ALLIANCE NEW EUROPE FUND
SEMI-ANNUAL REPORT
JANUARY 31, 1996
LETTER TO SHAREHOLDERS ALLIANCE NEW EUROPE FUND, INC.February 12, 1996
_______________________________________________________________________________
Dear Shareholder:
It's been a period of strong gains in global financial markets in the six
months since we last reported. Though European markets trailed the U.S. market
by over 15% in 1995, year to date 1996 has seen solid improvement. The
following table shows how Alliance New Europe Fund performed during the fiscal
half year ended January 31, 1996, and for comparison we've shown performance
for Morgan Stanley's (MS) unmanaged Europe Index-a measure of stock market
performance in 14 countries-and for the average of its Lipper universe of 42
European region funds. This peer group has generally similar investment
objectives to the New Europe Fund though investment policies for the various
funds may differ.
Total Return
Periods Ended January 31, 1996
Six Months Twelve Months
---------- --------------
ALLIANCE NEW EUROPE FUND
Class A +2.26% +21.38%
Class B +2.05% +20.77%
Class C +2.05% +20.75%
MS EUROPE INDEX +3.30% +23.90%
LIPPER EUROPEAN REGION UNIVERSE -0.49% +19.87%
TOTAL RETURNS ARE BASED ON THE NET ASSET VALUES OF EACH CLASS OF SHARES AS OF
JANUARY 31; ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
MARKET OVERVIEW
January started with a bang for European markets. France and Germany led the
way with gains of 8% or better while Switzerland and the United Kingdom lagged
somewhat with a respective 1% decline and 1% gain. Europe as a whole
appreciated about 5% in January in local currency terms, but the dollar's
approximate 4% appreciation reduced this to 1% for dollar-based investors.
The solid gains are especially welcome after generally poor performance in 1995
for European stocks, particularly in France and Germany, which lagged U.S.
equities by over 30%. The weaker dollar of 1995 had a negative impact on
European profits, as did weaker-than-expected economic growth.
UPDATE ON EUROPEAN ECONOMIES
The economic picture continued to deteriorate throughout 1995 as consumer
demand remained depressed and inventories built up. However, consumer balance
sheets are strong and tax rates have stabilized in both Germany and the U.K.
after having risen in each of the last three years. Unfortunately, taxes are
going up in France and Belgium in 1996.
Governments are clearly concerned about the sharp declines in growth, and
consequently interest rates should remain favorable until growth resumes.
There's plenty of pent-up demand for housing and automobiles, thus we expect
the economies to recover as 1996 progresses.
The U.S. dollar is a critical issue. Despite its recent recovery, the dollar is
still lower than its equilibrium value and European competitiveness will remain
strained unless it strengthens further. This creates a difficult environment
for job creation and consumer confidence, as well as profits.
INVESTMENT ACTIVITY
Although growth stocks were clearly the best performers in 1995 we continue to
adhere to the value philosophy that has served the Fund well over time. We own
a number of stocks which lack earnings momentum for 1995-96, but which have
good earnings power potential for 1997-98.
A number of stocks in the portfolio sell at less than half of what we view as
their current fair market value. For example, one of your Fund's recent
additions is a French company with a fittings and couplings business with sales
of 1.7 billion (French francs) and an average operating margin of 12%. This is
only a part of the company's business but is conceivably worth the 1.5 billion
(FF) market value of the entire company. This same company also produces
annually 1.3 billion (FF) of tower cranes for construction sites throughout the
world. Though it is currently depressed, this business has produced margins as
high as 27% per annum and has never operated at a loss. Although 1996 earnings
will suffer because of a poor German construction market, 1997 and 1998 should
bring a strong recovery and respectable per-share earnings.
1
ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
The construction sector in Europe has been oversold, and we continue to hold a
number of British construction companies because of a likely recovery in a
depressed housing market. In France, the Fund currently owns the stock of a
construction company that is also active in television and cellular phones. We
believe the stock is selling at a significant discount to its net asset value
because the market is not focused on the potential of the cellular franchise,
which should begin connecting subscribers early this summer.
