the futures contracts less
any amounts maintained in a margin account with the Fund s broker. PREMIER
GROWTH 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 the currency of a particular country to an extent greater than the
aggregate market value (at the time of making such sale) of the securities held
in its portfolio denominated or quoted in that particular foreign currency.
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"
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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 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, 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 the securities 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.
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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 incorrectly forecasted
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 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 risks in lending portfolio securities, as
with other extensions of credit, consist of possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, 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
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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 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
Funds 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
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deemed to prohibit the Fund from purchasing the securities of any issuer
pursuant to the exercise of rights distributed to the Fund by the issuer,
except that no such purchase may be made if as a result the Fund will fail to
meet the diversification requirements of the Code and any such acquisition in
excess of the foregoing 15% or 25% limits will be sold by the Fund as soon as
reasonably practicable (this restriction does not apply to U.S. Government
securities, but will apply to foreign government securities unless the
Commission permits their exclusion); (iii) borrow money except from banks for
temporary or emergency purposes, including the meeting of redemption requests
that might require the untimely disposition of securities; borrowing in the
aggregate may not exceed 15%, and borrowing for purposes other than meeting
redemptions may not exceed 5%, of the Fund's total assets (including the amount
borrowed) less liabilities (not including the amount borrowed) at the time the
borrowing is made; outstanding borrowings in excess of 5% of the Fund's total
assets will be repaid before any subsequent investments are made; or (iv)
purchase a security (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange) if, as a result, the Fund would own
any securities of an open-end investment company or more than 3% of the total
outstanding voting stock of any closed-end investment company, or more than 5%
of the value of the Fund's total assets would be invested in securities of any
closed-end investment company, or more than 10% of such value in closed-end
investment companies in general.
ALL-ASIA INVESTMENT FUND may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
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.
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.
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.
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Government obligations or (ii) own more than 10% of the outstanding voting
securities of any issuer.
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, GLOBAL SMALL CAP FUND and WORLDWIDE
PRIVATIZATION 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
United States 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 of the 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 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 U.S.
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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 by NEW EUROPE FUND. 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. Since 1972, when the pound sterling was allowed
to float against other currencies, it has generally depreciated against most
major currencies, including the U.S. dollar. From 1990 through 1994, the pound
sterling declined at an average annual rate of approximately 3.6% against 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 United Kingdom's largest stock exchange is the International Stock Exchange
of the United Kingdom and the Republic of Ireland (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 a record high of 3593.0 on October 18, 1995, up 17% from the end of
1994.
The public sector borrowing requirement ("PSBR"), a mandated measure of the
amount required to balance the budget, is running in excess of the November 1994
budget estimate, as a result of decreased revenue growth and increased
government spending. The PSBR estimate for the 1996-97 fiscal year has also been
raised, but is still expected to be under the European Union limit.
Since 1979, the Conservative Party has controlled Parliament. However, in recent
years, this dominance has been called into question. In 1990, due to an internal
challenge for leadership the Conservative Party chose John Major to replace
Margaret Thatcher as Prime Minister. Mr. Major's position has been strengthened
by his reelection as leader of the Conservative Party and is expected to retain
that position until the next general election. Unless the Conservative Party
calls for an earlier election, the next general election will take place in
April 1997. For further information regarding the United Kingdom, see the Fund's
Statement of Additional Information.
Investment in Japanese Issuers by ALL-ASIA INVESTMENT FUND and INTERNATIONAL
FUND. 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. The Japanese yen has generally been appreciating
against the U.S. dollar for the past decade but has recently fallen from its
post-World War II high 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 46% through the beginning of 1993.
In 1993, the TOPIX increased by approximately 9% from the end of 1992, and by
the end of 1994 increased by approximately 8% from the end of 1993. As of
October 27, 1995, the TOPIX had declined by approximately 11% from the end of
1994. 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. The price/earnings ratios
of First Section companies, however, are on average high in comparison with
other major stock 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 also 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. In
August 1993, following a split in that party, a coalition government
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was formed. That coalition government collapsed in April 1994, and was replaced
by a minority coalition that, in turn, collapsed in June 1994. The stability of
the current ruling coalition, the third since 1993, and the first in 47 years
led by a socialist, is not assured. For further information regarding Japan,
see each Fund's Statement of Additional Information.
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 may emphasize investment in,
smaller, emerging companies. Investment in such companies involves greater
risks than is customarily associated with securities 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.
U.S. and Foreign Taxes. 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.
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, although the market
values of securities rated below investment grade and comparable unrated
securities tend to react less to fluctuations in interest rate levels than do
those of higher-rated 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-
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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 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 PREMIER GROWTH FUND, WORLDWIDE PRIVATIZATION
FUND, NEW EUROPE FUND, ALL-ASIA INVESTMENT 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 are not subject to these limitations.
Because PREMIER GROWTH FUND, WORLDWIDE PRIVATIZATION FUND, NEW EUROPE FUND,
ALL-ASIA INVESTMENT FUND and INCOME BUILDER FUND is each 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.
------------------------------------------------------------
PURCHASE AND SALE
------------------------------------------------------------
OF SHARES
------------------------------------------------------------
HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers, banks or
other financial intermediaries, or directly through Alliance Fund Distributors,
Inc. ("AFD"), each Fund's principal underwriter. 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 Statement of Additional Information for more
information.
Existing shareholders may make subsequent purchases by electronic funds transfer
if they have completed the Telephone Transactions section of the Subscription
Application or the Shareholder Options form obtained from Alliance Fund
Services, Inc. ("AFS"), each Fund's registrar, transfer agent and dividend
disbursing agent. Telephone purchase orders can be made by calling (800) 221-
5672, may not exceed $500,000, must be received by the Fund by 3:00 p.m. Eastern
time on a Fund business day and will be made at the next day's net asset value
(less any applicable sales charge).
Each Fund offers three classes of shares, Class A, Class B and Class C.
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
39
<PAGE>
("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 Statement 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. 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 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.
Year Since Purchase CDSC
------------------------
First........... 4.0%
Second.......... 3.0%
Third........... 2.0%
Fourth.......... 1.0%
Fifth........... None
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 without any initial sales charge or a CDSC. A
Fund will thus receive the full amount of your purchase, and 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.
APPLICATION OF THE CDSC
Shares obtained from dividend or distribution reinvestment are not subject to
the CDSC on Class A and Class B shares. 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 New York Stock Exchange
(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 would
accurately reflect fair market value.
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 are no initial or contingent deferred sales charges. Consult your
financial agent. Dealers and agents may receive differing compensation for
selling Class A, Class B or Class C shares. There is no size limit on purchases
of Class A shares. The maximum purchase of Class C shares is $5,000,000. The
maximum purchase of Class B shares is $250,000. The Funds may refuse any order
to purchase shares.
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 Equico Securities, 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 for
Class A and Class B shares) 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
40
<PAGE>
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 for Class A and
Class B shares). 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
1-800-221-5672
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 may be made
only once in any 30-day period. A shareholder who has completed the Telephone
Transactions section of the Subscription Application, or the Shareholder Options
form obtained from AFS, can elect to have the proceeds of their redemption sent
to their 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. 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. Some
services are described in the attached 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 (which include 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.
Class A and Class B 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.
41
<PAGE>
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.
Principal occupation
during the past
Fund Employee; year; title five years
- --------------------------------------------------------------------------------
The Alliance Fund Alfred Harrison since 1989-- Associated with
Vice Chairman of Alliance Capital Alliance
Management Corporation ("ACMC")*
Paul H. Jenkel since 1985-- Associated with
Senior Vice President of ACMC Alliance
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance since July
1993; prior thereto,
associated with
Equitable Capital
Management Corporation
("Equitable
Capital")**
Premier Growth Fund Alfred Harrison since inception-- (see above)
(see above)
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-- Associated with
Executive Vice President of ACMC Alliance since
1993; prior thereto,
associated with
Equitable Capital
Randall E. Haase since 1994-- Associated with
Senior Vice President of ACMC Alliance since July
1993; prior thereto,
associated with
Equitable Capital
Timothy Rice since 1993-- Associated with
Vice President of ACMC Alliance
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 Mark H. Breedon since inception-- Associated with
Privatization Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited ***
Principal occupation
during the past
Fund Employee; year; title five years
- --------------------------------------------------------------------------------
New Europe Fund Eric N. Perkins since 1992-- Associated with
Senior Vice President of ACMC Alliance
and director of European equity
research
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)
Timothy Rice since 1993-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance since
1993; prior thereto,
associated with
Equitable Capital
Strategic Balanced Bruce W. Calvert since 1990-- Associated with
Fund Fund Vice Chairman and the Chief Alliance
Investment Officer of ACMC
Balanced Shares Bruce W. Calvert since 1990-- (see above)
(see above)
Income Builder Fund Andrew M. Aran since 1994-- Associated with
Senior Vice President of ACMC Alliance since
March 1991; prior
thereto, a Vice
President of
PaineWebber, Inc.
Thomas M. Perkins since 1991-- Associated with
Senior Vice President of ACMC Alliance
Utility Income Fund Gregory Allison since 1995-- Associated with
Portfolio Manager of Utility Alliance since
Income Fund 1994; prior thereto,
associated with
Gabelli & Co.
Growth & Income Paul Rissman since 1994-- Associated with
Fund Vice President of ACMC Alliance
- --------------------------------------------------------------------------------
* 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, 1995 totaling more than $140 billion
(of which approximately $47 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 51 registered investment companies managed by Alliance
comprising 107 separate investment portfolios currently have over two million
shareholders. As of September 30, 1995, Alliance was retained as an investment
manager for 29 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, a French insurance holding company. Certain information concerning the
ownership and control of
42
<PAGE>
Equitable by AXA is set forth in each Fund's Statement of Additional Information
under Management of the Fund.
ADMINISTRATOR AND CONSULTANT 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.
In connection with its provision of advisory services to ALL-ASIA INVESTMENT
FUND, Alliance has retained at its expense OCBC Asset Management Limited ("OAM")
as a consultant to provide to Alliance such statistical and other factual
information, research and assistance with respect to economic, financial,
political, technological and social conditions and trends in Asian countries,
including information on markets and industries, as Alliance shall from time to
time request. OAM will not furnish investment 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.
OAM is one of the largest Singapore-based investment management companies
specializing in investment in Asia-Pacific markets. OAM provides consulting and
advisory services to institutions and individuals, including mutual funds. As of
September 30, 1995, OAM had approximately $1.5 billion in assets under
management.
OAM is a wholly-owned subsidiary of Oversea-Chinese Banking Corporation Limited
("OCBC Bank"), which is based in Singapore. The OCBC Bank Group has an extensive
network of banking offices in the Asian Pacific region. The OCBC Bank Group
engages in a wide variety of activities including commercial banking, investment
banking, and property and hotel investment and management. OCBC Bank is the
third largest company listed on the Stock Exchange of Singapore with a market
capitalization as of September 30, 1995 of approximately $11.4 billion.
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 aggregate
average daily net assets of each Fund attributable to each class of 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 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 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.
43
<PAGE>
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 (except GROWTH
FUND and STRATEGIC BALANCED FUND) 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................... $ 1,985,734 (6.26%) $ 581,997 (5.77%)
Growth Fund..................... $43,429,599 (2.89%) $1,079,385 (0.48%)
Premier Growth Fund............. $ 5,101,361 (2.14%) $ 267,542 (1.29%)
Technology Fund................. $ 9,244,048 (3.34%) $ 398,864 (0.92%)
Quasar Fund..................... $ 764,753 (4.61%) $ 159,240 (9.88%)
International Fund.............. $ 1,672,131 (3.41%) $ 455,492 (2.35%)
Worldwide Privatization Fund.... $ 138,862 (0.17%) $ 569 (0.17%)
New Europe Fund................. $ 1,630,288 (4.72%) $ 298,375 (3.82%)
All-Asia Investment Fund........ $ 552,379 (10.68%) $ 25,680 (4.30%)
Global Small Cap Fund........... $ 922,746 (17.87%) $ 327,084 (23.25%)
Strategic Balanced Fund......... $ 759,314 (2.04%) $ 219,442 (5.34%)
Balanced Shares................. $ 965,505 (6.40%) $ 262,338 (5.14%)
Income Builder Fund............. $ 526,493 (13.97%) $1,642,685 (3.35%)
Utility Income Fund............. $ 725,771 (6.6%) $ 293,252 (8.4%)
Growth and Income Fund.......... $ 3,367,375 (2.46%) $ 638,657 (1.78%)
</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 Fund's 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.
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 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.
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,
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 and excise taxes on that part of
its taxable income including net capital gains which it
44
<PAGE>
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. A corporation's dividends-received deduction
will be disallowed unless the corporation holds shares in the Fund at least 46
days. Furthermore, the dividends-received deduction will be disallowed to the
extent a corporation's investment in shares of a Fund is financed with
indebtedness.
The excess of net long-term capital gains over the net short-term capital losses
realized and distributed by each Fund to its shareholders as capital gains
distributions is taxable to the shareholders as long-term capital gains,
irrespective of the length of time a shareholder may have held his or her stock.
Long-term capital gains distributions 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 taxable to such shareholder as long-term
capital gain, any loss realized on the sale of such shares during such six-month
period would be a long-term capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, 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.
Distributions by a Fund may be subject to state and local taxes. ALLIANCE FUND,
PREMIER GROWTH FUND, TECHNOLOGY FUND, INCOME BUILDER FUND, QUASAR FUND, NEW
EUROPE FUND, BALANCED SHARES and GROWTH AND INCOME FUND are qualified to do
business in the Commonwealth of Pennsylvania and, therefore, are subject to the
Pennsylvania foreign franchise and corporate net income tax in respect of their
business activities in Pennsylvania. Accordingly, shares of such Funds are
exempt from Pennsylvania personal property taxes. These Funds anticipate
continuing such business activities but reserve the right to suspend them at any
time, resulting in the termination of the exemptions.
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.
Shareholders will be advised annually as to the federal tax status of dividends
and capital gains distributions made by a Fund for the preceding year.
Shareholders are urged to consult their tax advisers regarding their own tax
situation.
------------------------------------------------------------
GENERAL INFORMATION
------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Rules of Fair Practice 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 INCOME BUILDER FUND, INC. (1991), ALLIANCE UTILITY INCOME FUND, INC.
(1993), and ALLIANCE GROWTH AND INCOME FUND, INC. (1932). 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 in the case of the Funds
organized as Maryland corporations, state law. Shareholders have available
certain procedures for the removal of Directors.
A shareholder in a Fund will be entitled to his or her pro rata share of all
dividends and distributions arising from the Fund's
45
<PAGE>
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 and
C shares have identical voting, dividend, liquidation and other rights, except
that each class bears its own distribution and transfer agency expenses. 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 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, STRATEGIC BALANCED
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.
STRATEGIC BALANCED 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 will include performance data for each class of shares in any
advertisement or sales literature using performance data of that Fund. These
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.
46
<PAGE>
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".
47
<PAGE>
- --------------------------------------------------------------------------------
ALLIANCE SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
The Alliance Stock Funds
Alliance Fund International Fund Strategic Balanced Fund
Growth Fund Worldwide Privatization Fund Balanced Shares
Premier Growth Fund New Europe Fund Income Builder Fund
Technology Fund All-Asia Investment Fund Utility Income Fund
Quasar Fund Global Small Cap Fund Growth & Income Fund
INFORMATION AND INSTRUCTIONS
----------------------------
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
SIGNATURES - PLEASE BE SURE TO SIGN THE APPLICATION (SECTION 7)
If shares are registered in the name of:
. an individual, the individual should sign.
. joint tenants, both should sign.
. a custodian for a minor, the custodian should sign.
. a corporation or other organization, an authorized officer should sign (please
indicate corporate office or title).
. a trustee or other fiduciary, the fiduciary or fiduciaries should sign (please
indicate capacity).
REGISTRATION
To ensure proper tax reporting to the IRS:
. Individuals, Joint Tenants and Gift/Transfer to a Minor:
- Indicate your name exactly as it appears on your social security card.
. Trust/Other:
- 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.
PLEASE NOTE:
. Certain legal documents will be required from corporations or other
organizations, executors and trustees, or if a redemption is requested by
anyone other than the shareholder of record. If you have any questions
concerning a redemption, contact the Fund at the number below:
. In the case of redemptions or repurchase of shares recently purchased by
check, redemption proceeds will not be made available until the Fund is
reasonably assumed that the check has cleared, normally up to 15 calendar days
following the purchase date.
IF WE CAN ASSIST YOU IN ANY WAY, PLEASE DO NOT HESITATE TO CALL US AT:
1-(800) 221-5672.
