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This is filed pursuant to Rule 497(c).
File Nos. 2-29901 and 811-01716
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[LOGO ALLIANCE QUASAR FUND, INC.
________________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1999
(as amended November 1, 1999)
________________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the current Prospectus for the Alliance Quasar Fund, Inc. (the
"Fund") that offers the Class A, Class B and Class C shares of
the Fund and the current Prospectus for the Fund that offers the
Advisor Class shares of the Fund (the "Advisor Class Prospectus"
and, together with the Prospectus for the Fund that offers the
Class A, Class B and Class C shares of the Fund, the
"Prospectus"). Copies of such Prospectuses may be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone number shown above.
Table Of Contents
Page
Description of the Fund.................................
Management of the Fund..................................
Expenses of the Fund....................................
Purchase of Shares......................................
Redemption and Repurchase of Shares.....................
Shareholder Services....................................
Net Asset Value.........................................
Dividends, Distributions and Taxes......................
Portfolio Transactions....................
General Information.....................................
Report of Independent Auditors and Financial
Statements............................................
Appendix A: Certain Employee Benefit Plans............. A-1
_________________
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
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_______________________________________________________________
DESCRIPTION OF THE FUND
_______________________________________________________________
Alliance Quasar Fund, Inc. (the "Fund") is a
diversified, open-end investment company. Except as otherwise
indicated, the investment policies of the Fund are not
"fundamental policies" within the meaning of the Investment
Company Act of 1940, as amended (the "1940 Act"), and may,
therefore, be changed by the Board of Directors without a
shareholder vote. However, the Fund will not change its
investment policies without contemporaneous written notice to its
shareholders. The Fund's investment objective may not be changed
without shareholder approval. There can be, of course, no
assurance that the Fund will achieve its investment objective.
Investment Objective
The investment objective of the Fund is growth of
capital by pursuing aggressive investment policies. Investments
will be made based upon their potential for capital appreciation.
Therefore, current income will be incidental to the objective of
capital growth. Because of the market risks inherent in any
investment, the selection of securities on the basis of their
appreciation possibilities cannot ensure against possible loss in
value. Moreover, to the extent the Fund seeks to achieve its
objective through the more aggressive investment policies
described below, risk of loss increases. The Fund is therefore
not intended for investors whose principal objective is assured
income or preservation of capital.
How The Fund Pursues Its Objective
Within this basic framework, the policy of the Fund is
to invest in any companies and industries and in any types of
securities which are believed to offer possibilities for capital
appreciation. Investments may be made in well-known and
established companies as well as in new and unseasoned companies.
Critical factors considered in the selection of securities
include the economic and political outlook, the values of
individual securities relative to other investment alternatives,
trends in the determinants of corporate profits, and management
capability and practices.
It is the policy of the Fund to invest principally in
equity securities (common stocks, securities convertible into
common stocks or rights or warrants to subscribe for or purchase
common stocks); however, it may also invest to a limited degree
in non-convertible bonds and preferred stocks when, in the
judgment of Alliance Capital Management L.P., the Fund's
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investment adviser (the "Adviser"), such investments are
warranted to achieve the Fund's investment objective. When
business or financial conditions warrant, a more defensive
position may be assumed and the Fund may invest in short-term
fixed-income securities, in investment grade debt securities, in
preferred stocks or may hold its assets in cash.
The Fund may invest in both listed and unlisted domestic
and foreign securities, in restricted securities, and in other
assets having no ready market, but not more than 10% of the
Fund's total assets may be invested in all such restricted or not
readily marketable assets at any one time. Restricted securities
may be sold only in privately negotiated transactions or in a
public offering with respect to which a registration statement is
in effect under Rule 144 or 144A promulgated under the Securities
Act of 1933, as amended (the "Securities Act"). Where
registration is required, the Fund may be obligated to pay all or
part of the registration expense, and a considerable period may
elapse between the time of the decision to sell and the time the
Fund may be permitted to sell a security under an effective
registration statement. If during such a period adverse market
conditions were to develop, the Fund might obtain a less
favorable price than that which prevailed when it decided to
sell. Restricted securities and other not readily marketable
assets will be valued in such manner as the Board of Directors of
the Fund in good faith deems appropriate to reflect their fair
market value.
The Fund intends to invest in special situations from
time to time. A special situation arises when, in the opinion of
the Fund's management, the securities of a particular company
will, within a reasonably estimable period of time, be accorded
market recognition at an appreciated value solely by reason of a
development particularly or uniquely applicable to that company
and regardless of general business conditions or movements of the
market as a whole. Developments creating special situations
might include, among others, the following: liquidations,
reorganizations, recapitalizations or mergers, material
litigation, technological breakthroughs and new management or
management policies. Although large and well-known companies may
be involved, special situations often involve much greater risk
than is inherent in ordinary investment securities. The Fund
will not, however, purchase securities of any company with a
record of less than three years continuous operation (including
that of predecessors) if such purchase would cause the Fund's
investments in such companies, taken at cost, to exceed 25% of
the value of the Fund's total assets.
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Additional Investment Policies And Practices
The following additional investment policies supplement
those set forth in the Prospectus.
General. In seeking to attain its investment objective
of growth of capital, the Fund will supplement customary
investment practices by engaging in a broad range of investment
techniques including short sales "against the box," writing call
options, purchases and sales of put and call options written by
others and investing in special situations. These techniques are
speculative, may entail greater risk, may be considered of a more
short-term nature, and to the extent used, may result in greater
turnover of the Fund's portfolio and a greater expense than is
customary for most investment companies. Consequently, the Fund
is not a complete investment program and is not a suitable
investment for those who cannot afford to take such risks or
whose objective is income or preservation of capital. No
assurance can be given that the Fund will achieve its investment
objective. However, by buying shares in the Fund an investor may
receive advantages he would not readily obtain as an individual,
including professional management and continuous supervision of
investments. The Fund will be subject to the overall limitation
(in addition to the specific restrictions referred to below) that
the aggregate value of all restricted and not readily marketable
securities of the Fund, and of all cash and securities covering
outstanding call options written or guaranteed by the Fund, shall
at no time exceed 15% of the value of the total assets of the
Fund.
There is also no assurance that the Fund will at any
particular time engage in all or any of the investment activities
in which it is authorized to engage. In the opinion of the
Fund's management, however, the power to engage in such
activities provides an opportunity which is deemed to be
desirable in order to achieve the Fund's investment objective.
Short Sales. The Fund may only make short sales of
securities "against the box." A short sale is effected by selling
a security which the 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 the
Fund contemporaneously owns or has the right to obtain securities
identical to those sold short without payment. Short sales may
be used by the Fund to defer the realization of gain or loss for
federal income tax purposes on securities then owned by the Fund.
Gains or losses will be short- or long-term for federal income
tax purposes depending upon the length of the period the
securities are held by the Fund before closing out the short
sales by delivery to the lender. The Fund may, in certain
instances, realize short-term gain on short sales "against the
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box" by covering the short position through a subsequent
purchase. Not more than 15% of the value of the Fund's net
assets will be in deposits on short sales "against the box".
Pursuant to the Taxpayer Relief Act of 1997, if the Fund has
unrealized gain with respect to a security and enters into a
short sale with respect to such security, the Fund generally will
be deemed to have sold the appreciated security and thus will
recognize gain for tax purposes.
Puts and Calls. The Fund may write call options and may
purchase and sell put and call options written by others,
combinations thereof, or similar options. The Fund may not write
put options. A put option gives the buyer of such option, upon
payment of a premium, the right to deliver a specified number of
shares of a stock to the writer of the option on or before a
fixed date at a predetermined price. A call option gives the
purchaser of the option, upon payment of a premium, the right to
call upon the writer to deliver a specified number of shares of a
specified stock on or before a fixed date, at a predetermined
price, usually the market price at the time the contract is
negotiated. When calls written by the Fund are exercised, the
Fund will be obligated to sell stocks below the current market
price.
The writing of call options will, therefore, involve a
potential loss of opportunity to sell securities at higher
prices. In exchange for the premium received, the writer of a
fully collateralized call option assumes the full downside risk
of the securities subject to such option. In addition, the
writer of the call gives up the gain possibility of the stock
protecting the call. Generally, the opportunity for profit from
the writing of options is higher, and consequently the risks are
greater when the stocks involved are lower priced or volatile, or
both. While an option that has been written is in force, the
maximum profit that may be derived from the optioned stock is the
premium less brokerage commissions and fees. (For a discussion
regarding certain tax consequences of the writing of call options
by the Fund, see "Dividends, Distributions and Taxes".)
Writing, purchasing and selling call options are highly
specialized activities and entail greater than ordinary
investment risks. It is the Fund's policy not to write a call
option if the premium to be received by the Fund in connection
with such option would not produce an annualized return of at
least 15% of the then market value of the securities subject to
option. Commissions, stock transfer taxes and other expenses of
the Fund must be deducted from such premium receipts. Option
premiums vary widely depending primarily on supply and demand.
Calls written by the Fund will ordinarily be sold either on a
national securities exchange or through put and call dealers,
most, if not all, of whom are members of a national securities
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exchange on which options are traded, and will in such cases be
endorsed or guaranteed by a member of a national securities
exchange or qualified broker-dealer, which may be Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ"), an affiliate of
the Adviser. The endorsing or guaranteeing firm requires that
the option writer (in this case the Fund) maintain a margin
account containing either corresponding stock or other equity as
required by the endorsing or guaranteeing firm. A call written
by the Fund will not be sold unless the Fund at all times during
the option period owns either (a) the optioned securities, or
securities convertible into or carrying rights to acquire the
optioned securities or (b) an offsetting call option on the same
securities.
The Fund will not sell a call option written or
guaranteed by it if, as a result of such sale, the aggregate of
the Fund's portfolio securities subject to outstanding call
options (valued at the lower of the option price or market value
of such securities) would exceed 15% of the Fund's total assets.
The Fund will not sell any call option if such sale would result
in more than 10% of the Fund's assets being committed to call
options written by the Fund, which, at the time of sale by the
Fund, have a remaining term of more than 100 days. The aggregate
cost of all outstanding options purchased and held by the Fund
shall at no time exceed 10% of the Fund's total assets.
The Fund may purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated (i.e., over-the-counter) transactions. The Fund will
effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and
loan institutions) deemed creditworthy by the Adviser, and the
Adviser has adopted procedures for monitoring the
creditworthiness of such entities.
In buying a call, the Fund would be in a position to
realize a gain if, during the option period, the price of the
shares increased by an amount in excess of the premium paid and
commissions payable on exercise. It would realize a loss if the
price of the security declined or remained the same or did not
increase during the period by more than the amount of the premium
and commissions payable on exercise. By buying a put, the Fund
would be in a position to realize a gain if, during the option
period, the price of the shares declined by an amount in excess
of the premium paid and commissions payable on exercise. It
would realize a loss if the price of the security increased or
remained the same or did not decrease during that period by more
than the amount of the premium and commissions payable on
exercise. In addition, the Fund could realize a gain or loss on
such options by selling them.
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As noted above, the Fund may purchase and sell put and
call options written by others, combinations thereof, or similar
options. There are markets for put and call options written by
others and the Fund may from time to time sell or purchase such
options in such markets. If an option is not so sold and is
permitted to expire without being exercised, its premium would be
lost by the Fund.
Portfolio Turnover. Generally, the Fund's policy with
respect to portfolio turnover is to purchase securities with a
view to holding them for periods of time sufficient to assure
long-term capital gains treatment upon their sale and not for
trading purposes. However, it is also the Fund's policy to sell
any security whenever, in the judgment of the Adviser, its
appreciation possibilities have been substantially realized or
the business or market prospects for such security have
deteriorated, irrespective of the length of time that such
security has been held. This policy may result in the Fund
realizing short-term capital gains or losses on the sale of
certain securities. See "Dividends, Distributions and Taxes."
It is anticipated that the Fund's rate of portfolio turnover will
not exceed 200% during the current fiscal year. A 200% annual
turnover rate would occur, for example, if all the stocks in the
Fund's portfolio were replaced twice within a period of one year.
A portfolio turnover rate approximating 200% involves
correspondingly greater brokerage commission expenses than would
a lower rate, which expenses must be borne by the Fund and its
shareholders.
Fundamental Investment Policies
In addition to the investment objective and policies
described above, the Fund has adopted certain fundamental
investment policies which may not be changed without approval by
the vote of a majority of the Fund's outstanding voting
securities which means the vote of (1) 67% or more of the shares
represented at a meeting at which more than 50% of the
outstanding shares of the Fund are represented or (2) more than
50% of the outstanding shares of the Fund, whichever is less.
Whenever any investment restriction states a maximum percentage
of the Fund's assets which may be invested in any security or
other asset, it is intended that such maximum percentage
limitation be determined immediately after and as a result of the
Fund's acquisition of such securities or other assets.
Accordingly, any later increase or decrease in percentage beyond
the specified limitation resulting from a change in values or net
assets will not be considered a violation.
Briefly, these policies provide that the Fund may not:
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(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;
(iv) invest more than 10% of its assets in
restricted securities;
(v) purchase or sell real estate;
(vi) participate on a joint or joint and several
basis in any securities trading account;
(vii) invest in companies for the purpose of
exercising control;
(viii) purchase or sell commodities or commodity
contracts;
(ix) write put options;
(x) except as permitted in connection with short
sales of securities "against the box" described under the heading
"--Short Sales" above, make short sales of securities;
(xi) make loans of its funds or assets to any
other person, which shall not be considered as including the
purchase of a portion of an issue of publicly distributed bonds,
debentures, or other securities, whether or not the purchase was
made upon the original issuance of the securities; except that
the Fund may not purchase non- publicly distributed securities
subject to the limitations applicable to restricted securities;
(xii) except as permitted in connection with short
sales of securities or writing of call options, described under
the headings "--Short Sales" and "--Puts and Calls" above,
pledge, mortgage or hypothecate any of its assets;
(xiii) except as permitted in connection with short
sales of securities "against the box" described under the heading
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"Additional Investment Policies and Practices" above, make short
sales of securities; or
(xiv) purchase securities on margin, but it may
obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities.
In connection with the qualification or registration of
the Fund's shares for sales under the securities laws of certain
states, the Fund has agreed, in addition to the foregoing
investment restrictions, that it (i) will not invest more than
10% of its total assets in the securities of any one issuer; (ii)
will not invest more than 5% of its total assets in securities of
issuers which have been in operation for less than three years,
including the operations of any predecessors, and any equity
securities of issuers which are not readily marketable; (iii)
will not invest more than 5% of its total assets in puts, calls,
straddles, spreads or any combination thereof nor more than 2% of
its net assets in puts or calls written by others; (iv) will not
invest more than 5% of its net assets in warrants nor more than
2% of its net assets in unlisted warrants; (v) will not invest in
real estate (including limited partnership interests), excluding
readily marketable securities or participations or other direct
interests in oil, gas or other mineral leases, exploration or
development programs; and (vi) will not purchase or retain the
securities of any issuer if those officers and directors of the
Fund or its Adviser owning individually more than 1/2 of 1% of
such issuer together own more than 5% of the securities of such
issuer.
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MANAGEMENT OF THE FUND
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Adviser
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision of the Fund's Board of Directors (see "Management of
the Fund" in the Prospectus).
The Adviser is a leading international adviser managing
client accounts with assets as of September 30, 1999 totaling
more than $317 billion (of which more than $143 billion
represented assets of investment companies). As of September 30,
1999, the Adviser managed retirement assets for many of the
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largest public and private employee benefit plans (including 28
of the nation's FORTUNE 100 companies), for public employee
retirement funds in 31 states, for investment companies, and for
foundations, endowments, banks and insurance companies worldwide.
The 52 registered investment companies managed by the Adviser,
comprising 118 separate investment portfolios, currently have
approximately 4.8 million shareholder accounts.
