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This is filed pursuant to Rule 497(e).
File Nos.: 033-18647 and 811-05398
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Class B Prospectus
ALLIANCE VARIABLE PRODUCTS
SERIES FUND
May 3, 1999
Premier Growth Portfolio
This Prospectus describes the Portfolio that is available as an underlying
investment through your variable contract. For information about your
variable contract, including information about insurance-related
expenses, see the Prospectus for your variable contract which
accompanies this Prospectus.
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this
Prospectus. Any representation to the contrary is a
criminal offense.
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TABLE OF CONTENTS
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Page
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RISK/RETURN SUMMARY........................................................ 3
Summary of Principal Risks............................................... 5
GLOSSARY................................................................... 6
DESCRIPTION OF THE PORTFOLIO............................................... 8
Investment Objectives and Policies....................................... 8
Description of Investment Practices...................................... 9
Additional Risk Considerations........................................... 13
MANAGEMENT OF THE PORTFOLIO................................................ 17
PURCHASE AND SALE OF SHARES................................................ 17
How The Portfolio Values Its Shares...................................... 17
How To Purchase and Sell Shares.......................................... 17
DIVIDENDS, DISTRIBUTIONS AND TAXES......................................... 18
DISTRIBUTION ARRANGEMENTS.................................................. 18
FINANCIAL HIGHLIGHTS....................................................... 19
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Alliance Variable Products Series Fund's investment adviser is Alliance Capital
Management L.P., a global investment manager providing diversified services to
institutions and individuals through a broad line of investments including more
than 100 mutual funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about Alliance Variable
Products Series Fund. You will find additional information about the Portfolio
of the Fund, including a detailed description of the risks of an investment in
the Portfolio, after this summary.
The Risk/Return Summary describes the Portfolio's objectives, principal
investment strategies and principal risks. The Portfolio's summary includes a
discussion of some of the principal risks of investing in the Portfolio. A
further discussion of these and other risks is on page 5.
A more detailed description of the Portfolio, including the risks associated
with investing in the Portfolio, can be found further back in this Prospectus.
Please be sure to read this additional information BEFORE you invest. The
Portfolio may at times use certain types of investment derivatives such as
options, futures, forwards, and swaps. The use of these techniques involves
special risks that are discussed in this Prospectus.
The Risk/Return Summary includes a table for the Portfolio showing its average
annual returns and a bar chart showing its annual returns. The table and the
bar chart provide an indication of the historical risk of an investment in the
Portfolio by showing:
. how the Portfolio's average annual returns for one and five years and
over the life of the Portfolio compare to those of a broad based
securities market index; and
. changes in the Portfolio's performance from year to year over the life
of the Portfolio.
If the Portfolio's returns reflected fees charged by your variable contract,
the returns shown in the table and bar charts for the Portfolio would be lower.
The Portfolio's past performance, of course, does not necessarily indicate how
it will perform in the future.
Other important things for you to note:
. You may lose money by investing in the Portfolio.
. An investment in the Portfolio is not a deposit in a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
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Premier Growth Portfolio
Objective: The Portfolio's investment objective is growth of capital by
pursuing aggressive investment policies.
Principal Investment Strategies and Risks: The Portfolio invests primarily
in equity securities of U.S. companies. Unlike most equity funds, the
Portfolio focuses on a relatively small number of intensively researched
companies. Alliance selects the Portfolio's investments from a research
universe of more than 600 companies that have strong management, superior
industry positions, excellent balance sheets, and superior earnings growth
prospects.
Normally, the Portfolio invests in about 40-50 companies, with the 25 most
highly regarded of these companies usually constituting approximately 70%
of the Portfolio's net assets. During market declines, while adding to
positions in favored stocks, the Portfolio becomes somewhat more
aggressive, gradually reducing the number of companies represented in its
portfolio. Conversely, in rising markets, while reducing or eliminating
fully-valued positions, the Portfolio becomes somewhat more conservative,
gradually increasing the number of companies represented in its portfolio.
Through this approach, Alliance seeks to gain positive returns in good
markets while providing some measure of protection in poor markets. The
Portfolio also may invest up to 20% of its net assets in convertible
securities.
Among the principal risks of investing in the Portfolio is market risk.
Because the Portfolio invests in a smaller number of securities than many
other equity funds, your investment has the risk that changes in the value
of a single security may have a more significant effect, either negative
or positive, on the Portfolio's net asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Portfolio. The performance information in the table and bar
chart is the performance of the Portfolio's Class A shares adjusted to reflect
the higher expense ratio of the Class B Shares.
Performance Information and Bar Chart
Performance Table
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Since
1 Year 5 Years Inception
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Portfolio......................................... 47.72% 27.62% 25.18%
S&P 500 Index..................................... 28.58% 24.06% 21.27%
</TABLE>
The average annual total returns in the performance table are for periods ended
December 31, 1998. Since Inception return information is from June 26, 1992 for
the Portfolio and June 30, 1992 for the Index.
Bar Chart
N/A N/A N/A N/A 12.4 -3.2 44.6 22.5 33.6 47.7
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89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Portfolio as a long-term investment.
The Portfolio's returns will fluctuate over long and short periods. For
example, during the period shown in the bar chart, the Portfolio's:
Best quarter was up 29.66%, 4th quarter, 1998; and
Worst quarter was down 11.20%, 3rd quarter, 1998.
