ALLIANCE NEW EUROPE FUND
SEMI-ANNUAL REPORT
JANUARY 31, 1999
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
March 26, 1999
Dear Shareholder:
We are pleased to report to you on our performance, investment strategy, and
outlook of the Alliance New Europe Fund for the period ended January 31, 1999.
INVESTMENT RESULTS AND ACTIVITY
The following table provides information on Alliance New Europe Fund's
performance and, for comparison, that of relevant benchmarks for the six- and
12-month periods ended January 31, 1999. The Fund's Class A shares modestly
underperformed the benchmark (the MSCI Europe Index) for the six months ended
January 31, 1999, but matched its performance over the preceding 12 months. The
Fund outperformed its peer group universe, represented by the Lipper European
Region Funds Average during the periods.
Our bottom-up stock selection process influenced performance. Our process seeks
to identify companies offering the best available combination of fundamental
growth at a reasonable price based on internally generated research provided by
our eight industry-oriented European analysts located in London. The events of
the last six months and their effect on the outlook for profits in a variety of
industries precipitated some material changes in the composition of the Fund's
portfolio, but not before we suffered somewhat in terms of our performance.
Specifically, the Fund's exposure to economically sensitive issues and select
financial stocks undermined performance in the six-month period ended January
31, 1999. In fact, it was this very same group that led to our strong
performance in the first part of 1998 and effectively allowed our returns to
match that of the benchmark.
INVESTMENT RESULTS*
Periods Ended January 31, 1999
TOTAL RETURNS
6 MONTHS 12 MONTHS
-------- ---------
ALLIANCE NEW EUROPE FUND
Class A -1.78% 22.71%
Class B -2.07% 21.81%
Class C -2.02% 21.86%
MSCI EUROPE INDEX -0.85% 22.96%
LIPPER EUROPEAN REGION FUNDS AVERAGE -5.23% 19.44%
* THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON THE
NET ASSET VALUE AS OF JANUARY 31, 1999. ALL FEES AND EXPENSES RELATED TO THE
OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT NO ADJUSTMENT HAS BEEN MADE FOR
SALES CHARGES THAT MAY APPLY WHEN SHARES ARE PURCHASED OR REDEEMED. RETURNS FOR
THE FUND INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD.
TOTAL RETURNS FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES
ASSOCIATED WITH THAT CLASS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EUROPE INDEX IS A
MARKET-CAPITALIZATION WEIGHTED INDEX OF OVER 550 STOCKS TRADED IN 15 EUROPEAN
MARKETS. THE LIPPER EUROPEAN REGION FUNDS AVERAGE (LIPPER AVERAGE) REPRESENTS
FUNDS THAT INVEST IN EQUITY SECURITIES WHOSE PRIMARY TRADING MARKETS OR
OPERATIONS ARE CONCENTRATED IN THE EUROPEAN REGION OR IN A SINGLE COUNTRY
WITHIN THIS REGION. THESE FUNDS HAVE GENERALLY SIMILAR INVESTMENT OBJECTIVES TO
YOUR FUND, ALTHOUGH INVESTMENT POLICIES FOR THE VARIOUS FUNDS MAY DIFFER. THE
LIPPER AVERAGE, FOR THE SIX- AND 12-MONTH PERIODS ENDED JANUARY 31, 1999
REFLECTS PERFORMANCE OF 104 AND 96 MUTUAL FUNDS, RESPECTIVELY. AN INVESTOR
CANNOT INVEST DIRECTLY IN AN INDEX OR AN AVERAGE.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 4.