Alliance Capital Management Corporation ("ACMC") is the
general partner of the Adviser. As of September 30, 1999, The
Equitable Life Assurance Society of the United States
("Equitable"), ACMC, Inc. and Equitable Capital Management
Corporation ("ECMC") were the beneficial owners of approximately
56% of the outstanding Units of the Adviser. ACMC, ECMC and
ACMC, Inc. are wholly owned subsidiaries of Equitable, one of the
largest life insurance companies in the United States. ECMC is a
registered investment adviser and ACMC, Inc. is a holding company
for Units of the Adviser. Equitable is a wholly owned subsidiary
of AXA Financial, Inc. ("AXA Financial"), a Delaware corporation
whose shares are traded on the New York Stock Exchange. AXA
Financial serves as the holding company for the Adviser,
Equitable and Donaldson, Lufkin & Jenrette, Inc., a broker-dealer
holding company. As of September 30, 1999, AXA, a French
insurance holding company, owned approximately 56% of the issued
and outstanding shares of the common stock of AXA Financial.
Under the Investment Advisory Contract, the Adviser
furnishes advice and recommendations with respect to the Fund's
portfolio of securities and investments and provides persons
satisfactory to the Board of Directors to act as officers and
employees of the Fund. Such officers and employees, as well as
certain Directors of the Fund may be employees of the Adviser or
its affiliates.
The Adviser is, under the Investment Advisory Contract,
responsible for the following expenses incurred by the Fund:
(i) the compensation of any of the Fund's directors, officers and
employees who devote less than all of their time to its affairs
and who devote part of their time to the affairs of the Adviser
or its affiliates, (ii) expenses of computing the net asset value
of the Fund's shares to the extent such computation is required
under applicable Federal securities laws, (iii) expenses of
office rental, and (iv) clerical and bookkeeping expenses.
The Fund has, under the Investment Advisory Contract,
assumed the obligation for payment of all of its other expenses
as described in the Prospectus. As to the obtaining of services
other than those specifically provided to the Fund by the
Adviser, the Fund may employ its own personnel. For such
services, it also may utilize personnel employed by the Adviser.
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In such event, the services will be provided to the Fund at cost
and the payments therefor must be specifically approved by the
Fund's Board of Directors. The Fund paid to the Adviser a total
of $120,737 in respect of such services during the fiscal year of
the Fund ended September 30, 1998.
For the services rendered by the Adviser under the
Investment Advisory Contract, the Fund pays the Adviser a
quarterly fee on the first business day of January, April, July
and October equal to .25 of 1% (approximately 1% on an annualized
basis) of the net assets of the Fund at the end of the preceding
quarter. The advisory fees for the fiscal years of the Fund
ended in 1996, 1997 and 1998, amounted to $2,780,297, $7,233,060
and $15,656,013, respectively.
The Investment Advisory Contract became effective on
July 22, 1992. The Investment Advisory Contract was approved by
the unanimous vote, cast in person, of the Fund's Directors,
including the Directors who are not parties to the Investment
Advisory Contract or interested persons as defined in the 1940
Act of any such party, at a meeting called for that purpose and
held on October 17, 1991. At a meeting held on June 11, 1992, a
majority of the outstanding voting securities of the Fund
approved the Investment Advisory Contract.
The Investment Advisory Contract continues in force for
successive twelve-month periods (computed from each October 1),
provided that such continuance is specifically approved at least
annually by the Fund's Directors or by a majority vote of the
holders of the outstanding voting securities of the Fund, and, in
either case, by a majority of the Directors who are not parties
to the Investment Advisory Contract or interested persons as
defined in the 1940 Act of any such party. Most recently, the
continuance of the Investment Advisory Contract until
September 30, 2000 was approved by a vote, cast in person, of the
Directors, including a majority of the Directors who are not
parties to the Investment Advisory Contract or interested persons
of any such party, at a meeting called for that purpose and held
on July 14, 1999.
The Investment Advisory Contract is terminable without
penalty on 60 days' written notice by a vote of a majority of the
Fund's outstanding voting securities or by a vote of a majority
of the Fund's Directors, or by the Adviser on 60 days' written
notice, and will automatically terminate in the event of its
assignment. The Investment Advisory Contract provides that in the
absence of willful misfeasance, bad faith or gross negligence on
the part of the Adviser, or of reckless disregard of its
obligations thereunder, the Adviser shall not be liable for any
action or failure to act in accordance with its duties
thereunder.
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Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The Adviser
may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients
simultaneously with the Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. It is
the policy of the Adviser to allocate advisory recommendations
and the placing of orders in a manner which is deemed equitable
by the Adviser to the accounts involved, including the Fund.
When two or more of the clients of the Adviser (including the
Fund) are purchasing or selling the same security on a given day
from the same broker-dealer, such transactions may be averaged as
to price.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to AFD Exchange Reserves, Alliance All-
Asia Investment Fund, Inc., Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Capital Reserves, Alliance
Global Dollar Government Fund, Inc., Alliance Global Environment
Fund, Inc., Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Government Reserves,
Alliance Greater China '97 Fund, Inc., Alliance Growth and Income
Fund, Inc., Alliance Health Care Fund, Inc. Alliance High Yield
Fund, Inc., Alliance Institutional Funds, Inc., Alliance
Institutional Reserves, Inc., Alliance International Fund,
Alliance International Premier Growth Fund, Inc., Alliance
Limited Maturity Government Fund, Inc., Alliance Money Market
Fund, Alliance Mortgage Securities Income Fund, Inc., Alliance
Multi-Market Strategy Trust, Inc., Alliance Municipal Income
Fund, Inc., Alliance Municipal Income Fund II, Alliance Municipal
Trust, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Real Estate Investment Fund, Inc., Alliance Select
Investor Series, Inc., Alliance Technology Fund, Inc., Alliance
Utility Income Fund, Inc., Alliance Variable Products Series
Fund, Inc., Alliance Worldwide Privatization Fund, Inc., The
Alliance Fund, Inc., The Alliance Portfolios and The Hudson River
Trust, all registered open-end investment companies; and to ACM
Government Income Fund, Inc., ACM Government Securities Fund,
Inc., ACM Government Spectrum Fund, Inc., ACM Government
Opportunity Fund, Inc., ACM Managed Income Fund, Inc., ACM
Managed Dollar Income Fund, Inc., ACM Municipal Securities Income
Fund, Inc., Alliance All-Market Advantage Fund, Inc., Alliance
World Dollar Government Fund, Inc., Alliance World Dollar
Government Fund II, Inc., The Austria Fund, Inc., The Korean
Investment Fund, Inc., The Southern Africa Fund, Inc. and The
Spain Fund, Inc., all registered closed-end investment
companies.
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Directors and Officers
The business and affairs of the Fund are managed under the
direction of the Board of Directors. The Directors and principal officers of
the Fund, their ages and their principal occupations during the past five
years are set forth below. Each such Director and officer is also a director,
trustee or officer of other registered investment companies sponsored by the
Adviser. Unless otherwise specified, the address of each of the following
persons is 1345 Avenue of the Americas, New York, New York 10105.
Directors
JOHN D. CARIFA,* 54, Chairman of the Board, is the
President, Chief Operating Officer and a Director of ACMC, with
which he has been associated since prior to 1994.
RUTH BLOCK, 68, was formerly an Executive Vice President
and the Chief Insurance Officer of Equitable. She is a Director
of Ecolab Incorporated (specialty chemicals) and BP Amoco
Corporation (oil and gas). Her address is P.O. Box 4623,
Stamford, Connecticut 06903.
DAVID H. DIEVLER, 70, is an independent consultant. He
was formerly a Senior Vice President of ACMC until December 1994.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 57, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1994.
Previously, he was Director of the National Academy of Design.
His address is 150 White Plains Road, Tarrytown, New York 10591.
WILLIAM H. FOULK, JR., 67, is an Investment Adviser and
an independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1994. His address is
Room 100, 2 Greenwich Plaza, Greenwich, Connecticut 06830.
DR. JAMES M. HESTER, 75, has been President of the Harry
Frank Guggenheim Foundation, with which he has been associated
since prior to 1994. He was formerly President of New York
University, the New York Botanical Garden and Rector of the
United Nations University. His address is 25 Cleveland Lane,
Princeton, New Jersey 08540.
CLIFFORD L. MICHEL, 60, is a member of the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1994. He is President and Chief Executive Officer of
____________________
* An "interested person" of the Fund as defined in the 1940
Act.
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Wenonah Development Company (investments) and a Director of
Placer Dome, Inc. (mining). His address is St. Bernard's Road,
Gladstone, New Jersey 07934.
DONALD J. ROBINSON, 65, is Senior Counsel to the law
firm of Orrick, Herrington & Sutcliffe and was formerly a senior
partner and a member of the Executive Committee of that firm. He
was also a Trustee of the Museum of the City of New York from
1977 to 1995. His address is 98 Hell's Peak Road, Weston,
Vermont 05161.
OFFICERS
JOHN D. CARIFA, Chairman, see biography above.
ALDEN M. STEWART, President, 53, is an Executive Vice
President of ACMC, with which he has been associated since prior
to 1994.
KATHLEEN A. CORBET, Senior Vice President, 39, is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1994.
RANDALL E. HAASE, Senior Vice President, 36, is a Senior
Vice President of ACMC, with which he has been associated since
prior to 1994.
THOMAS J. BARDONG, Vice President, 54, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1994.
EDMUND P. BERGAN, JR., Secretary, 49, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS"), with which
he has been associated since prior to 1994.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
49, is a Senior Vice President of AFS and a Vice President of
AFD, with which he has been associated since prior to 1994.
VINCENT S. NOTO, Controller, 34, is a Vice President of
AFS, with which he has been associated since prior to 1994.
ANDREW L. GANGOLF, Assistant Secretary, 45, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since December 1994. Prior thereto, he was a
Vice President and Assistant Secretary of Delaware Management
Co., Inc.
DOMENICK PUGLIESE, Assistant Secretary, 38, is a Vice
President and Assistant General Counsel of AFD, with which he has
14
<PAGE>
been associated since May 1995. Prior thereto, he was Vice
President and Counsel of Concord Holding Corporation since prior
to 1994.
EMILIE D. WRAPP, Assistant Secretary, 43, is a Vice
President and Assistant General Counsel of AFD, with which she
has been associated since prior to 1994.
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended September 30, 1998,
the aggregate compensation paid to each of the Directors during
calendar year 1998 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of registered investment companies (and separate investment
portfolios within those companies) in the Alliance Fund Complex
with respect to which each of the Directors serves as a director
or trustee, are set forth below. Neither the Fund nor any other
registered investment company in the Alliance Fund Complex
provides compensation in the form of pension or retirement
benefits to any of its directors or trustees. Each of the
Directors is a director or trustee of one or more other
registered investment companies in the Alliance Fund Complex.
Total Number
Total Number of Investment
Of Investment Portfolios
Companies in Within the
the Alliance Alliance Fund
Total Fund Complex, Complex,
Compensation Including the Including the
from the Fund, as to Fund, as to
Alliance Fund which the which the
Aggregate Complex, Director is a Director is a
Name of Compensation Including the Director or Director or
Director from the Fund Fund Trustee Trustee
___________ ____________ _____________ _____________ _______________
John D. Carifa $-0- $-0- 50 114
Ruth Block $4,058 $180,763 37 77
David H. Dievler $4,736 $216,288 43 80
John H. Dobkin $4,025 $185,363 41 91
William H. Foulk, Jr. $4,055 $241,003 45 109
Dr. James Hester $4,062 $172,913 37 74
Clifford L. Michel $4,062 $187,763 38 90
Donald J. Robinson $3,986 $193,709 41 103
As of October 8, 1999, the Directors and officers of the
Fund as a group owned less than 1% of the shares of the Fund.
15
<PAGE>
_______________________________________________________________
EXPENSES OF THE FUND
_______________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund's shares and to permit the Fund to pay distribution
services fees to defray expenses associated with the distribution
of its Class A, Class B and Class C shares in accordance with a
plan of distribution which is included in the Agreement and has
been duly adopted and approved in accordance with Rule 12b-1
under the 1940 Act (the "Rule 12b-1 Plan").
During the Fund's fiscal year ended September 30, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class A shares, in amounts
aggregating $1,239,764 which constituted 0.26%, annualized, of
the Fund's aggregate average daily net assets attributable to
Class A shares during the period, and the Adviser made payments
from its own resources as described above aggregating $1,765,835.
Of the $3,005,599 paid by the Fund and the Adviser under the Rule
12b-1 Plan with respect to the Class A shares,, $89,648 was spent
on advertising, $75,589 on the printing and mailing of
prospectuses for persons other than current shareholders,
$1,277,995 for compensation to broker-dealers and other financial
intermediaries (including, $198,477 to the Fund's Principal
Underwriters), $731,822 for compensation to sales personnel,
$830,545 was spent on printing of sales literature, travel,
entertainment, due diligence and other promotional expenses.
During the Fund's fiscal year ended September 30, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class B shares, in amounts
aggregating $6,552,472, which constituted 1.00%, annualized, of
the Fund's aggregate average daily net assets attributable to
Class B shares during the period, and the Adviser made payments
from its own resources as described above aggregating
$12,412,000. Of the $18,964,472 paid by the Fund and the Adviser
under the Rule 12b-1 Plan with respect to the Class B shares,
$123,152 was spent on advertising, $95,202 on the printing and
mailing of prospectuses for persons other than current
shareholders, $17,200,333 for compensation to broker-dealers and
other financial intermediaries (including, $276,270 to the Fund's
Principal Underwriters), $384,182 for compensation to sales
personnel, $411,213 was spent on printing of sales literature,
travel, entertainment, due diligence and other promotional
16
<PAGE>
expenses, and $750,390 was spent on interest on Class B shares
financing.
During the Fund's fiscal year ended September 30, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class C shares, in amounts
aggregating $1,893,195, which constituted 1.00%, annualized, of
the Fund's aggregate average daily net assets attributable to
Class C shares during the period, and the Adviser made payments
from its own resources as described above aggregating $660,482.
Of the $2,553,677 paid by the Fund and the Adviser under the Rule
12b-1 Plan with respect to the Class C shares, $40,076 was spent
on advertising, $32,299 on the printing and mailing of
prospectuses for persons other than current shareholders,
$2,000,805 for compensation to broker-dealers and other financial
intermediaries (including, $91,177 to the Fund's Principal
Underwriters), $127,302 for compensation to sales personnel,
$136,554 was spent on printing of sales literature, travel,
entertainment, due diligence and other promotional expenses, and
$216,641 was spent on interest on Class C shares financing.
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and at the same time to permit the
Principal Underwriter to compensate broker-dealers in connection
with the sale of such shares. In this regard the purpose and
function of the combined contingent deferred sales charge and
distribution services fee on the Class B shares and Class C
shares are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and distribution services fee
provide for the financing of the distribution of the relevant
class of the Fund's shares.
With respect to Class A shares of the Fund, distribution
expenses accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent
fiscal years. AFD's compensation with respect to Class B and
Class C shares for any given year, however, will probably exceed
the distribution services fee payable under the Rule 12b-1 Plan
with respect to the class involved and, in the case of Class B
and Class C shares, payments received from contingent deferred
sales charges ("CDSCs"). The excess will be carried forward by
AFD and reimbursed from distribution services fees payable under
the Rule 12b-1 Plan with respect to the class involved and, in
the case of Class B and Class C shares, payments subsequently
received through CDSCs, so long as the Rule 12b-1 Plan is in
effect.
17
<PAGE>
Unreimbursed distribution expenses incurred as of the
end of the Fund's most recently completed fiscal period, and
carried over for reimbursement in future years in respect of the
Class B and Class C shares for the Fund were, respectively,
$27,654,262 (4.42% of the net assets of Class B) and $1,923,179
(1.06% of the net assets of Class C).
The Rule 12b-1 Plan is in compliance with rules of the
National Association of Securities Dealers, Inc. which
effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to
.75% and .25%, respectively, of the average annual net assets
attributable to that class. The rules also limit the aggregate
of all front-end, deferred and asset-based sales charges imposed
with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per
annum.