<PAGE>
- --------------------------------------------------------------------------------
SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
Alliance Stock Funds
(see instructions at the front of the application)
1. YOUR ACCOUNT REGISTRATION (Please Print)
-------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Owner's Name (First Name) (MI) (Last Name)
[_][_][_][_][_][_][_]
Social Security Number (Required to open account)
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Joint Owner's Name* (First Name) (MI) (Last Name)
*Joint Tenants with right of survivorship unless otherwise indicated
[_] GIFT/TRANSFER TO A MINOR
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Custodian - One Name Only (First Name) (MI) (Last Name)
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Minor (First Name) (MI) (Last Name)
[_][_][_][_][_][_][_]
Minor's Social Security Number Under the State of _____ (Minor's Residence)
(Required to open account) Uniform Gifts/Transfer to Minor's Act
[_] TRUST ACCOUNT
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Trustee
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Trust
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Trust (cont'd)
[_][_][_][_][_][_][_][_][_][_][_] [_][_][_][_][_][_][_][_][_][_][_][_]
Trust Dated Tax ID or Social Security Number
(Required to open account)
[_] OTHER
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Corporation, Partnership or other Entity
[_][_][_][_][_][_][_][_][_][_][_][_]
Tax ID Number
2. ADDRESS
----------
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Street
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
City State Zip Code
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
If Non-U.S., Specify Country
[_][_][_][-][_][_][_][-][_][_][_][_][_] [_][_][_][-][_][_][_][-][_][_][_][_]
Daytime Phone Evening Phone
I am a: [_] U.S Citizen [_] Non-Resident Alien [_] Resident Alien [_] Other
-- --
For Alliance Use Only
-- --
<PAGE>
3. INITIAL INVESTMENT
---------------------
Minimum: $250; Maximum: Class B only - $250,000; Class C only - $5,000,000.
Make all checks payable to The Alliance Stock Fund in which you are investing.
I hereby subscribe for shares of the following Alliance Stock Funds(s):
<TABLE>
<CAPTION>
Class C
Class A Class B (Asset-based)
(Initial Sales) Dollar (Contingent Deferred) Dollar Sales Dollar
Charge Amount Sales Charge) Amount Charge) Amount
--------------- ------ -------------------- ------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
[_] Alliance Fund [_](44) ______ [_](43) ______ [_](344) ______
[_] Growth Fund [_](31) ______ [_](01) ______ [_](331) ______
[_] Premier Growth Fund [_](78) ______ [_](79) ______ [_](378) ______
[_] Technology Fund [_](82) ______ [_](282) ______ [_](382) ______
[_] Quasar Fund [_](26) ______ [_](29) ______ [_](326) ______
[_] International Fund [_](40) ______ [_](41) ______ [_](340) ______
[_] Worldwide Privatization Fund [_](112) ______ [_](212) ______ [_](312) ______
[_] New Europe Fund [_](62) ______ [_](58) ______ [_](362) ______
[_] All-Asia Investment Fund [_](118) ______ [_](218) ______ [_](318) ______
[_] Global Small Cap Fund [_](45) ______ [_](48) ______ [_](345) ______
[_] Strategic Balance Fund [_](32) ______ [_](02) ______ [_](332) ______
[_] Balanced Shares [_](96) ______ [_](75) ______ [_](396) ______
[_] Income Builder Fund [_](111) ______ [_](211) ______ [_](311) ______
[_] Utility Income Fund [_](9) ______ [_](209) ______ [_](309) ______
[_] Growth & Income Fund [_](94) ______ [_](74) ______ [_](394) ______
</TABLE>
to be purchased with the enclosed check or draft for $_____
DEALER USE ONLY
Wire Confirm No.:
4. 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 list below any existing
accounts to be considered and complete the Right of Accumulation section or the
Statement of Intent section.
- --------------------- -------------- --------------------- --------------
Fund Account Number Fund Account Number
A. RIGHT OF ACCUMULATION
[_] Please line the account listed above for Right of Accumulation privileges,
so that this and future purchases will receive any discount for which they
are eligible.
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 an
additional sales charge must be paid from my account.
- --------------------- -------------- --------------------- --------------
Name on Account Account Number Name on Account Account Number
5. DISTRIBUTION OPTIONS
-----------------------
If no box is checked, all distributions will be reinvested in additional shares
of the Fund
Income Dividend:(elect one) [_] Reinvest dividends
[_] Pay dividends in cash
[_] Use Dividends Direction Plan
Capital Gains Distribution:(elect one) [_] Reinvest capital gains
[_] Pay capital gains in cash
[_] Use Dividends Direction Plan
If you elect to receive your income dividends or capital gains distributions in
cash, please enclose a PREPRINTED VOIDED CHECK from the bank account you wish to
have your dividends deposited into.**
If you wish to utilize the Dividend Direction Plan, please designate the
Alliance account you wish to have your dividends reinvested in:
- ----------------------------------- -----------------------------------
Fund Name Existing Account No.
SPECIAL DISTRIBUTION INSTRUCTIONS: [_] Please pay my distributions via check and
send to the address indicated in Section
2.
[_] Please mail my distributions to the
person and/or address designated below:
- ----------------------------------- -----------------------------------
Name Address
- ----------------------------------- ---------------- ---------------
City State Zip
6. SHAREHOLDER OPTIONS
----------------------
A. AUTOMATIC INVESTMENT PROGRAM (AIP)**
I hereby authorized Alliance Fund Services, Inc. to draw on my bank account, on
or about the ____ day of each month for a monthly investment in my Fund account
in the amount of $________ (minimum $25 per month). Please attach a PREPRINTED
VOIDED CHECK from the bank account you wish to use.
NOTE: If your bank is not a member of the NACHA, your Alliance account will be
credited on or about the 20th of each month.
The Fund requires signatures of bank account owners exactly as they appear on
bank records.
- --------------------- -------------- --------------------- --------------
Individual Account Date Joint Account Date
**Your bank must be a member of the National Automated Clearing House
Association (NACHA).
<PAGE>
B. TELEPHONE TRANSACTIONS
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange
shares for your account. Purchase and redemption requests will be processed
via electronic funds transfer (EFT) to and from your bank account.
Instructions: . Review the information in the Prospectus about telephone
transaction services.
. Check the box next to the telephone transaction service(s)
you desire.
. 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 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.
The fund requires signatures of bank account owners exactly as they appear on
bank records.
--------------------------- -------- ------------------------ --------
Individual Account Owner Date Joint Account Owner Date
TELEPHONE EXCHANGES AND REDEMPTIONS BY CHECK
Unless I have checked on 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 to 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 have no change within the last 30 days. The maximum telephone redemption
amount is $50,000 per check. This service can be enacted once every 30 days.
[_] I do NOT elect the telephone [_] I do NOT elect the telephone
exchange service. redemption by check service.
C. SYSTEMATIC WITHDRAWAL PLAN (SWP)**
In order to establish a SWP, an investor must own or purchase shares of the
Fund having a current net asset value of at least:
. $10,000 for monthly payments; . $5,000 for bi-monthly payments; . $4,000
for quarterly or less frequent payments.
[_] I authorize this service to begin in _________, 19__, for the amount of
Month
$___________ ($50.00 minimum).
Frequency: (Please select one) [_] Monthly [_] Bi-Monthly [_] Quarterly
[_] Annually [_] In the months circled: J F M A M J J A S O N D
Please send payments to: (please select one)
[_] My check account. Select the date of the month on or about which you wish
the EFT payments to be made: ______. Please enclose a preprinted voided
check to ensure accuracy. EFT not available to Class B shareowners other
than retirement plans.
[_] My address of record designated in Section 2.
[_] The payee and address specified below:
-------------------------------------- -----------------------------------
Name of Payee Address
-------------------------------------- ------------------- ------------
City State Zip
D. AUTO EXCHANGE
[_] I authorize Alliance Fund Services, Inc. to initiate a monthly exchange
for $_______ ($25.00 minimum) on the _______ day of the month, into the
Alliance Fund noted below:
Fund Name: _____________________________________
[_] Existing account number: ___________________ [_] New account
Shares exchanged will be redeemed at net asset value computed on the date
of the month selected. (If the date selected is not a fund business day
the transaction will be processed on the next fund business day.)
Certificates must remain unissued.
7. SHAREHOLDER AUTHORIZATION This section MUST be completed
-----------------------------------------------------------
I certify under penalty of perjury that the number shown in Section 1 of this
form is my correct tax identification number or social security number and that
I have not been notified that this account is subject to backup withholding.
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.
- ------------------------------ -------------------
Signature Date
- ------------------------------ ------------------- --------------------------
Signature Date Acceptance Date:
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 7, as well as the legal capacity of the
shareholder.
Dealer/Agent Firm _____________________ Authorized Signature ___________________
Representative First Name _____________ MI _______ Last Name ___________________
Representative Number __________________________________________________________
Branch Office Address __________________________________________________________
City __________________________________ State ___________ Zip Code _____________
Branch Number _________________________ Branch Phone (___)______________________
**Your bank must be a member of the National Automated Clearing House
Association (NACHA).
<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
February 1, 1996
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Funds' current 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..............
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.......................................
REPORT OF INDEPENDENT ACCOUNTANTS..........................
<PAGE>
APPENDIX...................................................A-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 Alliance Strategic Balanced Fund
(the "Strategic Balanced Fund," formerly Alliance Balanced Fund)
and Alliance Growth Fund (the "Growth Fund"), each a series (each
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. The Fund's investment objective is to provide
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 will vary 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. Thus, 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 and mix and the
ability of Alliance Capital Management L.P. (the "Adviser") to
judge and react to changing market conditions.
The Fund's equity securities will generally consist of
dividend-paying common stocks but may also include other equity-
type securities such as warrants, preferred stocks and
convertible debt instruments. The Fund's equity investments will
primarily be in companies with favorable outlooks for earnings
and whose rates of growth are expected by the Adviser to exceed
that of the United States economy over time.
The Fund's debt securities will consist primarily of
securities such as bonds, notes, debentures and money market
instruments. The Fund's debt investments may include securities
issued or guaranteed by the U.S. Government or its agencies and
instrumentalities (including zero-coupon securities), as well as
securities issued by private corporations. The Fund may also
invest in mortgage-backed securities, adjustable rate securities
and asset-backed securities. 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.
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It is a fundamental policy of the Fund that it will
invest at least 25% of its total assets in fixed-income
securities. For this purpose, fixed-income securities include
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 Ratings Services ("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 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 considered 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. Prepayments occur when the
mortgagor on an individual mortgage prepays the remaining
principal before the mortgage's scheduled maturity date. 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. 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. Prepayments are important
because of their effect on the yield and price of the mortgage-
backed securities. During periods of declining interest rates,
such prepayments can be expected to accelerate and the Fund would
be required to reinvest the proceeds at the lower interest rates
then available. In addition, prepayments of mortgages which
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underlie securities purchased at a premium could result in
capital losses.
ADJUSTABLE RATE SECURITIES. Adjustable rate securities
are securities that 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 act as a buffer to reduce sharp changes in
the value of adjustable rate securities, these securities are
still subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness.
Because the interest rate is reset only periodically, 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 during a specified period or over the life of the
security.
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 at times to liquidate other investments in order to
satisfy its dividend requirements.
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
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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 to exchange
currency at a future time at a rate or rates that may be higher
or lower than the spot rate. Foreign currency futures contracts
are standardized exchange-traded contracts and have margin
requirements.
For transactions 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 convertible feature. Also, the price
of the convertible security will normally vary to some degree
with changes in the price of the underlying stock although in
some market conditions the higher yield tends to make the
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convertible security less volatile than the underlying common
stock. In addition, the price of the convertible security will
also vary to some degree inversely 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's investment objective is to provide
long-term growth of capital. Current income is only an incidental
consideration. The Fund attempts to achieve its objective by
investing primarily in 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.
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, 1995, the Fund did not
invest in any High-Yield Securities.
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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
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
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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 considered
appropriate in the circumstances.
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
higher yield than the underlying stock but lower than a fixed-
income security without the convertible feature. Also, the price
of the convertible security will normally vary to some degree
with changes in the price of the underlying stock although in
some market conditions the higher yield tends to make the
convertible security less volatile than the underlying common
stock. In addition, the price of the convertible security will
also vary to some degree inversely 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 at times to liquidate other investments in order to
satisfy its dividend requirements.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Fund may
engage in foreign currency exchange transactions to protect
against uncertainty in the level of future currency exchange
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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
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 to exchange
currency at a future time at a rate or rates that may be higher
or lower than the spot rate. Foreign currency futures contracts
are standardized exchange-traded contracts and have margin
requirements.
For transactions 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.
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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
portfolio turnover rate will involve greater costs to a Fund
(including brokerage commissions and 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 be subject to various delays and
risks of loss, including (a) possible declines in the value of
the underlying security during the period while the Funds seek to
enforce their rights thereto, (b) possible reduced levels of
income and lack of access to income during this period and
(c)inability to enforce rights and the expenses involved in the
attempted enforcement.
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NON-PUBLICLY TRADED SECURITIES
The Funds may invest in securities which are not
publicly traded, including securities sold pursuant to Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities"). The
sale of these securities is usually restricted under Federal
securities laws, and market quotations may not be readily
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 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
of assets or nationalization, 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
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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 recovery
of the Fund's assets held abroad) and expenses not present in the
settlement of domestic investments. The Fund may invest a
portion of its assets in developing countries or in countries
with new or developing capital markets. The risks noted above
are generally intensified for these investments. These countries
may have relatively unstable governments, economies based on only
a few industries or securities markets that trade a small number
of securities. Securities of issuers located in these countries
tend to have volatile prices and may offer significant potential
for loss as well as gain.
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.
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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 by entities in order to finance their current operations.
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
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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. Nevertheless, principal repayment rates
tend not to vary too much with interest rates, and the short-term
nature of the underlying car loans or receivables tends to dampen
the impact of any change in the prepayment level. 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 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, the
Funds may invest in other 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
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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. If the Adviser determines that a Fund should
make securities loans, it is not intended that the value of the
securities loaned would exceed 25% of the value of such Fund's
total assets.
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 cash, U.S. Government securities or other liquid
high-grade debt obligations 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 it is deemed 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
15
<PAGE>
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).
OPTIONS
OPTIONS ON SECURITIES. The Funds may write call 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 cash, U.S.
Government securities or other liquid high-grade debt obligations
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.
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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
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
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<PAGE>
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
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 in 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
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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
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, the Fund holds in
its portfolio securities the price changes of which are, in the
option of the Adviser, expected to replicate substantially the
movement of the index or indexes upon which the options written
by the Fund are based. A put 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, the Fund segregates with its custodian
cash, U.S. Government securities or other liquid high-grade debt
obligations having a value equal to or greater than the exercise
price of the option.
A Fund may also purchase put options on securities
indexes to hedge its investments against a decline in value. 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.
The purchase of call options on securities indexes may
be used by a Fund 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 calls on securities the
Fund owns.
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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
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 part or entirely, 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 rate 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 did 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
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<PAGE>
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 to attempt to protect its current
or intended investments from 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
it holds securities denominated in such currency and it
anticipates a decline in the value of such currency relative to
the dollar. In the event such decline occurs, 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.
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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, 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 a 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 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 occurs, it may
be offset, in whole or part, by a profit on the option. If the
market decline does not 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
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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 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 cash, U.S. Government securities or other
liquid, high-grade debt securities 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,
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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, these
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.
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,
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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 fixed income securities, the portfolio securities which are
being hedged may not be the same type of obligation 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.
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.
The risk of imperfect correlation, however, generally tends to
diminish as the maturity date of the Futures Contract or
expiration date of the option approaches.
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
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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 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
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
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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 it is disadvantageous to do
so. The inability to close 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 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
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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 "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
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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
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
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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 United States 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
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
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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 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 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.
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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
it determines that foreign governmental restrictions or taxes
would prevent the orderly settlement of foreign currency option
exercises, or would result in undue burdens on the OCC or its
clearing member, 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.
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
United States 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
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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 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 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 in order to meet tax requirements.
FUTURE DEVELOPMENTS
The above discussion relates to each Fund's proposed use
of Futures 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.
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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 restrictions on the
investments to 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
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
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<PAGE>
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
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)
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<PAGE>
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 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 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
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<PAGE>
market value) to be invested in the
securities of such issuers; and, provided
further, that a Fund's purchases of
securities issued by an 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.
(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
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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.