The Fund continues to own depressed French financial services stocks. We also
own a number of property companies selling at 40% discounts to their currently
depressed asset values. Our opinion is that the French property market is close
to a bottom and these stocks have good upside potential once the market is
convinced that a bottom has been reached.
Core holdings continue to include solid growth stocks selling at low multiples,
which include two Dutch insurers with price earnings multiples at about 10x and
with 8-10% annual growth potential. We also hold large positions in German and
Swiss chemical/pharmaceutical hybrid companies that have break-up values 50%
higher than current prices, reasonable earnings growth outlooks and price
earnings multiples of around 11x.
We are reasonably optimistic about the outlook for European equities and as
always, we appreciate your investment in the New Europe Fund. We look forward
to reporting its progress to you in the coming period.
Sincerely,
John D. Carifa
Chairman and President
Eric N. Perkins
Vice President
2
ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
Alliance New Europe Fund seeks long-term capital appreciation. It invests
principally in a non-diversified portfolio of the equity securities of European
companies.
INVESTMENT RESULTS
AVERAGE ANNUAL TOTAL RETURN AS OF JANUARY 31, 1996
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year +21.38% +16.18%
. Five Years +11.82% +10.86%
. Since Inception* +7.58% +6.78%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year +20.77% +16.77%
. Since Inception* +9.49% +9.49%
CLASS C SHARES
. One Year +20.75%
. Since Inception* +15.32%
The average annual total returns reflect investment of dividends and/or capital
gains distributions in additional shares-with and without the effect of the
4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
Class C shares are not subject to front-end or contingent deferred sales
charges. Past performance does not guarantee future results. Investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
* Inception: 4/2/90, Class A; 3/5/91, Class B; 5/3/93, Class C.
3
TEN LARGEST HOLDINGS
JANUARY 31, 1996 (UNAUDITED) ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -------------------------------------------------------------------------------
Fortis Amev N.V. $3,394,486 2.7%
AB Astra, Ser. A 2,873,663 2.3
B.A.T. Industries Plc. 2,795,162 2.2
Nestle, S.A. 2,728,849 2.2
Ciba-Geigy A.G. 2,609,786 2.1
Deutsche Bank A.G. 2,586,711 2.1
Den Danske Bank International, S.A. 2,492,438 2.0
Bayer A.G. 2,482,376 2.0
Vodafone Group Plc. 2,350,533 1.9
Peugeot, S.A. 2,278,422 1.8
$26,592,426 21.3%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED JANUARY 31, 1996 (UNAUDITED)
_______________________________________________________________________________
SHARES
---------------------
HOLDINGS
PURCHASES COUNTRY BOUGHT 1/31/96
- -------------------------------------------------------------------------------
Anglian Water Plc. United Kingdom 150,000 150,000
Baloise Holdings Switzerland 610 610
BTR, Plc. United Kingdom 246,000 402,000
Eni S.p.A. (Ente Nazionale Idrocarburi) Italy 366,000 366,000
Peninsular & Oriental Steam Navigation United Kingdom 170,000 170,000