In approving the 12b-1 Plan, the Directors of the Fund
determined that there was a reasonable likelihood that the Rule
12b-1 Plan would benefit the Fund and its shareholders. The
distribution services fee of a particular class will not be used
to subsidize the provision of distribution services with respect
to any other class.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.
The Agreement will continue in effect for successive
twelve-month periods (computed from each October 1), provided,
however, that such continuance is specifically approved at least
annually by the Directors of the Fund or by vote of the holders
of a majority of the outstanding voting securities (as defined in
the 1940 Act) of that class, and, in either case, by a majority
of the Directors of the Fund who are not parties to the Agreement
or interested persons, as defined in the 1940 Act, of any such
party (other than as directors of the Fund) and who have no
direct or indirect financial interest in the operation of the
Rule 12b-1 Plan or any agreement related thereto. Most recently
the continuance of the Agreement until September 30, 2000 was
approved by a vote, cast in person, of the Directors, including a
majority of the Directors who are not "interested persons", as
defined in the 1940 Act, at their meeting held on July 14, 1999.
18
<PAGE>
In the event that the Rule 12b-1 Plan is terminated or
not continued with respect to the Class A shares, Class B shares
or Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class, and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
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.
Transfer Agency Agreement
AFS, an indirect wholly-owned subsidiary of the Adviser
located at 500 Plaza Drive, Secaucus, New Jersey 07094, receives
a transfer agency fee per account holder of each of the Class A
shares, Class B shares, Class C shares and Advisor Class shares
of the Fund, plus reimbursement for out-of-pocket expenses. The
transfer agency fee with respect to the Class B shares and Class
C shares is higher than the transfer agency fee with respect to
the Class A shares and Advisor Class shares, reflecting the
additional costs associated with the Class B and Class C
contingent deferred sales charges. For the fiscal year ended
September 30, 1998, the Fund paid AFS $2,255,105 pursuant to the
Transfer Agency Agreement.
_______________________________________________________________
PURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Buy Shares."
19
<PAGE>
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), without any
initial sales charge and, as long as the shares are held for one
year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset-
based sales charge, in each case as described below. Shares of
the Fund that are offered subject to a sales charge are offered
through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered
into selected agent agreements with the Principal Underwriter
("selected agents") and (iii) the Principal Underwriter.
Advisor Class shares of the Fund may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, (iii) by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares) or (iv) by
directors and present or retired full-time employees of CB
Richard Ellis, Inc. Generally, a fee-based program must charge
an asset-based or other similar fee and must invest at least
$250,000 in Advisor Class shares of the Fund in order to be
approved by the Principal Underwriter for investment in Advisor
Class shares.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of shares made through
such financial representative. Such financial representative may
also impose requirements with respect to the purchase, sale or
exchange of shares that are different from, or in addition to,
20
<PAGE>
those imposed by the Fund, including requirements as to the
minimum initial and subsequent investment amounts. Sales
personnel of selected dealers and agents distributing the Fund's
shares may receive differing compensation for selling Class A,
Class B, Class C or Advisor Class shares.
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under "Class
A Shares." On each Fund business day on which a purchase or
redemption order is received by the Fund and trading in the types
of securities in which the Fund invests might materially affect
the value of Fund shares, the per share net asset value is
computed in accordance with the Fund's Articles of Incorporation
and By-Laws as of the next close of regular trading on the New
York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern
time) by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any weekday on which the Exchange is open
for trading.
The respective per share net asset values of the Class
A, Class B, Class C and Advisor Class shares are expected to be
substantially the same. Under certain circumstances, however,
the per share net asset values of the Class B and Class C shares
may be lower than the per share net asset values of the Class A
and Advisor Class shares as a result of the differential daily
expense accruals of the distribution and transfer agency fees
applicable with respect to those classes of shares. Even under
those circumstances, the per share net asset values of the four
classes eventually will tend to converge immediately after the
payment of dividends, which will differ by approximately the
amount of the expense accrual differential among the classes.
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchase of shares placed through
selected dealers, agents or financial representatives, as
applicable, the applicable public offering price will be the net
21
<PAGE>
asset value as so determined, but only if the selected dealer,
agent or financial representative receives the order prior to the
close of regular trading on the Exchange and transmits it to the
Principal Underwriter prior to 5:00 p.m. Eastern time. The
selected dealer, agent or financial representative, as
applicable, is responsible for transmitting such orders by 5:00
p.m. Eastern time (certain selected dealers, agents or financial
representatives may enter into operating agreements permitting
them to transmit purchase information to the Principal
Underwriter after 5:00 p.m. Eastern time and receive that day's
net asset value). If the selected dealer, agent or financial
representative fails to do so, the investor's right to that day's
closing price must be settled between the investor and the
selected dealer, agent or financial representative, as
applicable. If the selected dealer, agent or financial
representative, as applicable, receives the order after the close
of regular trading on the Exchange, the price will be based on
the net asset value determined as of the close of regular trading
on the Exchange on the next day it is open for trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase orders may not exceed $500,000. Payment for
shares purchased by telephone can be made only by electronic
funds transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription. As
a convenience to the subscriber, and to avoid unnecessary expense
to the Fund, stock certificates representing shares of the Fund
are not issued except upon written request to the Fund by the
shareholder or his or her authorized selected dealer or agent.
This facilitates later redemption and relieves the shareholder of
the responsibility for and inconvenience of lost or stolen
certificates. No certificates are issued for fractional shares,
although such shares remain in the shareholder's account on the
books of the Fund.
22
<PAGE>
In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part, to provide
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, such cash or other
incentives may take the form of payment for attendance at
seminars, meals, sporting events or theater performances, or
payment for travel, lodging and entertainment incurred in
connection with travel taken by persons associated with a dealer
or agent to locations within or outside the United States. Such
dealer or agent may elect to receive cash incentives of
equivalent amount in lieu of such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge when
applicable) and Class B and Class C shares bear the expense of
the contingent deferred sales charge, (ii) Class B shares and Class
C shares each bear the expense of a higher distribution services
fee than those borne by Class A shares, and Advisor Class shares do
not bear such a fee, (iii) Class B and Class C shares bear higher
transfer agency costs than that borne by Class A and Advisor
Class shares, (iv) each of Class A, Class B and Class C shares
has exclusive voting rights with respect to provisions of the
Rule 12b-1 Plan pursuant to which its distribution services fee
is paid and other matters for which separate class voting is
appropriate under applicable law, provided that, if the Fund
submits to a vote of the Class A shareholders, an amendment to
the Rule 12b-1 Plan that would materially increase the amount to
be paid thereunder with respect to the Class A shares, then such
amendment will also be submitted to the Class B shareholders and
the Advisor Class shareholders and the Class A shareholders, the
Class B shareholders and the Advisor Class shareholders will vote
separately by class and (v) Class B shares and Advisor Class
shares are subject to a conversion feature. Each class has
different exchange privileges and certain different shareholder
service options available.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
23
<PAGE>
Alternative Retail Purchase Arrangements -- Class A, Class B and
Class C Shares**
The alternative purchase arrangements available with
respect to Class A, Class B and Class C shares permit an investor
to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their
investment in the Fund, the accumulated distribution services fee
and contingent deferred sales charge on Class B shares prior to
conversion, or the accumulated distribution services fee and
contingent deferred sales charge on Class C shares, would be less
than the initial sales charge and accumulated distribution
services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher
return of Class A shares. Class A shares will normally be more
beneficial than Class B shares to the investor who qualifies for
reduced initial sales charges on Class A shares, as described
below. In this regard, the Principal Underwriter will reject any
order (except orders from certain retirement plans and certain
employee benefit plans) for more than $250,000 for Class B
shares. (See Appendix A for information concerning the
eligibility of certain employee benefit plans to purchase Class B
shares at net asset value without being subject to a contingent
deferred sales charge and the ineligibility of certain such plans
to purchase Class A shares.) Class C shares will normally not be
suitable for the investor who qualifies to purchase Class A
shares at net asset value. For this reason, the Principal
Underwriter will reject any order for more than $1,000,000 for
Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
____________________
** Advisor Class shares are sold to investors described above
in this section under "Purchase of Shares--General.
24
<PAGE>
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge on Class A shares would have to hold his or
her investment approximately seven years for the Class C
distribution services fee to exceed the initial sales charge plus
the accumulated distribution services fee of Class A shares. In
this example, an investor intending to maintain his or her
investment for a longer period might consider purchasing Class A
shares. This example does not take into account the time value
of money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in net
asset value or the effect of different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
During the Fund's fiscal years ended in 1998, 1997, and
1996, the aggregate amount of underwriting commissions payable
with respect to shares of the Fund were $6,151,282, $6,033,396
and $1,860,257, respectively. Of that amount, the Principal
Underwriter received the amounts of $224,489, $201,195 and
$85,854, respectively, representing that portion of the sales
charges paid on shares of the Fund sold during the year which was
not reallowed to selected dealers (and was, accordingly, retained
by the Principal Underwriter). During the Fund's fiscal years
ended in 1998, 1997 and 1996, the Principal Underwriter received
contingent deferred sales charges of $21,804, $3,953 and $0,
respectively, on Class A Shares, $1,179,325, $482,376 and $0,
respectively, on Class B shares, and $118,235, $51,887 and $0,
respectively, on Class C shares.
Class A Shares
The public offering price of Class A shares, is the net
asset value plus a sales charge, as set forth below.
25
<PAGE>
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
________ ________ ________ ____________
Less than
$100,000 4.44% 4.25% 4.00%
$100,000 but
less than
$250,000 3.36 3.25 3.00
$250,000 but
less than
$500,000 2.30 2.25 2.00
$500,000 but
less than
$1,000,000* 1.78 1.75 1.50
___________________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. In
determining the contingent deferred sales charge applicable to a
redemption of Class A shares, it will be assumed that the
redemption is, first, of any shares that are not subject to a
contingent deferred sales charge (for example, because an initial
sales charge was paid with respect to the shares, or they have
been held beyond the period during which the charge applies or
were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers and agents for selling
Class A shares. With respect to purchases of $1,000,000 or more
made through selected dealers or agents, the Adviser may,
26
<PAGE>
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
1% of the amount invested to compensate such dealers or agents
for their distribution assistance in connection with such
purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "Class B
shares--Conversion Feature" and "--Conversion of Advisor Class
Shares to Class A Shares." The Fund receives the entire net
asset value of its Class A shares sold to investors. The
Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above. In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter. A selected
dealer who receives reallowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities
Act.
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but may be subject in most cases to a contingent
deferred sales charge) or (ii) a reduced initial sales charge.
The circumstances under which such investors may pay a reduced
initial sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
27
<PAGE>
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-Quality Bond Portfolio
-U.S. Government Portfolio
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
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<PAGE>
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting AFS at the address or the
"For Literature" telephone number shown on the front cover of
this Statement of Additional Information.
Cumulative Quantity Discount (Right of Accumulation).
An investor's purchase of additional Class A shares of the Fund
may qualify for a Cumulative Quantity Discount. The applicable
sales charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of
business on the previous day) of (a) all
shares of the Fund held by the investor and
(b) all shares of any other Alliance Mutual
Fund held by the investor; and
(iii) the net asset value of all shares described
in paragraph (ii) owned by another
shareholder eligible to combine his or her
purchase with that of the investor into a
single "purchase" (see above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the 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
29
<PAGE>
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors may also
obtain the reduced initial sales charges shown in the table above
by means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B, Class
C and/or Advisor Class shares) of the Fund or any other Alliance
Mutual Fund. Each purchase of shares under a Statement of
Intention will be made at the public offering price or prices
applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Statement of Intention. At
the investor's option, a Statement of Intention may include
purchases of shares of the Fund or any other Alliance Mutual Fund
made not more than 90 days prior to the date that the investor
signs the Statement of Intention; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will be necessary to invest
only a total of $60,000 during the following 13 months in shares
of the Fund or any other Alliance Mutual Fund, to qualify for the
3.25% sales charge on the total amount being invested (the sales
charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
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<PAGE>
the rate of the sales charge applicable to the actual amount of
the aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting AFS at the address or
telephone numbers shown on the cover of this Statement of
Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
under the schedule of sales charges set forth in this Statement
of Additional Information, to an investment 13 times larger than
such initial purchase. The sales charge applicable to each
succeeding monthly purchase will be that normally applicable,
under such schedule, to an investment equal to the sum of (i) the
total purchase previously made during the 13-month period and
(ii) the current month's purchase multiplied by the number of
months (including the current month) remaining in the 13-month
period. Sales charges previously paid during such period will
not be retroactively adjusted on the basis of later purchases.
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that (i)
such reinvestment is made within 120 calendar days after the
redemption or repurchase date and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the redemption or repurchase transaction. Investors
may exercise the reinstatement privilege by written request sent
to the Fund at the address shown on the cover of this Statement
of Additional Information.
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<PAGE>
Sales at Net Asset Value. The Fund may sell its Class A
shares at net asset value (i.e., without an initial sales charge)
and without a contingent deferred sales charge to certain
categories of investors, including: (i) investment management
clients of the Adviser or its affiliates; (ii) officers and
present or former Directors of the Fund; present or former
directors and trustees of other investment companies managed by
the Adviser; present or retired full-time employees of the
Adviser, the Principal Underwriter, AFS and their affiliates;
officers and directors of ACMC, the Principal Underwriter, AFS
and their affiliates; officers, directors and present and full-
time employees of selected dealers or agents; or the spouse,
sibling, direct ancestor or direct descendant (collectively
"relatives") of any such person; or any trust, individual
retirement account or retirement plan account for the benefit of
any such person or relative; or the estate of any such person or
relative, if such shares are purchased for investment purposes
(such shares may not be resold except to the Fund); (iii) the
Adviser, the Principal Underwriter, Alliance Fund Services, Inc.
and their affiliates; and certain employee benefit plans for
employees of the Adviser, the Principal Underwriter, AFS and
their affiliates; (iv) registered investment advisers or other
financial intermediaries who charge a management, consulting or
other fee for their services and who purchase shares through a
broker or agent approved by the Principal Underwriter and clients
of such registered investment advisers or financial
intermediaries whose accounts are linked to the master account of
such investment adviser or financial intermediary on the books of
such approved broker or agent; (v) persons who were shareholders
of the Fund before the commencement of sales of shares of the
Fund subject to a sales charge; (vi) persons participating in a
fee-based program, sponsored and maintained by a registered
broker-dealer or other financial intermediaries and approved by
the Principal Underwriter, pursuant to which such persons pay an
asset-based fee to such broker-dealer or financial intermediary,
or its affiliates or agents, for services in the nature of
investment advisory or administrative services; (vii) persons who
establish to the Principal Underwriter's satisfaction that they
are investing within such time period as may be designated by the
Principal Underwriter, proceeds of redemption of shares of such
other registered investment companies as may be designated from
time to time by the Principal Underwriter; and (viii) employer-
sponsored qualified 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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<PAGE>
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
the Class B shares are paid to the Principal Underwriter and are
used by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services
fee enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
To illustrate, assume that on or after November 19, 1993
an investor purchased 100 Class B shares at $10 per share (at a
cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor
has acquired 10 additional Class B shares upon dividend
reinvestment. If at such time the investor makes his or her
first redemption of 50 Class B shares (proceeds of $600), 10
Class B shares will not be subject to the charge because of
dividend reinvestment. With respect to the remaining 40 Class B
shares, the charge is applied only to the original cost of $10
per share and not to the increase in net asset value of $2 per
share. Therefore, $400 of the $600 redemption proceeds will be
charged at a rate of 3.0% (the applicable rate in the second year
after purchase as set forth below).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
33
<PAGE>
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a %
of Dollar Amount Subject to Charge
Shares purchased Shares purchased
before on or after
Years Since Purchase November 19, 1993 November 19, 1993
First 5.5% 4.0%
Second 4.5% 3.0%
Third 3.5% 2.0%
Fourth 2.5% 1.0%
Fifth 1.5% None
Sixth 0.5% None
Seventh and thereafter None None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative or (iv)
pursuant to a systematic withdrawal plan (see "Shareholder
Services--Systematic Withdrawal Plan" below).