The Adviser is a leading international investment
manager supervising client accounts with assets as of
September 30, 1995 of more than $140 billion (of which more than
$47 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 and included, as of September 30,
1995, 29 of the FORTUNE 100 Companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,350
employees who operated out of domestic offices and the overseas
offices of subsidiaries in Bombay, Istanbul, London, Sydney,
Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The 51
registered investment companies comprising 107 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"), a holding company controlled by
AXA, a French insurance holding company. As of June 30, 1995,
ACMC, Inc. and Equitable Capital Management Corporation
("Equitable Capital"), each a wholly-owned direct or indirect
subsidiary of Equitable, together with Equitable, owned in the
aggregate approximately 59% of the issued and outstanding units
representing assignments of beneficial ownership of limited
partnership interests in the Adviser ("Units"). As of June 30,
1995, approximately 33% and 8% of the Units were owned by the
public and employees of the Adviser and its subsidiaries,
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<PAGE>
respectively, including employees of the Adviser who serve as
Directors of the Fund.
AXA owns approximately 60% of the outstanding voting
shares of common stock of ECI. AXA is the holding company for an
international group of insurance and related financial services
companies. AXA's insurance operations are comprised of
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities in France, the United States, the United Kingdom,
Canada and other countries, principally in Europe. AXA is also
engaged in asset management, investment banking and brokerage,
real estate and other financial services activities in the United
States and Europe. Based on information provided by AXA, as of
January 1, 1995, 42.3% of the issued shares (representing 54.7%
of the voting power) of AXA were owned by Midi Participations, a
French corporation that is a holding company. The voting shares
of Midi Participations are in turn owned 60% by Finaxa, a French
corporation that is a holding company, and 40% by subsidiaries of
Assicurazioni Generali S.p.A., an Italian corporation
("Generali") (one of which, Belgica Insurance Holding S.A., a
Belgian corporation, owned 34.1%). As of January 1, 1995, 62.1%
of the issued shares (representing 75.7% of the voting power) of
Finaxa were owned by five French mutual insurance companies (the
"Mutuelles AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle,
owned 31.8% of the issued shares) (representing 39.0% of the
voting power), and 26.5% of the issued shares (representing 16.6%
of the voting power) of Finaxa were owned by Banque Paribas, a
French bank ("Paribas"). Including the shares owned by Midi
Participations, as of January 1, 1995, the Mutuelles AXA directly
or indirectly owned 51.3% of the issued shares (representing
65.8% of the voting power) of AXA. In addition, certain
subsidiaries of AXA own 0.4% of the shares of AXA which are not
entitled to be voted. Acting as a group, the Mutuelles AXA
control AXA, Midi Participations and Finaxa.
INVESTMENT ADVISORY CONTRACT AND EXPENSES
The Adviser serves as investment manager and adviser of
each of the Funds, furnishes continuously 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 and Class C shares of each Fund
to the extent that expenses exceed an annual rate of 1.40% for
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<PAGE>
Class A shares and 2.10% for Class B and Class C 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 Contract
or 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, 1996 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 19, 1995.
Prior to July 22, 1992, Equitable served as investment
manager to the Funds and Equitable Capital served as sub-adviser
to the Funds. Equitable was compensated for its services as
investment manager to such Funds at the same rates as are
currently paid by such Funds to the Adviser. Equitable Capital
was compensated for its services as sub-adviser to such Funds by
Equitable at an annual rate equal to .45% of the average daily
net assets of such Funds.
For the fiscal year ended October 31, 1995, the Adviser
earned $11,100,437 in management fees from the Growth Fund (of
which $0 in fees were 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 the fiscal year ended April 30, 1994, the Adviser
earned $1,425,457 in management fees from the Growth Fund (of
which $56,371 in fees were waived).
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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 in fees were waived). During the period
May 1, 1994 through July 31, 1994, the Adviser earned $108,893 in
management fees from the Strategic Balanced Fund (of which
$81,067 in fees were waived). During the period July 23, 1993
through the fiscal year ended April 30, 1994, the Adviser earned
$280,948 from the Strategic Balanced Fund (an additional $136,242
in fees were 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 that word.
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,* 50, is Chairman of the Board and
President, is the President, Chief Operating Officer, and a
_________________________
*An "interested person" of the Trust, as defined by the 1940 Act.
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Director of Alliance Capital Management Corporation, the general
partner of the Adviser. His address is 1345 Avenue of the
Americas, New York, New York 10105.
Alberta B. Arthurs, 63, is the Director for Arts and
Humanities for The Rockefeller Foundation. Her address is 1133
Avenue of the Americas, New York, New York 10036.
Ruth Block, 65, 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, 73, 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.
Brenton W. Harries, 67, 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, 61, was formerly a partner at
Orrick, Herrington & Sutcliffe and is currently of counsel to
that firm. His address is 599 Lexington Avenue, 26th Floor, New
York, New York 10022.
OFFICERS
John D. Carifa, President, see biography above.
Edmund P. Bergan, Jr., 45, Clerk, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
His address is 1345 Avenue of the Americas, New York, New York
10105.
Mark D. Gersten, 45, Treasurer and Chief Financial
Officer, is a Senior Vice President of Alliance Fund Services,
Inc. His address is 500 Plaza Drive, Secaucus, New Jersey 07094.
Patrick J. Farrell, 36, Controller and Chief Accounting
Officer, is a Vice President of Alliance Fund Services, Inc. His
address is 500 Plaza Drive, Secaucus, New Jersey 07094.
Melvin J. Oliver, 38, Assistant Controller, is an
Accounting Manager of Alliance Fund Services, Inc. His address is
500 Plaza Drive, Secaucus, New Jersey 07094.
42
<PAGE>
Bruce W. Calvert, 49, Vice President, is the Vice
Chairman and Chief Investment Officer of Alliance Capital
Management Corporation, the general partner of Alliance Capital
Management L.P. His address is 1345 Avenue of the Americas, New
York, NY 10105.
Kathleen A. Corbet, 35, Vice President, is, since July
23, 1993, Senior Vice President of Alliance Capital Management
Corporation, general partner of Alliance Capital Management L.P.
She was formerly employed by Equitable Capital. Her address is
1345 Avenue of the Americas, New York, NY 10105.
Franklin Kennedy, III, 53, Vice President, is, since
July 23, 1993, Senior Vice President of Alliance Capital
Management Corporation, the general partner of Alliance Capital
Management L.P. He was formerly employed by Equitable Capital.
His address is 1345 Avenue of the Americas, New York, New York
10105.
Barbara J. Krumsiek, 43, Vice President - Marketing, is,
since July 23, 1993, a Senior Vice President of Alliance Fund
Distributors, Inc. She was formerly an Investment Officer of
Equitable, Senior Vice President of Equitable Capital and Vice
President of Equitable Variable Life Insurance Company. Her
address is 1345 Avenue of the Americas, New York, New York 10105.
Wayne D. Lyski, 54, Vice President, is Executive Vice
President of Alliance Capital Management Corporation, the general
partner of Alliance Capital Management L.P. His address is 1345
Avenue of the Americas, New York, NY 10105.
The aggregate compensation paid to each of the Trustees
by the Growth Fund for the fiscal year ended October 31, 1995 and
by the Strategic Balanced Fund for the fiscal year ended July 31,
1995, the aggregate compensation paid to each of the Trustees
during calendar year 1995 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 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.
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Total Number of
Funds in the
Alliance Fund
Total Complex,
Compensation Including the
Aggregate From the Trust, as to
Aggregate Compensation Alliance which the
Compensation from the Fund Complex Trustee is a
Name of Trustee from the Strategic Including Director or
of the Fund Growth Fund Balanced Fund the Trust* Trustee
Alberta B. Arthurs $4,800 $4,800 $24,000 5
Ruth Block $4,800 $4,800 $159,000 31
John D. Carifa $ -- $ -- $ -- 42
Richard W. Couper $4,800 $4,800 $24,000 5
Brenton W. Harries $4,800 $4,800 $24,000 5
Donald J. Robinson $3,600 $3,600 $24,000 5
____________________________
* There are 107 investment companies or portfolios thereof in
the Alliance Fund Complex.
As of January 15, 1996, 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.
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
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<PAGE>
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, 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) 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.
Aggregate securities transactions for the Growth Fund
during the fiscal year ended October 31, 1995 were
$2,506,327,245, and in connection therewith, brokerage
commissions of $3,231,153 (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, 1995 were $152,033,912 and, in connection
therewith, brokerage commissions of $196,452 (100%) were
allocated to persons or firms supplying research information. For
the fiscal year ended October 31, 1995, the Growth Fund paid an
aggregate of $3,231,153 in brokerage commissions. For the 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, 1995, the Strategic Balanced Fund paid an aggregate of
$196,452 in brokerage commissions. For the period May 1, 1994
through July 31, 1994, the Strategic Balanced Fund paid an
aggregate of $33,604 in brokerage commissions. For the fiscal
year ended April 30, 1994, the Strategic Balanced Fund paid an
aggregate of $101,939 in brokerage commissions.
45
<PAGE>
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 commission. 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
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,
1995 for the Growth Fund and July 31, 1995 for the Strategic
Balanced Fund are set forth below:
% of Fund's % of Fund's
Amount of Aggregate Aggregate Dollar
Fiscal Year Brokerage Brokerage Amount of
Ended Fund Commissions Commissions Transactions
___________ ____ ___________ ___________ ________________
October 31, 1995 Growth Fund $15,700 0.49% 0.0%
July 31, 1995 Strategic $240 0.12% 0.0001%
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
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<PAGE>
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
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 Alliance Fund Distributors, Inc. (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 shares, Class B shares 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
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<PAGE>
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.
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 $26,650 with respect to the Class A shares of the
Strategic Balanced Fund and $71,670 with respect to the Class A
shares of Growth Fund for the fiscal years ended July 31, 1995
and October 31, 1995, 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 $95,168 with respect to the Class B shares of the
Strategic Balanced Fund and $540,603 with respect to the Class B
Shares of the Growth Fund for the fiscal years ended July 31,
1995 and October 31, 1995, 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 $28,755 with respect to the Class C shares of the
Strategic Balanced Fund and $55,340 with respect to the Class C
shares of the Growth Fund for the fiscal years ended July 31,
1995 and October 31, 1995, 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
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<PAGE>
Class A, Class B, and Class C shares, respectively, were as
follows for the periods indicated:
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, 1995) July 31, 1995) July 31, 1995)
___________________ _______________ _______________ ______________
Advertising/Marketing $11,999 $42,533 $12,341
Printing and Mailing
of Prospectuses and
Semi-Annual and
Annual Reports to
Other than Current
Shareholders $2,527 $5,862 $3,729
Compensation to
Underwriters $26,650 $95,168 $28,755
Compensation to
Dealers $23,751 $239,175 $41,543
Compensation to Sales
Personnel $1,013 $4,999 $1,532
Interest, Carrying or
Other Financing
Charges -0- $17,181 -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) $47,807 $148,628 $45,661
$113,747 $553,546 $133,561
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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
Category October 31, October 31, October 31,
of Expense 1995) 1995) 1995)
Advertising/Marketing $31,506 $238,417 25,556
Printing and Mailing
of Prospectuses and
Semi-Annual and
Annual Reports to
Other than Current
Shareholders $22,574 $139,711 $5,018
Compensation to
Underwriters $71,670 $540,603 $55,340
Compensation to
Dealers $515,125 $26,720,525 $72,221
Compensation to Sales
Personnel $99,237 $925,340 $7,373
Interest, Carrying or
Other Financing
Charges -0- $1,218,709 -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) $331,678 $1,063,683 $90,481
$1,071,790 $30,846,988 $255,989
CUSTODIAL ARRANGEMENTS
State Street Bank and Trust Company, 225 Franklin
Street, Boston, MA, 02110 ("State Street Bank") is the Trust's
custodian.
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TRANSFER AGENCY ARRANGEMENTS
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of the Funds, plus reimbursement for out-of-pocket
expenses.
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 "initial sales charge
alternative"), with a contingent deferred sales charge (the
"deferred sales charge alternative"), or without any initial or
contingent deferred sales charge (the "asset-based sales charge
alternative"), as described below. Shares of the Funds are
offered on a continuous basis through (i) investment dealers that
are members of the National Association of Securities Dealers,
Inc. and have entered into selected dealer agreements with the
Principal Underwriter ("selected dealers"), (ii) depository
institutions and other financial intermediaries or their
affiliates, that have entered into selected agent agreements with
the Principal Underwriter ("selected agents"), or (iii) the
Principal Underwriter. The minimum for initial investments is
$250; subsequent investments (other than reinvestments of
dividends and capital gains distributions in shares) must be in
the minimum amount of $50. As described under "Shareholder
Services," the Funds offer an automatic investment program and a
403(b)(7) retirement plan which permit investments of $25 or
more. The subscriber may use the Subscription Application found
in the Prospectus for his or her initial investment. Sales
personnel of selected dealers and agents distributing the Funds'
shares may receive differing compensation for selling Class A,
Class B or Class C shares.
Investors may purchase shares of the Funds in the United
States either through selected dealers or agents or directly
through the Principal Underwriter. Shares may also be sold in
foreign countries where permissible. The 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.
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The public offering price of shares of the Funds is
their net asset value, plus, in the case of most purchases of
Class A shares, a sales charge which will vary depending on the
amount of the purchase, as shown in the table in the Prospectus.
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. New York 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. The respective per share net asset values of the
Class A, Class B and Class C shares are expected to be
substantially the same. Under certain circumstances, however,
the per share net asset values of the Class B and Class C shares
may be lower than the per share net asset value of the Class A
shares as a result of the daily expense accruals of the
distribution and transfer agency fees applicable with respect to
the Class B and Class C shares. Even under those circumstances,
the per share net asset values of the three classes eventually
will tend to converge immediately after the payment of dividends,
which will differ by approximately the amount of the expense
accrual differential among the classes. A Fund business day is
any weekday, exclusive of national holidays on which the Exchange
is closed and Good Friday. For purposes of this computation, the
securities in a Fund's portfolio are valued at their current
market value determined on the basis of market quotations or, if
such quotations are not readily available, such other methods as
the Trustees believe would accurately reflect fair market value.
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). Orders received by the Principal Underwriter prior to
the close of regular trading on the Exchange on each day the
Exchange is open for trading are priced at the net asset value
computed as of the close of regular trading on the Exchange on
that day (plus applicable Class A sales charges). In the case of
orders for purchase of shares placed through selected dealers or
agents, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer or
agent receives the order prior to the close of regular trading on
the Exchange and transmits it to the Principal Underwriter prior
to its close of business that same day (normally 5:00 p.m.
Eastern time). The selected dealer or agent is responsible for
transmitting such orders by 5:00 p.m. If the selected dealer or
agent fails to do so, the investor's right to that day's closing
price must be settled between the investor and the selected
dealer or agent. If the selected dealer or agent receives the
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<PAGE>
order after the close of regular trading on the Exchange, the
price will be based on the net asset value determined as of the
close of regular trading on the Exchange on the next day it is
open for trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "Literature" telephone number
shown on the cover of this Statement of Additional Information.
Payment for shares purchased by telephone can be made only by
Electronic Funds Transfer from a bank account maintained by the
shareholder at a bank that is a member of the National Automated
Clearing House 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 amount paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash bonuses or other incentives to dealers or
agents, including Equico Securities, Inc., the previous principal
underwriter of the Funds and 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 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
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<PAGE>
elect to receive cash incentives of equivalent amount in lieu of
such payments.
ALTERNATIVE PURCHASE ARRANGEMENTS
Each Fund issues three classes of shares: Class A
shares are sold to investors choosing the initial sales charge
alternative, Class B shares are sold to investors choosing the
deferred sales charge alternative, and Class C shares are sold to
investors choosing the asset-based sales charge alternative. The
three classes of shares each represent an interest in the same
portfolio of investments of 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 shares bear the
expense of the contingent deferred sales charge, (ii) Class B
shares and Class C shares each bear the expense of a higher
distribution services fee and in the case of Class B shares,
higher transfer agency costs, (iii) each class has exclusive
voting rights with respect to 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,
and (iv) only the Class B shares are subject to a conversion
feature. Each class has different exchange privileges and
certain different shareholder service options available.