Peugeot, S.A. France 15,600 15,600
Sainbury (J), Plc. United Kingdom 213,000 213,000
Schmalbach Lubeca A.G. Germany 6,400 6,400
Varta A.G. Germany 5,750 5,750
Winterthur Schweiz Switzerland 1,670 1,670
HOLDINGS
SALES COUNTRY SOLD 1/31/96
- -------------------------------------------------------------------------------
Brown Boveri & Compagnie, A.G. Switzerland 1,090 -0-
Dixons Group Plc. United Kingdom 248,050 -0-
Elsevier N.V. Netherlands 110,000 -0-
Forte Plc. United Kingdom 402,230 -0-
Heineken N.V. Netherlands 11,050 -0-
Johnson, Matthey Plc. United Kingdom 140,172 -0-
Royal Bank of Scotland Group Plc. United Kingdom 246,095 137,500
SEITA France 54,100 -0-
Thorn-Emi Plc. United Kingdom 81,454 -0-
Unilever Ord. United Kingdom 76,000 -0-
4
INDUSTRY DIVERSIFICATION
JANUARY 31, 1996 (UNAUDITED) ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
COMPANY U.S. $VALUE PERCENT OF NET ASSETS
- -------------------------------------------------------------------------------
Consumer Staples $ 18,047,699 14.4%
Banking 14,486,169 11.6
Consumer Manufacturing 12,515,338 10.0
Utilities 9,936,862 7.9
Insurance 9,370,509 7.5
Chemicals 5,458,942 4.4
Multi-Industry 5,003,938 4.0
Healthcare 4,851,365 3.9
Energy 4,626,240 3.7
Retail 4,668,175 3.7
Capital Goods 4,108,638 3.3
Real Estate 3,601,713 2.9
Transportation 3,592,994 2.9
Airlines 3,550,289 2.8
Consumer Services 2,328,595 1.9
Printing and Publishing 2,245,322 1.8
Forest Products and Paper 1,882,943 1.5
Basic Industries 1,789,450 1.4
Finance 1,738,342 1.4
Communication Equipment 1,600,154 1.3
Metals and Mining 1,324,159 1.0
Other 211,799 0.2
Total Investments 116,939,635 93.5
Cash & Receivables, net of liabilities 8,186,732 6.5
Net Assets $125,126,367 100.0%
5
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1996 (UNAUDITED) ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- ------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS91.7%
BELGIUM0.8%
Kredietbank, N.V. 3,320 $ 942,059
DENMARK2.2%
Den Danske Bank International, S.A. (a) 35,700 2,492,438
Tele Danmark A.S. Ser.B 4,300 237,479
2,729,917
FINLAND1.6%
Metsa-Serla Oy Ser. B 26,600 730,199
Unitas Bank, Ltd.* 475,000 1,241,318
1,971,517
FRANCE18.8%
Assurances Generales de France (a) 53,200 1,509,210
Banque Nationale de Paris 29,600 1,251,165
Bouygues, S.A. 13,243 1,340,441
Casino Guichard Perrachon 13,651 440,979
Cep Communications 3,000 270,178
Compagnie Financiere de Paribas, S.A. 20,900 1,099,881
Credit Foncier de France 26,850 367,969
Eaux (Cie Generale) (a) 15,800 1,676,591
Groupe Danone (a) 12,100 1,918,851
GTM Entrepose, S.A. 4,400 300,641
Klepierre 2,480 296,178
Legris Industries, S.A.* 20,300 757,115
Pechiney, S.A. Ser.A 2,700 103,977
Peugeot, S.A. (a) 15,600 2,278,422
Salomon, S.A. 1,960 1,115,123
Sanofi, S.A. 16,600 1,101,739
Sefimeg 9,700 634,292
SIMCO 7,820 690,484
Simco Nouv 219 17,622
Societe de Immeubles De France, S.A. 7,919 496,125
Total, S.A. Cl.B (a) 24,095 1,649,655
TV Francaise (a) 9,000 942,686
Unibail 11,720 1,170,223
Union Immobiliere de France 9,000 792,913
Usinor Sacilor* 90,300 1,324,159
23,546,619
GERMANY11.9%
Bayer A.G. (a) 8,300 2,482,376
Deutsche Bank A.G. (a) 51,800 2,586,711