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose
of the conversion feature is to reduce the distribution services
34
<PAGE>
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee
enables the Fund to sell Class C shares without either an initial
or contingent deferred sales charge, as long as the shares are
held for one year or more. Class C shares do not convert to any
other class of shares of the Fund and incur higher distribution
services fees and transfer agency costs than Class A shares and
Advisor Class shares, and will thus have a higher expense ratio
and pay correspondingly lower dividends than Class A shares and
Advisor Class shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
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<PAGE>
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on shares
derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, as described above
under "--Class B Shares." In determining the contingent deferred
sales charge applicable to a redemption of Class C shares, it
will be assumed that the redemption is, first, of any shares that
are not subject to a contingent deferred sales charge (for
example, because the shares have been held beyond the period
during which the charge applies or were acquired upon the
reinvestment of dividends or distributions) and, second, of
shares held longest during the time they are subject to the sales
charge.
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares and Advisor Class shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts and employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares-- General," and by
investment advisory clients of, and by certain other persons
associated with, the Adviser and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan, or to be associated with the
investment adviser or financial intermediary, in each case, that
satisfies the requirements to purchase shares set forth under
"Purchase of Shares--General" or (ii) the holder is otherwise no
longer eligible to purchase Advisor Class shares as described in
the Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
shares held by the shareholder will convert automatically to
Class A shares of the Fund during the calendar month following
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<PAGE>
the month in which the Fund is informed of the occurrence of the
Conversion Event. The Fund will provide the shareholder with at
least 30 days' notice of the conversion. The failure of a
shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event. The conversion would occur on the
basis of the relative net asset values of the two classes and
without the imposition of any sales load, fee or other charge.
Class A shares currently bear a .30% distribution services fee.
Advisor Class shares do not have any distribution services fee.
As a result, Class A shares have a higher expense ratio and may
pay correspondingly lower dividends and have a lower net asset
value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law. The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem his Advisor Class shares, which would constitute a taxable
event under federal income tax law.
_______________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation requires that the Fund redeem
the shares tendered to it, as described below, at a redemption
price equal to their net asset value as next computed following
the receipt of shares tendered for redemption in proper form.
Except for any contingent deferred sales charge which may be
applicable to Class A, Class B or Class C shares, there is no
redemption charge. Payment of the redemption price will be made
37
<PAGE>
within seven days after the Fund's receipt of such tender for
redemption. If a shareholder is in doubt about what documents
are required by his or her fee-based program or employee benefit
plan, the shareholder should contact his or her financial
representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission
may by order permit for the protection of security holders of the
Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment received by a shareholder upon
redemption or repurchase of his shares, assuming the shares
constitute capital assets in his hands, will result in long-term
or short-term capital gains (or loss) depending upon the
shareholder's holding period and basis in respect of the shares
redeemed.
To redeem shares of the Fund for which no stock
certificates have been issued, the registering owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
To redeem shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
38
<PAGE>
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Fund. The
signature or signatures on the assignment form must be guaranteed
in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer of shares for which no stock certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from AFS. A telephone redemption
request by electronic funds transfer may not exceed $100,000
(except for certain omnibus accounts) and must be made by 4:00
p.m. Eastern time on a Fund business day as defined above.
Proceeds of telephone redemptions will be sent by electronic
funds transfer to a shareholder's designated bank account at a
bank selected by the shareholder that is a member of the NACHA.
Telephone Redemption By Check. Each Fund shareholder is
eligible to request redemption by check of Fund shares for which
no stock certificates have been issued by telephone at (800) 221-
5672 before 4:00 p.m. Eastern time on a Fund business day in an
amount not exceeding $50,000. Proceeds of such redemptions are
remitted by check to the shareholder's address of record. A
shareholder otherwise eligible for telephone redemption by check
may cancel the privilege by written instruction to AFS, or by
checking the appropriate box on the Subscription Application
found in the Prospectus.
Telephone Redemptions - General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching AFS by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
AFS at the address shown on the cover of this Statement of
Additional Information. The Fund reserves the right to suspend
or terminate its telephone redemption service at any time without
notice. Telephone redemption is not available with respect to
shares (i) for which certificates have been issued, (ii) held in
nominee or "street name" accounts, (iii) held by a shareholder
who has changed his or her address of record within the preceding
30 calendar days or (iv) held in any retirement plan account.
Neither the Fund nor the Adviser, the Principal Underwriter or
AFS will be responsible for the authenticity of telephone
requests for redemptions that the Fund reasonably believes to be
genuine. The Fund will employ reasonable procedures in order to
verify that telephone requests for redemptions are genuine,
39
<PAGE>
including, among others, recording such telephone instructions
and causing written confirmations of the resulting transactions
to be sent to shareholders. If the Fund did not employ such
procedures, it could be liable for losses arising from
unauthorized or fraudulent telephone instructions. Selected
dealers or agents may charge a commission for handling telephone
requests for redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. Eastern time (certain
selected dealers, agents or financial representatives may enter
into operating agreements permitting them to transmit purchase
information to the Principal Underwriter after 5:00 p.m. Eastern
time and receive that day's net asset value). If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
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deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
_______________________________________________________________
SHAREHOLDER SERVICES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares-Shareholder Services." The shareholder services set forth
below are applicable to Class A, Class B, Class C and Advisor
Class shares unless otherwise indicated. If you are an Advisor
Class shareholder through an account established under a fee-
based program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing electronic funds transfer
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives
the proceeds from the investor's bank. In electronic form,
drafts can be made on or about a date each month selected by the
shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus. Current shareholders should
contact AFS at the address or telephone numbers shown on the
cover of this Statement of Additional Information to establish an
automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Adviser).
In addition, (i) present officers and full-time employees of the
Adviser, (ii) present Directors or Trustees of any Alliance
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Mutual Fund and (iii) certain employee benefit plans for
employees of the Adviser, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates may, on a tax-free
basis, exchange Class A shares of the Fund for Advisor Class
shares of the Fund. Exchanges of shares are made at the net
asset value next determined and without sales or service charges.
Exchanges may be made by telephone or written request. Telephone
exchange requests must be received by Alliance Fund Services,
Inc. by 4:00 p.m. Eastern time on a Fund business day in order to
receive that day's net asset value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request. Call
Alliance Fund Services, Inc. at 800-221-5672 to exchange
uncertificated shares. Except with respect to exchanges of Class
A shares of the Fund for Advisor Class shares of the Fund,
exchanges of shares as described above in this section are
taxable transactions for federal tax purposes. The exchange
service may be changed, suspended, or terminated on 60 days'
written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for federal income tax purposes.
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Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless AFS
receives written instruction to the contrary from the
shareholder, or the shareholder declines the privilege by
checking the appropriate box on the Subscription Application
found in the Prospectus. Such telephone requests cannot be
accepted with respect to shares then represented by stock
certificates. Shares acquired pursuant to a telephone request
for exchange will be held under the same account registration as
the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone AFS with their account number and other details
of the exchange, at (800) 221-5672 before 4:00 p.m., Eastern
time, on a Fund business day as defined above. Telephone
requests for exchange received before 4:00 p.m. Eastern time on a
Fund business day will be processed as of the close of business
on that day. During periods of drastic economic or market
developments, such as the market break of October 1987, it is
possible that shareholders would have difficulty in reaching AFS
by telephone (although no such difficulty was apparent at any
time in connection with the 1987 market break). If a shareholder
were to experience such difficulty, the shareholder should issue
written instructions to AFS at the address shown on the cover of
this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the following
Fund business day prior thereto.
None of the Alliance Mutual Funds nor the Adviser, the
Principal Underwriter or AFS will be responsible for the
authenticity of telephone requests for exchanges that the Fund
reasonably believes to be genuine. The Fund will employ
reasonable procedures in order to verify that telephone requests
for exchanges are genuine, including, among others, recording
such telephone instructions and causing written confirmations of
the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers, agents or financial
representatives, as applicable, may charge a commission for
handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
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<PAGE>
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact AFS at the "For Literature"
telephone number on the cover of this Statement of Additional
Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan reaches $1 million
on or before December 15 in any year, all Class B shares and
C shares of the Fund held by the plan can be exchanged at the
plan's request without any sales charge, for Class A shares of
the Fund.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
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<PAGE>
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to AFS as compensation for its services to the retirement plan
accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact AFS.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on the shareholder's Class A, Class B,
Class C or Advisor Class Fund shares be automatically reinvested,
in any amount, without the payment of any sales or service
charges, in shares of the same class of such other Alliance
Mutual Fund(s). Further information can be obtained by
contacting AFS at the address or the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Investors wishing to establish a dividend direction
plan in connection with their initial investment should complete
the appropriate section of the Subscription Application found in
the Prospectus. Current shareholders should contact AFS to
establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
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participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such 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
Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level.
Therefore, redemptions of shares under the plan may reduce or
even liquidate a shareholder's account and may subject the
shareholder to the Fund's involuntary redemption provisions. See
"Redemption and Repurchase of Shares-- General." Purchases of
additional shares concurrently with withdrawals are undesirable
because of sales charges when purchases are made. While an
occasional lump-sum investment may be made by a holder of Class A
shares who is maintaining a systematic withdrawal plan, such
investment should normally be an amount equivalent to three times
the annual withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting AFS at the address or the "For Literature"
telephone number shown on the cover of this Statement of
Additional Information.
CDSC Waiver for Class B and Class C Shares. Under a
systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3%
quarterly of the value at the time of redemption of the Class B
or Class C shares in a shareholder's account may be redeemed free
of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
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<PAGE>
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. Redemptions of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.
With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent auditors, Ernst & Young LLP, as
well as a confirmation of each purchase and redemption. By
contacting his or her broker or AFS, a shareholder can arrange
for copies of his or her account statements to be sent to another
person.
_______________________________________________________________
NET ASSET VALUE
_______________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange (ordinarily 4:00 p.m.
Eastern time) following receipt of a purchase or redemption order
by the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors deems
appropriate or necessary in order to comply with Rule 22c-1 under
the 1940 Act. The Fund's per share net asset value is calculated
by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any weekday on which the Exchange is open
for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
States over-the-counter market) are valued, except as indicted
below, at the last sale price reflected on the consolidated tape
47
<PAGE>
at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each case
on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued
at the mean of the closing bid and asked prices on such day. If
no bid or asked prices are quoted on such day, then the security
is valued in good faith at fair value by, or in accordance with
procedures established by, the Board of Directors. Readily
marketable securities not listed on the Exchange or on a foreign
securities exchange but listed on other United States national
securities exchanges or traded on The Nasdaq Stock Market, Inc.
are valued in like manner. Portfolio securities traded on the
Exchange and on one or more foreign or other national securities
exchanges, and portfolio securities not traded on the Exchange
but traded on one or more foreign or other national securities
exchanges are valued in accordance with these procedures by
reference to the principal exchange on which the securities are
traded.
Readily marketable securities traded in the over-the-
counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a U.S.
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on The
Nasdaq Stock Market, Inc.), are valued at the mean of the current
bid and asked prices as reported by Nasdaq or, in the case of
securities not quoted by Nasdaq, the National Quotation Bureau or
another comparable sources.
Listed put or call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price. If there are no
quotations available for the day of valuations, the last
available closing settlement price will be used.
U.S. Government Securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
48
<PAGE>
believed to reflect the fair market value of such securities.
The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Board of Directors at fair value.
The Board of Directors may suspend the determination of
the Fund's, net asset value (and the offering and sale of
shares), subject to the rules of the Commission and other
governmental rules and regulations, at a time when: (1) the
Exchange is closed, other than customary weekend and holiday
closings, (2) an emergency exists as a result of which it is not
reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets,
or (3) for the protection of shareholders, the Commission by
order permits a suspension of the right of redemption or a
postponement of the date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. dollars at the mean
of the current bid and asked prices of such currency against the
U.S. dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
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The assets attributable to the Class A shares, Class B
shares, Class C shares and Advisor Class shares will be invested
together in a single portfolio. The net asset value of each
class will be determined separately by subtracting the
liabilities allocated to that class from the assets belonging to
that class in conformance with the provisions of a plan adopted
by the Fund in accordance with Rule 18f-3 under the 1940 Act.
_______________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_______________________________________________________________
Each dividend and capital gains distribution, if any,
declared by the Fund on its outstanding shares will, at the
election of each shareholder, be paid in cash or reinvested in
additional full or fractional shares of the same class of common
stock of the Fund having an aggregate net asset value as of the
payment date of such dividend or distribution equal to the cash
amount of such dividend or distribution. Election to receive
dividends and distributions in cash or full or fractional shares
is made at the time the shares are initially purchased and may be
changed at any time prior to the record date for a particular
dividend or distribution. Cash dividends can be paid by check
or, if the shareholder so elects, electronically via the ACH
network. There is no sales or other charge in connection with
the reinvestment of dividends and capital gains distributions.
Dividends paid by the Fund, if any, with respect to Class A,
Class B, Class C and Advisor Class shares will be calculated in
the same manner at the same time on the same day and will be in
the same amount, except that the higher distribution services
applicable to Class B and C shares, and any incremental transfer
agency costs relating to Class B and Class C shares, will be
borne exclusively by the class to which they relate.
General
The Fund intends for each taxable year to qualify to be
taxed as a "regulated investment company" under the Code. Such
qualification does not, of course, involve governmental
supervision of management or investment practices or policies.
Investors should consult their own counsel for a complete
understanding of the requirements the Fund must meet to qualify
for such treatment. The information set forth in the Prospectus
and the following discussion relate solely to federal income
taxes on dividends and distributions by the Fund and assumes that
the Fund qualifies as a regulated investment company. Investors
should consult their own counsel for further details and for the
application of state and local tax laws to his or her particular
situation.
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Dividends of net ordinary income and distributions of
net short-term capital gains are taxable to shareholders as
ordinary income. The dividends-received deduction for
corporations should also be applicable to the Fund's dividends of
net investment income and distributions of net realized short-
term capital gains. The amount of such dividends and
distributions eligible for the dividends-received deduction is
limited to the amount of qualifying dividends from domestic
corporations received by the Fund during the fiscal year. Under
provisions of the tax law, a corporate shareholder's dividends
received deduction will be disallowed unless the shareholder
holds shares in the Fund at least 46 days during the 90-day
period beginning 45 days before the date on which the shareholder
becomes entitled to receive the dividend. In determining the
holding period of such shares for this purpose, any period during
which a shareholder's risk of loss is offset by means of options,
short sales or similar transactions is not counted. Furthermore,
provisions of the tax law disallow the dividends-received
deduction to the extent a corporation's investment in shares of
the Fund is financed with indebtedness.
Distributions of net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) are
taxable as long-term capital gain, regardless of how long a
shareholder has held shares in the Fund. Distributions of net
capital gain are not eligible for the dividends received
deduction referred to above. Any dividend or distribution
received by a shareholder on shares of the Fund will have the
effect of reducing the net asset value of such shares by the
amount of such dividend or distribution. Furthermore, a dividend
or distribution made shortly after the purchase of such shares by
a shareholder, although in effect a return of capital to that
particular shareholder, would be taxable to him as described
above.
Dividends and distributions are taxable in the manner
described above regardless of whether they are paid to the
shareholder in cash or are reinvested in additional shares of the
Fund's common stock. Any gain or loss arising from a sale or
redemption of Fund shares generally will be capital gain or loss
except in the case of a dealer or a financial institution, and
will be long-term capital gain or loss if the shareholder has
held such shares for more than one year at the time of the sale
or redemption; otherwise it will be short-term capital gain or
loss. If a shareholder has held shares in the Fund for six
months or less and during that period has received a distribution
of net capital gain, any loss recognized by the shareholder on
the sale of those shares during the six-month period will be
treated as a long-term capital loss to the extent of the
distribution. In determining the holding period of such shares
for this purpose, any period during which a shareholder's risk of
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<PAGE>
loss is offset by means of options, short sales or similar
transactions is not counted.