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SUMMARY OF PRINCIPAL RISKS
The value of your investment in the Portfolio will change with changes in the
values of the Portfolio's investments. Many factors can affect those values. In
this Summary, we describe the principal risks that may affect the Portfolio's
investments as a whole. The Portfolio could be subject to additional principal
risks because the types of investments made by the Portfolio can change over
time. This Prospectus has additional descriptions of the types of investments
that appear in bold type in the discussions under "Description of Investment
Practices" or "Additional Risk Considerations." These sections also include
more information about the Portfolio, its investments, and related risks.
. Market Risk This is the risk that the value of the Portfolio's
investments will fluctuate as the stock or bond markets fluctuate and
that prices overall will decline over shorter or longer-term periods.
. Management Risk The Portfolio is subject to management risk because it
is an actively managed investment Portfolio. Alliance will apply its
investment techniques and risk analyses in making investment decisions
for the Portfolio, but there can be no guarantee that its decisions
will produce the desired results. In some cases, derivative and other
investment techniques may be unavailable or Alliance may determine not
to use them, possibly even under market conditions where their use
could benefit the Portfolio.
. Focused Portfolio Risk The Portfolio invests in a limited number of
companies and may have more risk because changes in the value of a
single security may have a more significant effect, either negative or
positive, on the Portfolio's net asset value.
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GLOSSARY
This Prospectus uses the following terms.
Types of Securities
Bonds are fixed, floating, and variable rate debt obligations.
Convertible securities are fixed-income securities that are convertible into
common and preferred stock.
Debt securities are bonds, debentures, notes, and bills.
Equity securities include (i) common stocks, partnership interests, business
trust shares and other equity or ownership interests in business enterprises,
and (ii) securities convertible into, and rights and warrants to subscribe for
the purchase of, such stocks, shares and interests.
Fixed-income securities are debt securities and preferred stocks, including
floating rate and variable rate instruments.
Foreign government securities are securities issued or guaranteed, as to
payment of principal and interest, by foreign governments, quasi-governmental
entities, or governmental agencies or other entities.
Rule 144A securities are securities that may be resold under Rule 144A of the
Securities Act.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
Rating Agencies, Rated Securities and Indexes
Duff & Phelps is Duff & Phelps Credit Rating Company.
Fitch is Fitch IBCA, Inc.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or B and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
S&P 500 Index is S&P's 500 Composite Stock Price Index, a widely recognized
unmanaged index of market activity.
Other
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Commission is the Securities and Exchange Commission.
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Duration is a measure that relates the price volatility of a security to
changes in interest rates. The duration of a debt security is the weighted
average term to maturity, expressed in years, of the present value of all
future cash flows, including coupon payments and principal repayments. Thus, by
definition, duration is always less than or equal to full maturity.
Exchange is the New York Stock Exchange.
Non-U.S. Company is an entity that (i) is organized under the laws of a foreign
country and conducts business in a foreign country, (ii) derives 50% or more of
its total revenues from business in foreign countries, or (iii) issues equity
or debt securities that are traded principally on a stock exchange in a foreign
country.
Securities Act is the Securities Act of 1933, as amended.
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DESCRIPTION OF THE PORTFOLIO
This section of the Prospectus provides a more complete description of the
Portfolio's investment objectives, principal strategies and risks. Of course,
there can be no assurance that the Portfolio will achieve its investment
objective.
Please note that:
. Additional discussion of the Portfolio's investments, including the
risks of the investments, can be found in the discussion under
Description of Investment Practices following this section.
. The description of the principal risks for the Portfolio may include
risks described in the Summary of Principal Risks above. Additional
information about the risks of investing in the Portfolio can be found
in the discussion under Additional Risk Considerations.
. Additional descriptions of the Portfolio's strategies, investments and
risks can be found in the Fund's Statement of Additional Information or
SAI.
. Except as noted, (i) the Portfolio's investment objectives are
"fundamental" and cannot be changed without a shareholder vote, and
(ii) the Portfolio's investment policies are not fundamental and thus
can be changed without a shareholder vote.
Investment Objectives and Policies
Premier Growth Portfolio
The Portfolio seeks long-term growth of capital by investing predominantly in
the equity securities of a limited number of large, carefully selected, high-
quality U.S. companies that are judged likely to achieve superior earnings
growth. As a matter of fundamental policy, the Portfolio normally invests at
least 85% of its total assets in the equity securities of U.S. companies. A
U.S. company is a company that is organized under United States law, has its
principal office in the United States and issues equity securities that are
traded principally in the United States. Normally, about 40-50 companies will
be represented in the Portfolio, with the 25 most highly regarded of these
companies usually constituting approximately 70% of the Portfolio's net assets.
The Portfolio is thus atypical from most equity mutual funds in its focus on a
relatively small number of intensively researched companies. The Portfolio is
designed for those seeking to accumulate capital over time with less volatility
than that associated with investment in smaller companies.
Alliance's investment strategy for the Portfolio emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more
than 600 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.