INVESTMENT AND MARKET REVIEW
The six months ending January 31, 1999 were a period of extreme volatility in
financial markets in general and in Europe particularly. Russia's default on
its debt obligations in August and the subsequent problems at Long-Term Capital
Management in September fanned investors' fears of an escalation of the
emerging markets problems. These problems, which had started in Asia one year
previously, created concerns about global price pressures, financial system
stability, and economic growth. By early October, equity markets in Europe had
given up all the gains they had accrued in the first half of 1998. It was not
until swift action was taken by key central banks around the world that the
equity markets started to stabilize. With liquidity overwhelming concerns about
slowing profits growth, European equity markets recovered strongly into
year-end with many markets able to post 20% plus returns for all of 1998.
1
ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
Changes in the outlook for global growth and its implications for corporate
profit growth precipitated a change in the Fund's holdings starting in
September. Tepid growth, accompanied by further deflationary tendencies, led us
to reason that the same trends evident in the U.S. would evidence themselves in
Europe. That is to say that economically, the consumer would remain the primary
beneficiary of global trends, while manufacturers, particularly those close to
the primary or commodity-end of the production spectrum, would continue in
relative terms to suffer. In stock market terms, this suggests to us that a
benign interest rate outlook, coupled with surplus liquidity, should lead
investors to favor companies with high price to earnings ratios and good
earnings visibility/momentum at the expense of cheaply valued cyclical
companies lacking in earnings visibility.
This led us to sell manufacturers or commodity producers such as L'Air Liquide,
BASF AG (chemicals), Thyssen AG, Johnson Matthey Plc (metals), and Veba AG (oil
& chemicals). These were replaced with companies in the consumer services area
such as Essilor International SA (eyeglass manufacturer), ProSieben Media AG
(media), EMAP Plc, Pearson Plc, United News & Media Plc (publishing), Delhaize
"Le Lion" SA, Dixons Group Plc (retailing), and Misys Plc (technology). We
believe that all these companies have the potential for double-digit growth in
earnings in 1999.
We also believe that the environment for financial stocks would be less
favorable as global growth slowed. Our concern about emerging and capital
markets exposure led us to sell our holdings in Banco Bilbao Vizcaya SA, Banco
Santander SA, Bank Austria AG, and Societe Generale. While we remain
underweight in financial stocks relative to the benchmark, we have recently
begun to add selectively to holdings in this group, primarily in the insurance
sector.
Our exposure to equities in the United Kingdom has risen at the expense of
Germany during the period under review. In response to successive cuts in
interest rates by the Bank of England, we expect a bottoming-out of the U.K.
economy in 1999. This should lead to better investment opportunities for
domestically exposed companies that stand to benefit from rising levels of
activities. Our holdings in Beazer Group Plc (home building) and Vodafone Group
Plc (mobile telecommunication) all fit in well with this perspective. Each
earns a significant percentage of their profits in the United Kingdom.
Currency exposure is not hedged at the present time, despite our expectations
of a weak Euro near-term. The sole reason for the weaker Euro, we believe, is
due to economic growth exceeding expectations in the United States, while
growth undershoots expectations in Continental Europe. We expect this to
reverse as we move through 1999. This should result in a firmer tone for the
Euro and little change overall from the start to the end of the year.
INVESTMENT OUTLOOK
The gap between fundamentals and price that we saw at the end of the third
quarter has been fully corrected thanks to a liquidity-induced rally resulting
from successive and widespread interest cuts by central banks around the world.
In looking forward to 1999, we believe it is appropriate to reflect back on the
key issues of 1998 and to seek an answer to the following question: To what
degree have the problems and imbalances exposed in the global economy and
financial markets in 1998 been laid to rest or resolved? The answer to this
question, we believe, is the key determinant of whether one espouses a
cautiously optimistic point of view for equities in 1999, or whether one
characterises the rise in equities as an extension of an equity bubble that
began to develop in the spring of 1998.