A dividend or capital gains distribution with respect to
shares of the Fund held by a tax-deferred or qualified plan, such
as an individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, generally will not be
taxable to the plan. Distributions from such plans will be
taxable to individual participants under applicable tax rules
without regard to the character of the income earned by the
qualified plan.
Foreign Tax Credits
Income received by the Fund may also be subject to
foreign income taxes, including withholding taxes. It is
impossible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested
within various countries is not known. If more than 50% of the
value of the Fund's total assets at the close of its taxable year
consists of stocks or securities of foreign corporations, the
Fund will be eligible and intends to file an election with the
Internal Revenue Service to pass through to its shareholders the
amount of foreign taxes paid by the Fund. However, there can be
no assurance that the Fund will be able to do so. Pursuant to
this election a shareholder will be required to (i) include in
gross income (in addition to taxable dividends actually received)
his pro rata share of foreign taxes paid by the Fund, (ii) treat
his pro rata share of such foreign taxes as having been paid by
him, and (iii) either deduct such pro rata share of foreign taxes
in computing his taxable income or treat such foreign taxes as a
credit against United States federal income taxes. Shareholders
who are not liable for federal income taxes, such as retirement
plans qualified under section 401 of the Code, will not be
affected by any such pass-through of taxes by the Fund. No
deduction for foreign taxes may be claimed by an individual
shareholder who does not itemize deductions. In addition,
certain shareholders may be subject to rules which limit or
reduce their ability to fully deduct, or claim a credit for,
their pro rata share of the foreign taxes paid by the Fund. A
shareholder's foreign tax credit with respect to a dividend
received from the Fund will be disallowed unless the shareholder
holds shares in the Fund on the ex-dividend date and for at least
15 other days during the 30-day period beginning 15 days prior to
the ex-dividend date. Each shareholder will be notified within
60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will pass through for that year
and, if so, such notification will designate (i) the
shareholder's portion of the foreign taxes paid to each such
country and (ii) the portion of dividends that represents income
derived from sources within each such country.
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The federal income tax status of each year's
distributions by the Fund will be reported to shareholders and to
the Internal Revenue Service. The foregoing is only a general
description of the treatment of foreign taxes under the United
States federal income tax laws. Because the availability of a
foreign tax credit or deduction will depend on the particular
circumstances of each shareholder, potential investors are
advised to consult their own tax advisers.
The foregoing discussion relates only to U.S. federal
income tax law as it affects shareholders who are U.S. residents
or U.S. corporations. The effects of Federal income tax law on
shareholders who are non-resident aliens or foreign corporations
may be substantially different. Foreign investors should consult
their counsel for further information as to the U.S. tax
consequences of receipt of income from the Fund.
For Federal income tax purposes, when equity call
options which the 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 the Fund
is exercised, the selling price of the underlying stock is
increased by the amount of the premium, and the gain or loss on
the sale of stock 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.
______________________________________________________________
PORTFOLIO TRANSACTIONS
_______________________________________________________________
Subject to the general supervision of the Board of
Directors of the Fund, the Adviser is responsible for the
investment decisions and the placing of orders for portfolio
transactions for the Fund. The Adviser determines the broker to
be used in each specific transaction with the objective of
negotiating a combination of the most favorable commission and
the best price obtainable on each transaction (generally defined
as "best execution"). When consistent with the objective of
obtaining best execution, brokerage may be directed to persons or
firms supplying investment information to the Adviser. There may
be occasions where the transaction cost charged by a broker may
be greater than that which another broker may charge if the Fund
determines in good faith that the amount of such transaction cost
is reasonable in relation to the value of the brokerage, research
and statistical services provided by the executing broker.
Neither the Fund nor the Adviser has entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research services
53
<PAGE>
they provide. To the extent that such persons or firms supply
investment information to the Adviser for use in rendering
investment advice to the Fund, such information may be supplied
at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the
Fund. While it is impossible to place an actual dollar value on
such investment information, its receipt by the Adviser probably
does not reduce the overall expenses of the Adviser to any
material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e)(3) of the Securities Exchange
Act of 1934 and is designed to augment the Adviser's own internal
research and investment strategy capabilities. Research services
furnished by brokers through which the Fund effects securities
transactions are used by the Adviser in carrying out its
investment management responsibilities with respect to all its
client accounts.
The Fund may deal in some instances in securities which
are not listed on a national stock exchange but are traded in the
over-the-counter market. The Fund may also purchase listed
securities through the third market, i.e., from a dealer which is
not a member of the exchange on which a security is listed. Where
transactions are executed in the over-the-counter market or third
market, the Fund will seek to deal with the primary market
makers; but when necessary in order to obtain the best price and
execution, it will utilize the services of others. In all cases,
the Fund will attempt to negotiate best execution.
The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc. and subject
to seeking best execution, the Fund may consider sales of shares
of the Fund or other investment companies managed by the Adviser
as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with DLJ, an affiliate of the Adviser, and with brokers which may
54
<PAGE>
have their transactions cleared or settled, or both, by the
Pershing Division of DLJ, for which DLJ may receive a portion of
the brokerage commissions. In such instances, the placement of
orders with such brokers would be consistent with the Fund's
objective of obtaining best execution and would not be dependent
upon the fact that DLJ is an affiliate of the Adviser. With
respect to orders placed with DLJ for execution on a national
securities exchange, commissions received must conform to Section
17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder, which
permit an affiliated person of a registered investment company
(such as the Fund), or any affiliated person of such person, to
receive a brokerage commission from such registered investment
company provided that such commission is reasonable and fair
compared to the commissions received by other brokers in
connection with comparable transactions involving similar
securities during a comparable period of time.
During the fiscal years ended September 30, 1998, 1997
and 1996, the Fund incurred brokerage commissions amounting in
the aggregate to $5,405,376, $2,877,625 and $979,002,
respectively. During the fiscal years ended September 30, 1998,
1997 and 1996, brokerage commissions amounting in the aggregate
to $19,605, $4,865 and $0, respectively, were paid to DLJ and
brokerage commissions amounting in the aggregate to $-0-, $-0-,
and $-0-, respectively, were paid to brokers utilizing the
Pershing Division of DLJ. During the fiscal year ended September
30, 1998, the brokerage commissions paid to DLJ constituted 0.36%
of the Fund's aggregate brokerage commissions and the brokerage
commissions paid to brokers utilizing the Pershing Division of
DLJ constituted 0% of the Fund's aggregate brokerage commissions.
During the fiscal year ended September 30, 1998, of the Fund's
aggregate dollar amount of brokerage transactions involving the
payment of commissions, 0% were effected through DLJ and 0% were
effected through brokers utilizing the Pershing Division of DLJ.
During the fiscal year ended September 30, 1998, transactions in
portfolio securities of the Fund aggregating $2,010,943,650 with
associated brokerage commissions of approximately $1,958,910 were
allocated to persons or firms supplying research services to the
Fund or the Adviser.
_______________________________________________________________
GENERAL INFORMATION
_______________________________________________________________
Capitalization
The Fund was originally organized under the name Quasar
Associates, Inc. as a Delaware corporation on August 5, 1968 and,
effective April 27, 1989, was reorganized as a corporation under
the laws of Maryland under the name "Alliance Quasar Fund, Inc."
55
<PAGE>
The authorized capital stock of the Fund currently consists of
3,000,000 shares of Class A Common Stock, 3,000,000 shares of
Class B Common Stock, 3,000,000 shares of Class C Common Stock,
and 3,000,000 shares of Advisor Class Common Stock, each having a
par value of $.002 per share.
All shares of the Fund, when issued, are fully paid and
non-assessable. The Directors are authorized to reclassify and
issue any unissued shares to any number of additional series and
classes without shareholder approval. Accordingly, the Directors
in the future, for reasons such as the desire to establish one or
more additional portfolios with different investment objectives,
policies or restrictions, may create additional classes or series
of shares. Any issuance of shares of another class or series
would be governed by the 1940 Act and the law of the State of
Maryland. If shares of another series were issued in connection
with the creation of a second portfolio, each share of either
portfolio would normally be entitled to one vote for all
purposes. Generally, shares of both portfolios would vote as a
single series on matters, such as the election of Directors, that
affected both portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of
the Investment Advisory Contract and changes in investment
policy, shares of each portfolio would vote as a separate series.
Procedures for calling a shareholders' meeting for the removal of
Directors of the Fund, similar to those set forth in Section
16(c) of the 1940 Act will be available to shareholders of the
Fund. The rights of the holders of shares of a series may not be
modified except by the vote of a majority of the outstanding
shares of such series.
It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required
by federal or state law. Shareholders have available certain
procedures for the removal of Directors.
A shareholder will be entitled to share pro rata with
other holders of the same class of shares all dividends and
distributions arising from the Fund's assets and, upon redeeming
shares, will receive the then current net asset value of the Fund
represented by the redeemed shares less any applicable CDSC. The
Fund is empowered to establish, without shareholder approval,
additional portfolios, which may have different investment
objectives and policies than those of the Fund, and additional
classes of shares within the Fund. If an additional portfolio or
class were established in the Fund, each share of the portfolio
or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together
as a single class on matters, such as the election of Directors,
that affect each portfolio and class in substantially the same
manner. Class A, B, C and Advisor Class shares have identical
56
<PAGE>
voting, dividend, liquidation and other rights, except that each
class bears its own transfer agency expenses, each of Class A,
Class B and Class C shares of the Fund bears its own distribution
expenses and Class B shares and Advisor Class shares convert to
Class A shares under certain circumstances. Each class of shares
of the Fund votes separately with respect to the Fund's Rule 12b-
1 distribution plan and other matters for which separate class
voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the
Directors and, in liquidation of the Fund, are entitled to
receive the net assets of the Fund.
At the close of business on October 8, 1999 there were
20,818,560 Class A shares,27,423,388 Class B shares, 7,835,072
Class C shares and 6,818,851 Advisor Class shares common stock of
the Fund outstanding. To the knowledge of the Fund, the
following persons owned of record or beneficially, 5% or more of
a class of the outstanding shares of the Fund as of October 8,
1999:
Name and Address Shares % of Class
Class A
MLPF&S 4,066,749 19.76%
For the Sole Benefit of
Its Customers
Attn: Fund Administration (973N3)
4800 Deer Lake Dr East, 2nd Floor
Jacksonville, FL 32246-6484
Class B
MLPF&S 7,197,661 26.21%
For the Sole Benefit of
Its Customers
Attn: Fund Administration (976X1)
4800 Deer Lake Dr East, 2nd Floor
Jacksonville, FL 32246-6484
Class C
MLPF&S 3,350,736 42.72%
For the Sole Benefit of
Its Customers
Attn: Fund Administration (97BG2)
4800 Deer Lake Dr East, 2nd Floor
Jacksonville, FL 32246-6484
57
<PAGE>
Advisor Class
Merrill Lynch 4,841,310 72.21%
Mutual Fund Administration (97LS2)
4800 Deer Lake Dr East, 2nd Floor
Jacksonville, FL 32246-6484
Charles Schwab & Co. 699,604 10.44%
For the Exclusive Benefit
of Customers
Mutual Fund Operations
101 Montgomery Street
San Francisco, CA 94104-4122
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, will act as the Fund's
custodian for the assets of the Fund but plays no part in
deciding the purchase or sale of portfolio securities. Subject
to the supervision of the Fund's Directors, State Street Bank and
Trust Company may enter into sub-custodial agreements for the
holding of the Fund's foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., an indirect wholly-
owned subsidiary of Alliance, located at 1345 Avenue of the
Americas, New York, New York 10105, is the principal underwriter
of shares of the Fund. Under the Distribution Services Agreement
between the Fund and the Principal Underwriter, the Fund has
agreed to indemnify the Principal Underwriter, in the absence of
its willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations thereunder, against certain civil
liabilities, including liabilities under the Securities Act.
Counsel
Legal matters in connection with the issuance of the
shares of common stock offered hereby are passed upon by Seward &
Kissel LLP, New York, New York. Seward & Kissel LLP has relied
upon the opinion of Venable, Baetjer and Howard, LLP, Baltimore,
Maryland, for matters relating to Maryland law.
Independent Auditors
Ernst & Young LLP, New York, New York, has been
appointed as independent auditors for the Fund.
58
<PAGE>
Performance Information
From time to time, the Fund advertises its "total
return", which is computed separately for Class A, Class B, Class
C and Advisor Class shares. Such advertisements disclose the
Fund's average annual compounded total return for the periods
prescribed by the Commission. The Fund's total return for each
such period is computed by finding, through the use of a formula
prescribed by the Commission, the average annual compounded rate
of return over the period that would equate an assumed initial
amount invested to the value of the investment at the end of the
period. For purposes of computing total return, income dividends
and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases and redemptions of the Fund's
shares are assumed to have been paid.
The Fund calculates average annual total return
information in the Performance Table in the Risk/Return Summary
according to the Commission formula as described above. In
accordance with Commission guidelines, total return information
is presented for each class for the same time periods, i.e., the
1, 5 and 10 years (or over the life of the Fund, if the Fund is
less than 10 years old) ending on the last day of the most recent
calendar year. Since different classes may have first been sold
on different dates ("Actual Inception Dates"), in some cases this
can result in return information being presented for a class for
periods prior to its Actual Inception Date. Where return
information is presented for periods prior to the Actual
Inception Date of a Class (a "Younger Class"), such information
is calculated by using the historical performance of the class
with the earliest Actual Inception Date (the "Oldest Class").
For this purpose, the Fund calculates the difference in total
annual fund operating expenses (as a percentage of average net
assets) between the Younger Class and the Oldest Class, divides
the difference by 12, and subtracts the result from the monthly
performance at net asset value (including reinvestment of all
dividends and distributions) of the Oldest Class for each month
prior to the Younger Class's Actual Inception Date for which
performance information is to be shown. The resulting "pro
forma" monthly performance information is used to calculate the
Younger Class's average annual returns for these periods. Any
conversion feature applicable to the Younger Class is assumed to
occur in accordance with the Actual Inception Date for that
class, not its hypothetical inception date.
The Fund's average annual total return for the one-, five-
and ten-year periods ended March 31, 1999 (or since inception
through that date, as noted) was as follows:
59
<PAGE>
Class A (22.66%) 14.45% 9.96%
Class B (23.26%) 13.57% 12.29%*
Class C (23.21%) 13.59% 13.79%*
Advisor Class (22.44%) 3.02% N/A
*Inception Dates: Class B - September 17, 1990
Class C - May 3, 1993
Advisor Class - October 2, 1996
The Funds total return is computed separately for Class
A, Class B, Class C and Advisor Class shares. The Fund's total
return is not fixed and will fluctuate in response to prevailing
market conditions or as a function of the type and quality of the
securities in the Fund's portfolio and the Fund's expenses.
Total return information is useful in reviewing the Fund's
performance but such information may not provide a basis for
comparison with bank deposits or other investments which pay a
fixed yield for a stated period of time. An investor's principal
invested in the Fund is not fixed and will fluctuate in response
to prevailing market conditions.
Advertisements quoting performance ratings of the Fund
as measured by financial publications or independent
organizations such as Lipper, Inc. and Morningstar, Inc. and
advertisements presenting the historical record of payments of
income dividends by the Fund may also from time to time be sent
to investors or placed in newspapers or magazines such as
Barrons, Business Week, Changing Times, Forbes, Investor's Daily,
Money Magazine, The New York Times and The Wall Street Journal or
other media on behalf of the Fund. The Fund has been ranked by
Lipper in the category known as "small company growth."
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or to AFS at the address or telephone
numbers shown on the front cover of this Statement of Additional
Information. This Statement of Additional Information does not
contain all the information set forth in the Registration
Statement filed by the Fund with the Commission under the
Securities Act. Copies of the Registration Statement may be
obtained at a reasonable charge from the Securities and Exchange
Commission or may be examined, without charge, at the offices of
the Commission in Washington, D.C.