In managing the Portfolio, Alliance seeks to utilize market volatility
judiciously (assuming no change in company fundamentals), striving to
capitalize on apparently unwarranted price fluctuations, both to purchase or
increase positions on weakness and to sell or reduce overpriced holdings. The
Portfolio normally remains nearly fully invested and does not take significant
cash positions for market timing purposes. During market declines, while adding
to positions in favored stocks, the Portfolio becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Portfolio becomes somewhat more conservative, gradually
increasing the number of companies represented in its portfolio. Alliance thus
seeks to gain positive returns in good markets while providing some measure of
protection in poor markets.
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Alliance expects the average market capitalization of companies represented in
the Portfolio normally to be in the range, or in excess, of the average market
capitalization of companies included in the S&P 500 Index.
The Portfolio also may:
. invest up to 15% of its total assets in foreign securities;
. purchase and sell exchange-traded index options and stock index futures
contracts;
. write covered exchange-traded call options on its securities of up to
15% of its total assets, and purchase and sell exchange-traded call and
put options on common stocks written by others of up to, for all
options, 10% of its total assets;
. make short sales "against the box" of up to 15% of its net assets; and
. invest up to 10% of its total assets in illiquid securities.
Because the Portfolio invests in a smaller number of securities than many other
equity Portfolios, your investment also has the risk that changes in the value
of a single security may have a more significant effect, either negative or
positive, on the Portfolio's net asset value.
DESCRIPTION OF INVESTMENT PRACTICES
This section describes the Portfolio's investment practices and associated
risks. Unless otherwise noted, the Portfolio's use of any of these practices
was specified in the previous section.
Derivatives. The Portfolio may use derivatives to achieve its investment
objectives. Derivatives are financial contracts whose value depends on, or is
derived from, the value of an underlying asset, reference rate or index. These
assets, rates, and indices may include bonds, stocks, mortgages, commodities,
interest rates, currency exchange rates, bond indices, and stock indices.
Derivatives can be used to earn income or protect against risk, or both. For
example, one party with unwanted risk may agree to pass that risk to another
party who is willing to accept the risk, the second party being motivated, for
example, by the desire either to earn income in the form of a fee or premium
from the first party, or to reduce its own unwanted risk by attempting to pass
all or part of that risk to the first party.
Derivatives can be used by investors such as the Portfolio to earn income and
enhance returns, to hedge or adjust the risk profile of a portfolio, and either
to replace more traditional direct investments or to obtain exposure to
otherwise inaccessible markets. The Portfolio is permitted to use derivatives
for one or more of these purposes, although the Portfolio generally uses
derivatives primarily as direct investments in order to enhance yields and
broaden portfolio diversification. Each of these uses entails greater risk than
if derivatives were used solely for hedging purposes. Derivatives are a
valuable tool, which, when used properly, can provide significant benefits to
Portfolio shareholders. The Portfolio may take a significant position in those
derivatives that are within its investment policies if, in Alliance's judgment,
this represents the most effective response to current or anticipated market
conditions. Alliance's use of derivatives is subject to continuous risk
assessment and control from the standpoint of the Portfolio's investment
objectives and policies.
Derivatives may be (i) standardized, exchange-traded contracts or (ii)
customized, privately-negotiated contracts. Exchange-traded derivatives tend to
be more liquid and subject to less credit risk than those that are privately
negotiated.
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There are four principal types of derivative instruments--options, futures,
forwards, and swaps--from which virtually any type of derivative transaction
can be created.
. Options--An option, which may be standardized and exchange-traded, or
customized and privately negotiated, is an agreement that, for a
premium payment or fee, gives the option holder (the buyer) the right
but not the obligation to buy or sell the underlying asset (or settle
for cash an amount based on an underlying asset, rate or index) at a
specified price (the exercise price) during a period of time or on a
specified date. A call option entitles the holder to purchase, and a
put option entitles the holder to sell, the underlying asset (or settle
for cash an amount based on an underlying asset, rate or index).
Likewise, when an option is exercised the writer of the option is
obligated to sell (in the case of a call option) or to purchase (in the
case of a put option) the underlying asset (or settle for cash an
amount based on an underlying asset, rate or index).
. Futures--A futures contract is an agreement that obligates the buyer to
buy and the seller to sell a specified quantity of an underlying asset
(or settle for cash the value of a contract based on an underlying
asset, rate or index) at a specific price on the contract maturity
date. Futures contracts are standardized, exchange-traded instruments
and are fungible (i.e., considered to be perfect substitutes for each
other). This fungibility allows futures contracts to be readily offset
or cancelled through the acquisition of equal but opposite positions,
which is the primary method in which futures contracts are liquidated.
A cash-settled futures contract does not require physical delivery of
the underlying asset but instead is settled for cash equal to the
difference between the values of the contract on the date it is entered
into and its maturity date.
. Forwards--A forward contract is an obligation by one party to buy, and
the other party to sell, a specific quantity of an underlying commodity
or other tangible asset for an agreed upon price at a future date.
Forward contracts are customized, privately negotiated agreements
designed to satisfy the objectives of each party. A forward contract
usually results in the delivery of the underlying asset upon maturity
of the contract in return for the agreed upon payment.
. Swaps--A swap is a customized, privately negotiated agreement that
obligates two parties to exchange a series of cash flows at specified
intervals (payment dates) based upon or calculated by reference to
changes in specified prices or rates (interest rates in the case of
interest rate swaps, currency exchange rates in the case of currency
swaps) for a specified amount of an underlying asset (the "notional"
principal amount). The payment flows are netted against each other,
with the difference being paid by one party to the other. Except for
currency swaps, the notional principal amount is used solely to
calculate the payment streams but is not exchanged. With respect to
currency swaps, actual principal amounts of currencies may be exchanged
by the counterparties at the initiation, and again upon the
termination, of the transaction.