The alternative purchase arrangements permit an investor
to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their
investment in a Fund, the accumulated distribution services fee
and contingent deferred sales charges on Class B shares prior to
conversion, or the accumulated distribution services fee on
Class C shares, would be less than the initial sales charge and
accumulated distribution services fee on Class A shares purchased
at the same time, and to what extent such differential would be
offset by the higher return of Class A shares. Class A shares
will normally be more beneficial than Class B shares to the
investor who qualifies for reduced initial sales charges on
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 $5,000,000 for Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
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However, because initial sales charges are deducted at the time
of purchase, most investors purchasing Class A shares would not
have all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and,
in the case of Class B shares, being subject to a contingent
deferred sales charge. For example, based on current fees and
expenses, an investor subject to the 4.25% initial sales charge
would have to hold his or her investment approximately seven
years for the Class C distribution services fee to exceed the
initial sales charge plus the accumulated distribution services
fee of Class A shares. In this example, an investor intending to
maintain his or her investment for a longer period might consider
purchasing Class A shares. This example does not take into
account the time value of money, which further reduces the impact
of the Class C distribution services fees on the investment,
fluctuations in net asset value or the effect of different
performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
period during which Class B shares are subject to a contingent
deferred sales charge may find it more advantageous to purchase
Class C shares.
The Trustees of the Trust have determined that currently
no conflict of interest exists between or among the Class A,
Class B and Class C shares. On an ongoing basis, the Trustees of
the Trust, pursuant to their fiduciary duties under the 1940 Act
and state laws, will seek to ensure that no such conflict arises.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
The public offering price of Class A shares for
purchasers choosing the initial sales charge alternative is the
net asset value plus a sales charge, as set forth below:
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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, and such charge will be applied to
redemptions of shares by shareholders who hold both Class A
shares and Class B shares, as described below under "Deferred
Sales Charge Alternative--Class B Shares." Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the 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 Rule 12b-1 Plans 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.
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<PAGE>
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, or (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge. 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 in the Prospectus. The Principal
Underwriter may, however, elect to reallow the entire sales
charge to selected dealers and agents for all sales with respect
to which orders are placed with the Principal Underwriter. A
selected dealer who receives 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 31, 1995.
Net Asset Value per Class A
Share at October 31, 1995 $29.48
Per Share Sales Charge - 4.25%
of offering price (4.44% of
net asset value per share) $ 1.31
Class A Per Share Offering Price
to the Public $30.79
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 that amount, the Principal Underwriter received the amount of
$1,814, 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 (and was, accordingly, 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.
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<PAGE>
During the Strategic Balanced Fund's fiscal year ended July 31,
1994, the aggregate amount of underwriting commissions payable
with respect to Class A shares of the Fund was $38,541. During
the Strategic Balanced Fund's fiscal year ended July 31, 1994,
the Principal Underwriter received $21,732 in contingent deferred
sales charges. During the Strategic Balanced Fund's fiscal year
ended April 30, 1994, the aggregate amount of underwriting
commissions payable with respect to Class A shares of the Fund
was $149,378. During the period August 2, 1993 through April 30,
1994, the Principal Underwriter received $53,292 in contingent
deferred sales charges, and during the period May 1, 1993 through
August 1, 1993 Equico received $7,146 in contingent deferred
sales charges with respect to the Strategic Balanced Fund.
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 that
amount, the Principal Underwriter received the amount of
$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 (and was, accordingly, 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 aggregate
amount of underwriting commissions payable with respect to
Class A shares of the Fund was $3,061,478. Of that amount, the
Principal Underwriter received the amount of $89,423,
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 (and was, accordingly, retained by the
Principal Underwriter). During the Growth Fund's fiscal year
ended October 31, 1994, the Principal Underwriter received
$410,313 in contingent deferred sales charges. During the Growth
Fund's fiscal year ended April 30, 1994, the aggregate amount of
underwriting commissions payable with respect to Class A shares
of the Fund was $3,947,074. During the period August 2, 1993
through April 30, 1994, the Principal Underwriter received
$199,405 in contingent deferred sales charges, and during the
period May 1, 1993 through August 1, 1993 Equico received $67,835
in contingent deferred sales charges with respect to the Growth
Fund.
An investor choosing the initial sales charge
alternative may under certain circumstances be entitled to pay
reduced sales charges or no initial sales charge (but the shares
may nonetheless be subject in most cases to a contingent deferred
sales charge.) The circumstances under which such investors may
pay reduced sales charges are described below.
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<PAGE>
COMBINED PURCHASE PRIVILEGE. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges shown in the Prospectus 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 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 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 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:
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 Small Cap Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Mortgage Strategy Trust, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
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<PAGE>
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance 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 Alliance Fund Services,
Inc. at the address or the "Literature" telephone number shown on
the front cover of this Statement of Additional Information.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). An
investor's purchase of additional Class A shares of 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 Class A,
Class B and Class C shares of the Fund held by
the investor and (b) all shares of any other
Alliance Mutual Fund held by the investor; and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with
that of the investor into a single "purchase"
(see above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
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<PAGE>
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the initial sales charge for the $100,000
purchase would be at the 2.25% rate applicable to a single
$300,000 purchase of shares of the Fund, rather than the 3.25%
rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
STATEMENT OF INTENTION. Class A investors may also
obtain the reduced initial sales charges shown in the Prospectus
by means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B and/or
Class C shares) of 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 be necessary to invest only a
total of $60,000 during the following 13 months in shares of the
Fund or any other Alliance Mutual Fund to qualify for the initial
sales charge on the total amount being invested, i.e., the
initial sales charge applicable to an investment of $100,000.
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
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
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<PAGE>
charge, if necessary. Dividends on escrowed shares, whether paid
in cash or reinvested in additional Fund shares, are not subject
to escrow. When the full amount indicated has been purchased,
the escrow will be released. To the extent that an investor
purchases more than the dollar amount indicated on the Statement
of Intention and qualifies for a further reduced sales charge,
the initial sales charge will be adjusted for the entire amount
purchased at the end of the 13-month period. The difference in
the initial sales charge will be used to purchase additional
shares of a Fund subject to the rate of the initial 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
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 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 a Fund or
any other Alliance Mutual Fund at a reduced initial sales charge
on a monthly basis during the 13-month period following such a
plan's initial purchase. The initial sales charge applicable to
such initial purchase of shares of a Fund will be that normally
applicable, under the schedule of the initial 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 current month's
purchase multiplied by the number of months (including the
current month) remaining in the 13-month period, and (ii) the
total purchase previously made during the 13-month period. Sales
charges previously paid during such period will not be
retroactively adjusted on the basis of later purchases.
REINSTATEMENT PRIVILEGE. A shareholder who has caused
any or all of his or her Class A shares of 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 such reinvestment
is made within 120 calendar days after the redemption or
repurchase date. Shares are sold to a reinvesting shareholder at
the net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for Federal tax purposes except
that no loss will be recognized to the extent that the proceeds
are reinvested in shares of the Fund. The reinstatement
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<PAGE>
privilege may be used by the shareholder only once, irrespective
of the number of shares redeemed or repurchased, except that the
privilege may be used without limit in connection with
transactions whose sole purpose is to transfer a shareholder's
interest in a Fund to his or her individual retirement account or
other qualified retirement plan account. Investors may exercise
the reinstatement privilege by written request sent to 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
advisory 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; officers, directors and present or retired full-time
employees of ACMC, the Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates; officers, directors and
present and full-time employees of selected dealers or agents; or
the spouse, sibling, direct ancestor or direct descendant
(collectively "relatives") of any such person; or any trust,
individual retirement account or retirement plan account for the
benefit of any such person or relative; or the estate of any such
person or relative, if such shares are purchased for investment
purposes (such shares may not be resold except to the relevant
Fund); (iii) certain employee benefit plans for employees of the
Adviser, the Principal Underwriter, Alliance Fund Services, Inc.
and their affiliates; (iv) persons participating in a fee-based
program, sponsored and maintained by a registered broker-dealer
and approved by the Principal Underwriter, pursuant to which such
persons pay an asset-based fee to such broker-dealer, or its
affiliate or agent, for service in the nature of investment
advisory or administrative services; (v) persons who establish to
the Principal Underwriter's satisfaction that they are investing
in the Fund, within such time period as may be designated by the
Principal Underwriter, proceeds of their redemption of shares of
such other registered investment companies as may be designated
from time to time by the Principal Underwriter; and (vi)
employer-sponsored qualified pension or profit-sharing plans
(including Section 401(k) plans), custodial accounts maintained
pursuant to Section 403(b)(7) retirement plans and individual
retirement accounts (including individual retirement accounts to
which simplified employee pension (SEP) contributions are made),
if such plans or accounts are established or administered under
programs sponsored by administrators or other persons that have
been approved by the Principal Underwriter.
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DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Investors choosing the deferred sales charge alternative
purchase Class B shares at the public offering price equal to the
net asset value 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 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 which
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
To illustrate, assume that on or after November 19, 1993
an investor purchased 100 Class B shares at $10 per share (at a
cost of $1,000) and in the second year after purchase the net
asset value per share is $12 and, during such time, the investor
has acquired 10 additional Class B shares upon dividend
reinvestment. If at such time the investor makes his or her
first redemption of 50 Class B shares (proceeds of $600), 10
Class B shares will not be subject to charge because of dividend
reinvestment. With respect to the remaining 40 Class B shares,
the charge is applied only to the original cost of $10 per share
and not to the increase in net asset value of $2 per share.
Therefore, $400 of the $600 redemption proceeds will be charged
at a rate of 3.0% (the applicable rate in the second year after
purchase).
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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.
Year Since
Purchase
Subject to Contingent Deferred Sales Charge for the
Charge Funds as a % of Dollar Amount
Shares purchased
Shares on or after Shares
purchased August 2, 1993, purchased
before but before on or after
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, it will be assumed in the case of
Class B shares purchased on or after November 19, 1993, that the
redemption is first of any shares in the shareholder's Fund
account that are not subject to a contingent deferred sales
charge, second of Class B shares held for over three years and
third of Class B shares that are subject to a contingent deferred
sales charge held shortest during the one-year period during
which such shares are subject to the sales charge. When Class B
shares acquired in an exchange are redeemed, the applicable
contingent deferred sales charge and conversion schedules will be
the schedules that applied to Class B shares of the Alliance
Mutual Fund originally purchased by the shareholder at the time
of their purchase.
The contingent deferred sales charges on Class A and
Class B shares are waived on redemptions of shares (i) following
the death or disability, as defined in the Internal Revenue Code
of 1986, as amended (the "Code"), of a shareholder, (ii) to the
extent that the redemption represents a minimum required
distribution from an individual retirement account or other
retirement plan to a shareholder who has attained the age of
70-1/2, (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
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<PAGE>
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 and such
shares will no longer be subject to a higher distribution
services fee. 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. Such
conversions will be 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. See "Shareholder
Services--Exchange Privilege."
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 (i) the assessment of the higher distribution
services fee and transfer agency costs with respect to Class B
shares does not result in a Fund's dividends or distributions
constituting "preferential dividends" under the Code, and
(ii) the conversion of Class B shares to Class A shares does not
constitute a taxable event under federal income tax law. The
conversion of Class B shares to Class A shares may be suspended
if such an opinion is no longer available at the time such
conversion is to occur. In that event, no further conversions of
Class B shares would occur, and shares might continue to be
subject to the higher distribution services fee for an indefinite
period.
ASSET-BASED SALES CHARGE ALTERNATIVE--CLASS C SHARES
Investors choosing the asset-based sales charge
alternative purchase Class C shares at the public offering price
equal to the net asset value per share of the Class C shares on
the date of purchase without the imposition of a sales charge
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either at the time of purchase or 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 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.
Class C shares do not convert to any other class of shares 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.
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."
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
next computed following the receipt of shares tendered for
redemption in proper form. Except for any contingent deferred
sales charge which may be applicable to Class A shares or Class B
shares, there is no redemption charge. Payment of the redemption
price will be made within seven days after a Fund's receipt of
such tender for redemption.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the 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 Securities and Exchange
Commission 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
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shareholder, depending upon the market value of a Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A shares and Class B
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment 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 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 institution that is an "eligible guarantor" as
defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.
TELEPHONE REDEMPTION BY ELECTRONIC FUNDS TRANSFER. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer, once in any 30 day period, of shares for which no
share certificates have been issued by telephone at
(800) 221-5672 by a shareholder who has completed the appropriate
portion of the Subscription Application or, in the case of an
existing shareholder, an "Autosell" application obtained from
Alliance Fund Services, Inc. A telephone redemption request may
not exceed $100,000, 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 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 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. 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.
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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 Funds reserve the
right to suspend or terminate their telephone redemption service
at any time without notice. Neither the Funds nor the Adviser,
the Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
redemptions that a Fund reasonably believes to be genuine.
Alliance Fund Services, Inc. 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 Alliance Fund
Services, Inc. did not employ such procedures, it could be liable
for losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers or agents may charge a commission
for handling telephone requests for redemptions.
To redeem shares of the 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
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.
REPURCHASE
The Funds may repurchase shares through the Principal
Underwriter or selected dealers or agents. The repurchase price
will be the net asset value next determined after the Principal
Underwriter receives the request (less the contingent deferred
sales charge, if any, with respect to the Class A shares and
Class B shares), except that requests placed through selected
dealers or agents before the close of regular trading on the
Exchange on any day will be executed at the net asset value
determined as of such close of regular trading on that day if
received by the Principal Underwriter prior to its close of
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business on that day (normally 5:00 p.m. Eastern time). The
selected dealer or agent is responsible for transmitting the
request to the Principal Underwriter by 5:00 p.m. If the
selected dealer or agent fails to do so, the shareholder's right
to receive that day's closing price must be settled between the
shareholder and the dealer or agent. A shareholder may offer
shares of 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 shares and Class B
shares). Normally, if shares of the Funds are offered through a
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
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 all three classes of shares of the Funds.
AUTOMATIC INVESTMENT PROGRAM
Investors may purchase shares of the Funds through an
automatic investment program utilizing "pre-authorized check"
drafts drawn on the investor's own bank account. Under such a
program, pre-authorized monthly drafts for a fixed amount (at
least $25) are used to purchase shares through the selected
dealer or selected agent designated by the investor at the public
offering price next determined after the Principal Underwriter
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receives the proceeds from the investor's bank. Drafts may be
made in paper form or, if the investor's bank is a member of the
NACHA, in electronic form. If made in paper form, the draft is
normally made on the 20th day of each month, or the next business
day thereafter. If made in electronic form, drafts can be made
on or about a date each month selected by the shareholder.
Investors wishing to establish an automatic investment program in
connection with their initial investment should complete the
appropriate portion of the Subscription Application found in the
Prospectus. Current shareholders should contact Alliance Fund
Services, Inc. at the address or telephone numbers shown on the
cover of this Statement of Additional Information to establish an
automatic investment program.
EXCHANGE PRIVILEGE
Class A shareholders can exchange their Class A shares
for Class A shares of any other Alliance Mutual Fund that offers
Class A shares and for shares of Alliance World Income Trust,
Inc. without the payment of any sales or service charges. For
purposes of applying any applicable contingent deferred sales
charge upon the newly acquired Class A shares, the period of time
the Class A shares surrendered in the exchange have been held is
added to the period of time the newly acquired shares have been
held. Prospectuses for each Alliance Mutual Fund may be obtained
by contacting Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information or by
telephone at (800) 227-4618 or, in Illinois, (800) 227-4170.
Class B shareholders of the Funds can exchange their
Class B shares ("original Class B shares") for Class B shares of
any other Alliance Mutual Fund that offers Class B shares ("new
Class B shares") without the payment of any contingent deferred
sales or service charges. For purposes of computing both the
time remaining before the new Class B shares convert to Class A
shares of that fund and the contingent deferred sales charge
payable upon disposition of the new Class B shares, the period of
time for which the original Class B shares have been held is
added to the period of time for which the new Class B shares have
been held. After an exchange, new Class B shares will
automatically convert into Class A shares in accordance with the
conversion schedule applicable to the Alliance Mutual Fund Class
B shares originally purchased for cash, and when redemption
occurs, the contingent deferred sales charge schedule applicable
to the Class B shares originally purchased for cash is applied.
Class C shareholders of the Funds can exchange their
Class C shares for Class C shares of any other Alliance Mutual
Fund that offers Class C shares.
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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 Alliance Mutual 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 or agent, are authorized to make telephone requests for
exchanges unless Alliance Fund Services, Inc. receives written
instruction to the contrary from the shareholder, or the
shareholder declines the privilege by checking the appropriate
box on the Subscription Application found in the Prospectus. Such
telephone requests cannot be accepted with respect to shares then
represented by share certificates. Shares acquired pursuant to a
telephone request for exchange will be held under the same
account registration as the shares redeemed through such
exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange at (800) 221-5672 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. New
York time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic economic
or market developments, such as the market break of October 1987,
it is possible that shareholders would have difficulty in
reaching Alliance Fund Services, Inc. by telephone (although no
such difficulty was apparent at any time in connection with the
1987 market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
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normally occur on the 12th day of each month, or the following
Fund business day.