60
<PAGE>
_______________________________________________________________
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
_______________________________________________________________
61
<PAGE>
ALLIANCE QUASAR FUND
SEMI-ANNUAL REPORT
MARCH 31, 1999
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999 (UNAUDITED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-97.9%
CONSUMER PRODUCTS & SERVICES-51.9%
ADVERTISING-0.3%
Merkert American Corp. (a) 410,600 $ 4,465,275
AIRLINES-6.6%
Alaska Air Group, Inc. (a) 1,254,700 59,598,250
America West Holdings
Corp. Cl.B (a) 1,365,400 26,027,938
Atlas Air, Inc. (a) 341,600 9,842,350
Mesa Air Group, Inc. (a) 1,343,000 8,393,750
----------------
103,862,288
APPAREL-1.0%
Tommy Hilfiger Corp. (a) 225,600 15,538,200
BUSINESS SERVICES-4.8%
Carriage Services,
Inc. Cl.A (a) 721,900 10,918,738
Central Garden & Pet Co. (a) 518,400 8,748,000
Century Business Services,
Inc. (a) 1,716,122 18,770,084
FirstService Corp. (a) 874,000 11,416,625
TeleSpectrum Worldwide,
Inc. (a) 3,021,000 25,867,312
----------------
75,720,759
ENTERTAINMENT & LEISURE-10.9%
Bally Total Fitness Holding
Corp. (a) 795,700 18,997,337
Cinar Corp. (a) 629,200 14,471,600
Premier Parks, Inc. (a) 2,128,800 79,297,800
SFX Entertainment, Inc. 479,200 30,938,350
Sunterra Corp. (a) 2,603,900 25,388,025
Vistana, Inc. (a) 180,400 2,525,600
----------------
171,618,712
RESTAURANTS & LODGING-1.5%
Florida Panthers Holdings,
Inc. Cl.A (a) 926,700 7,181,925
MeriStar Hospitality Corp. 910,700 16,563,356
----------------
23,745,281
RETAILING-26.2%
BJ's Wholesale Club, Inc. (a) 667,400 17,644,387
Budget Group, Inc. Cl.A (a) 2,270,000 27,807,500
Circuit City Stores, Inc. -
CarMax Group (a) 2,893,100 11,391,581
Dollar Thrifty Automotive
Group, Inc. (a) 1,396,900 24,096,525
Furniture Brands International,
Inc. (a) 490,100 10,843,463
Group 1 Automotive, Inc. (a) 1,536,100 37,730,456
Industrie Natuzzi SpA
(ADR) (Italy) 1,509,000 24,898,500
Men's Wearhouse, Inc. (a) 923,250 26,658,844
Movado Group, Inc. 767,600 19,190,000
Sports Authority, Inc. (a) 2,768,400 20,243,925
Stage Stores, Inc. (a) 2,207,900 16,007,275
Tiffany & Co. 843,800 63,074,050
Trans World Entertainment
Corp. (a) 883,100 9,714,100
Tweeter Home Entertainment
Group, Inc. (a) 221,600 7,146,600
United Rentals, Inc. (a) 1,122,700 31,996,950
Venator Group, Inc. (a) 3,942,100 27,841,081
Whole Foods Market, Inc. (a) 289,000 9,934,375
Zale Corp. (a) 725,600 24,806,450
----------------
411,026,062
MISCELLANEOUS-0.6%
Cash America International,
Inc. 744,300 9,582,863
----------------
815,559,440
TECHNOLOGY-15.1%
COMMUNICATION EQUIPMENT-2.0%
Com21, Inc. (a) 269,100 7,063,875
Pinnicle Holdings, Inc. (a) 1,109,100 16,775,137
Tekelec, Inc. (a) 1,050,300 7,680,319
----------------
31,519,331
COMPUTER SOFTWARE & SERVICES-6.0%
CheckFree Corp. (a) 883,300 37,595,457
DBT Online, Inc. (a) 1,122,400 27,919,700
Harbinger Corp. (a) 799,720 5,398,110
IMRglobal Corp. (a) 496,100 8,805,775
Micromuse, Inc. (a) 33,800 1,554,800
Transaction Systems
Architects, Inc. Cl.A (a) 367,200 13,219,200
----------------
94,493,042
NETWORKING SOFTWARE-1.5%
Apex PC Solutions, Inc. (a) 1,694,400 23,615,700
6
ALLIANCE QUASAR FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
SEMI-CONDUCTOR EQUIPMENT-0.7%
Conexant Systems, Inc. (a) 157,400 $ 4,358,013
MKS Instruments, Inc. (a) 472,100 6,314,337
----------------
10,672,350
TELECOMMUNICATIONS-2.9%
GST Telecommunications,
Inc. (a) 1,058,000 11,571,875
ICG Communications,
Inc. (a) 688,200 13,764,000
Millicom International
Cellular, SA (a)
(Luxembourg) 786,200 20,441,200
----------------
45,777,075
MISCELLANEOUS-2.0%
Engineering Animation,
Inc. (a) 213,900 9,010,537
Excalibur Technologies
Corp. (a) 752,700 9,832,144
Harman International
Industries, Inc. 309,900 11,388,825
Ziff-Davis, Inc. 32,000 1,152,000
----------------
31,383,506
----------------
237,461,004
FINANCIAL SERVICES-10.8%
BROKERAGE & MONEY MANAGEMENT-4.3%
Legg Mason, Inc. 1,984,900 66,866,319
INSURANCE-0.7%
Reinsurance Group of America,
Inc. 337,050 11,417,569
REAL ESTATE-5.8%
Chelsea GCA Realty, Inc. 1,686,900 47,022,337
Glenborough Realty
Trust, Inc. 579,800 9,856,600
Taubman Centers, Inc. 2,792,400 34,206,900
----------------
91,085,837
----------------
169,369,725
BASIC INDUSTRIES-10.0%
BUILDING & RELATED-0.1%
Associated Materials, Inc. 178,200 1,893,375
METAL HARDWARE-2.1%
Bethlehem Steel Corp. (a) 4,034,700 33,286,275
TEXTILE PRODUCTS-3.2%
Mohawk Industries, Inc. (a) 1,659,300 49,779,000
TRANSPORTATION & SHIPPING-4.6%
Carey International, Inc. (a) 1,244,700 20,226,375
Consolidated Freightways
Corp. (a) 2,802,100 32,924,675
Teekay Shipping Corp. 1,133,700 18,706,050
----------------
71,857,100
----------------
156,815,750
HEALTH CARE-6.8%
BIOTECHNOLOGY-3.0%
GelTex Pharmaceuticals,
Inc. (a) 1,326,600 18,655,312
Human Genome Sciences,
Inc. (a) 27,000 936,563
MedImmune, Inc. (a) 208,100 12,316,919
Novoste Corp. (a) 648,100 15,554,400
----------------
47,463,194
DRUGS, HOSPITAL SUPPLIES & MEDICAL
SERVICES-3.8%
Aradigm Corp. (a) 917,800 8,374,925
Orthodontic Centers of
America, Inc. (a) 828,700 13,052,025
St. Jude Medical, Inc. (a) 366,400 8,931,000
Synetic, Inc. (a) 393,800 22,003,575
Veterinary Centers of
America, Inc. (a) 482,900 6,820,962
----------------
59,182,487
----------------
106,645,681
ENERGY-1.8%
OIL & GAS SERVICES-1.8%
Southern Union Co. 1,449,897 27,366,806
CONSUMER MANUFACTURING-1.5%
AUTO & RELATED-1.5%
Monaco Coach Corp. (a) 1,040,475 23,995,955
Total Common Stocks
(cost $1,560,719,869) 1,537,214,361
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
SHORT-TERM INVESTMENT-2.3%
U.S. GOVERNMENT & AGENCIES-2.3%
Federal Home Loan
Mortgage Corp.
4.82%, 4/01/99
(amortized cost
$36,400,000) $ 36,400 $ 36,400,000
TOTAL INVESTMENTS-100.2%
(cost $1,597,119,869) 1,573,614,361
Other assets less
liabilities-(0.2%) (2,397,394)
NET ASSETS-100% $ 1,571,216,967
(a) Non-income producing security.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999 (UNAUDITED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value
(cost $1,597,119,869) $ 1,573,614,361
Cash 75,304
Receivable for investment securities sold 13,892,334
Dividends receivable 2,516,550
Receivable for capital stock sold 2,514,169
Other assets 105,202
Total assets 1,592,717,920
LIABILITIES
Payable for investment securities purchased 13,378,361
Advisory fee payable 3,903,260
Payable for capital stock redeemed 3,002,797
Distribution fee payable 819,123
Accrued expenses 397,412
Total liabilities 21,500,953
NET ASSETS $ 1,571,216,967
COMPOSITION OF NET ASSETS
Shares of capital stock, at par $ 143,048
Additional paid-in capital 1,777,235,972
Accumulated net investment loss (8,697,027)
Accumulated net realized loss on investment
transactions (173,958,370)
Net unrealized depreciation of investments and
other assets (23,506,656)
$ 1,571,216,967
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($540,632,206 / 23,263,567 shares of capital stock
issued and outstanding) $23.24
Sales charge--4.25% of public offering price 1.03
Maximum offering price $24.27
CLASS B SHARES
Net asset value and offering price per share
($629,718,222 / 30,169,667 shares of capital stock
issued and outstanding) $20.87
CLASS C SHARES
Net asset value and offering price per share
($185,632,333 / 8,886,378 shares of capital stock
issued and outstanding) $20.89
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($215,234,206 / 9,204,565 shares of capital stock
issued and outstanding) $23.38
See notes to financial statements.
9
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1999 (UNAUDITED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends $ 6,289,652
Interest 1,663,993 $ 7,953,645
EXPENSES
Advisory fee 8,597,531
Distribution fee - Class A 728,502
Distribution fee - Class B 3,352,429
Distribution fee - Class C 1,003,702
Transfer agency 2,294,556
Registration 272,142
Printing 218,232
Custodian 143,920
Administrative 60,500
Audit and legal 56,423
Directors' fees 14,500
Miscellaneous 33,182
Total expenses 16,775,619
Less: expense offset arrangement
(see Note B) (125,277)
Net expenses 16,650,342
Net investment loss (8,696,697)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions (162,444,022)
Net change in unrealized depreciation of
investments and other assets 321,881,716
Net gain on investments 159,437,694
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 150,740,997
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE QUASAR FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment loss $ (8,696,697) $ (14,960,472)
Net realized gain (loss) on investment
transactions (162,444,022) 79,606,746
Net change in unrealized appreciation
(depreciation) of investments and
other assets 321,881,716 (516,425,096)
Net increase (decrease) in net assets
from operations 150,740,997 (451,778,822)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A (22,823,517) (17,164,110)
Class B (32,223,342) (24,996,773)
Class C (9,594,700) (7,133,144)
Advisor Class (9,530,738) (2,825,501)
CAPITAL STOCK TRANSACTIONS
Net increase 17,284,640 868,194,847
Total increase 93,853,340 364,296,497
NET ASSETS
Beginning of year 1,477,363,627 1,113,067,130
End of period $ 1,571,216,967 $ 1,477,363,627
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Quasar Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The Fund offers Class A, Class B, Class C and Advisor Class shares. Class A
shares are sold with a front-end sales charge of up to 4.25% for purchases not
exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase may be subject to a contingent
deferred sales charge of 1%. Class B shares are currently sold with a
contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month of
purchase. Class C shares are subject to a contingent deferred sales charge of
1% on redemptions made within the first year after purchase. Advisor Class
shares are sold without an initial or contingent deferred sales charge and are
not subject to ongoing distribution expenses. Advisor Class shares are offered
to investors participating in fee-based programs and to certain retirement plan
accounts. All four classes of shares have identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. The financial statements have been prepared in conformity
with generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets
and liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange are generally
valued at the last reported sales price or if no sale occurred, at the mean of
the closing bid and asked prices on that day. Securities traded in the
over-the-counter market, including securities traded on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. Readily marketable debt
securities are valued at the last sales price. Securities which mature in 60
days or less are valued at amortized cost, unless this method does not
represent fair value. Securities for which current market quotations are not
readily available are valued at their fair value as determined in good faith
by, or in accordance with procedures adopted by, the Board of Directors. Fixed
income securities may be valued on the basis of prices obtained from a pricing
service when such prices are believed to reflect the fair market value of such
securities.
2. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date the securities are
purchased or sold. The fund accretes discounts as adjustments to income.
Investment gains and losses are determined on the identified cost basis.
4. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisory Class shares have no distribution fees.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences, do not require
such reclassification.
12
ALLIANCE QUASAR FUND
_______________________________________________________________________________
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser") an advisory fee at a quarterly rate
equal to .25% (approximately 1% on an annual basis) of the net assets of the
Fund valued on the last business day of the previous quarter.
Pursuant to the advisory agreement, the Fund paid $60,500 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the six months ended March 31, 1999.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Adviser, under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $1,562,420 for the six months ended March 31, 1999.
In addition, for the six months ended March 31, 1999, the Fund's expenses were
reduced by $125,277 under an expense offset arrangement with Alliance Fund
Services. Transfer agency fees reported in the statement of operation exclude
these credits.
Alliance Fund Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary
of the Adviser, serves as the Distributor of the Fund's shares. The Distributor
received front-end sales charges of $63,785 from the sales of Class A shares
and $17,619, $1,309,352 and $83,391 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C
shares, respectively, for the six months ended March 31, 1999.
Brokerage commissions paid on investment transactions for the six months ended
March 31, 1999 amounted to $3,032,899, none of which was paid to Donaldson,
Lufkin & Jenrette Securities Corp., an affiliate of the Adviser.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30% of the Fund's average daily net assets attributable to Class
A shares and 1% of the average daily net assets attributable to both Class B
and Class C shares. There is no distribution fee on the Advisor Class shares.
The fees are accrued daily and paid monthly. The Agreement provides that the
Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amount of
$28,723,266 and $2,053,367 for Class B and Class C shares, respectively; such
costs may be recovered from the Fund in future periods so long as the Agreement
is in effect. In accordance with the Agreement, there is no provision for
recovery of unreimbursed distribution costs incurred by the Distributor beyond
the current fiscal year for Class A shares. The Agreement also provides that
the Adviser may use its own resources to finance the distribution of the Fund's
shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $784,084,312 and $818,690,777,
respectively, for the six months ended March 31, 1999. There were no purchases
or sales of U.S. government and government agency obligations for the six
months ended March 31, 1999.
At March 31, 1999, the cost of investments for federal income tax purposes was
$1,615,559,313. Accordingly, gross unrealized appreciation of investments was
$200,000,284 and gross unrealized depreciation of investments was $241,945,236,
resulting in net unrealized depreciation of $41,944,952.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $.002 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
----------------------------- -------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30, MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998 (UNAUDITED) 1998
------------ ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 44,655,717 43,817,026 $ 1,040,245,914 $ 1,244,246,754
Shares issued in
reinvestment of
distributions 905,268 571,457 20,223,740 15,988,123
Shares converted
from Class B 119,633 165,256 2,874,684 4,647,898
Shares redeemed (44,649,036) (35,561,736) (1,047,501,109) (1,011,637,305)
Net increase 1,031,582 8,992,003 $ 15,843,229 $ 253,245,470
CLASS B
Shares sold 6,822,230 18,286,351 $ 143,491,847 $ 482,762,932
Shares issued in
reinvestment of
distributions 1,502,464 923,019 30,212,928 23,536,952
Shares converted
to Class A (132,803) (181,899) (2,874,684) (4,647,898)
Shares redeemed (9,012,108) (6,112,452) (190,052,351) (154,925,238)
Net increase
(decrease) (820,217) 12,915,019 $ (19,222,260) $ 346,726,748
CLASS C
Shares sold 8,248,453 11,956,015 $ 173,813,114 $ 308,470,104
Shares issued in
reinvestment of
distributions 445,535 260,405 8,968,640 6,642,958
Shares redeemed (8,832,066) (8,416,893) (187,299,498) (213,847,794)
Net increase
(decrease) (138,078) 3,799,527 $ (4,517,744) $ 101,265,268
ADVISOR CLASS
Shares sold 7,004,500 9,129,797 $ 156,897,650 $ 259,655,427
Shares issued in
reinvestment of
distributions 413,259 95,462 9,281,785 2,676,749
Shares redeemed (6,038,974) (3,452,506) (140,998,020) (95,374,815)
Net increase 1,378,785 5,772,753 $ 25,181,415 $ 166,957,361
</TABLE>
NOTE F: BANK BORROWING
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions, in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the six months ended March 31, 1999.