Our view is that external and internal conditions are set to remain challenging
for equities in 1999. Many of the global macroeconomic issues that haunted the
markets over the summer have not been resolved. Japan remains weakened by lack
of consumption and an ongoing credit crunch that is unlikely to show material
change anytime soon. Asian economies are bottoming, but will recover slowly as
their systems regain liquidity, while Latin America looks set for a year of
very tepid and possibly negative Gross Domestic Product growth. Strong growth
in Europe has now given way to very weak trends. Declining expectations and
order intake amongst industrial companies are offsetting the strength in
consumption and consumer confidence. The same picture, but from a much stronger
base, can be seen in the U.S., which looks set to remain the critical player in
sustaining global growth. But with manufacturing slowing and corporate profits
facing a challenging environment, one has
2
ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
to question how long the consumer will feel good if unemployment trends start
to reverse.
Global economic growth in 1999 is likely to be weak relative to 1998. The
strain on corporate profits is already showing amidst declining volumes and
sliding pricing power. Our valuation work shows the European markets to be
fairly valued in general (using bottom-up consensus forecasts that already look
too optimistic for 1999). In fact, throughout most of 1998, with the exception
of early January and late third/early fourth quarter 1998, European markets
have tended to trade at fair to extended valuations. By itself, valuation is
not a reason for a stock or equity market to correct (either up or down). A
trigger for this is needed. Valuations that are fair to extended leave little
room for disappointment, and as we have written in the past, make the markets
vulnerable to external shocks. For 1999, we believe the following are the key
external risks: a surprise rise in interest rates in the U.S. (short or long),
a crash in the dollar or yen, further implosion of the Japanese economy, Euro
failure, further downward pressure on commodity and oil prices, or a crisis in
Brazil.
Until such time as we discern a shift in the direction of economic indicators
and activities from today's levels, we think that the trends in place for the
last several quarters will remain intact. That is to say that large cap,
earnings momentum-driven companies will probably continue to lead in terms of
relative performance. It also suggests to us that interactive forces between
the economy and the stock markets are likely to remain in place. This should
leave the bias in the direction of equity prices toward the upside despite our
valuation concerns. But given the disparity in valuations between large and
small cap stocks, as well as growth and value stocks, WE EXPECT 1999 TO PROVIDE
MORE BROAD-BASED OPPORTUNITIES IN TERMS OF STOCK SELECTION THAN 1998. Our
cautiously optimistic view is predicated on the fact that we expect market
breadth to widen from the narrow concentration seen throughout 1998. Even so,
we are holding cash balances above normal until such time as prices offer more
downside protection.
It is not too hard these days to find companies with clean balance sheets,
attractive dividend yields, and double digit return on capital employed (ROCE)
that are selling at single digit multiples on trough 1999 earnings estimates.
In equal measure, it is not hard to find companies trading at multiples that
even aggressive growth managers would find daunting from a long-term return
perspective. If the bull market has further to run, then we think 1999 will
present opportunities for both sets of companies (perhaps the latter early on
in the year and the former group in the second half). As such, we prefer to
keep the Fund's portfolios "barbelled"--that is, between high multiple
companies with strong franchises and good growth prospects (which for the most
part is already discounted in the share price), and those companies that are
still growing (and adding economic value), albeit at a below trend pace, but
where value remains outstanding both in relative and absolute terms. If we are
right about volatility in 1999, and we expect it will be more evenly spread
than last year, then the "barbelled" set of holdings in our portfolio should
provide for moderate relative volatility and above average returns. We expect
1999 to be no less challenging than 1998.
As always, we appreciate your investment in the New Europe Fund and look
forward to reporting its progress to you in the coming period.