Neither the Alliance Mutual Funds nor the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that a Fund reasonably believes to be genuine. Alliance
Fund Services, Inc. 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 Alliance Fund Services, Inc. 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 exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Funds being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to 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 Alliance Fund Services,
Inc. at the "Literature" telephone number on the cover of this
Statement of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
INDIVIDUAL RETIREMENT ACCOUNT ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by a 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.
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EMPLOYER-SPONSORED QUALIFIED RETIREMENT PLANS. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan investing through
the Alliance Premier Retirement Program reaches $5 million on or
before December 15 in any year, all Class B shares or Class C
shares of the Fund held by such plan can be exchanged, without
any sales charge, for Class A shares of such Fund shortly before
the end of the calendar year in which the $5 million level is
attained. The Fund waives any contingent deferred sales charge
applicable to redemptions of Class B shares by qualified plans
investing through the Alliance Premier Retirement Program.
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 The Equitable Life Assurance Society of the United
States, 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 Alliance
Fund Services, Inc. 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 Alliance
Fund Services, Inc.
DIVIDEND DIRECTION PLAN
A shareholder who already maintains, in addition to his
or her Class A, Class B or Class C account, a Class A, Class B or
Class C account with one or more other Alliance Mutual Funds may
direct that income dividends and/or capital gains paid on his or
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her Class A, Class B or Class C shares be automatically
reinvested, in any amount, without the payment of any sales or
service charges, in shares of the same class of such other
Alliance Mutual Fund(s). Further information can be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"Literature" telephone number shown on the cover of this
Statement of Additional Information. Investors wishing to
establish a dividend direction plan in connection with their
initial investment should complete the appropriate section of the
Subscription Application found in the Prospectus. Current
shareholders should contact Alliance Fund Services, Inc. to
establish a dividend direction plan.
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 withdrawal 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 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.
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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 Alliance Fund Services, Inc. at the address or
the "Literature" telephone number shown on the cover of this
Statement of Additional Information.
Class B CDSC Waiver for shares acquired after July 1,
1995. 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 shares in a shareholder's account acquired after
July 1, 1995 may be redeemed free of any contingent deferred
sales charge. Class B shares acquired after July 1, 1995 that are
not subject to a contingent deferred sales charge (such as shares
acquired with reinvented dividends or distributions) will be
redeemed first and will count toward these limitations. Remaining
Class B shares acquired after July 1, 1995 that are held the
longest will be redeemed next. Redemptions of Class B shares
acquired after July 1, 1995 in excess of the foregoing
limitations and redemptions of Class B shares acquired before
July 1, 1995 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 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 net asset value of a share of each class is
determined by dividing the value, as of the close of regular
trading on the New York Stock Exchange (currently 4:00 p.m.), 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.
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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
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 Automatic 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
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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
of redemption or a postponement of the date of payment on
redemption.
The assets belonging to the Class A shares, the Class B
shares and the Class C shares will be invested together in a
single portfolio.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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, (2) 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 contracts on foreign
currencies held for less than three months), and (3) diversify
its holdings so that at the end of each quarter of its taxable
year (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 the securities of other regulated investment
companies) 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. 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 loss), and (b) 90% of
the excess of (i) its tax-exempt interest income less
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(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. 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. 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 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 excess of net long-term capital gains over the net
short-term capital losses realized and distributed by a Fund to
its shareholders as capital gains distributions will not be
taxable to the Fund but will be taxable to the shareholders as
long-term capital gains, irrespective of the length of time a
shareholder may have held his Fund shares. 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 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
less than six months 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 gain or loss on the sale of stock
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becomes long-term or short-term depending on the holding period
of the stock. There may be short-term gains or losses associated
with closing purchase transactions.
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 receipt of income from 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
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.
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The assets received by the Trust for the issue or sale
of the Class A, Class B and Class C 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 Fund and each class of
shares thereof, certain expenses may be legally chargeable
against the assets of all Funds 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 January 15, 1996:
81
<PAGE>
NAMES AND ADDRESSES % OF CLASS
GROWTH FUND - CLASS A
Merrill Lynch
Mutual Fund Operations 8.26%
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6486
CLASS B
Merrill Lynch
Mutual Fund Operations 20.56%
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6486
CLASS C
Merrill Lynch
Mutual Fund Operations 44.88%
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6486
STRATEGIC BALANCED FUND - CLASS C
Merrill Lynch
Mutual Fund Operations 20.30%
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6486
Tri-M Corporation 401k
PS-Savings Plan 21.94%
284 Gale Lane, P.O. Box 69
Kennett Square, PA 19348-0069
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
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
82
<PAGE>
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. 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.
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.
83
<PAGE>
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 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 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 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 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.
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, 1995, and of the Growth Fund
for the fiscal year ended October 31, 1995, 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.
84
<PAGE>
TOTAL RETURN QUOTATIONS
From time to time, a Fund may advertise its "total
return." Total return is computed separately for Class A,
Class B and Class C shares. Such advertisements disclose a
Fund's average annual compounded total return for recent 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 15.09% for the one-year period
ended October 31, 1995, 25.93% for the five-year period ended
October 31, 1995 and 21.39% for the period September 4, 1990
(commencement of distribution of Class A shares), through October
31, 1995. The average annual compounded total return for Class B
shares of the Growth Fund was 15.33% for the one-year period
ended October 31, 1995, 26.15% for the five-year period ended
October 31, 1995, and 20.06% for the period October 23, 1987
(commencement of distribution of Class B shares) through
October 31, 1995. The average annual compounded total return for
Class C shares of the Growth Fund was 19.32% for the one-year
period ended October 31, 1995 and 12.92% for the period August 2,
1993 (commencement of distribution of Class C shares) through
October 31, 1995. The average annual compounded total return for
Class A shares of the Strategic Balanced Fund was 7.63% for the
one-year period ended July 31, 1995 and 11.29% for the period
September 4, 1990 (commencement of distribution of Class A
shares) through July 31, 1995. The average annual compounded
total return for Class B shares of the Strategic Balanced Fund
was 7.63% for the one-year period ended July 31, 1995, 9.56% for
the five-year period ended July 31, 1995 and 12.08% for the
period October 23, 1987 (commencement of distribution of Class B
shares) through July 31, 1995. The average annual compounded
total return for Class C shares of the Strategic Balanced Fund
was 11.62% for the one-year period ended July 31, 1995 and was
4.68% for the period August 2, 1993 (commencement of distribution
of Class C shares) through July 31, 1995.
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
85
<PAGE>
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.
86
00250184.AF0
<PAGE>
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 ALLIANCE GROWTH FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
COMMON AND PREFERRED STOCKS96.7%
TECHNOLOGY31.7%
ELECTRONICS19.0%
3Com Corp.* (a) 283,300 $ 13,315,100
cisco Systems, Inc.* (a) 1,599,000 123,922,500
EMC Corp.* (a) 1,699,300 26,339,150
General Instrument Corp.* 1,666,300 31,659,700
Micron Technology, Inc.(a) 93,100 6,575,187
Motorola, Inc.(a) 1,396,800 91,665,000
Oracle Systems Corp.* (a) 913,000 39,829,625
Silicon Graphics, Inc.* (a) 252,000 8,379,000
Texas Instruments, Inc.(a) 500,000 34,125,000
Westinghouse Electric Corp. 500,000 7,062,500
382,872,762
OFFICE EQUIPMENT & SERVICES1.8%
Bay Networks, Inc.* (a) 339,700 22,505,125
Cabletron Systems, Inc.* 155,900 12,257,638
34,762,763
SEMI-CONDUCTORS & RELATED5.2%
Intel Corp.(a) 1,126,600 78,721,175
National Semiconductor Corp.* (a) 1,083,300 26,405,437
105,126,612
TELECOMMUNICATIONS5.7%
Air-Touch Communications, Inc.* 1,586,700 45,220,950
Cox Communications, Inc.* (a) 168,000 3,150,000
DSC Communications Corp.* (a) 783,700 28,996,900
Millicom International Cellular S.A.* 312,800 10,322,400
Northern Telecom, Ltd. 45,000 1,620,000
Rogers Cantel Mobile Communications,
Inc. Cl.B* 571,500 11,858,625
United States Cellular Corp.* 259,700 8,959,650
Vodafone PLC (ADR)(b) 125,000 5,109,375
115,237,900
638,000,037
CREDIT SENSITIVE22.3%
BANKS0.5%
First Chicago Corp. 90,000 1,586,250
NationsBank Corp. 124,000 8,153,000
9,739,250
FINANCIAL SERVICES2.4%
American Express Co. 250,000 10,156,250
Capital One Financial Corp. 193,000 4,728,500
Dean Witter, Discover & Co. 80,000 3,980,000
Federal National Mortgage Assn. 57,800 6,061,775
Franchise Financial Corp. of America 90,000 1,901,250
JP Realty, Inc. 755,300 15,483,650
Mercury Finance Co. 139,800 2,691,150
Student Loan Marketing Assn. 56,000 3,297,000
48,299,575
INSURANCE11.9%
20th Century Industries, Inc.* 1,098,300 18,259,238
Acceptance Insurance Cos., Inc.* 465,600 6,984,000
Allstate Corp.(a) 909,410 33,420,817
American International Group, Inc. 754,350 63,648,281
John Alden Financial Corp. 246,500 5,114,875
PennCorp. Financial Group, Inc. 484,500 11,567,438
PMI Group, Inc. 46,700 2,241,600
Progressive Corp. (Ohio) 401,800 16,674,700
PXRE Corp. 8 204
Travelers, Inc. 1,638,700 82,754,350
240,665,503
REAL ESTATE6.1%
Amli Residential Properties Trust 204,000 3,927,000
Associated Estates Realty Corp. 28,700 588,350
CBL & Associates Properties, Inc. 264,000 5,610,000
Columbus Realty Trust 167,600 3,016,800
Essex Property Trust 201,900 3,684,675
First Industrial Realty Trust, Inc. 187,000 3,810,125
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
Gables Residential Trust 230,000 $ 4,945,000
Highwoods Properties, Inc. 544,200 14,489,325
Macerich Co. 644,400 12,968,550
Manufactured Home Communities, Inc. 160,000 2,640,000
Mitsubishi Estate 140,000 1,491,764
Oasis Residential, Inc. 30,000 652,500
cv. pfd. 160,000 4,040,000
Paragon Group, Inc. 150,000 2,587,500
Saul Centers, Inc. 238,000 3,421,250
Simon Property Group, Inc. 301,500 7,009,875
Spieker Properties, Inc. 426,200 10,335,350
Storage USA, Inc. 403,700 11,808,225
Summit Properties, Inc. 507,700 9,392,450
Sun Communities, Inc. 280,000 6,965,000
Tucker Properties Corp. 429,800 3,975,650
Walden Residential Properties, Inc. 228,100 4,191,338
Weeks Corp. 71,500 1,644,500
123,195,227
UTILITY/GAS0.4%
Renaissance Energy, Ltd.* 334,000 7,385,244
UTILITY/TELEPHONE1.0%
MCI Communications Corp. 369,000 9,201,937
Telefonos de Mexico, S.A. (ADS)* (a)(c) 100,000 2,750,000
Telephone and Data Systems, Inc. 210,000 8,400,000
20,351,937
449,636,736
CONSUMER NONCYCLICALS12.9%
BEVERAGES0.1%
Coca-Cola Femsa S.A. (ADR)(c) 175,000 3,150,000
DRUGS4.4%
Abbott Laboratories 535,000 21,266,250
Amgen, Inc.* 106,000 5,088,000
Astra AB,Series A(g) 400,000 14,697,467
Gensia, Inc.*(d) 68,500 804,875
Merck & Co., Inc. 432,000 24,840,000
Pfizer, Inc. 380,000 21,802,500
88,499,092
HOSPITAL SUPPLIES & SERVICES1.9%
Healthsource, Inc.* 262,500 13,912,500
Quest Medical, Inc.* 265,225 2,917,475
United Healthcare Corp. 388,900 20,660,312
37,490,287
TOBACCO6.5%
Loews Corp. 416,000 60,996,000
Philip Morris Cos., Inc. 827,000 69,881,500
130,877,500
260,016,879
CONSUMER CYCLICALS8.7%
AUTO & TRUCKS2.1%
Chrysler Corp. 246,830 12,742,599
General Motors Corp. Cl.E 623,000 29,358,875
42,101,474
PHOTO & OPTICAL1.7%
Eastman Kodak Co. 545,700 34,174,462
RETAILINGGENERAL4.9%
Home Depot, Inc. 779,000 29,017,750
Lowes Cos., Inc. 1,072,500 28,957,500
Melville Corp. 50,000 1,600,000
Sears Roebuck & Co. 1,098,500 37,349,000
Talbots, Inc. 71,700 1,738,725
98,662,975
174,938,911
BUSINESS SERVICES8.6%
PRINTING, PUBLISHING & BROADCASTING4.9%
Comcast Corp. Cl.A (SPL) 291,500 5,210,563
Donnelley (R.R.) & Sons Co. 904,200 33,003,300
Grupo Television S.A. de C.V. (ADR)* (a)(c) 100,000 1,712,500
Tele-Communications, Inc.* 621,375 15,301,359
Tele-Communications, Inc. Cl.A* 2,249,400 38,239,800
Time Warner, Inc. 140,000 5,110,000
98,577,522
6
ALLIANCE GROWTH FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
RAILROADS & EQUIPMENT2.9%
Conrail, Inc.(a) 319,000 $ 21,931,250
Union Pacific Corp. 550,000 35,956,250
57,887,500
TRANSPORTATION0.8%
Pittston Services Group 577,000 15,867,500
172,332,522
DIVERSIFIED3.5%
Hanson PLC (ADR)(b)*
warrants, 9/30/97 1,045,296 99,159
B warrants, 9/30/97 877,003 109,625
ITT Corp. 576,300 70,596,750
70,805,534
CAPITAL GOODS3.5%
MACHINERY3.5%
Applied Materials, Inc.* 50,000 2,506,250
Mannesmann AG (ADR)(e) 205,000 67,442,294
69,948,544
BASIC MATERIALS3.3%
CHEMICALS3.0%
Great Lakes Chemical Corp. 371,000 24,903,375
Monsanto Co. 219,000 22,940,250
W.R. Grace & Co. 227,000 12,655,250
60,498,875
METALS & MINING0.3%
Freeport-McMoRan, Inc. 180,983 6,764,240
67,263,115
ENERGY2.0%
OIL SUPPLIES & CONSTRUCTION2.0%
Ensco International, Inc.* 83,475 1,408,641
Gulf Canada Resources, Ltd.* 6,808,000 26,381,000
Western Atlas, Inc.* 296,600 13,013,325
40,802,966
SHARES,
CONTRACTS (F)
OR PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------------
CONSUMER SERVICES0.2%
HOTELS & RESTAURANTS0.2%
McDonald's Corp. 90,000 $ 3,690,000
Total Common Stocks
(cost $1,713,059,502) 1,947,435,244
LONG TERM DEBT SECURITIES1.5%
ELECTRONICS1.5%
3Com Corp.
10.25%, 11/01/01(d) $ 8,500 13,610,625
Altera Corp.
5.75%, 6/15/02 5,550 7,443,938
Cypress Semiconductor Corp.
3.15%, 3/15/01(d) 6,500 8,588,125
Total Long Term Debt Securities
(cost $25,287,782) 29,642,688
SHORT-TERM DEBT SECURITIES3.5%
Federal Home Loan Bank
5.59%, 11/10/95 10,000 9,986,025
5.60%, 11/13/95 21,170 21,130,483
5.82%, 11/01/95 25,600 25,600,000
Federal National Mortgage Assn.