Debt instruments that incorporate one or more of these building blocks for the
purpose of determining the principal amount of and/or rate of interest payable
on the debt instruments are often referred to as "structured securities." An
example of this type of structured security is indexed commercial paper. The
term is also used to describe certain securities issued in connection with the
restructuring of certain foreign obligations. The term "derivative" also is
sometimes used to describe securities involving rights to a portion of the cash
flows from an underlying pool of mortgages or other assets from which payments
are passed through to the owner of, or that collateralize, the securities.
While the judicious use of derivatives by highly-experienced investment
managers such as Alliance can be quite beneficial, derivatives involve risks
different from, and, in certain cases, greater than, the risks presented by
more traditional investments. The following is a general discussion of
important risk factors and issues relating to the use of derivatives that
investors should understand before investing in the Portfolio.
. Market Risk--This is the general risk of all investments that the value
of a particular investment will change in a way detrimental to the
Portfolio's interest based on changes in the bond market generally.
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. Management Risk--Derivative products are highly specialized instruments
that require investment techniques and risk analyses different from
those associated with stocks and bonds. The use of a derivative
requires an understanding not only of the underlying instrument but
also of the derivative itself, without the benefit of observing the
performance of the derivative under all possible market conditions. In
particular, the use and complexity of derivatives require the
maintenance of adequate controls to monitor the transactions entered
into, the ability to assess the risk that a derivative adds to the
Portfolio, and the ability to forecast price, interest rate, or
currency exchange rate movements correctly.
. Credit Risk--This is the risk that a loss may be sustained by the
Portfolio as a result of the failure of a derivative counterparty to
comply with the terms of the derivative contract. The credit risk for
exchange-traded derivatives is generally less than for privately
negotiated derivatives, since the clearing house, which is the issuer
or counterparty to each exchange-traded derivative, provides a
guarantee of performance. This guarantee is supported by a daily
payment system (i.e., margin requirements) operated by the clearing
house in order to reduce overall credit risk. For privately negotiated
derivatives, there is no similar clearing agency guarantee. Therefore,
the Portfolio considers the creditworthiness of each counterparty to a
privately negotiated derivative in evaluating potential credit risk.
. Liquidity Risk--Liquidity risk exists when a particular instrument is
difficult to purchase or sell. If a derivative transaction is
particularly large or if the relevant market is illiquid (as is the
case with many privately negotiated derivatives), it may not be
possible to initiate a transaction or liquidate a position at an
advantageous price.
. Leverage Risk--Since many derivatives have a leverage component,
adverse changes in the value or level of the underlying asset, rate or
index can result in a loss substantially greater than the amount
invested in the derivative itself. In the case of swaps, the risk of
loss generally is related to a notional principal amount, even if the
parties have not made any initial investment. Certain derivatives have
the potential for unlimited loss, regardless of the size of the initial
investment.
. Other Risks--Other risks in using derivatives include the risk of
mispricing or improper valuation of derivatives and the inability of
derivatives to correlate perfectly with underlying assets, rates and
indices. Many derivatives, in particular privately negotiated
derivatives, are complex and often valued subjectively. Improper
valuations can result in increased cash payment requirements to
counterparties or a loss of value to the Portfolio. Derivatives do not
always perfectly or even highly correlate or track the value of the
assets, rates or indices they are designed to closely track.
Consequently, the Portfolio's use of derivatives may not always be an
effective means of, and sometimes could be counterproductive to,
furthering the Portfolio's investment objective.
Derivatives Used by the Portfolio. The following describes specific derivatives
that the Portfolio may use.
Futures Contracts and Options on Futures Contracts. The Portfolio may buy and
sell futures contracts on fixed-income or other securities or foreign
currencies, and contracts based on interest rates or financial indices,
including any index of U.S. Government securities, foreign government
securities or corporate debt securities.
Options on futures contracts are options that call for the delivery of futures
contracts upon exercise. Options on futures contracts written or purchased by
the Portfolio will be traded on U.S. or foreign exchanges and will be used only
for hedging purposes.
Options on Securities. In purchasing an option on securities, the Portfolio
would be in a position to realize a gain if, during the option period, the
price of the underlying securities increased (in the case of a call) or
decreased (in the case of a put) by an amount in excess of the premium paid;
otherwise the Portfolio would experience a loss not greater than the premium
paid for the option. Thus, the Portfolio would realize a loss if the price of
the underlying security declined or remained the same (in the case of a call)
or increased or
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remained the same (in the case of a put) or otherwise did not increase (in the
case of a put) or decrease (in the case of a call) by more than the amount of
the premium. If a put or call option purchased by the Portfolio were permitted
to expire without being sold or exercised, its premium would represent a loss
to the Portfolio.