Henkel KGAA Vz (a) 4,810 1,891,169
Klein, Schanz & Beck 2,490 438,460
Lufthansa 11,400 1,710,128
Schmalbach Lubeca A.G. 6,400 1,032,335
Sueddeutsche Zucker (a) 2,833 1,498,479
Varta A.G.* 5,750 1,020,237
Veba A.G.(a) 51,000 2,270,148
14,930,043
IRELAND1.0%
Irish Life Plc. 300,463 1,213,149
ITALY4.2%
Eni S.p.A (Ente Nazionale
Idrocarburi)* 366,000 1,355,847
La Rinascente S.p.A. (a) 277,700 1,775,253
Telecom Italia S.p.A. 811,000 1,373,672
Telecom Italia Mobile S.p.A.* 657,700 742,674
5,247,446
NETHERLANDS5.8%
Beheersmaatschappij J. Amerika N.V. *(b) 160,000 576,282
European Vinyl Corp. (a) 13,000 366,779
Fortis Amev N.V. 52,700 3,394,486
Int'l Nederlanden 33,536 2,188,288
Kon Nedlloyd N.V. 35,300 680,210
7,206,045
NORWAY2.3%
Bergesen Cl.A 38,700 778,393
Christiania Bank 601,000 1,439,455
First Olsen Tankers, Ltd.* 105,000 725,466
2,943,314
6
ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- ------------------------------------------------------------------------
SPAIN5.1%
Banco Intercontinental Espanol 18,100 $ 1,905,870
Natra, S.A. 44,000 368,535
Repsol, S.A. 46,600 1,620,739
Tabacalera, S.A. Ser. A 37,000 1,438,852
Unidad Editorial, S.A. (b) 549,920 626,030
Uralita 44,000 398,372
6,358,398
SWEDEN4.3%
Astra AB
Ser. A (a) 30,800 1,250,172
Ser. B (a) 40,500 1,623,491
Marielberg Tidings Ser. A 51,500 1,349,115
Stora Kopparbergs Ser. B 107,500 1,152,744
5,375,522
SWITZERLAND7.2%
Baloise Holdings 610 1,209,792
Ciba-Geigy A.G. 3,130 2,609,786
Forbo Holding A.G. 3,550 1,452,122
Nestle, S.A. 2,590 2,728,849
Winterthur Schweiz 1,670 1,065,376
9,065,925
UNITED KINGDOM25.8%
Allied Radio Plc.* 1,144,000 64,750
Anglian Water Plc. 150,000 1,281,705
B.A.T. Industries Plc. 316,492 2,795,162
British Airways Plc. 230,000 1,840,161
British Land Co, Plc. 204,000 1,242,217
British Telecom Plc. 312,000 1,680,650
BTR, Plc. 402,000 2,013,578
General Electric Plc. 293,000 1,604,849
Grand Metropolitan Plc. 335,000 2,247,448
Hazelwood Foods 328,200 510,778
Hepworth Ceramic 301,434 1,411,947
House of Fraser 166,200 452,031
Lex Services, Plc. 41,700 206,036
Marley 520,300 986,645
Mowlem (John) & Co. Plc. 860,000 818,634
Peninsular & Oriental Steam Navigation 170,000 1,408,926
Royal Bank of Scotland Group Plc. 137,500 1,159,304
Rugby Group Plc. 778,500 1,317,456
Sainbury (J), Plc. 213,000 1,269,650
Smith (WH) Group Plc. 115,900 730,262
SmithKline Beecham Cl.A 79,469 875,963
Tate & Lyle 276,000 1,964,237
Vodafone Group Plc. 655,000 2,350,533
Wimpey (George) Plc. 917,000 2,009,055
32,241,977
UNITED STATES0.5%
Northern Foods Plc. 233,800 685,338
OTHER0.2%
Asesores Bursatiles Capital Fund N.V.*(b) 800 211,799
Total Common Stocks & Other Investments
(cost $105,764,298) 114,669,068
PREFERRED STOCKS1.8%
FINLAND1.3%
Nokia Corp. (a) 41,050 1,600,154
GERMANY0.5%
Klein, Schanz & Beck 5,700 670,413
Total Preferred Stocks (cost $2,943,194) 2,270,567
TOTAL INVESTMENTS93.5%
(cost $108,707,492) 116,939,635
Other assets less liabilities6.5% 8,186,732
NET ASSETS100% $125,126,367
* Non-income producing.
(a) Securities with an aggregate market value of approximately $24,659,974,
segregated to collateralize forward exchange currency contracts.
(b) Illiquid security, valued at fair value (see Notes A & F).