Sincerely,
John D. Carifa
Chairman and President
Stephen Beinhacker
Vice President
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
3
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
Alliance New Europe Fund is a non-diversified investment company that seeks
long-term capital appreciation through investment primarily in the equity
securities of companies based in Europe
INVESTMENT RESULTS
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF JANUARY 31, 1999
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 22.71% 17.47%
Five Years 16.09% 15.09%
Since Inception* 11.94% 11.38%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 21.81% 17.81%
Five Years 15.28% 15.28%
Since Inception* 13.38% 13.38%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 21.86% 20.86%
Five Years 15.30% 15.30%
Since Inception* 17.80% 17.80%
SEC AVERAGE ANNUAL TOTAL RETURNS AS OF THE MOST RECENT QUARTER-END (DECEMBER
31, 1998)
CLASS A CLASS B CLASS C
--------- --------- ---------
1 Year 19.67% 20.12% 23.10%
5 Years 15.92% 16.10% 16.10%
Since Inception* 11.28% 13.27% 17.75%
The Fund's investment results represent average annual total returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) 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);
and for Class C shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000. Total return for Advisor Class shares will differ due to
different expenses associated with that class.
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.
4
TEN LARGEST HOLDINGS
JANUARY 31, 1999 (UNAUDITED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Nokia AB Oyj Corp. Series A $17,830,253 5.5%
Zurich Allied AG 9,895,472 3.1
Novartis AG 8,617,294 2.7
Vodafone Group Plc. 7,644,021 2.4
ING Groep NV 7,526,648 2.3
Suez Lyonnaise des Eaux 6,602,095 2.1
Schweizerische Rueckversicherungs-Gesellschaft 6,130,576 1.9
Equant NV 6,063,750 1.9
Tabacalera, SA Series A 6,050,282 1.9
Endesa, SA 5,570,746 1.7
$81,931,137 25.5%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED JANUARY 31, 1999 (UNAUDITED)
_______________________________________________________________________________
SHARES
- -------------------------------------------------------------------------------
HOLDINGS
PURCHASES COUNTRY BOUGHT 1/31/99
- -------------------------------------------------------------------------------
Assurance Generales de France France 63,600 63,600
Banca di Roma Italy 2,145,000 2,145,000
Barco NV Belgium 11,440 11,440
DaimlerChrysler AG Germany 48,700 48,700
Delhaize "Le Lion" SA Belgium 36,730 36,730
Koninklijke Ahold NV Netherlands 135,000 135,000
Mannesmann AG Germany 35,500 35,500
Novartis AG Switzerland 2,650 4,600
SEITA France 78,165 78,165
Williams Plc. United Kingdom 508,000 508,000
HOLDINGS
SALES COUNTRY SOLD 1/31/99
- -------------------------------------------------------------------------------
Adidas-Salomon AG Germany 25,400 -0-
Akzo Nobel NV Netherlands 182,720 44,080
British Aerospace Plc. United Kingdom 456,800 175,092
Julius Baer Holdings AG Switzerland 1,125 -0-
Nokia AB Oyj Corp. Series A Finland 62,000 122,000
Royal Philips Electronics NV Netherlands 114,000 -0-
Telecom Italia Mobile SpA Italy 809,000 -0-
Thyssen AG Germany 17,060 -0-
Total, SA Cl.B France 21,562 -0-