5.63%, 11/15/95 15,000 14,967,158
Total Short-Term Debt Securities
(amortized cost $71,683,666) 71,683,666
TOTAL INVESTMENTS101.7%
(cost $1,810,030,950) 2,048,761,598
OUTSTANDING CALL OPTIONS
WRITTEN(1.0%)
3Com Corp.
expiring Dec 1995
@ $45.50 1,000 (489,100)
Allstate Corp.
expiring Jan 1996
@ $39.63 1,000 (98,900)
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH FUND
_______________________________________________________________________________
COMPANY CONTRACTS (F) VALUE
- -----------------------------------------------------------------------
Bay Networks
expiring Jan 1996
@ $64.75 1,000 $ (787,500)
cisco Systems, Inc.
expiring Nov 1995
@ $66.13 3,000 (3,633,000)
expiring Jan 1996
@ $78.50 350 (229,915)
expiring Feb 1996
@ $79.75 500 (318,300)
Conrail, Inc.
expiring Dec 1995
@ $65.75 1,000 (501,000)
@ $65.96 1,500 (769,500)
@ $65.88 500 (253,000)
Cox Communications, Inc.
expiring Dec 1995
@ $20.25 1,500 (139,500)
DSC Communications Corp.
expiring Nov 1995
@ $52.70 1,000 (1,000)
expiring Jan 1996
@ $38.00 1,000 (352,000)
expiring Feb 1996
@ $38.38 1,000 (347,500)
EMC Corp.
expiring Nov 1995
@ $20.00 2,000 (200)
@ $19.88 1,000 (8,100)
expiring Dec 1995
@ $20.25 1,000 (10,900)
expiring Jan 1996
@ $14.13 3,000 (679,200)
Grupo Television S.A. de C.V. (ADR)(c)
expiring Jan 1996
@ $18.38 1,000 (131,000)
Intel Corp.
expiring Nov 1995
@ $61.63 500 (435,500)
expiring Dec 1995
@ $63.38 500 (380,500)
@ $62.38 1,000 (879,000)
@ $63.63 1,000 (787,500)
@ $59.63 1,000 (1,127,000)
expiring Jan 1996
@ $59.50 1,000 (1,159,000)
@ $58.63 1,000 (1,264,000)
Micron Technology, Inc.
expiring Nov 1995
@ $68.63 800 (510,400)
Motorola, Inc.
expiring Feb 1996
@ $65.75 500 (243,000)
National Semiconductor Corp.
expiring Jan 1996
@ $26.75 1,000 (169,900)
@ $25.38 1,000 (223,600)
expiring Feb 1996
@ $24.88 1,000 (246,000)
Oracle Systems Corp.
expiring Nov 1995
@ $42.75 1,000 (258,000)
expiring Dec 1995
@ $40.75 1,000 (462,500)
expiring Jan 1996
@ $38.13 500 (343,500)
@ $40.00 500 (283,000)
@ $44.25 500 (179,300)
Silicon Graphics, Inc.
expiring Dec 1995
@ $38.88 1,000 (52,000)
expiring April 1996
@ $33.25 1,500 (465,000)
Telefonos de Mexico S.A. (ADS)(c)
expiring Jan 1996
@ $30.88(c) 1,000 (65,000)
8
ALLIANCE GROWTH FUND
_______________________________________________________________________________
COMPANY CONTRACTS (F) VALUE
- -----------------------------------------------------------------------
Texas Instruments, Inc.
expiring Jan 1996
@ $73.25 1,000 $(362,700)
@ $72.38 1,000 (444,300)
@ $75.00 1,000 (530,200)
@ $68.75 500 (322,700)
@ $71.13 500 (270,200)
@ $70.13 500 (299,000)
expiring Feb 1996
@ $69.75 500 (309,000)
COMPANY VALUE
- -----------------------------------------------------------------------
Total Outstanding Call Options Written
(premiums received $18,649,332) $ (20,821,415)
TOTAL INVESTMENTS NET OF OUTSTANDING
CALL OPTIONS WRITTEN -100.7%
(cost $1,791,381,618) 2,027,940,183
Other assets less liabilities(0.7%) (14,097,962)
NET ASSETS100% $2,013,842,221
* Non-income producing security.
(a) Security on which options are written (shares subject to call have an
aggregate market value of $210,562,500).
(b) Country of origin-United Kingdom.
(c) Country of origin-Mexico.
(d) 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, 1995,
these securities amounted to $23,003,625 or 1.1% of net assets.
(e) Country of origin-Germany.
(f) One contract relates to 100 shares.
(g) Country of origin-Sweden.
Glossary of Terms:
ADR - American Depository Receipt
ADS - American Depository Security
See notes to financial statements.
9
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ALLIANCE GROWTH FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $1,810,030,950) $2,048,761,598
Cash 92,180
Receivable for investment securities sold 17,088,566
Receivable for shares of beneficial interest sold 13,929,879
Net unrealized appreciation of forward exchange currency
contracts 2,641,165
Dividends and interest receivable 1,568,078
Total assets 2,084,081,466
LIABILITIES
Payable for investment securities purchased 41,596,069
Outstanding call options written, at value
(premiums received $18,649,332) 20,821,415
Payable for shares of beneficial interest redeemed 4,404,092
Distribution fee payable 1,527,725
Advisory fee payable 1,272,524
Accrued expenses 617,420
Total liabilities 70,239,245
NET ASSETS $2,013,842,221
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 794
Additional paid-in capital 1,728,807,797
Distributions in excess of net investment income (867,482)
Accumulated net realized gain on investments 46,729,327
Net unrealized appreciation of investments, options and
foreign currency denominated assets and liabilities 239,171,785
$2,013,842,221
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and redemption price per share ($285,160,612/
9,673,820 shares of beneficial interest issued and outstanding) $29.48
Sales charge-4.25% of public offering price 1.31
Maximum offering price $30.79
Class B Shares
Net asset value and offering price per share ($1,502,019,746/
60,609,109 shares of beneficial interest issued and outstanding) $24.78
Class C Shares
Net asset value, redemption and offering price per share($226,661,863
/9,143,242 shares of beneficial interest issued and outstanding) $24.79
See notes to financial statements.
10
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 ALLIANCE GROWTH FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $90,923) $24,906,926
Interest 3,217,433 $ 28,124,359
EXPENSES
Advisory fee 11,100,437
Distribution fee - Class A 664,925
Distribution fee - Class B 10,954,700
Distribution fee - Class C 1,629,465
Transfer agency 3,130,468
Printing 509,666
Registration 388,877
Custodian 219,622
Audit and legal 124,419
Trustees' fees 27,866
Amortization of organization expenses 6,667
Miscellaneous 20,388
Total expenses 28,777,500
Net investment loss (653,141)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities transactions 49,687,961
Net realized gain on options transactions 2,542,001
Net realized loss on foreign currency transactions (3,644,535)
Net change in unrealized appreciation of securities 228,345,177
Net change in unrealized appreciation of options (2,479,328)
Net change in unrealized appreciation of foreign
currency denominated assets and liabilities 2,640,571
Net gain on investments 277,091,847
NET INCREASE IN NET ASSETS FROM OPERATIONS $276,438,706
See notes to financial statements.
11
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE GROWTH FUND
_______________________________________________________________________________
Year Ended May 1, 1994
October 31, to
1995 Oct. 31,1994*
------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income (loss) $ (653,141) $ 1,087,125
Net realized gain on investments, options,
and foreign currency transactions 48,585,427 7,686,932
Net change in unrealized appreciation of
investments, options, and foreign currency
denominated assets and liabilities 228,506,420 29,276,693
Net increase in net assets from operations 276,438,706 38,050,750
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (773,224) -0-
Class B (380,866) -0-
Class C (57,618) -0-
Net realized gain on investments
Class A (2,882,018) -0-
Class B (15,615,519) -0-
Class C (2,362,349) -0-
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 725,770,828 434,991,030
Total increase 980,137,940 473,041,780
NET ASSETS
Beginning of period 1,033,704,281 560,662,501
End of period $2,013,842,221 $1,033,704,281
* The Fund changed its fiscal year end from April 30 to October 31.
See notes to financial statements.
12
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995 ALLIANCE GROWTH FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Growth Fund (the '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. Prior to August 2, 1993, the Trust
was known as The Equitable Funds, and the Fund was known as The Equitable
Growth Fund. The Fund offers Class A, Class B and Class C shares. Class A
shares are sold with a front-end sales charge of up to 4.25%. Class B shares
are sold with a contingent deferred sales charge which declines from 4.00% 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 purchased
on or after August 2, 1993 and held for a period ending eight years after the
end of the calendar month of purchase will convert to Class A shares. Class C
shares are sold without an initial or contingent deferred sales charge. All
three classes of shares have identical voting, dividend, liquidation and other
rights, except that each class bears different distribution expenses and has
exclusive voting rights with respect to its distribution plan. 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 the New York Stock 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 Fund to meet their obligations may be affected by
economic developments in a specific industry or region.
2. CURRENCY TRANSLATION
Assets and liabilities denomintaed in foreign currencies are translated into
U.S. dollars at the mean of the quoted bid and asked price of the respective
currency against the U.S. dollar on the valuation date. Purchases and sales of
portfolio securities are translated at the rates of exchange prevailing when
such securities were acquired or sold. Income and expenses are translated at
rates of exchange prevailing when earned or accrued.
Net realized loss on foreign currency transactions of $3,616,989 represents net
foreign exchange gains and losses from holdings of forward foreign currency
contracts, currency gains or losses realized between the trade and settlement
dates on security transactions, and the difference between the amounts of
dividends and foreign taxes recorded on the Fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized currency gains and
losses from valuing foreign currency denomintaed assets and liabilities at
fiscal year end exchange rates are reflected as a component of unrealized
appreciation of investments and foreign currency denomintaed 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 applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
To reflect reclassifications arising from permanent book/tax differences for
the year ended October 31, 1995, $26,600 was reclassified from distributions in
excess of net investment income to accumulated net realized gain on investments.
4. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Security transactions are accounted for on the date securities are
purchased or sold. Security gains and losses are determined on the identified
cost basis. The Fund accretes discounts and amortizes premiums as adjustments
to interest income.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GROWTH FUND
_______________________________________________________________________________
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles.
6. 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 on such Class, except that the Funds'
Class B and Class C shares bear higher distribution and transfer agent 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
Prior to July 22, 1993, Equitable Capital Management Corporation (Equitable
Capital) served as the investment adviser to the Trust. On July 22, 1993,
Alliance Capital Management, L.P. (Alliance) acquired the business and
substantially all of the assets of Equitable Capital and became the investment
adviser to the Trust.
Under the terms of an investment advisory agreement, the Fund pays Alliance an
advisory fee at an annual rate of .75% of the Fund's average daily net assets.
Such a fee is accrued daily and paid monthly. The Investment Adviser has
agreed, under the terms of the investment advisory agreement, to voluntarily
waive its fees and bear certain expenses so that total expenses do not exceed
on an annual basis 1.40%, 2.10% and 2.10% of average net assets, respectively,
for the Class A, Class B and Class C shares. Prior to August 2, 1993, the
annual rate for Class B shares was 2.15%. No reimbursement was required for the
year ended October 31, 1995. In addition to these voluntary arrangements, the
Investment Adviser will reduce its compensation, to the extent that expenses of
the Fund for any fiscal year (exclusive of interest, taxes, brokerage,
distribution fees, and extraordinary expenses) exceed the most restrictive
expense limitation prescribed by any state in which the Fund's shares are
qualified for sale. The Fund believes that the most restrictive expense ratio
limitation imposed by any state in which the Fund has qualified its shares for
sale is 2.5% of the first $30 million of the Fund's average daily net assets,
2% of the next $70 million of its average daily net assets and 1.5% of its
average daily net assets in excess of $100 million.
The Fund has a Services Agreement with Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) to provide personnel and facilities to
perform transfer agency services for the Fund. Compensation under this
agreement amounted to $2,182,567 for the year ended October 31, 1995.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received net
front-end sales charges of $144,082 from the sale of Class A shares and
$2,261,095 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B shares for the year ended October 31, 1995.
Brokerage commissions paid on securities transactions for the year ended
October 31, 1995 amounted to $3,231,153, of which $15,700 was paid to
Donaldson, Lufkin & Jenrette Securities Corp. ('DLJ'), an affiliate of the
Adviser.
Accrued expenses include amounts owed to two of the trustees under a deferred
compensation plan of $32,133.
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 .50 of 1% 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. The Trustees currently limit payments under the
Class A plan to .30 of 1% the Fund's average daily net assets attributable to
Class A shares. The Agreement provides that the Distributor will use such
payments in their entirety for distribution assistance and promotional
activities. The Distributor has incurred
14
ALLIANCE GROWTH FUND
_______________________________________________________________________________
expenses in excess of the distribution costs reimbursed by the Fund in the
amount of $3,367,375, and $638,657 for Class B and C shares, respectively; such
costs may be recovered from the Fund in future periods so long as the Agreement
is in effect. In accordance with the Agreement, there is no provision for
recovery of unreimbursed distribution costs incurred by the Distributor beyond
the current fiscal year for Class A shares. The Agreement also provides that
the Adviser may use its own resources to finance the distribution of the Fund's
shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $1,621,899,092 and $884,428,153, respectively, for the year ended
October 31, 1995. There were purchases of $17,813,299 and sales of $15,467,362
of U.S. Government and government agency obligations for the year ended October
31, 1995.
1. OPTION TRANSACTIONS
For hedging purposes, the Fund purchases and writes (sells) put and call
options on U.S. and foreign government securities and foreign currencies that
are traded on U.S. and foreign 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.
Transactions in options written for the year ended October 31, 1995 were as
follows:
Number of
Contracts Premiums
--------- -------------
Options outstanding at beginning of year 15,000 $ 4,049,495
Options written 160,460 54,046,526
Options terminated in closing purchase transactions (43,200) (12,189,845)
Options expired (56,080) (17,331,519)
Options exercised (31,530) (9,925,325)
Options outstanding at October 31, 1995 44,650 $18,649,332
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GROWTH FUND
_______________________________________________________________________________
2. FOREIGN EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings. A forward exchange currency contract is a commitment to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original contract and the
closing of such contract is included in net realized gain or loss from foreign
currency transactions. Fluctuations in the value of forward exchange currency
contracts are recorded for financial reporting purposes as unrealized gains or
losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or securities in a separate account of the Fund having a value equal to the
aggregate amount of the Fund's commitments under forward exchange currency
contracts entered into with respect to position hedges. Risks may arise from
the potential inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
At October 31, 1995, the Fund had outstanding forward exchange currency
contracts, both to purchase and sell foreign currencies against the U.S.
dollar, as follows:
<TABLE>
<CAPTION>
CONTRACT VALUE ON U.S.$ UNREALIZED
AMOUNT ORIGINATION CURRENT APRECIATION
(000) DATE VALUE (DEPRECIATION)
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
Japanese Yen, expiring 11/15/95 1,660,900 $16,615,646 $16,275,475 $ (340,171)
FOREIGN CURRENCY SALE CONTRACTS
Japanese Yen, expiring 11/15/95 1,660,900 19,256,811 16,275,475 2,981,336
-----------
$2,641,165
</TABLE>
At October 31, 1995, the cost of securities for federal income tax purposes was
$1,814,955,598. Accordingly gross unrealized appreciation of investments was
$313,807,208 and gross unrealized depreciation of investments was $80,001,208
resulting in net unrealized appreciation of $233,806,000.
16
ALLIANCE GROWTH FUND
_______________________________________________________________________________
NOTE E: SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $0.00001 par value shares of beneficial
interest authorized divided into three classes, designated Class A, Class B and
Class C shares. Transactions in shares of beneficial interest were as follows:
SHARES AMOUNT
------------------------- ----------------------------
YEAR ENDED MAY 1,1994* YEAR ENDED MAY 1,1994*
OCTOBER 31, TO OCTOBER 31, TO
1995 OCT. 31,1994 1995 OCT. 31,1994
----------- ------------ ------------- -------------
CLASS A
Shares sold 5,137,889 2,831,659 $138,168,292 $ 68,901,177
Shares issued in
reinvestment of
dividends and
distributions 136,788 -0- 3,174,842 -0-
Shares redeemed (2,291,772) (427,892) (62,614,033) (10,438,866)
Net increase 2,982,905 2,403,767 $ 78,729,101 $ 58,462,311
CLASS B
Shares sold 31,470,527 17,260,944 $706,760,789 $356,698,970
Shares issued in
reinvestment of
dividends and
distributions 631,579 -0- 12,397,903 -0-
Shares redeemed (6,927,995) (1,274,037) (156,819,474) (26,373,086)
Net increase 25,174,111 15,986,907 $562,339,218 $330,325,884
CLASS C
Shares sold 5,581,389 2,792,380 $125,759,340 $ 57,684,514
Shares issued in
reinvestment of
dividends and
distributions 61,296 -0- 1,203,861 -0-
Shares redeemed (1,894,060) (554,996) (42,260,692) (11,481,679)
Net increase 3,748,625 2,237,384 $ 84,702,509 $ 46,202,835
* The Fund changed its fiscal year end from April 30 to October 31.