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1996 (UNAUDITED) ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $108,707,492) $116,939,635
Cash, at value (cost $4,730,210) 4,727,749
Receivable for investment securities sold 4,136,810
Receivable for capital stock sold 1,266,413
Dividends receivable 705,217
Unrealized appreciation of forward exchange currency contracts 443,737
Other assets 5,602
Total assets 128,225,163
LIABILITIES
Payable for investment securities purchased 2,710,860
Payable for capital stock redeemed 146,844
Advisory fee payable 111,869
Distribution fee payable 58,006
Accrued expenses and other liabilities 71,217
Total liabilities 3,098,796
NET ASSETS $125,126,367
COMPOSITION OF NET ASSETS
Capital stock, at par $ 84,518
Additional paid-in capital 111,454,040
Distributions in excess of net investment income (885,251)
Accumulated net realized gain on investments and foreign
currency transactions 5,865,661
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 8,607,399
$125,126,367
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share($78,447,488/
5,238,998 shares of capital stock issued and outstanding) $14.97
Sales charge-4.25% of public offering price .66
Maximum offering price $15.63
CLASS B SHARES
Net asset value and offering price per share($38,028,585/
2,617,959 shares of capital stock issued and outstanding) $14.53
CLASS C SHARES
Net asset value, redemption and offering price per share($8,650,294
/594,889 shares of capital stock issued and outstanding) $14.54
See notes to financial statements.
8
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1996 (UNAUDITED) ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of ($124,300) $1,228,524
EXPENSES
Advisory fee 658,766
Distribution fee - Class A 120,074
Distribution fee - Class B 173,844
Distribution fee - Class C 39,927
Transfer agency 111,320
Custodian 88,504
Administrative 62,744
Audit and legal 40,664
Registration 36,432
Directors' fees 15,272
Printing 14,904
Miscellaneous 24,774
Total expenses 1,387,225
Net investment loss (158,701)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain on investment transactions 7,256,736
Net realized loss on foreign currency transactions (815,498)
Net change in unrealized appreciation (depreciation) of:
Investments (5,252,796)
Foreign currency denominated assets and liabilities 1,545,185
Net gain on investments and foreign currency transactions 2,733,627
NET INCREASE IN NET ASSETS FROM OPERATIONS $2,574,926
See notes to financial statements.
9
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JANUARY 31,1996 JULY 31,
(UNAUDITED) 1995
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income (loss) $(158,701) $ 167,293
Net realized gain on investments and foreign
currency transactions 6,441,238 23,504,623
Net change in unrealized appreciation
(depreciation)of investments and foreign
currency denominated assets and liabilities (3,707,611) (1,551,521)
Net increase in net assets from operations 2,574,926 22,120,395
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A -0- (563,832)
Class B -0- (232,044)
Class C -0- (73,698)
Net realized gain on investments
Class A (2,402,498) -0-
Class B (1,136,246) -0-
Class C (271,554) -0-
CAPITAL STOCK TRANSACTIONS
Net decrease (2,079,652) (22,827,762)
Total decrease (3,315,024) (1,576,941)
NET ASSETS
Beginning of period 128,441,391 130,018,332
End of period $125,126,367 $128,441,391
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 (UNAUDITED) ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance New Europe Fund, Inc. (the 'Fund'), which is a Maryland corporation,
is registered under the Investment Company Act of 1940, as a non-diversified,
open-end management investment company. The Fund offers Class A, Class B and
Class C shares. Class A shares are sold with a front-end sales charge of up to
4.25%. Class B shares are sold with a contingent deferred sales charge which
declines from 4% 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 sold without an
initial or contingent deferred sales charge. All three classes of shares have
identical voting, dividend, liquidation and other rights, except that each
class bears different distribution expenses and has exclusive voting rights
with respect to its distribution plan. The following is a summary of
significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a United States or European stock exchange for
which market quotations are readily available are valued at the last quoted
sales price on that exchange on the day of valuation or, if no such closing
price is available, at the last bid price quoted on such day. Other securities,
including securities of issuers within Eastern European countries, for which
market quotations are readily available are valued in a like manner. Readily
marketable fixed income securities are valued on the basis of prices provided
by a pricing service when such prices are believed by the Adviser to reflect
the fair market value of such securities. Securities, including securities of
issuers within Eastern European countries, and assets for which market
quotations are not readily available, including investments that are subject to
limitations as to their sale (restricted securities), are valued at fair value
as determined in good faith by the Fund's Board of Directors. In determining
fair value, consideration is given to cost, operating and other financial data.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated at the rates
of exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when accrued.