Veba AG Germany 51,200 -0-
5
INDUSTRY DIVERSIFICATION
JANUARY 31, 1999 (UNAUDITED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
PERCENT OF
U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Aerospace & Defense $ 1,323,891 0.4%
Basic Industries 9,496,363 3.0
Capital Goods 13,352,546 4.1
Consumer Manufacturing 33,899,019 10.5
Consumer Services 30,991,918 9.6
Consumer Staples 37,894,569 11.8
Energy 7,113,551 2.2
Finance 58,495,595 18.2
Healthcare 23,522,702 7.3
Multi-Industry 21,411,489 6.7
Technology 23,894,003 7.4
Utilities 32,970,854 10.3
Total Investments 294,366,500 91.5
Cash and receivables, net of liabilities 27,166,933 8.5
Net Assets $321,533,433 100.0%
6
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1999 (UNAUDITED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-89.0%
BELGIUM-1.8%
Barco NV 11,440 $ 2,433,112
Delhaize "Le Lion" SA 36,730 3,421,365
------------
5,854,477
DENMARK-1.1%
Ratin A/S Cl. B 16,730 3,479,820
FINLAND-7.1%
Nokia AB Oyj Corp. Series A 122,000 17,830,253
Orion-yhtymae Oy Ser. B 105,740 2,387,231
Stora Enso Oyj Cl. R 301,400 2,714,957
------------
22,932,441
FRANCE-12.5%
Assurances Generales de France 63,600 3,732,513
Banque Nationale de Paris 53,500 4,864,820
Compagnie de Saint-Gobain 19,500 2,732,372
Compagnie Francaise d'Etudes et de
Construction Technip, SA 29,000 2,572,688
Essilor International, SA 7,100 2,971,671
Sanofi, SA 23,000 4,525,520
Schneider, SA 63,000 3,661,474
SEITA 78,165 4,445,052
Suez Lyonnaise des Eaux 32,000 6,602,095
Valeo, SA 47,739 4,202,511
------------
40,310,716
GERMANY-5.9%
DaimlerChrysler AG (a) 48,700 5,054,246
Mannesmann AG 35,500 4,966,243
Merck KGaA 65,820 2,395,534
Schmalbach Lubeca AG 19,128 2,284,301
Volkswagen AG 55,000 4,297,481
------------
18,997,805
GREECE-0.6%
Panafon Hellenic Telecom, SA (GDR) (a) 60,130 2,020,368
IRELAND-1.4%
CRH Plc. 265,100 4,332,063
ITALY-4.8%
Banca di Roma (a) 2,145,000 3,183,702
ENI SpA 567,000 3,366,263
Telecom Italia SpA 524,388 4,914,445
Unicredito Italiano SpA 737,000 4,015,111
------------
15,479,521
NETHERLANDS-7.7%
Akzo Nobel NV 44,080 1,764,732
Equant NV (a) 77,000 6,063,750
ING Groep NV 129,000 7,526,648
Koninklijke Ahold NV 135,000 5,251,150
Thermo Eurotech NV (a) (b) 160,000 495,463
Wolters Kluwerc NV 18,100 3,580,944
------------
24,682,687
PORTUGAL-0.8%
Electricidade de Portugal, SA 105,000 2,567,570
SPAIN-6.5%
Endesa, SA 200,000 5,570,746
Repsol, SA 69,000 3,747,287
Tabacalera, SA Ser. A 261,150 6,050,282
Telefonica, SA 105,090 4,810,850
rights, expiring 1/30/99 (a) 105,090 95,619
Unidad Editorial, SA Series A (a) (b) 549,920 601,447
------------
20,876,231
SWEDEN-4.1%
Astra AB Ser. A 121,500 2,625,452
Autoliv, Inc. (SDR) 120,000 4,962,938
Electrolux AB Ser. B 179,500 2,785,337
ForeningsSparbanken AB 107,500 2,853,690
------------
13,227,417
SWITZERLAND-10.8%
Nestle, SA 1,395 2,553,269
Novartis AG 4,600 8,617,294
Schindler Holding AG 1,330 2,157,568
REGD 446 783,284
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
Schweizerische Rueckversicherungs-
Gesellschaft 2,470 $ 6,130,576
Swatch Group AG 15,240 1,988,574
UBS AG 7,500 2,428,058
Zurich Allied AG 13,400 9,895,472
------------
34,554,095
UNITED KINGDOM-23.9%
Amvescap Plc. 89,100 738,277
Bank of Scotland 341,366 4,335,588