The Portfolio may write a put or call option in return for a premium, which is
retained by the Portfolio whether or not the option is exercised. Except with
respect to uncovered call options written for cross-hedging purposes, the
Portfolio will not write uncovered call or put options on securities. A call
option written by the Portfolio is "covered" if the Portfolio owns the
underlying security, has an absolute and immediate right to acquire that
security upon conversion or exchange of another security it holds, or holds a
call option on the underlying security with an exercise price equal to or less
than that of the call option it has written. A put option written by the
Portfolio is covered if the Portfolio holds a put option on the underlying
securities with an exercise price equal to or greater than that of the put
option it has written.
The risk involved in writing an uncovered call option is that there could be an
increase in the market value of the underlying security, and the Portfolio
could be obligated to acquire the underlying security at its current price and
sell it at a lower price. The risk of loss from writing an uncovered put option
is limited to the exercise price of the option.
The Portfolio may write a call option on a security that it does not own in
order to hedge against a decline in the value of a security that it owns or has
the right to acquire, a technique referred to as "cross-hedging." The Portfolio
would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction exceeds that to be received from writing a covered call option,
while at the same time achieving the desired hedge. The correlation risk
involved in cross-hedging may be greater than the correlation risk involved
with other hedging strategies.
The Portfolio generally purchases or writes privately negotiated options on
securities and will effect such transactions only with investment dealers and
other financial institutions (such as commercial banks or savings and loan
institutions) deemed creditworthy by Alliance. Privately negotiated options
purchased or written by the Portfolio may be illiquid and it may not be
possible for the Portfolio to effect a closing transaction at an advantageous
time.
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than taking or making delivery of a
security at a specified price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of cash if the
closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which provide
a stable stream of income with generally higher yields than those of equity
securities of the same or similar issuers. The price of a convertible security
will normally vary with changes in the price of the underlying equity security,
although the higher yield tends to make the convertible security less volatile
than the underlying equity security. As with debt securities, the market value
of convertible securities tends to decrease as interest rates rise and increase
as interest rates decline. While convertible securities generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality, they enable investors to benefit from increases in the market price of
the underlying common stock. Convertible debt securities that are rated Baa or
lower by Moody's or BBB or lower by S&P, Duff & Phelps or Fitch and comparable
unrated securities may share some or all of the risks of debt securities with
those ratings.
Illiquid Securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many currency swaps and any assets used to cover currency
swaps, (ii) over the counter options and assets used to cover over the counter
options, and (iii) repurchase agreements not terminable within seven days.
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The Portfolio may not be able to sell such securities and may not be able to
realize their full value upon sale. Alliance will monitor the Portfolio's
investments in illiquid securities. Rule 144A securities will not be treated as
"illiquid" for the purposes of the limit on investments so long as the
securities meet liquidity guidelines established by the Board of Directors.
Rights and Warrants. Warrants are option securities permitting their holders to
subscribe for other securities. Rights are similar to warrants except that they
have a substantially shorter duration. Rights and warrants do not carry with
them dividend or voting rights with respect to the underlying securities, or
any rights in the assets of the issuer. As a result, an investment in rights
and warrants may be considered more speculative than certain other types of
investments. In addition, the value of a right or a warrant does not
necessarily change with the value of the underlying securities, and a right or
a warrant ceases to have value if it is not exercised prior to its expiration
date.
Short Sales. A short sale is effected by selling a security that the Portfolio
does not own, or if the Portfolio owns the security, is not to be delivered
upon consummation of the sale. A short sale is "against the box" if the
Portfolio owns or has the right to obtain without payment securities identical
to those sold short.
If the price of the security sold short increases between the time of the short
sale and the time the Portfolio replaces the borrowed security, the Portfolio
will incur a loss; conversely, if the price declines, the Portfolio will
realize a short-term capital gain. Any gain will be decreased, and any loss
increased, by the transaction costs described above. Although the Portfolio's
gain is limited to the price at which it sold the security short, its potential
loss is theoretically unlimited.
Future Developments. The Portfolio may, following written notice to its
shareholders, take advantage of other investment practices that are not
currently contemplated for use by the Portfolio, or are not available but may
yet be developed, to the extent such investment practices are consistent with
the Portfolio's investment objective and legally permissible for the Portfolio.
Such investment practices, if they arise, may involve risks that are different
from or exceed those involved in the practices described above.
Portfolio Turnover. The portfolio turnover rate for the Portfolio is included
in the Financial Highlights section. The Portfolio is actively managed and, in
some cases in response to market conditions, the Portfolio's turnover may
exceed 100%. A higher rate of portfolio turnover increases brokerage and other
expenses, which must be borne by the Portfolio and its shareholders.
Temporary Defensive Position. For temporary defensive purposes, the Portfolio
may invest in certain types of short-term, liquid, high-grade or high-quality
debt securities. These securities may include U.S. Government securities,
qualifying bank deposits, money market instruments, prime commercial paper and
other types of short-term debt securities, including notes and bonds. Such
securities may also include short-term, foreign-currency denominated securities
of the type mentioned above issued by foreign governmental entities, companies
and supranational organizations. While the Portfolio is investing for temporary
defensive purposes, they may not meet their investment objective.
ADDITIONAL RISK CONSIDERATIONS
Investment in the Portfolio involves the special risk considerations described
below. Certain of these risks may be heightened when investing in emerging
markets.