Net foreign exchange losses of $815,498 represent foreign exchange gains and
losses from sales and maturities of debt securities, holding of foreign
currencies, exchange gains or losses realized between the trade and settlement
dates on security transactions, and the difference between the amounts of
dividends, interest and foreign taxes receivable recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
currency gains and losses from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation of investments and foreign currency denominated assets
and liabilities.
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Security transactions are accounted for on the date securities are
purchased or sold. Security gains and losses are determined on the identified
cost basis. The Fund accretes discounts on short-term securities as adjustments
to interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under an investment advisory agreement, the Fund pays its Adviser, Alliance
Capital Management L.P., (the 'Adviser'), a monthly fee equal to the annualized
rate of 1.10% of the Fund's average daily net assets up to $100 million, .95%
of the next $100 million of the Fund's average daily net assets and .80% of the
Fund's average daily net assets over $200 million. The Adviser has agreed,
under the terms of the advisory agreement, to reimburse the Fund to the extent
that its aggregate expenses (exclusive of interest, taxes, brokerage,
distribution fee, extraordinary expenses and certain other expenses) exceed the
limits prescribed by any state in which the Fund's shares are qualified for
sale. The Fund believes that the most restrictive expense ratio limitation
currently imposed by any state is 2.5% of the first $30 million of the Fund's
average daily net assets, 2% of the next $70 million of its average daily net
assets and 1.5% of its average daily net assets in excess of $100 million. For
the six months ended January 31, 1996, no such reimbursement was required.
Pursuant to the advisory agreement, the Fund paid $62,744 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the six months ended January 31, 1996.
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 $82,659 for the six months ended January 31, 1996.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $2,930 from the sale of Class A shares and $37,857
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the six months ended January 31, 1996.
Brokerage commissions paid on securities transactions for the six months ended
January 31, 1996, amounted to $172,513, none of which was paid to brokers
utilizing the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp. ('DLJ'), an affiliate of the Adviser, nor to DLJ directly.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the 'Agreement')
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the average daily net assets attributable to the
Class A shares and 1% of the average daily net assets attributable to the Class
B and Class C 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 $1,897,146 and $342,892 for Class B and
C shares, respectively; such costs may be recovered from the Fund in future
periods so long as the Agreement is in effect. In accordance with the
Agreement, there is no provision for recovery of unreimbursed distribution
costs, incurred by the Distributor, beyond the current fiscal year for Class A
shares. The Agreement also provides that the Adviser may use its own resources
to finance the distribution of the Fund's shares.
12
ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $40,451,132 and $49,158,972, respectively, for the six months ended
January 31, 1996. There were no purchases or sales of U.S. Government and
government agency obligations for the six months ended January 31, 1996.
FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings and to hedge certain firm purchase and sale commitments denominated in
foreign currencies. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The gain or loss arising from the difference between the original
contracts and the closing of such contract is included in net realized gain or
loss from foreign currency transactions.
Fluctuations in the value of forward exchange currency contracts are recorded
for financial reporting purposes as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or securities in a separate account of the Fund having a value equal to the
aggregate amount of the Fund's commitments under forward exchange currency
contracts entered into with respect to position hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, as reflected in the following table, reflects the total exposure the
Fund has in that particular currency contract.
At January 31, 1996, the Fund had outstanding forward exchange currency
contracts both to sell or purchase foreign currencies against the U.S. dollar,
as follows:
CONTRACT VALUE ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
------ ---------- ---------- -------------
FOREIGN CURRENCY SELL CONTRACTS
Deutsche Marks,
expiring 2/23/96 14,200 $9,619,944 $9,579,703 $ 40,241
French Francs,
expiring 2/29/96 50,500 10,216,888 9,895,374 321,514
Italian Lira,
expiring 2/1/96 21,813 13,655 13,677 (22)
Swiss Francs,
expiring 2/29/96 2,800 2,397,465 2,315,348 82,117
FOREIGN CURRENCY BUY CONTRACTS
Netherlands Guilder,
expiring 2/1/96 170 102,057 101,944 (113)
---------
$443,737
At January 31, 1996, the cost of investments for federal income tax purposes
was $109,210,610. Accordingly, gross unrealized appreciation of investments was
$13,998,399 and gross unrealized depreciation of investments was $6,269,373,
resulting in net unrealized appreciation of $7,729,026.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 150,000,000 shares of $0.01 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares.