Beazer Group Plc. 469,900 1,106,917
British Aerospace Plc. 175,092 1,323,891
British Airways Plc. 449,025 2,638,809
British Energy Plc. 289,000 3,258,702
Diageo Plc. 298,180 3,271,343
Dixons Group Plc. 175,800 2,924,918
EMAP Plc. 93,960 1,920,827
Energis Plc. (a) 73,000 1,950,505
FKI Plc. 850,000 1,988,294
Hays Plc. 131,400 1,286,828
Imperial Tobacco Group Plc. 275,600 3,177,976
Kingfisher Plc. 302,876 3,125,787
Ladbroke Group Plc. 877,039 3,247,073
Misys Plc. 360,000 3,744,978
Norwich Union Plc. 150,000 1,155,171
Orange Plc. (a) 9,500 138,027
Pearson Plc. 75,000 1,677,778
Provident Financial Plc. 101,575 1,501,740
Reuters Group Plc. 227,500 3,445,931
Royal Bank of Scotland Group Plc 204,912 3,638,811
Tomkins Plc. 1,177,527 4,228,640
Unilever Plc. 122,300 1,204,761
United Assurance Group Plc. 337,000 3,233,696
United News & Media Plc. 275,000 2,507,401
Vodafone Group Plc. 392,085 7,644,021
Whitbread Plc. Cl. A 272,999 3,903,500
Williams Plc. 508,000 2,596,264
------------
76,916,454
Total Common Stocks & Other Investments
(cost $255,032,576) 286,231,665
PREFERRED STOCKS-2.5%
GERMANY-2.5%
Henkel KGaA Vorzug 33,940 2,335,403
Hornbach Holding AG 10,000 437,880
ProSieben Media AG 63,000 3,081,084
Wella AG 3,287 2,280,468
------------
Total Preferred Stocks
(cost $9,114,616) 8,134,835
TOTAL INVESTMENTS-91.5%
(cost $264,147,192) 294,366,500
Other assets less liabilities-8.5% 27,166,933
------------
NET ASSETS-100% $321,533,433
(a) Non-income producing security.
(b) Restricted and illiquid securities, valued at fair value (see Notes A & F).
Glossary of Terms:
GDR - Global Depositary Receipt.
SDR - Swedish Depositary Receipt.
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1999 (UNAUDITED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $264,147,192) $294,366,500
Cash, at value (cost $25,349,907) 25,315,533
Receivable for investment securities 7,628,797
Receivable for capital stock sold 2,443,345
Dividends receivable 829,718
Other assets 13,479
Total assets 330,597,372
LIABILITIES
Payable for investment securities and foreign currency
purchased 7,176,755
Payable for capital stock redeemed 1,193,148
Advisory fee payable 253,777
Distribution fee payable 190,648
Accrued expenses 249,611
Total liabilities 9,063,939
NET ASSETS $321,533,433
COMPOSITION OF NET ASSETS
Capital stock, at par $ 177,676
Additional paid-in capital 283,970,551
Accumulated net investment loss (1,580,650)
Accumulated net realized gain on investments and foreign
currency transactions 8,712,331
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 30,253,525
$321,533,433
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($127,121,565/6,768,580 shares of capital stock issued
and outstanding) $18.78
Sales charge--4.25% of public offering price .83
Maximum offering price $19.61
CLASS B SHARES
Net asset value and offering price per share
($145,893,396/8,265,966 shares of capital stock issued
and outstanding) $17.65
CLASS C SHARES
Net asset value and offering price per share
($44,436,137/2,515,442 shares of capital stock issued
and outstanding) $17.67
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($4,082,335/217,564 shares of capital stock issued
and outstanding) $18.76
See notes to financial statements.