Currency Considerations. The Portfolio invests some portion of its assets in
securities denominated in, and receive revenues in, foreign currencies and,
consequently, will be adversely affected by reductions in the value of those
currencies relative to the U.S. Dollar. These changes will affect the
Portfolio's net assets, distributions and income. If the value of the foreign
currencies in which the Portfolio receives income falls relative to the
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<PAGE>
U.S. Dollar between receipt of the income and the making of Portfolio
distributions, the Portfolio may be required to liquidate securities in order
to make distributions if the Portfolio has insufficient cash in U.S. Dollars to
meet the distribution requirements that the Portfolio must satisfy to qualify
as a regulated investment company for federal income tax purposes. Similarly,
if an exchange rate declines between the time the Portfolio incurs expenses in
U.S. Dollars and the time cash expenses are paid, the amount of the currency
required to be converted into U.S. Dollars in order to pay expenses in U.S.
Dollars could be greater than the equivalent amount of such expenses in the
currency at the time they were incurred. In light of these risks, the Portfolio
may engage in certain currency hedging transactions, as described above, which
involve certain special risks.
Fixed-Income Securities. The value of the Portfolio's shares will fluctuate
with the value of its investments. The value of the Portfolio's investments
will change as the general level of interest rates fluctuates. During periods
of falling interest rates, the values of the Portfolio's securities will
generally rise, although if falling interest rates are viewed as a precursor to
a recession, the values of the Portfolio's securities may fall along with
interest rates. Conversely, during periods of rising interest rates, the values
of a Portfolio's securities will generally decline. Changes in interest rates
have a greater effect on fixed-income securities with longer maturities and
durations than those with shorter maturities and durations.
In seeking to achieve the Portfolio's investment objective, there will be
times, such as during periods of rising interest rates, when depreciation and
realization of capital losses on securities in the Portfolio will be
unavoidable. Moreover, medium- and lower-rated securities and non-rated
securities of comparable quality may be subject to wider fluctuations in yield
and market values than higher-rated securities under certain market conditions.
Such fluctuations after a security is acquired do not affect the cash income
received from that security but will be reflected in the net asset value of the
Portfolio.
Foreign Securities. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, the Portfolio whose investment portfolio includes
foreign securities may experience greater price volatility and significantly
lower liquidity than a portfolio invested solely in securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States.
Securities registration, custody and settlements may in some instances be
subject to delays and legal and administrative uncertainties. Furthermore,
foreign investment in the securities markets of certain foreign countries is
restricted or controlled to varying degrees. These restrictions or controls may
at times limit or preclude investment in certain securities and may increase
the cost and expenses of the Portfolio. In addition, the repatriation of
investment income, capital or the proceeds of sales of securities from certain
of the countries is controlled under regulations, including in some cases the
need for certain advance government notification or authority, and if a
deterioration occurs in a country's balance of payments, the country could
impose temporary restrictions on foreign capital remittances.
The Portfolio also could be adversely affected by delays in, or a refusal to
grant, any required governmental approval for repatriation, as well as by the
application to it of other restrictions on investment. Investing in local
markets may require the Portfolio to adopt special procedures or seek local
governmental approvals or other actions, any of which may involve additional
costs to the Portfolio. These factors may affect the liquidity of the
Portfolio's investments in any country and Alliance will monitor the effect of
any such factor or factors on the Portfolio's investments. Furthermore,
transaction costs including brokerage commissions for transactions both on and
off the securities exchanges in many foreign countries are generally higher
than in the U.S.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting,
and auditing
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<PAGE>
standards of foreign countries may differ, in some cases significantly, from
U.S. standards in important respects, and less information may be available to
investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about most U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, or diplomatic
developments could affect adversely the economy of a foreign country. In the
event of nationalization, expropriation or other confiscation, the Portfolio
could lose its entire investment in securities in the country involved. In
addition, laws in foreign countries governing business organizations,
bankruptcy and insolvency may provide less protection to security holders such
as the Portfolio than that provided by U.S. laws.
Alliance believes that, except for currency fluctuations between the U.S.
Dollar and the Canadian Dollar, the matters described above are not likely to
have a material adverse effect on the Portfolio's investments in the securities
of Canadian issuers or investments denominated in Canadian Dollars. The factors
described above are more likely to have a material adverse effect on the
Portfolio's investments in the securities of Mexican and other non-Canadian
foreign issuers, including investments in securities denominated in Mexican
Pesos or other non-Canadian foreign currencies. If not hedged, however,
currency fluctuations could affect the unrealized appreciation and depreciation
of Canadian Government securities as expressed in U.S. Dollars.
Investment in Smaller, Emerging Companies. The foreign securities in the
Portfolio may invest may include securities of smaller, emerging companies.
Investment in such companies involves greater risks than is customarily
associated with securities of more established companies. Companies in the
earlier stages of their development often have products and management
personnel which have not been thoroughly tested by time or the marketplace;
their financial resources may not be as substantial as those of more
established companies. The securities of smaller companies may have relatively
limited marketability and may be subject to more abrupt or erratic market
movements than securities of larger companies or broad market indices. The
revenue flow of such companies may be erratic and their results of operations
may fluctuate widely and may also contribute to stock price volatility.