Each class consists of 50,000,000 authorized shares. Transactions in shares of
beneficial interest were as follows:
SHARES AMOUNT
------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JAN. 31,1996 JULY 31, JAN. 31,1996 JULY 31,
(UNAUDITED) 1995 (UNAUDITED) 1995
---------- ----------- ------------ -------------
CLASS A
Shares sold 262,886 669,629 $ 3,900,937 $ 9,073,455
Shares issued in
reinvestment of
dividends and
distributions 87,353 22,756 1,262,243 286,723
Shares redeemed (810,769) (1,846,522) (12,020,073) (24,604,898)
Net decrease (460,530) (1,154,137) $(6,856,893) $(15,244,720)
CLASS B
Shares sold 712,481 1,138,036 $10,247,272 $ 14,986,892
Shares issued in
reinvestment of
dividends and
distributions 46,660 9,139 654,638 112,591
Shares redeemed (488,816) (1,330,104) (7,049,470) (17,132,367)
Net increase (decrease) 270,325 (182,929) $ 3,852,440 $ (2,032,884)
CLASS C
Shares sold 470,932 1,012,937 $ 6,780,627 $ 13,356,791
Shares issued in
reinvestment of
dividends and
distributions 5,746 1,254 80,733 15,462
Shares redeemed (411,800) (1,440,571) (5,936,559) (18,922,411)
Net increase (decrease) 64,878 (426,380) $ 924,801 $ (5,550,158)
NOTE F: ILLIQUID SECURITIES
SECURITY DATE ACQUIRED U.S. $ COST
- ------------------------------------- ------------- -----------
Asesores Bursatiles Capital Fund N.V. 10/29/90 $356,924
Beheersmaatschappij J. Amerika N.V. 3/19/91 512,088
Unidad Editorial, S.A. 10/01/92 699,170
The securities shown above are illiquid and have been valued at fair value in
accordance with procedures described in Note A. The value of these securities
at January 31, 1996 was $1,414,111, representing 1.1% of net assets.
14
FINANCIAL HIGHLIGHTS ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------------
SIX MONTHS MARCH 1, APRIL 2,
ENDED 1994 1990(A)
JANUARY 31, YEAR ENDED TO YEAR ENDED FEBRUARY 28, TO
1996 JULY 31, JULY 31, ---------------------------------- FEBRUARY 28,
(UNAUDITED) 1995 1994* 1994 1993 1992 1991
------------ -------- ----------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.11 $12.66 $12.53 $ 9.37 $ 9.81 $ 9.76 $11.11(d)
INCOME FROM INVESTMENT OPERATIONS
Net investment income -0-(c) .04 .09 .02(c) .04 .02(c ).26
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions .33 2.50 .04 3.14 (.33) .05 (.91)
Net increase (decrease) in net asset
value from operations .33 2.54 .13 3.16 (.29) .07 (.65)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.09) -0- -0- (.15) (.02) (.26)
Distributions from net realized gains
on investments and foreign
currency transactions (.47) -0- -0- -0- -0- -0- (.44)
Total dividends and distributions (.47) (.09) -0- -0- (.15) (.02) (.70)
Net asset value, end of period $14.97 $15.11 $12.66 $12.53 $ 9.37 $ 9.81 $ 9.76
TOTAL RETURN
Total investment return based on net
asset value (e) 2.26% 20.22% 1.04% 33.73% (2.82)% .74% (5.63)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $78,447 $86,112 $86,739 $90,372 $79,285 $108,510 $188,016
Ratio of expenses to average net assets 2.02%(f) 2.09% 2.06%(f) 2.30% 2.25% 2.24% 1.52%(f)
Ratio of net investment income
to average net assets -0-%(f) .37% 1.85%(f) .17% .47% .16% 2.71%(f)
Portfolio turnover rate 34% 74% 35% 94% 125% 34% 48%
</TABLE>
See footnote summary on page 17.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------
SIX MONTHS MARCH 1, March 5,
ENDED 1994 1991(b)
JANUARY 31, YEAR ENDED TO YEAR ENDED FEBRUARY 28, TO
1996 JULY 31, JULY 31, --------------------- FEBRUARY 29,
(UNAUDITED) 1995 1994* 1994 1993 1992
------------ -------- ----------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.71 $12.41 $12.32 $9.28 $9.74 $9.84
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.05)(c) (.05) .07 (.05)(c) (.02) (.04)(c)