9
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1999 (UNAUDITED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $153,331) $ 1,205,153
Interest 286,386 $ 1,491,539
EXPENSES
Advisory fee 1,371,106
Distribution fee - Class A 173,078
Distribution fee - Class B 647,682
Distribution fee - Class C 189,138
Transfer agency 329,675
Custodian 146,678
Administrative 60,500
Audit and legal 57,607
Printing 36,679
Registration 31,815
Directors' fees 17,000
Miscellaneous 32,202
Total expenses 3,093,160
Less: expense offset arrangement (See Note B) (20,971)
Net expenses 3,072,189
Net investment loss (1,580,650)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 5,975,972
Net realized gain on foreign currency
transactions 4,554,638
Net change in unrealized appreciation of:
Investments (15,027,331)
Foreign currency denominated assets and
liabilities (11,919)
Net loss on investments and foreign currency
transactions (4,508,640)
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (6,089,290)
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1999 JULY 31,
(UNAUDITED) 1998
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (1,580,650) $ (183,175)
Net realized gain on investments and foreign
currency transactions 10,530,610 43,640,270
Net change in unrealized appreciation of
investments and foreign currency denominated
assets and liabilities (15,039,250) 11,117,869
Net increase (decrease) in net assets from
operations (6,089,290) 54,574,964
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Distributions in excess of net investment
income
Class A -0- (163,447)
Advisor Class -0- (18,527)
Net realized gain on investments and foreign
currency transactions
Class A (14,329,507) (8,368,006)
Class B (17,661,905) (7,564,196)
Class C (5,167,355) (1,982,938)
Advisor Class (416,416) (421,605)
CAPITAL STOCK TRANSACTIONS
Net increase 54,234,883 109,259,378
Total increase 10,570,410 145,315,623
NET ASSETS
Beginning of year 310,963,023 165,647,400
End of period $321,533,433 $310,963,023
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999 (UNAUDITED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
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 diversified,
open-end management investment company. The Fund offers Class A, Class B, Class
C and Advisor Class shares. Class A shares are sold with a front-end sales
charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to
purchases of $1,000,000 or more, Class A shares redeemed within one year of
purchase may be subject to a contingent deferred sales charge of 1%. Class B
shares are sold with a contingent deferred sales charge which declines from 4%
to zero depending on the period of time the shares are held. Class B shares
will automatically convert to Class A shares eight years after the end of the
calendar month of purchase. Class C shares are subject to a contingent deferred
sales charge of 1% on redemptions made within the first year after purchase.
Advisor Class shares are sold without an initial or contingent deferred sales
charge and are not subject to ongoing distribution expenses. Advisor Class
shares are offered to investors participating in fee based programs and to
certain retirement plan accounts. All four classes of shares have identical
voting, dividend, liquidation and other rights, except that each class bears
different distribution expenses and has exclusive voting rights with respect to
its distribution plan. The financial statements have been prepared in
conformity with generally accepted accounting principles which require
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities in the financial statements and amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchange whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sales price or if no sale occurred, at
the mean of the closing bid and asked prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with the procedures adopted by,
the Board of Directors. Fixed income securities may be valued on the basis of
prices obtained from a pricing service when such prices are believed to reflect
the fair market value of such securities.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized foreign exchange gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities and forward currency
exchange contracts, 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 amounts
actually received or paid. Net currency gains and losses from valuing foreign
currency denominated assets and liabilities at year end exchange rates are
reflected as a component of net unrealized appreciation 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 any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
12
ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts on short-term securities as adjustments
to interest income.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and Advisor Class shares (Advisor Class shares have no
distribution fees).
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences do not require such
reclassification.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under an investment advisory agreement, the Fund pays 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 1% of
the next $100 million of the Fund's average daily net assets and .80 of 1% of
the Fund's average daily net assets over $200 million. Pursuant to the advisory
agreement, the Fund paid $60,500 to the Adviser representing the cost of
certain legal and accounting services provided to the Fund by the Adviser for
the six months ended January 31, 1999.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $247,826 for the six months ended January 31, 1999. In addition,
for the six months ended January 31, 1999, the Fund's expenses were reduced by
$20,971 under an expense offset arrangement with Alliance Fund Services.
Transfer agency fees reported in the statement of operations exclude these
credits.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $17,678 from the sale of Class A shares and $1,212,
$125,341 and $24,886 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class A, Class B and Class C shares,
respectively, for the six months ended January 31, 1999.