Extreme Governmental Action; Less Protective Laws. In contrast with investing
in the United States, foreign investment may involve in certain situations
greater risk of nationalization, expropriation, confiscatory taxation, currency
blockage or other extreme governmental action which could adversely impact the
Portfolio's investments. In the event of certain such actions, the Portfolio
could lose its entire investment in the country involved. In addition, laws in
various foreign countries governing, among other subjects, business
organization and practices, securities and securities trading, bankruptcy and
insolvency may provide less protection to investors such as the Portfolio than
provided under U.S. laws.
U.S. and Foreign Taxes. The Portfolio's investment in foreign securities may be
subject to taxes withheld at the source on dividend or interest payments.
Foreign taxes paid by the Portfolio may be creditable or deductible by U.S.
shareholders for U.S. income tax purposes. No assurance can be given that
applicable tax laws and interpretations will not change in the future.
Moreover, non-U.S. investors may not be able to credit or deduct such foreign
taxes.
Year 2000. Many computer systems and applications in use today process
transactions using two-digit date fields for the year of the transaction,
rather than the full four digits. If these systems are not modified or
replaced, transactions occurring after 1999 could be processed as year "1900",
which could result in processing inaccuracies and computer system failures.
This is commonly known as the Year 2000 problem. The failure of any of the
computer systems employed by the Portfolio's major service providers to process
Year 2000 related information properly could have a significant negative impact
on the Portfolio's operations and the
15
<PAGE>
services that are provided to the Portfolio's shareholders. In addition, to the
extent that the operations of issuers of securities held by the Portfolio are
impaired by the Year 2000 problem, or prices of securities held by the
Portfolio decline as a result of real or perceived problems relating to the
Year 2000, the value of the Portfolio's shares may be materially affected.
With respect to the Year 2000, the Portfolio has been advised that Alliance,
the Portfolio's investment adviser, Alliance Fund Distributors, Inc. ("AFD"),
the Portfolio's principal underwriter, and Alliance Fund Services, Inc.
("AFS"), the Portfolio's registrar, transfer agent and dividend disbursing
agent (collectively, "Alliance"), began to address the Year 2000 issue several
years ago in connection with the replacement or upgrading of certain computer
systems and applications. During 1997, Alliance began a formal Year 2000
initiative, which established a structured and coordinated process to deal with
the Year 2000 issue. Alliance reports that it has completed its assessment of
the Year 2000 issues on its domestic and international computer systems and
applications. Currently, management of Alliance expects that the required
modifications for the majority of its significant systems and applications that
will be in use on January 1, 2000, will be completed and tested by early 1999.
Full integration testing of these systems and testing of interfaces with third-
party suppliers will continue through 1999. At this time, management of
Alliance believes that the costs associated with resolving this issue will not
have a material adverse effect on its operations or on its ability to provide
the level of services it currently provides to the Portfolio.
The Portfolio and Alliance have been advised by the Portfolio's Custodian and
Administrator that they are each in the process of reviewing their systems with
the same goals. As of the date of this Prospectus, the Portfolio and Alliance
have no reason to believe that the Custodian or Administrator will be unable to
achieve these goals.
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<PAGE>
MANAGEMENT OF THE PORTFOLIO
Investment Adviser
The Portfolio's Adviser is Alliance Capital Management, L.P., 1345 Avenue of
the Americas, New York, New York 10105. Alliance is a leading international
investment manager supervising client accounts with assets as of December 31,
1998, totaling more than $286 billion (of which approximately $118 billion
represented the assets of investment companies). Alliance's clients are
primarily major corporate employee benefit funds, public employee retirement
systems, investment companies, foundations, and endowment funds. The 54
registered investment companies, with more than 118 separate portfolios,
managed by Alliance currently have over 3.6 million shareholder accounts. As of
December 31, 1998, Alliance was retained as an investment manager for employee
benefit plan assets of 35 of the FORTUNE 100 companies.
Alliance provides investment advisory services and order placement facilities
for the Portfolio. For these advisory services, for the fiscal year ended
December 31, 1998 the fee paid to Alliance by the Portfolio as a percentage of
average net assets was .97%, net of fee waivers and/or reimbursements. Absent
fee waivers and/or reimbursements, the fee paid to Alliance by the Portfolio as
a percentage of net assets would have been 1.00%.
Portfolio Managers
The following table lists the person who is primarily responsible for the day-
to-day management of the Portfolio, the length of time that person has been
primarily responsible for the Portfolio, and that person's principal occupation
during the past five years.
<TABLE>
<CAPTION>
Principal Occupation
Employee; Time Period; During
Portfolio Title With ACMC The Past Five Years*
--------- --------------------------------- ------------------------
<C> <S> <C>
Premier Growth Alfred Harrison; since inception; Associated with Alliance
Portfolio Director and Vice Chairman of since prior to 1994
Alliance Capital Management
Corporation**
</TABLE>
- --------
* Unless indicated otherwise, persons associated with Alliance have been
employed in a portfolio management, research or investment capacity.
** The sole general partner of Alliance.
PURCHASE AND SALE OF SHARES
How The Portfolio Values Its Shares
The Portfolio's net asset value or NAV is calculated at 4:00 p.m., Eastern
time, each day the Exchange is open for business. To calculate NAV, the
Portfolio's assets are valued and totaled, liabilities are subtracted, and the
balance, called net assets, is divided by the number of shares outstanding. The
Portfolio values its securities at their current market value determined on the
basis of market quotations or, if such quotations are not readily available,
such other methods as the Portfolio's Directors believe accurately reflect fair
market value. The Portfolio invests in securities that are primarily listed on
foreign exchanges and trade on weekends or other days when the fund does not
price its shares. The Portfolio's NAV may change on days when shareholders will
not be able to purchase or redeem the Portfolio's shares.