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions .34 2.44 .02 3.09 (.33) (.04)
Net increase (decrease) in net asset
value from operations .29 2.39 .09 3.04 (.35) (.08)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.09) -0- -0- (.11) (.02)
Dividends from net realized gains
on investments and foreign
currency transactions (.47) -0- -0- -0- -0- -0-
Total dividends and distributions (.47) (.09) -0- -0- (.11) (.02)
Net asset value, end of period $14.53 $14.71 $12.41 $12.32 $9.28 $9.74
TOTAL RETURN
Total investment return based on net
asset value (e) 2.05% 19.42% .73% 32.76% (3.49)% .03%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $38,029 $34,527 $31,404 $20,729 $1,732 $1,423
Ratio of expenses to average net assets 2.72%(f) 2.79% 2.76%(f) 3.02% 3.00% 3.02%(f)
Ratio of net investment income (loss)
to average net assets (.75)%(f) (.33)% 1.15%(f) (.52)% (.50)% (.71)%(f)
Portfolio turnover rate 34% 74% 35% 94% 125% 34%
</TABLE>
See footnote summary on page 17.
16
ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------
SIX MONTHS MARCH 1, MAY 3,
ENDED 1994 1993(B)
JANUARY 31, YEAR ENDED TO TO
1996 JULY 31, JULY 31, FEBRUARY 28,
(UNAUDITED) 1995 1994* 1994
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $14.72 $12.42 $12.33 $10.21
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.05)(c) (.07) .06 (.04)(c)
Net realized and unrealized gain
on investments and foreign
currency transactions .34 2.46 .03 2.16
Net increase in net asset value
from operations .29 2.39 .09 2.12
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.09) -0- -0-
Distributions from net realized gains
on investments and foreign
currency transactions (.47) -0- -0- -0-
Total dividends and distributions (.47) (.09) -0- -0-
Net asset value, end of period $14.54 $14.72 $12.42 $12.33
TOTAL RETURN
Total investment return based on net
asset value (e) 2.05% 19.40% .73% 20.77%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $8,650 $7,802 $11,875 $10,886
Ratio of expenses to average net assets 2.72%(f) 2.78% 2.76%(f) 3.00%(f)
Ratio of net investment income (loss)
to average net assets (.76)%(f) (.33)% 1.15%(f) (.52)%(f)
Portfolio turnover rate 34% 74% 35% 94%
</TABLE>
* The Fund changed its year end from February 28 to July 31.
(a) Commencement of operations.
(b) Commencement of distribution.
(c) Based on average shares outstanding.
(d) Net of offering costs of $.05.
(e) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return for a period of less than one year is not
annualized.
(f) Annualized.
17
ALLIANCE NEW EUROPE FUND, INC.
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
W.H. HENDERSON (1)
STIG HOST (1)
RICHARD M. LILLY (1)
ALAN STOGA (1)
ROBERT C. WHITE (1)
OFFICERS
THOMAS J. BARDONG, VICE PRESIDENT
NICHOLAS CROSSLAND, VICE PRESIDENT
ERIC N. PERKINS, VICE PRESIDENT
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
EDMUND P. BERGAN, JR., SECRECTARY
PATRICK J. FARRELL, CONTROLLER
CUSTODIAN AND ADMINISTRATOR
THE BANK OF NEW YORK
48 Wall Street
New York, NY 10286
PRINCIPAL UNDERWRITER
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
(1) Member of the Audit Committee.
18
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Small Cap Fund
Alliance Growth Fund
Alliance Premier Growth Fund
GROWTH & INCOME
Alliance Strategic Balanced Fund
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
Alliance Global Environment Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
19
ALLIANCE NEW EUROPE FUND, INC.
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCECAPITAL
MUTUAL FUNDS WITHOUT THE MYSTERY.
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS
OF THE FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
EURSR