14
FINANCIAL HIGHLIGHTS ALLIANCE QUASAR FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1999 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $22.27 $30.37 $27.92 $24.16 $22.65 $24.43
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.08)(a) (.17)(a) (.24)(a) (.25) (.22)(a) (.60)
Net realized and unrealized gain (loss)
on investment transactions 2.06 (6.70) 6.80 8.82 5.59 (.36)
Net increase (decrease) in net asset
value from operations 1.98 (6.87) 6.56 8.57 5.37 (.96)
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.01) (1.23) (4.11) (4.81) (3.86) (.82)
Net asset value, end of period $23.24 $22.27 $30.37 $27.92 $24.16 $22.65
TOTAL RETURN
Total investment return based on net
asset value (b) 9.07% (23.45)% 27.81% 42.42% 30.73% (4.05)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $540,632 $495,070 $402,081 $229,798 $146,663 $155,470
Ratio of expenses to average net assets 1.67%(c)(d) 1.61%(c) 1.67% 1.79% 1.83% 1.67%
Ratio of net investment loss to average
net assets (.69)%(d) (.59)% (.91)% (1.11)% (1.06)% (1.15)%
Portfolio turnover rate 49% 109% 135% 168% 160% 110%
</TABLE>
See footnote summary on page 18.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1999 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $20.17 $27.83 $26.13 $23.03 $21.92 $23.88
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.15)(a) (.36)(a) (.42)(a) (.20) (.37)(a) (.53)
Net realized and unrealized gain (loss)
on investment transactions 1.86 (6.07) 6.23 8.11 5.34 (.61)
Net increase (decrease) in net asset
value from operations 1.71 (6.43) 5.81 7.91 4.97 (1.14)
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.01) (1.23) (4.11) (4.81) (3.86) (.82)
Net asset value, end of period $20.87 $20.17 $27.83 $26.13 $23.03 $21.92
TOTAL RETURN
Total investment return based on net
asset value (b) 8.67% (24.03)% 26.70% 41.48% 29.78% (4.92)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $629,718 $625,147 $503,037 $112,490 $16,604 $13,901
Ratio of expenses to average net assets 2.44%(c)(d) 2.39%(c) 2.51% 2.62% 2.65% 2.50%
Ratio of net investment loss to average
net assets (1.47)%(d) (1.36)% (1.73)% (1.96)% (1.88)% (1.98)%
Portfolio turnover rate 49% 109% 135% 168% 160% 110%
</TABLE>
See footnote summary on page 18.
16
ALLIANCE QUASAR FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1999 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $20.18 $27.85 $26.14 $23.05 $21.92 $23.88
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.15)(a) (.35)(a) (.42)(a) (.20) (.37)(a) (.36)
Net realized and unrealized gain (loss)
on investment transactions 1.87 (6.09) 6.24 8.10 5.36 (.78)
Net increase (decrease) in net asset
value from operations 1.72 (6.44) 5.82 7.90 4.99 (1.14)
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.01) (1.23) (4.11) (4.81) (3.86) (.82)
Net asset value, end of period $20.89 $20.18 $27.85 $26.14 $23.05 $21.92
TOTAL RETURN
Total investment return based on net
asset value (b) 8.71% (24.05)% 26.74% 41.46% 29.87% (4.92)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $185,632 $182,110 $145,494 $28,541 $1,611 $1,220
Ratio of expenses to average net assets 2.43%(c)(d) 2.38%(c) 2.50% 2.61% 2.64% 2.48%
Ratio of net investment loss to average
net assets (1.45)%(d) (1.35)% (1.72)% (1.94)% (1.76)% (1.96)%
Portfolio turnover rate 49% 109% 135% 168% 160% 110%
</TABLE>
See footnote summary on page 18.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ADVISOR CLASS
------------------------------------
SIX MONTHS OCTOBER 2,
ENDED 1996(E)
MARCH 31, YEAR ENDED TO
1999 SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period $22.37 $30.42 $27.82
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (a) (.05) (.09) (.17)
Net realized and unrealized gain (loss)
on investment transactions 2.07 (6.73) 6.88
Net increase (decrease) in net asset
value from operations 2.02 (6.82) 6.71
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.01) (1.23) (4.11)
Net asset value, end of period $23.38 $22.37 $30.42
TOTAL RETURN
Total investment return based on net
asset value (b) 9.22% (23.24)% 28.47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $215,234 $175,037 $62,455
Ratio of expenses to average net assets 1.40%(c)(d) 1.38%(c) 1.58%(d)
Ratio of net investment loss to average
net assets (.41)%(d) (.32)% (.74)%(d)
Portfolio turnover rate 49% 109% 135%
</TABLE>
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(c) Ratios reflect expenses grossed up for expense offset arrangement with the
Transfer Agent. For the six months ended March 31, 1999, and the year ended
September 30, 1998, the ratios of expenses to average net assets were 1.66% and
1.60% for Class A shares, 2.43% and 2.38% for Class B shares, 2.42% and 2.37%
for Class C shares and 1.39% and 1.37% for Advisor Class shares, respectively.
(d) Annualized.
(e) Commencement of distribution.
18
<PAGE>
ALLIANCE QUASAR FUND
ANNUAL REPORT
SEPTEMBER 30, 1998
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998 ALLIANCE QUASAR FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-95.6%
CONSUMER PRODUCTS & SERVICES-47.2%
AIRLINES-5.1%
Alaska Air Group, Inc. (a) 1,291,800 $44,001,938
America West Holdings Corp.Cl.B (a) 1,973,500 24,668,750
Mesa Air Group, Inc. (a) 1,375,500 6,877,500
------------
75,548,188
APPAREL-3.0%
Stride Rite Corp. 920,900 7,539,869
Tommy Hilfiger Corp. (a) 633,200 25,961,200
Wolverine World Wide, Inc. 925,000 10,059,375
------------
43,560,444
BROADCASTING & CABLE-1.9%
Sinclair Broadcast Group, Inc. Cl.A (a) 739,900 12,023,375
Young Broadcasting, Inc. Cl.A (a) 478,200 16,258,800
------------
28,282,175
BUSINESS SERVICES-7.4%
Carriage Services, Inc. Cl.A (a) 581,100 14,345,906
Central Garden & Pet Co. (a) 738,800 13,667,800
Century Business Services, Inc. (a) 1,669,711 34,020,362
FirstService Corp. (a) 655,700 7,376,625
Renaissance Worldwide, Inc. (a) 1,270,000 16,668,750
TeleSpectrum Worldwide, Inc. (a) 2,835,700 23,571,756
------------
109,651,199
ENTERTAINMENT & LEISURE-5.7%
Bally Total Fitness Holding Corp. (a) 1,122,000 19,494,750
Family Golf Centers, Inc. (a) 389,450 6,912,737
N2K, Inc. (a) 404,000 2,903,750
Premier Parks, Inc. (a) 1,935,900 33,878,250
Preview Travel, Inc. (a) 380,000 6,935,000
Sunterra Corp. (a) 2,074,300 13,482,950
------------
83,607,437
RESTAURANTS & LODGING-1.8%
Florida Panthers Holdings, Inc. (a) 988,700 10,690,319
MeriStar Hospitality Corp. (a) 946,900 16,156,481
------------
26,846,800
RETAILING-22.3%
Abercrombie & Fitch Co. Cl.A (a) 223,800 9,847,200
Brylane, Inc. (a) 710,300 11,364,800
Budget Group, Inc. Cl.A (a) 2,382,700 54,355,344
Circuit City Stores, Inc.
- CarMax Group (a) 2,764,000 16,238,500
Dollar Thrifty Automotive Group, Inc. (a) 1,660,100 19,298,662
Furniture Brands International, Inc. (a) 824,800 16,083,600
Group 1 Automotive, Inc. (a) 1,319,400 19,791,000
Industrie Natuzzi SpA (ADR) (b) 1,255,600 24,798,100
Men's Wearhouse, Inc. (a) 763,250 13,166,062
Movado Group, Inc. 662,800 13,918,800
Pacific Sunwear of California, Inc. (a) 842,300 18,741,175
Sports Authority, Inc. (a) 1,016,300 7,749,288
Stage Stores, Inc. (a) 1,273,700 15,523,219
Tiffany & Co. 1,015,100 31,848,762
Trans World Entertainment Corp. (a) 593,000 10,822,250
United Auto Group, Inc. (a) 994,400 14,108,050
United Rentals, Inc. (a) 802,000 19,197,875
Venator Group, Inc. (a) 1,506,600 13,088,588
------------
329,941,275
------------
697,437,518
BASIC INDUSTRIES-12.3%
BUILDING & RELATED-0.3%
Associated Materials, Inc. (a) 660,000 5,115,000
METAL HARDWARE-3.5%
Bethlehem Steel Corp. (a) 6,196,100 51,117,825
METALS & MINING-0.3%
Royal Oak Mines, Inc. (a) 6,238,700 4,289,106
TEXTILE PRODUCTS-3.1%
Mohawk Industries, Inc. (a) 1,552,000 42,486,000
Novel Denim Holdings, Ltd. (a) 234,600 2,756,550
------------
45,242,550
6
ALLIANCE QUASAR FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
TRANSPORTATION & SHIPPING-5.1%
Carey International, Inc. (a) 910,100 $ 13,651,500
Consolidated Freightways Corp. (a) 2,518,600 20,778,450
Knightsbridge Tankers, Ltd. 252,200 5,422,300
OMI Corp. (a) 5,193,000 21,096,563
Teekay Shipping Corp. 818,300 14,882,831
------------
75,831,644
------------
181,596,125
TECHNOLOGY-11.2%
AEROSPACE-0.8%
Gulfstream Aerospace Corp. (a) 283,700 11,418,925
COMMUNICATION EQUIPMENT-1.0%
Comverse Technology, Inc. (a) 363,100 14,841,713
COMPUTER SOFTWARE & SERVICES-4.2%
CheckFree Holdings Corp. (a) 222,900 2,201,137
DBT Online, Inc. (a) 948,400 14,285,275
Harbinger Corp. (a) 1,151,400 8,347,650
Insight Enterprises, Inc. (a) 587,900 16,608,175
Saville Systems Plc (ADR) (a)(c) 665,400 9,648,300
Transaction Systems Architects, Inc. Cl.A (a) 309,200 10,976,600
------------
62,067,137
NETWORKING SOFTWARE-1.8%
Apex PC Solutions, Inc. (a) 993,800 19,503,325
Xylan Corp. (a) 508,275 6,734,644
------------
26,237,969
SEMI-CONDUCTOR EQUIPMENT-1.6%
Photronics, Inc. (a) 371,100 4,731,525
Uniphase Corp. (a) 261,600 10,725,600
Vitesse Semiconductor Corp. (a) 332,300 7,850,587
------------
23,307,712
TELECOMMUNICATIONS-1.5%
GST Telecommunications, Inc. (a) 951,100 5,944,375
Millicom International Cellular, SA (a)(d) 664,700 16,368,238
------------
22,312,613
MISCELLANEOUS-0.3%
Excalibur Technologies Corp. (a) 696,900 5,139,638
------------
165,325,707
HEALTH CARE-10.8%
BIOTECHNOLOGY-7.5%
Centocor, Inc. (a) 987,500 39,129,687
GelTex Pharmaceuticals, Inc. (a) 1,552,100 32,788,113
Gensia Sicor, Inc. (a) 2,294,100 9,319,781
MedImmune, Inc. (a) 463,400 30,005,150
------------
111,242,731
DRUGS, HOSPITAL SUPPLIES &
MEDICAL SERVICES-3.3%
Aradigm Corp. (a) 867,300 8,673,000
St. Jude Medical, Inc. (a) 511,800 11,835,375
Synetic, Inc. (a) 350,500 14,545,750
Veterinary Centers of America, Inc. (a) 746,600 13,625,450
------------
48,679,575
------------
159,922,306
FINANCIAL SERVICES-9.7%
BROKERAGE & MONEY MANAGEMENT-1.0%
Legg Mason, Inc. 565,200 14,871,825
INSURANCE-0.6%
Reinsurance Group of America, Inc. 168,800 8,735,400
REAL ESTATE-7.5%
Chelsea GCA Realty, Inc. 1,296,900 44,418,825
Glenborough Realty Trust, Inc. 886,200 18,831,750
Golf Trust of America, Inc. 627,200 18,659,200
Taubman Centers, Inc. 2,123,800 29,733,200
------------
111,642,975
OTHER-0.6%
International Alliance warrants,
expiring 12/30/99 (a) 740,311 8,324,797
------------
143,574,997
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
ENERGY-2.9%
OIL & GAS SERVICES-2.9%
Parker Drilling Co. (a) 2,547,900 $13,217,231
Southern Union Co. 1,433,250 28,665,000
------------
41,882,231
CONSUMER MANUFACTURING-1.5%
AUTO & RELATED-1.5%
Miller Industries, Inc. (a) 1,275,100 5,897,338
Monaco Coach Corp. (a) 664,050 16,767,262
------------
22,664,600
Total Common Stocks & Other Investments
(cost $1,757,790,337) 1,412,403,484
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
SHORT-TERM INVESTMENTS-4.6%
U.S. GOVERNMENT & AGENCIES-4.6%
Federal Home Loan Bank
5.40%, 10/01/98 $44,300 44,300,000
Federal National Mortgage Association
5.22%, 10/16/98 300 299,347
5.28%, 11/23/98 3,000 2,976,680
Student Loan Marketing Association
5.39%, 10/01/98 20,600 20,600,000
Total Short-Term Investments
(cost $68,176,027) 68,176,027
TOTAL INVESTMENTS-100.2%
(cost $1,825,966,364) 1,480,579,511
Other assets less liabilities-(0.2%) (3,215,884)
NET ASSETS-100% $1,477,363,627
(a) Non-income producing security.
(b) Country of origin--Italy.
(c) Country of origin--Ireland.
(d) Country of origin--Luxembourg.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998 ALLIANCE QUASAR FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $1,825,966,364) $1,480,579,511
Cash 732,317
Receivable for capital stock sold 14,195,769
Receivable for investment securities sold 6,368,070
Dividends receivable 2,342,144
Total assets 1,504,217,811
LIABILITIES
Payable for investment securities purchased 13,853,942
Payable for capital stock redeemed 7,564,859
Advisory fee payable 3,678,768
Distribution fee payable 763,252
Accrued expenses 993,363
Total liabilities 26,854,184
NET ASSETS $1,477,363,627
COMPOSITION OF NET ASSETS
Shares of capital stock, at par $ 140,144
Additional paid-in capital 1,759,954,236
Accumulated net investment loss (330)
Accumulated net realized gain on investment transactions 62,657,949
Net unrealized depreciation of investments and other assets (345,388,372)
$1,477,363,627
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($495,070,392/
22,231,985 shares of capital stock issued and outstanding) $22.27
Sales charge--4.25% of public offering price .99
Maximum offering price $23.26
CLASS B SHARES
Net asset value and offering price per share ($625,147,075/
30,989,884 shares of capital stock issued and outstanding) $20.17
CLASS C SHARES
Net asset value and offering price per share ($182,109,639/
9,024,456 shares of capital stock issued and outstanding) $20.18
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($175,036,521 / 7,825,780 shares of capital stock issued
and outstanding) $22.37
See notes to financial statements.