Your order for purchase or sale of shares is priced at the next NAV calculated
after your order is received by the Portfolio.
How To Purchase and Sell Shares
The Portfolio offers its shares through the separate accounts of life insurance
companies. You may only purchase and sell shares through these separate
accounts. See the Prospectus of the separate account of the participating
insurance company for information on the purchase and sale of the Portfolio's
shares.
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<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Portfolio declares dividends on its shares at least annually. The income
and capital gains distribution will be made in shares of the Portfolio.
See the Prospectus of the separate account of the participating insurance
company for federal income tax information.
Investment income received by the Portfolio from sources within foreign
countries may be subject to foreign income taxes withheld at the source.
Provided that certain code requirements are met, a Portfolio may "pass-through"
to its shareholders credits or deductions to foreign income taxes paid.
DISTRIBUTION ARRANGEMENTS
This Prospectus offers Class B shares of the Portfolios. The Class B shares
have an asset-based sales charge or Rule 12b-1 fee. The Portfolio has adopted a
plan under the Commission Rule 12b-1 that allows the Portfolio to pay asset-
based sales charges or distribution fees for the distribution and sale of its
shares. The amount of these fees for the Class B shares as a percentage of
average net assets is 0.25%. Because these fees are paid out of the Portfolio's
assets on an on-going basis, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales fees.
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<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Portfolio's financial performance for the period of the Portfolio's operations.
Certain information reflects financial results for a single Class A share of
each Portfolio. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in Class A shares of the
Portfolio (assuming reinvestment of all dividends and distributions). The
information has been audited by Ernst & Young LLP, the Fund's independent
auditors, whose report, along with each Portfolio's financial statements, is
included in the SAI, which is available upon request. Since the Portfolios did
not offer Class B shares prior to January 1999, the financial highlights are
solely for Class A shares and do not reflect the annual Class B Rule 12b-1 fee
of .25% of average net assets.
<TABLE>
<CAPTION>
Premier Growth Portfolio
------------------------------------------------
Year Ended December 31,
------------------------------------------------
1998 1997 1996 1995 1994
---------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year................... $ 20.99 $ 15.70 $ 17.80 $ 12.37 $ 12.79
---------- -------- ------- ------- -------
Income From Investment
Operations
Net investment income
(loss)(b)(c).............. (.01) .04 .08 .09 .03
Net realized and unrealized
gain (loss) on investment
transactions.............. 10.08 5.27 3.29 5.44 (.41)
---------- -------- ------- ------- -------
Net increase (decrease) in
net asset value from
operations................ 10.07 5.31 3.37 5.53 (.38)
---------- -------- ------- ------- -------
Less: Dividends and
Distributions
Dividends from net
investment income......... (.03) (.02) (.10) (.03) (.01)
Distributions from net
realized gains............ -0- -0- (5.37) (.07) (.03)
---------- -------- ------- ------- -------
Total dividends and
distributions............. (.03) (.02) (5.47) (.10) (.04)
---------- -------- ------- ------- -------
Net asset value, end of
year...................... $ 31.03 $ 20.99 $ 15.70 $ 17.80 $ 12.37
========== ======== ======= ======= =======
Total Return
Total investment return
based on net asset
value(d).................. 47.97% 33.86% 22.70% 44.85% (2.96)%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted)........... $1,247,254 $472,326 $96,434 $29,278 $37,669
Ratios to average net
assets of:
Expenses, net of waivers
and reimbursements...... 1.06% .95% .95% .95% .95%
Expenses, before waivers
and reimbursements...... 1.09% 1.10% 1.23% 1.19% 1.40%
Net investment income
(loss)(b)............... (.04)% .21% .52% .55% .42%
Portfolio turnover rate.... 31% 27% 32% 97% 38%
</TABLE>
- --------
Footnotes:
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Based on average shares outstanding.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total investment return
calculated for a period of less than one year is not annualized.
(e) Annualized.
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For more information about the Portfolio, the following documents are available
upon request:
Annual/Semi-annual Reports to Shareholders
The Portfolio's annual and semi-annual reports to shareholders contain
additional information on the Portfolio's investments. In the annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Portfolio's performance during its last fiscal
year.
Statement of Additional Information (SAI)
The Fund has an SAI, which contains more detailed information about the
Portfolio, including its operations and investment policies. The Fund's SAI is
incorporated by reference into (and is legally part of) this Prospectus.
You may request a free copy of the current annual/semi-annual report or the
SAI, by contacting your broker or other financial intermediary, or by
contacting Alliance:
By mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
By phone: For Information:
(800) 221-5672
For Literature:(800) 227-4618
Or you may view or obtain these documents from the Commission:
In person: at the Commission's Public Reference Room in
Washington, D.C.
By phone: 1-800-SEC-0330
By mail: Public Reference Section Securities and Exchange
Commission Washington, DC 20549-6009 (duplicating fee
required)
On the Internet: www.sec.gov
You also may find more information about Alliance and the Portfolio on the
internet at: www.Alliancecapital.com.
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