** Commencement of distribution.
17
FINANCIAL HIGHLIGHTS ALLIANCE GROWTH FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------
May 1,1994
Year Ended to Year Ended April 30,
October 31, October 31, ------------------------------------------
1995 1994** 1994 1993 1992 1991(a)
---------- ------------ --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $25.08 $23.89 $22.67 $20.31 $17.94 $13.61
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) .12 .09 (.01)* .05* .29* .17*
Net realized and unrealized gain on investments 4.80 1.10 3.55 3.68 3.95 4.22
Net increase in net asset value from operations 4.92 1.19 3.54 3.73 4.24 4.39
LESS: DISTRIBUTIONS
Dividends from net investment income (.11) -0- -0- (.14) (.26) (.06)
Distributions from net realized gains (.41) -0- (2.32) (1.23) (1.61) -0-
Total dividends and distributions (.52) -0- (2.32) (1.37) (1.87) (.06)
Net asset value, end of period $29.48 $25.08 $23.89 $22.67 $20.31 $17.94
TOTAL RETURN
Total investment return based on
net asset value (b) 20.18% 4.98% 15.66% 18.89% 23.61% 32.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $285,161 $167,800 $102,406 $13,889 $8,228 $713
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.35% 1.35%(c) 1.40% 1.40% 1.40% 1.40%(c)
Expenses, before waivers/reimbursements 1.35% 1.35%(c) 1.46% 1.84% 1.94% 8.79%(c)
Net investment income .56% .86%(c) .32% .20% 1.44% 1.99%(c)
Portfolio turnover rate 61% 24% 87% 124% 137% 130%
</TABLE>
See footnote summary on page 20.
18
ALLIANCE GROWTH FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------
MAY 1,1994
YEAR ENDED TO YEAR ENDED APRIL 30,
OCTOBER 31, OCTOBER 31, ---------------------------------------------
1995 1994** 1994 1993 1992 1991
------------ ------------ ------------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.21 $20.27 $19.68 $18.16 $16.88 $14.38
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.02) .01 (.07)*(e) (.06)* .17* .08*
Net realized and unrealized gain on investments 4.01 .93 2.98 3.23 3.67 3.22
Net increase in net asset value from operations 3.99 .94 2.91 3.17 3.84 3.30
LESS: DISTRIBUTIONS
Dividends from net investment income (.01) -0- -0- (.03) (.21) (.09)
Distributions from net realized gains (.41) -0- (2.32) (1.62) (2.35) (.71)
Total dividends and distributions (.42) -0- (2.32) (1.65) (2.56) (.80)
Net asset value, end of period $24.78 $21.21 $20.27 $19.68 $18.16 $16.88
TOTAL RETURN
Total investment return based on
net asset value (b) 19.33% 4.64% 14.79% 18.16% 22.75% 24.72%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,502,020 $751,521 $394,227 $56,704 $37,845 $22,710
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.05% 2.05%(c) 2.10% 2.15% 2.15% 2.10%
Expenses, before waivers/reimbursements 2.05% 2.05%(c) 2.13% 2.52% 2.65% 3.06%
Net investment income (loss) (.15)% .16%(c) (.36)% (.53)% .78% .56%
Portfolio turnover rate 61% 24% 87% 124% 137% 130%
</TABLE>
See footnote summary on page 20.
19
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE GROWTH FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS C
---------------------------------------
MAY 1,1994 AUGUST 2,
YEAR ENDED TO 1993 (D)
OCTOBER 31, OCTOBER 31, TO APRIL 30,
1995 1994** 1994
----------- ------------ ------------
Net asset value, beginning of period $21.22 $20.28 $21.47
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.03) .01 (.02)*
Net realized and unrealized gain on
investments 4.02 .93 1.15
Net increase in net asset value from
operations 3.99 .94 1.13
LESS: DISTRIBUTIONS
Dividends from net investment income (.01) -0- -0-
Distributions from net realized gains (.41) -0- (2.32)
Total dividends and distributions (.42) -0- (2.32)
Net asset value, end of period $24.79 $21.22 $20.28
TOTAL RETURN
Total investment return based on
net asset value (b) 19.32% 4.64% 5.27%
RATIOS/SUPPLEMENTAL DATA
Net assets,end of period(000's omitted) $226,662 $114,455 $64,030
Ratios to average net assets of:
Expenses,net of waivers/reimbursements 2.05% 2.05%(c) 2.10%(c)
Expenses,before waivers/reimbursements 2.05% 2.05%(c) 2.13%(c)
Net investment income (loss) (.15)% .16%(c) (.31)%(c)
Portfolio turnover rate 61% 24% 87%
* Net of fee waived and expenses reimbursed by the Adviser.
** The Fund changed its fiscal year end from April 30 to October 31.
(a) For the period September 4, 1990 (commencement of distribution) to April
30, 1991.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(c) Annualized.
(d) Commencement of distribution.
(e) Per share data based upon average monthly shares outstanding.
20
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE GROWTH FUND
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ALLIANCE GROWTH 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 Growth Fund (one of the
portfolios of The Alliance Portfolios, hereafter referred to as the 'Fund') at
October 31, 1995, the results of its operations for the year then ended, the
changes in its net assets for the year then ended, and for the period May 1,
1994 to October 31, 1994, 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 October 31, 1995 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
December 14, 1995
<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
Ratings Services 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
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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 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
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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
Rating Co. are as follows:
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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
00250184.AF0
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C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS:
(a) Financial Statements:
For financial statements, which are part of this
Registration Statement see "Financial Highlights" in the
Prospectuses and "Financial Statements" in the Statements of
Additional Information.
(b) Exhibits:
1. Agreement and Declaration of Trust (previously
filed with Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on July 8,
1987); Amendment No. 1 to Agreement and
Declaration of Trust (previously filed with Pre-
Effective Amendment No. 1 to the Registrant's
Registration Statement on July 8, 1987);
Amendment No. 2 to Agreement and Declaration of
Trust (previously filed with Post-Effective
Amendment No. 11 to the Registrant's
Registration Statement on June 28, 1993).
2. By-Laws (previously filed with Post-Effective
Amendment No. 1 to the Registrant's Registration
Statement on April 29, 1988); Amendment to By-
Laws dated October 16, 1991 (previously filed
with Post- Effective Amendment No. 9 to the
Registrant's Registration Statement on August
31, 1992).
3. Not applicable.
4(a). Specimen Share Certificate with respect to (a)
The Equitable Growth Fund; (b) The Equitable
Balanced Fund; (c) The Equitable Government
Securities Fund; (d) The Equitable Tax Exempt
Fund; (e) The Equitable Growth and Income Fund;
and (f) The Equitable Short- Term World Income
Fund (previously filed with Post- Effective
Amendment No. 6 to the Registrant's Registration
Statement on February 8, 1991).
4(b). Specimen Share Certificate with respect to (a)
The Equitable Aggressive Growth Fund; (b) The
Equitable Short-Term U.S. Government Fund; (c)
The Equitable Conservative Investors Fund; and
(d) The Equitable Growth Investors Fund
(previously filed with Post- Effective Amendment
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No. 9 to the Registrant's Registration Statement
on August 31, 1992).
4(c). Portions of the Registrant's Agreement and
Declaration of Trust and By-Laws pertaining to
shareholders' rights (previously filed with
Post- Effective Amendment No. 11 to the
Registrant's Registration Statement on June 28,
1993).
4(d). Specimen Share Certificate with respect to Class
C shares of (a) Alliance Conservative Investors
Fund and (b) Alliance Growth Investors Fund
(previously filed with Post-Effective Amendment
No. 17 to the Registrant's Registration
Statement on August 30, 1995).
4(e). Specimen Share Certificate with respect to Class
C shares of (a) Alliance Strategic Balanced
Fund; (b) Alliance Growth Fund; and (c) Alliance
Short-Term U.S. Government Fund (previously
filed with Post-Effective Amendment No. 19 to
the Registrant's Registration Statement on
October 31, 1995.)
5. Form of Investment Advisory Agreement between
the Registrant and Alliance Capital Management
L.P. (previously filed with Post-Effective
Amendment No. 11 to the Registrant's
Registration Statement on June 28, 1993).
6(a). Form of Distribution Services Agreement between
the Registrant and Alliance Fund Distributors,
Inc. (previously filed with Post-Effective
Amendment No. 11 to the Registrant's
Registration Statement on June 28, 1993).
6(b). Form of Selected Dealers Agreement between
Alliance Fund Distributors, Inc. and selected
dealers offering shares of the Registrant
(previously filed with Post- Effective Amendment
No. 11 to the Registrant's Registration
Statement on June 28, 1993).
6(c). Form of Selected Agents Agreement between
Alliance Fund Distributors, Inc. and selected
agents making available shares of the Registrant
(previously filed with Post-Effective Amendment
No. 11 to the Registrant's Registration
Statement on June 28, 1993).
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7. Not applicable.
8. Custodian Agreement between the Registrant and
State Street Bank and Trust Company (previously
filed with Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on November
21, 1988).
9(a). Transfer Agent Agreement between the Registrant
and State Street Bank and Trust Company
(previously filed with Post-Effective Amendment
No. 4 to the Registrant's Registration Statement
on June 29, 1989).
9(b). Accounting Agreement between Equitable Capital
Management Corporation and State Street Bank and
Trust Company concerning (a) The Equitable
Growth Fund; (b) The Equitable Balanced Fund;
(c) The Equitable Government Securities Fund;
and (d) The Equitable Tax Exempt Fund
(previously filed with Post-Effective Amendment
No. 4 to the Registrant's Registration Statement
on June 29, 1989).
9(c). Transfer Agent Agreement between the Registrant
and State Street Bank and Trust Company
(previously filed with Post-Effective Amendment
No. 17 to the Registrant's Registration
Statement on August 30, 1995).
10(a). Opinion and Consent of Counsel (previously filed
with Post-Effective Amendment No. 9 to the
Registrant's Registration Statement on August
31, 1992).
10(b). Opinion and Consent of Counsel (previously filed
with Post-Effective Amendment No. 17 to the
Registrant's Registration Statement on August
30, 1995).
11. Consent of Independent Accountants - filed
herewith.
12. Not applicable.
13. Investment Letter of The Equitable Life
Assurance Society of the United States
(previously filed with Pre-Effective Amendment
No. 2 to the Registrant's Registration Statement
on October 19, 1987).
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14. Not applicable.
15(a). Amended and Restated Distribution Plan
applicable to the Registrant's Class A shares
(previously filed with Post-Effective Amendment
No. 11 to the Registrant's Registration
Statement on June 28, 1993).
15(b). Amended and Restated Distribution Plan
applicable to the Registrant's Class B shares
(previously filed with Post-Effective Amendment
No. 11 to the Registrant's Registration
Statement on June 28, 1993).
15(c). Form of Distribution Plan applicable to the
Registrant's Class C shares (previously filed
with Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on June 28,
1993).
16. Schedule for computation of performance
quotations (previously filed with Post-Effective
Amendment No. 15 to the Registrant's
Registration Statement on January 27, 1995).
18. Rule 18f-3 Plan - filed herewith.
27. Financial Data Schedule - filed herewith.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
As of January 15, 1996, the Registrant, The Alliance
Portfolios, believes that no person is directly or indirectly
controlled by or under common control with the Registrant.
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Item 26. NUMBER OF HOLDERS OF SECURITIES
(as of January 15, 1996)
(1) (2)
NUMBER OF
RECORD
TITLE OF CLASS HOLDERS
Class A shares of
beneficial interest
of Alliance Growth Fund 30,605
Class B shares of
beneficial interest
of Alliance Growth Fund 144,610
Class C shares of
beneficial interest of
Alliance Growth Fund 16,219
Class A shares of
beneficial interest of
Alliance Strategic Balanced
Fund 1,602
Class B shares of
beneficial interest
of Alliance Strategic
Balanced Fund 4,378
Class C shares of
beneficial interest of
Alliance Strategic
Balanced Fund 354
Class A shares of
beneficial interest of
Alliance Short-Term
U.S. Government Fund 263
Class B shares of
beneficial interest
of Alliance Short-Term
U.S. Government Fund 560
Class C shares of
beneficial interest of
Alliance Short-Term
U.S. Government Fund 260
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<PAGE>
Item 27. INDEMNIFICATION
Paragraph (n) of Section 3, Article IV of the
Registrant's Agreement and Declaration of Trust provides in
relevant part that the Trustees of the Trust have the power:
"(n) To purchase and pay for entirely out of
Trust property such insurance as they may deem
necessary or appropriate for the conduct of the
business, including without limitation, insurance
policies insuring the assets of the Trust and payment
of distributions and principal on its portfolio
investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents,
investment advisers or managers, principal
underwriters, or independent contractors of the Trust
individually against all claims and liabilities of
every nature arising by reason of holding, being or
having held any such office or position, or by reason
of any action alleged to have been taken or omitted by
any such person as Shareholder, Trustee, officer,
employee, agent, investment adviser or manager,
principal underwriter, or independent contractor,
including any action taken or omitted that may be
determined to constitute negligence, whether or not the
Trust would have the power to indemnify such person
against such liability;"
Section 2 of Article VII of the Registrant's Agreement
and Declaration of Trust provides in relevant part:
"Limitation of Liability
Section 2. The Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any officer,
agent, employee, manager or principal underwriter of the Trust,
nor shall any Trustee be responsible for the act or omission of
any other Trustee, but nothing herein contained shall protect any
Trustee against any liability 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."
Article VIII of the Registrant's Agreement and
Declaration of Trust provides in relevant part:
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ARTICLE VIII
Indemnification
"Section 1. The Trust shall indemnify each of
its Trustees and officers (including persons who serve
at the Trust's request as directors, officers or
trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise)
(hereinafter referred to as a "Covered Person") against
all liabilities and expenses, including but not limited
to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees
reasonably incurred by any Covered Person in connection
with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which
such Covered Person may be or may have been involved as
a party or otherwise or with which such Covered Person
may be or may have been threatened, while in office or
thereafter, by reason of being or having been such a
Covered Person except with respect to any matter as to
which such Covered Person shall have been finally
adjudicated in any such action, suit or other
proceeding to be liable to the Trust or its
Shareholders by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's
office. Expenses, including counsel fees so incurred
by any such Covered Person (but excluding amounts paid
in satisfaction of judgments, in compromise or as fines
or penalties), shall be paid from time to time by the
Trust in advance of the final disposition of any such
action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to
repay amounts so paid to the Trust if it is ultimately
determined that indemnification of such expenses is not
authorized under this Article, provided, however, that
either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the
Trust shall be insured against losses arising from any
such advance payments or (c) either a majority of the
disinterested Trustees acting on the matter (provided
that a majority of the disinterested Trustees then in
office act on the matter), or independent legal counsel
in a written opinion, shall have determined, based upon
a review of readily available facts (as opposed to a
full trial type inquiry) that there is reason to
believe that such Covered Person will be found entitled
to indemnification under this Article.
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<PAGE>
"Section 2. As to any matter disposed of
(whether by a compromise payment, pursuant to a consent
decree or otherwise) without an adjudication by a
court, or by any other body before which the proceeding
was brought, that such Covered Person is liable to the
Trust or its Shareholders by reason of wilful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
or her office, indemnification shall be provided if (a)
approved as in the best interests of the Trust, after
notice that it involves such indemnification, by at
least a majority of the disinterested Trustees acting
on the matter (provided that a majority of the
disinterested Trustees then in office act on the
matter) upon a determination, based upon a review of
readily available facts (as opposed to a full trial
type inquiry) that such Covered Person is not liable to
the Trust or its Shareholders by reason or wilful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
or her office, or (b) there has been obtained an
opinion in writing of independent legal counsel, based
upon a review of readily available facts (as opposed to
a full trial type inquiry) to the effect that such
indemnification would not protect such Person against
any liability to the Trust to which he would otherwise
be subject by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties
involved in the conduct of his office. Any approval
pursuant to this Section shall not prevent the recovery
from any Covered Person in accordance with this Section
as indemnification if such Covered Person is
subsequently adjudicated by a Court of competent
jurisdiction to have been liable to the Trust or its
Shareholders by reason or wilful misfeasance, bad
faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's
office.
Section 3. The right of indemnification hereby
provided shall not be exclusive of or affect any other
rights to which such Covered Person may be entitled.
As used in this Article VIII, the term "Covered Person"
shall include such person's heirs, executors and
administrators and a "disinterested Trustee" is a
Trustee who is not an "interested person" of the Trust
as defined in Section 2(a)(19) of the Investment
Company Act of 1940, as amended, (or who has been
exempted from being an "interested person" by any rule,
regulation or order of the Commission) and against whom
none of such actions, suits or other proceedings or
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another action, suit or proceeding on the same or
similar grounds is then or has been pending. Nothing
contained in this Article shall affect any rights to
indemnification to which personnel of the Trust, other
than Trustees or officers, and other persons may be
entitled by contract or otherwise under law, nor the
power of the Trust to purchase and maintain liability
insurance on behalf of any such person.