9
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1998 ALLIANCE QUASAR FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $142,507) $ 8,652,140
Interest 6,618,674 $ 15,270,814
EXPENSES
Advisory fee 15,656,013
Distribution fee - Class A 1,239,764
Distribution fee - Class B 6,552,472
Distribution fee - Class C 1,893,195
Transfer agency 3,594,097
Registration 413,341
Printing 388,926
Custodian 272,845
Taxes 120,955
Administrative 120,737
Audit and legal 115,970
Directors' fees 29,000
Miscellaneous 54,391
Total expenses 30,451,706
Less: expense offset arrangement (see Note B) (220,420)
Net expenses 30,231,286
Net investment loss (14,960,472)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions 79,606,746
Net change in unrealized appreciation of
investments and other assets (516,425,096)
Net loss on investments (436,818,350)
NET DECREASE IN NET ASSETS FROM OPERATIONS $(451,778,822)
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE QUASAR FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (14,960,472) $ (8,301,609)
Net realized gain on investment transactions 79,606,746 61,906,245
Net change in unrealized appreciation of
investments and other assets (516,425,096) 130,575,519
Net increase (decrease) in net assets
from operations (451,778,822) 184,180,155
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A (17,164,110) (35,781,862)
Class B (24,996,773) (23,349,486)
Class C (7,133,144) (5,648,782)
Advisor Class (2,825,501) (312,701)
CAPITAL STOCK TRANSACTIONS
Net increase 868,194,847 623,150,616
Total increase 364,296,497 742,237,940
NET ASSETS
Beginning of year 1,113,067,130 370,829,190
End of year $1,477,363,627 $1,113,067,130
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 ALLIANCE QUASAR FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Quasar Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The Fund offers Class A, Class B, Class C and Advisor Class shares. Class A
shares are sold with a front-end sales charge of up to 4.25% for purchases not
exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a contingent
deferred sales charge of 1%. Class B shares are currently sold with a
contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month of
purchase. Class C shares are subject to a contingent deferred sales charge of
1% on redemptions made within the first year after purchase. Advisor Class
shares are sold without an initial or contingent deferred sales charge and are
not subject to ongoing distribution expenses. Advisor Class shares are offered
to investors participating in fee-based programs and to certain retirement plan
accounts. All four classes of shares have identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. The financial statements have been prepared in conformity
with generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets
and liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange are generally
valued at the last reported sales price or if no sale occurred, at the mean of
the closing bid and asked prices on that day. Securities traded in the
over-the-counter market, including securities traded on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. Readily marketable debt
securities are valued at the last sales price. Securities which mature in 60
days or less are valued at amortized cost, unless this method does not
represent fair value. Securities for which current market quotations are not
readily available are valued at their fair value as determined in good faith
by, or in accordance with procedures adopted by, the Board of Directors. Fixed
income securities may be valued on the basis of prices obtained from a pricing
service when such prices are believed to reflect the fair market value of such
securities.
2. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date the securities are
purchased or sold. The fund accretes discounts as adjustments to income.
Investment gains and losses are determined on the identified cost basis.
4. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisory Class shares have no distribution fees.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences, do not require
such reclassification. During the current fiscal year, permanent differences,
primarily due to net investment loss, resulted in a net increase in accumulated
net investment loss and a corresponding decrease in accumulated net realized
gain on investment transactions. This reclassification had no effect on net
assets.
12
ALLIANCE QUASAR FUND
_______________________________________________________________________________
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser") an advisory fee at a quarterly rate
equal to .25% (approximately 1% on an annual basis) of the net assets of the
Fund valued on the last business day of the previous quarter.
Pursuant to the advisory agreement, the Fund paid $120,737 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the year ended September 30, 1998.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Adviser, under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $2,255,105 for the year ended September 30, 1998.
In addition, for the year ended September 30, 1998, the Fund's expenses were
reduced by $220,420 under an expense offset arrangement with Alliance Fund
Services. Transfer agency fees reported in the statement of operation exclude
these credits.
Alliance Fund Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary
of the Adviser, serves as the Distributor of the Fund's shares. The Distributor
received front-end sales charges of $224,489 from the sales of Class A shares
and $21,804, $1,179,325 and $118,235 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C
shares, respectively, for the year ended September 30, 1998.
Brokerage commissions paid on investment transactions for the year ended
September 30, 1998 amounted to $5,405,376, of which $19,605 was paid to
Donaldson, Lufkin & Jenrette Securities Corp., an affiliate of the Adviser.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30% of the Fund's average daily net assets attributable to Class
A shares and 1% of the average daily net assets attributable to both Class B
and Class C shares. There is no distribution fee on the Advisor Class shares.
The fees are accrued daily and paid monthly. The Agreement provides that the
Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amount of
$27,654,262 and $1,923,179 for Class B and Class C shares, respectively; such
costs may be recovered from the Fund in future periods so long as the Agreement
is in effect. In accordance with the Agreement, there is no provision for
recovery of unreimbursed distribution costs incurred by the Distributor beyond
the current fiscal year for Class A shares. The Agreement also provides that
the Adviser may use its own resources to finance the distribution of the Fund's
shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $2,350,819,090 and $1,475,171,419,
respectively, for the year ended September 30, 1998. There were no purchases or
sales of U.S. government and government agency obligations for the year ended
September 30, 1998.
At September 30, 1998, the cost of investments for federal income tax purposes
was $1,836,952,502. Accordingly, gross unrealized appreciation of investments
was $83,287,021 and gross unrealized depreciation of investments was
$439,660,012, resulting in net unrealized depreciation of $356,372,991.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $.002 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEP. 30, SEP. 30, SEP. 30, SEP. 30,
1998 1997 1998 1997
------------- ------------ -------------- --------------
CLASS A
Shares sold 43,817,026 11,397,616 $1,244,246,754 $301,819,124
Shares issued in
reinvestment of
distributions 571,457 1,338,101 15,988,123 31,392,004
Shares converted
from Class B 165,256 93,234 4,647,898 2,388,921
Shares redeemed (35,561,736) (7,820,120) (1,011,637,305) (205,201,851)
Net increase 8,992,003 5,008,831 $ 253,245,470 $130,398,198
CLASS B
Shares sold 18,286,351 15,718,977 $ 482,762,932 $384,984,682
Shares issued in
reinvestment of
distributions 923,019 806,589 23,536,952 17,462,788
Shares converted
to Class A (181,899) (101,254) (4,647,898) (2,388,921)
Shares redeemed (6,112,452) (2,654,832) (154,925,238) (64,196,011)
Net increase 12,915,019 13,769,480 $ 346,726,748 $335,862,538
CLASS C
Shares sold 11,956,015 6,517,559 $ 308,470,104 $158,023,140
Shares issued in
reinvestment of
distributions 260,405 149,743 6,642,958 3,241,980
Shares redeemed (8,416,893) (2,534,347) (213,847,794) (61,156,504)
Net increase 3,799,527 4,132,955 $ 101,265,268 $100,108,616
OCT. 2,1996(A) OCT. 2,1996(A)
TO TO
SEP. 30, SEP. 30,
1997 1997
------------ --------------
ADVISOR CLASS
Shares sold 9,129,797 2,134,062 $ 259,655,427 $ 58,915,871
Shares issued in
reinvestment of
distributions 95,462 13,323 2,676,749 312,693
Shares redeemed (3,452,506) (94,358) (95,374,815) (2,447,300)
Net increase 5,772,753 2,053,027 $ 166,957,361 $ 56,781,264
(a) Commencement of distribution.
14
ALLIANCE QUASAR FUND
_______________________________________________________________________________
NOTE F: BANK BORROWING
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility") to
provide short-term financing if necessary, subject to certain restrictions, in
connection with abnormal redemption activity. Commitment fees related to the
Facility are paid by the participating funds and are included in the
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the year ended September 30, 1998.
15
FINANCIAL HIGHLIGHTS ALLIANCE QUASAR FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $30.37 $27.92 $24.16 $22.65 $24.43
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.17)(a) (.24)(a) (.25) (.22)(a) (.60)
Net realized and unrealized gain (loss)
on investment transactions (6.70) 6.80 8.82 5.59 (.36)
Net increase (decrease) in net asset
value from operations (6.87) 6.56 8.57 5.37 (.96)
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.23) (4.11) (4.81) (3.86) (.82)
Net asset value, end of year $22.27 $30.37 $27.92 $24.16 $22.65
TOTAL RETURN
Total investment return based on
net asset value (b) (23.45)% 27.81% 42.42% 30.73% (4.05)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $495,070 $402,081 $229,798 $146,663 $155,470
Ratio of expenses to average net assets 1.61%(c) 1.67% 1.79% 1.83% 1.67%
Ratio of net investment loss to
average net assets (.59)% (.91)% (1.11)% (1.06)% (1.15)%
Portfolio turnover rate 109% 135% 168% 160% 110%
</TABLE>
See footnote summary on page 19.
16
ALLIANCE QUASAR FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $27.83 $26.13 $23.03 $21.92 $23.88
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.36)(a) (.42)(a) (.20) (.37)(a) (.53)
Net realized and unrealized gain (loss)
on investment transactions (6.07) 6.23 8.11 5.34 (.61)
Net increase (decrease) in net asset
value from operations (6.43) 5.81 7.91 4.97 (1.14)
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.23) (4.11) (4.81) (3.86) (.82)
Net asset value, end of year $20.17 $27.83 $26.13 $23.03 $21.92
TOTAL RETURN
Total investment return based on net
asset value (b) (24.03)% 26.70% 41.48% 29.78% (4.92)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $625,147 $503,037 $112,490 $16,604 $13,901
Ratio of expenses to average net assets 2.39%(c) 2.51% 2.62% 2.65% 2.50%
Ratio of net investment loss to
average net assets (1.36)% (1.73)% (1.96)% (1.88)% (1.98)%
Portfolio turnover rate 109% 135% 168% 160% 110%
</TABLE>
See footnote summary on page 19.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $27.85 $26.14 $23.05 $21.92 $23.88
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.35)(a) (.42)(a) (.20) (.37)(a) (.36)
Net realized and unrealized gain (loss)
on investment transactions (6.09) 6.24 8.10 5.36 (.78)
Net increase (decrease) in net asset
value from operations (6.44) 5.82 7.90 4.99 (1.14)
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.23) (4.11) (4.81) (3.86) (.82)
Net asset value, end of year $20.18 $27.85 $26.14 $23.05 $21.92
TOTAL RETURN
Total investment return based on net
asset value (b) (24.05)% 26.74% 41.46% 29.87% (4.92)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $182,110 $145,494 $28,541 $1,611 $1,220
Ratio of expenses to average net assets 2.38%(c) 2.50% 2.61% 2.64% 2.48%
Ratio of net investment loss to average
net assets (1.35)% (1.72)% (1.94)% (1.76)% (1.96)%
Portfolio turnover rate 109% 135% 168% 160% 110%
</TABLE>
See footnote summary on page 19.
18
ALLIANCE QUASAR FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
----------------------------
OCTOBER 2,
1996(D)
YEAR ENDED TO
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
Net asset value, beginning of period $30.42 $27.82
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (a) (.09) (.17)
Net realized and unrealized gain (loss) on
investment transactions (6.73) 6.88
Net increase (decrease) in net asset value
from operations (6.82) 6.71
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.23) (4.11)
Net asset value, end of period $22.37 $30.42
TOTAL RETURN
Total investment return based on net asset value(b) (23.24)% 28.47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $175,037 $62,455
Ratio of expenses to average net assets 1.38%(c) 1.58%(e)
Ratio of net investment loss to average net assets (.32)% (.74)%(e)
Portfolio turnover rate 109% 135%
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(c) Ratios reflect expenses grossed up for expense offset arrangement with the
Transfer Agent. For the year ended September 30, 1998, the ratios of expenses
to average net assets were 1.60%, 2.38%, 2.37% and 1.37% for Class A, B, C, and
Advisor Class shares, respectively.
(d) Commencement of distribution.
(e) Annualized.
19
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE QUASAR FUND
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCE QUASAR FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance Quasar Fund, Inc. (the "Fund"), including the portfolio of
investments, as of September 30, 1998, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Quasar Fund, Inc. at September 30, 1998, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
indicated periods, in conformity with generally accepted accounting principles.
New York, New York
November 9, 1998
<PAGE>
____________________________________________________________
APPENDIX A:
CERTAIN EMPLOYEE BENEFIT PLANS
____________________________________________________________
Employee benefit plans described below which are
intended to be tax-qualified under section 401(a) of the Internal
Revenue Code of 1986, as amended ("Tax Qualified Plans"), for
which Merrill Lynch, Pierce, Fenner & Smith Incorporated or an
affiliate thereof ("Merrill Lynch") is recordkeeper (or with
respect to which recordkeeping services are provided pursuant to
certain arrangements as described in paragraph (ii) below)
("Merrill Lynch Plans") are subject to specific requirements as
to the Fund shares which they may purchase. Notwithstanding
anything to the contrary contained elsewhere in this Statement of
Additional Information, the following Merrill Lynch Plans are not
eligible to purchase Class A shares and are eligible to purchase
Class B shares of the Fund at net asset value without being
subject to a contingent deferred sales charge:
(i) Plans for which Merrill Lynch is the recordkeeper on a
daily valuation basis, if when the plan is established
as an active plan on Merrill Lynch's recordkeeping
system:
(a) the plan is one which is not already
investing in shares of mutual funds or
interests in other commingled investment
vehicles of which Merrill Lynch Asset
Management, L.P. is investment adviser or
manager ("MLAM Funds"), and either (A) the
aggregate assets of the plan are less than
$3 million or (B) the total of the sum of
(x) the employees eligible to participate in
the plan and (y) those persons, not
including any such employees, for whom a
plan account having a balance therein is
maintained, is less than 500, each of
(A) and (B) to be determined by Merrill
Lynch in the normal course prior to the date
the plan is established as an active plan on
Merrill Lynch's recordkeeping system (an
"Active Plan"); or
(b) the plan is one which is already investing
in shares of or interests in MLAM Funds and
the assets of the plan have an aggregate
value of less than $5 million, as determined
A-1
<PAGE>
by Merrill Lynch as of the date the plan
becomes an Active Plan.
For purposes of applying (a) and (b), there
are to be aggregated all assets of any Tax-
Qualified Plan maintained by the sponsor of
the Merrill Lynch Plan (or any of the
sponsor's affiliates) (determined to be such
by Merrill Lynch) which are being invested
in shares of or interests in MLAM Funds,
Alliance Mutual Funds or other mutual funds
made available pursuant to an agreement
between Merrill Lynch and the principal
underwriter thereof (or one of its
affiliates) and which are being held in a
Merrill Lynch account.
(ii) Plans for which the recordkeeper is not Merrill Lynch,
but which are recordkept on a daily valuation basis by
a recordkeeper with which Merrill Lynch has a
subcontracting or other alliance arrangement for the
performance of recordkeeping services, if the plan is
determined by Merrill Lynch to be so eligible and the
assets of the plan are less than $3 million.
Class B shares of the Fund held by any of the above-
described Merrill Lynch Plans are to be replaced at Merrill
Lynch's direction through conversion, exchange or otherwise by
Class A shares of the Fund on the earlier of the date that the
value of the plan's aggregate assets first equals or exceeds $5
million or the date on which any Class B share of the Fund held
by the plan would convert to a Class A share of the Fund as
described under "Purchase of Shares" and "Redemption and
Repurchase of Shares."
Any Tax Qualified Plan, including any Merrill Lynch
Plan, which does not purchase Class B shares of the Fund without
being subject to a contingent deferred sales charge under the
above criteria is eligible to purchase Class B shares subject to
a contingent deferred sales charge as well as other classes of
shares of the Fund as set forth above under "Purchase of Shares"
and "Redemption and Repurchase of Shares."
A-2
00250150.ay7