Section 2 of Article IX of the Registrant's Agreement
and Declaration of Trust provides in relevant part:
"TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR
SURETY
Section 2. The exercise by the Trustees of their
powers and discretions hereunder shall be binding upon everyone
interested. A Trustee shall be liable for his or her own willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee, and
for nothing else, and shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of
counsel or other experts with respect to the meaning and
operation of this Declaration of Trust, and shall be under no
liability for any act or omission in accordance with such advice
or for failing to follow such advice. The Trustees shall not be
required to give any bond as such, nor any surety if a bond is
required."
_____________
The form of Investment Advisory Agreement
between the Registrant and Alliance Capital
Management L.P. provides that Alliance Capital
Management L.P. will not be liable under such
agreement for any mistake of judgment or in any
event whatsoever except for lack of good faith and
that nothing therein shall be deemed to protect, or
purport to protect, Alliance Capital Management
L.P. against any liability to the Registrant or its
shareholders to which it would otherwise be subject
by reason or willful misfeasance, bad faith or
gross negligence in the performance of its duties
thereunder, or by reason or reckless disregard of
its obligations or duties thereunder.
The form of Distribution Services Agreement
between the Registrant and Alliance Fund
Distributors, Inc. provides that the Registrant
will indemnify, defend and hold Alliance Fund
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<PAGE>
Distributors, Inc., and any person who controls it
within the meaning of Section 15 of the Investment
Company Act of 1940, free and harmless from and
against any and all claims, demands, liabilities
and expenses which Alliance Fund Distributors, Inc.
or any controlling person may incur arising out of
or based upon any alleged untrue statement of a
material fact contained in Registrant's
Registration Statement, Prospectus or Statement of
Additional Information or arising out of, or based
upon, any alleged omission to state a material fact
required to be stated in any one of the foregoing
or necessary to make the statements in any one of
the foregoing not misleading, provided that nothing
therein shall be so construed as to protect
Alliance Fund Distributors, Inc. against any
liability to Registrant or its security holders to
which it would otherwise be subject by reason or
willful misfeasance, bad faith or gross negligence
in the performance of its duties thereunder, or by
reason of reckless disregard of its obligations or
duties thereunder.
The foregoing summaries are qualified by the
entire text of Registrant's Agreement and
Declaration of Trust, the Advisory Agreement
between the Registrant and Alliance Capital
Management L.P., the Advisory Agreements between
the Registrant and Equitable Capital Management
Corporation and the Distribution Services Agreement
between the Registrant and Alliance Fund
Distributors, Inc.
The Registrant participates in a joint
directors and officers liability policy for the
benefit of its Trustees and officers.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 (the
"Act") may be permitted to Trustees, Officers and
controlling persons of the Trust pursuant to the
foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the
Securities and Exchange Commission, such
indemnification is against public policy as
expressed in the act, and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other
than the payment by the Trust of expenses incurred
or paid by a Trustee, Officer or controlling person
of the Trust in the successful defense of any
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<PAGE>
action, suit or proceeding) is asserted by such
Trustee, Officer or controlling person in
connection with the securities being registered,
the Trust will, unless in the opinion of its
counsel the matter has been settled by controlling
precedent, submit to a court of appropriate
jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF ADVISER.
The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Fund" in the Prospectus
and in the Statement of Additional Information constituting
Parts A and B, respectively, of this Registration Statement
are incorporated by reference herein.
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV filed
with the Securities and Exchange Commission on April 21, 1988
(File No. 801-32361) and amended through the date hereof, is
incorporated by reference herein.
ITEM 29. Principal Underwriters
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale of
shares of the Registrant, also acts as principal
Underwriter or Distributor for the following investment
companies:
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
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<PAGE>
Alliance Mortgage Strategy Trust, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust,
Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc., the principal place
of business of which is 1345 Avenue of the Americas,
New York, New York, 10105.
Positions and
Position and Offices Offices
Name with Underwriter with Registrant
Michael J. Laughlin Chairman
Robert L. Errico President
Kimberly A.
Baumgardner Senior Vice President
Edmund P. Bergan, Senior Vice President, Clerk
Jr. Secretary & General
Counsel
Richard A. Davies Senior Vice President,
Managing Director
Daniel J. Dart Senior Vice President
Byron M. Davis Senior Vice President
Geoffrey L. Hyde Senior Vice President
Barbara J. Krumsiek Senior Vice President Vice President-
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Marketing
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Dusty W. Paschall Senior Vice President
Antonios G. Senior Vice President
Poleondakis
Gregory K. Senior Vice President
Shannahan
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Warren W. Babcock III Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
William P. Vice President
Beanblossom
Jack C. Bixler Vice President
Casimir F. Bolanowski Vice President
Kevin T. Cannon Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
Mark J. Dunbar Vice President
Sohaila S. Farsheed Vice President
Linda A. Finnerty Vice President
William C. Fisher Vice President
Robert M. Frank Vice President
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<PAGE>
Gerard J. Friscia Vice President
and Controller
Andrew L. Gangolf Vice President Assistant Clerk
Mark D. Gersten Vice President Treasurer and Chief
Financial Officer
Joseph W. Gibson Vice President
Troy L. Glawe Vice President
Herbert H. Goldman Vice President
James E. Gunter Vice President
Alan Halfenger Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Robert H. Joseph, Jr. Vice President
and Treasurer
Richard D. Keppler Vice President
Sheila F. Lamb Vice President
Donna M. Lamback Vice President
Thomas Leavitt, III Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. Vice President
MacDonald
Maura A. McGrath Vice President
Mark R. Manley Vice President, Counsel
and Assistant Secretary
Matthew P. Mintzer Vice President
Joanna D. Murray Vice President
Nicole M. Vice President
Nolan-Koester
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<PAGE>
Daniel J. Phillips Vice President
Robert T. Pigozzi Vice President
James J. Posch Vice President
Robert E. Powers Vice President
Domenick Pugliese Vice President
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
J. William Strott, Jr. Vice President
Richard E. Tambourine Vice President
Joseph T. Tocyloski Vice President
Neil S. Wood Vice President
Emilie D. Wrapp Vice President
Maria L. Carreras Assistant Vice President
Sarah A. Chodera Assistant Vice President
John W. Cronin Assistant Vice President
Leon M. Fern Assistant Vice President
William B. Hanigan Assistant Vice President
Vicky M. Hayes Assistant Vice President
Daniel M. Hazard Assistant Vice President
John C. Hershock Assistant Vice President
James J. Hill Assistant Vice President
Kalen H. Holliday Assistant Vice President
Thomas K. Intoccia Assistant Vice President
Edward W. Kelly Assistant Vice President
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Patrick Look Assistant Vice President
and Assistant Treasurer
Michael F. Mahoney Assistant Vice President
Shawn P. McClain Assistant Vice President
Thomas F. Monnerat Assistant Vice President
Jeanette M. Nardella Assistant Vice President
Carol H. Rappa Assistant Vice President
Lisa Robinson-Cronin Assistant Vice President
Karen C. Satterberg Assistant Vice President
Robert M. Smith Assistant Vice President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of
1940 and the Rules thereunder are maintained as follows:
journals, ledgers, securities records and other original
records are maintained principally at the offices of Alliance
Fund Services, Inc., 500 Plaza Drive, Secaucus, New Jersey
07094 and at the offices of State Street Bank and Trust
Company, the Registrant's Custodian, 225 Franklin Street,
Boston, Massachusetts 02110. All other records so required
to be maintained are maintained at the offices of Alliance
Capital Management L.P., 1345 Avenue of the Americas, New
York, New York 10105.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
C-16
<PAGE>
********************
NOTICE
A copy of the Agreement and Declaration of Trust of The
Alliance Portfolios (the "Trust") is on file with the Secretary
of State of The Commonwealth of Massachusetts and notice is
hereby given that this Registration Statement has been executed
on behalf of the Trust by an officer of the Trust as an officer
and by its Trustees as trustees and not individually and the
obligations of or arising out of this Registration Statement are
not binding upon any of the Trustees, officers or shareholder
individually but are binding only upon the assets and property of
the Trust.
C-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York
and State of New York, on the 31st day of January, 1996.
THE ALLIANCE PORTFOLIOS
by /s/ John D. Carifa
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
l933, as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities
and on the dates indicated:
Signature Title Date
1) Principal
Executive Officer
/s/ John D. Carifa Chairman January 31, 1996
John D. Carifa and President
2) Principal Financial
and Accounting Officer
/s/ Mark D. Gersten Treasurer January 31, 1996
Mark D. Gersten and Chief
Financial Officer
All of the Trustees
Alberta B. Arthurs
Ruth Block
John D. Carifa
Richard W. Couper
Brenton W. Harries
Donald J. Robinson
C-18
<PAGE>
by /s/ Edmund P. Bergen, Jr. January 31, 1996
(Attorney-in-fact)
Edmund P. Bergan, Jr.
C-19
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
11. Consent of Independent
Accountants
18. Rule 18f-3 Plan
27. Financial Data Schedules
C-20
00250184.AF0
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional
Information constituting part of this Post-Effective Amendment
No. 19 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated December 14, 1995,
relating to the financial statements and financial highlights of
Alliance Growth Fund and our report dated September 27, 1995,
relating to the financial statements and financial highlights of
Alliance Strategic Balanced Fund, which appears in such Statement
of Additional Information, and to the incorporation by reference
of our reports into the Prospectus which constitutes part of this
Registration statement. We also consent to the references to us
under the headings "Statements and Reports" and "Independent
Accountants" in such Statement of Additional Information and to
the reference to us under the heading "Financial Highlights" in
such Prospectus.
We also consent to the incorporation by reference to our report
dated June 22, 1995 relating to the financial statements and
financial highlights of Alliance Growth Investors Fund and
Alliance Conservative Investors Fund and our report dated October
20, 1995, relating to the financial statements and financial
highlights of Alliance Short-Term U.S. Government Fund into this
Registration Statement and to the references to us under the
headings "Statements and Reports" and "Independent Accountants"
in such Statement of Additional Information and to the reference
to us under the heading "Financial Highlights" in such
Prospectus.
/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
January 26, 1996
00250184.AF3
<PAGE>
THE ALLIANCE PORTFOLIOS
Plan pursuant to Rule 18f-3 under the
Investment Company Act of 1940
_____________________________________
Effective January 17, 1996
This Plan (the "Plan") is adopted by The Alliance
Portfolios (the "Trust") pursuant to Rule 18f-3 under the
Investment Company Act of 1940 (the "Act") and sets forth the
general characteristics of, and the general conditions under
which the Trust may offer, multiple classes of shares of its now
existing and hereafter created portfolios.(1) This Plan may be
revised or amended from time to time as provided below.
Class Designations
The Trust(2) 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 Class Y shares. Each of the four classes of
shares will represent interests in the same portfolio of
investments of the Trust 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 Trust's
prospectus or statement of additional information 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.
__________________
(1) Prior to the effectiveness of this Plan, the Trust has
been offering multiple classes of shares pursuant to an exemptive
order of the Securities and Exchange Commission. This Plan is
intended to allow the Trust 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.
(2) For purposes of this Plan, if the Trust has existing
more than one portfolio pursuant to which multiple classes of
shares are issued, then references in this Plan to the "Trust"
shall be deemed to refer instead to each portfolio.
<PAGE>
Class B shares are offered at their NAV, without an initial
sales charge, but 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 Rule 12b-1 fee, which may
include a service fee, and a CDSC, as described in the
Prospectus.
Class Y 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 Trust to the distributor or principal underwriter
of the Trust's shares (the "Distributor") and (ii) transfer
agency costs attributable to each class. Subject to the approval
of the Trust's Board of Trustees, including a majority of the
independent Trustees, 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(3), (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 Trust), (e) litigation and other legal expenses
relating to a specific class of shares, (f) Trustees' 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 class of shares, and (i) any additional expenses, not
including advisory or custodial fees or other expenses related to
__________________
(3) For Class Y 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 Trust (the "Adviser") or the
Distributor from their own resources.
2
<PAGE>
the management of the Trust'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 Trust.
However, notwithstanding the above, the Trust may allocate
all expenses other than Class Expenses on the basis of relative
net assets (settled shares), as permitted by Rule 18f-3(c)(2)
under the Act.
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
Trust.
The Trust may allocate income and realized and unrealized
capital gains and losses to each share based on relative net
assets (i.e. settled shares), as permitted by Rule 18f-3(c)(2)
under the Act.
Conversion and Exchange Features
Conversion Features
Class B shares of the Trust automatically convert to Class A
shares of the Trust 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. The conversion of Class B shares to
Class A shares may be suspended if the opinion of counsel
3
<PAGE>
obtained by the Trust that the conversion does not constitute a
taxable event under current federal income tax law is no longer
available. Class B 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 shares will stop converting into Class A shares unless
the Class B 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 Trustees shall take such
action as is necessary to ensure that existing Class B 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 Trustees to implement the
foregoing, such action may include the exchange of all existing
Class B shares for a new class of shares ("New Class B"),
identical to existing Class B shares, except that New Class B
shares shall convert to New Class A shares. Exchanges or
conversions described in this paragraph shall be effected in a
manner that the Trustees reasonably believe will not be subject
to federal taxation. Any additional cost associated with the
creation, exchange or conversion of New Class A or New Class B
shares shall be borne by the Adviser and the Distributor. Class
B 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 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. Class Y shares may be exchanged for Class Y
shares of another Alliance Mutual Fund and shares of certain
Alliance money market funds. If the aggregate net asset value of
shares of all Alliance Mutual Funds held by an investor in the
Trust 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 Trust 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 Trust. All exchange features applicable to each
class will be described in the Prospectus.
4
<PAGE>
Dividends
Dividends paid by the Trust with respect to its Class A,
Class B, Class C and Class Y 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 the Trust entitles the shareholder of record
to one vote. Each class of shares of the Trust 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. Both Class A and Class
B shareholders will vote separately as a class to approve any
material increase in payments authorized under the Rule 12b-1
plan applicable to Class A shares.
Responsibilities of the Trustees
On an ongoing basis, the Trustees will monitor the Trust for
the existence of any material conflicts among the interests of
the four classes of shares. The Trustees 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 Trustees, including a majority
of the independent Trustees, 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.
Reports to the Trustees
The Adviser and Distributor will be responsible for
reporting any potential or existing conflicts among the four
classes of shares to the Trustees. In addition, the Trustees 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 Trustees in the exercise of their
fiduciary duties. At least annually, the Trustees shall receive
a report from an expert, acceptable to the Trustees, (the
5
<PAGE>
"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 Trust 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 Trust 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.
Adopted this 17th day of January, 1996
By: /s/ Edmund P. Bergan, Jr.
Edmund P. Bergan, Jr.
Secretary
6
00250184.AE8
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000812015
<NAME> THE ALLIANCE PORTFOLIOS
<SERIES>
<NUMBER> 1
<NAME> GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 1810030950
<INVESTMENTS-AT-VALUE> 2048761598
<RECEIVABLES> 35227688
<ASSETS-OTHER> 92180
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2084081466
<PAYABLE-FOR-SECURITIES> 41596069
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<OTHER-ITEMS-LIABILITIES> 28643176
<TOTAL-LIABILITIES> 70239245
<SENIOR-EQUITY> 794
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<SHARES-COMMON-PRIOR> 47520530
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<OVERDISTRIBUTION-NII> 840882
<ACCUMULATED-NET-GAINS> 46702727
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<DIVIDEND-INCOME> 24906926
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<EXPENSES-NET> 28777500
<NET-INVESTMENT-INCOME> (653141)
<REALIZED-GAINS-CURRENT> 48585427
<APPREC-INCREASE-CURRENT> 228506420
<NET-CHANGE-FROM-OPS> 276438706
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1211708
<DISTRIBUTIONS-OF-GAINS> 20859886
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 970688421
<NUMBER-OF-SHARES-REDEEMED> 261694199
<SHARES-REINVESTED> 16776606
<NET-CHANGE-IN-ASSETS> 980137940
<ACCUMULATED-NII-PRIOR> 1023967
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 11100437
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<GROSS-EXPENSE> 28777500
<AVERAGE-NET-ASSETS> 1480058233
<PER-SHARE-NAV-BEGIN> 0
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<RETURNS-OF-CAPITAL> 0
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
00250184.AE7
</TABLE>