Brokerage commissions paid on investment transactions for the six months ended
January 31, 1999, amounted to $631,847, none of which was paid to Pershing
Trading Company L.P., an affiliate of the Adviser.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 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. There is no distribution fee on the Advisor Class shares.
The fees are accrued daily and paid monthly. The Agreement provides that the
Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amount of
$5,047,460 and $823,533 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
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
the Agreement, there is no provision for recovery of unreimbursed distribution
costs, incurred by the Distributor, beyond the current fiscal year for Class A
shares. The Agreement also provides that the Adviser may use its own resources
to finance the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $134,998,859 and $125,313,687,
respectively, for the six months ended January 31, 1999. There were no
purchases or sales of U.S. government and government agency obligations for the
six months ended January 31, 1999.
At January 31, 1999, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $45,362,137 and
gross unrealized depreciation of investments was $15,142,829, resulting in net
unrealized appreciation of $30,219,308 (excluding foreign currency
transactions).
FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward foreign 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 foreign exchange currency contract
is a commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The gain or loss arising from the difference between
the original contract and the closing of such contract is included in net
realized gain or loss from foreign currency transactions.
Fluctuations in the value of forward foreign exchange currency contracts are
recorded for financial reporting purposes as unrealized gains or losses by the
Fund.
The Fund's custodian will place and maintain cash not available for investment
or liquid assets in a separate account of the Fund having a value equal to the
aggregate amount of the Fund's commitments under forward foreign 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, reflects the total exposure the Fund has in that particular currency
contract.
At January 31, 1999, the Fund had no outstanding forward foreign exchange
currency contracts.
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $0.01 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in shares of beneficial interest were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1999 JULY 31, JANUARY 31, 1999 JULY 31,
(UNAUDITED) 1998 (UNAUDITED) 1998
------------ ------------ -------------- --------------
CLASS A
Shares sold 6,082,266 13,751,811 $114,031,773 $276,136,179
Shares issued in
reinvestment of
dividends and
distributions 646,882 378,398 11,572,721 6,266,271
Shares converted
from Class B 52,264 78,824 996,960 1,524,594
Shares redeemed (5,999,050) (12,445,170) (113,639,950) (249,970,416)
Net increase 782,362 1,763,863 $ 12,961,504 $ 33,956,628
14
ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1999 JULY 31, JANUARY 31, 1999 JULY 31,
(UNAUDITED) 1998 (UNAUDITED) 1998
------------ ------------ -------------- --------------
CLASS B
Shares sold 2,564,935 5,344,638 $ 46,183,757 $ 104,681,961
Shares issued in
reinvestment of
dividends and
distributions 764,041 400,667 12,858,820 6,334,550
Shares converted
to Class A (55,205) (82,525) (996,960) (1,524,594)
Shares redeemed (1,626,443) (2,738,266) (28,861,029) (51,595,123)
Net increase 1,647,328 2,924,514 $ 29,184,588 $ 57,896,794
CLASS C
Shares sold 1,099,113 1,386,110 $ 19,795,802 $ 27,622,464
Shares issued in
reinvestment of
dividends and
distributions 197,181 111,992 3,320,533 1,771,714
Shares redeemed (687,946) (536,318) (12,399,742) (10,257,012)
Net increase 608,348 961,784 $ 10,716,593 $ 19,137,166
ADVISOR CLASS
Shares sold 108,403 592,718 $ 2,079,674 $ 12,021,320
Shares issued in
reinvestment of
dividends and
distributions 20,566 25,969 367,511 428,215
Shares redeemed (55,675) (696,715) (1,074,987) (14,180,745)
Net increase
(decrease) 73,294 (78,028) $ 1,372,198 $ (1,731,210)
NOTE F: RESTRICTED AND ILLIQUID SECURITIES
DATE
SECURITY ACQUIRED U.S. $ COST
- -------- -------- -----------
Thermo Eurotech NV 3/19/91 $512,088
Unidad Editorial, SA Series A 10/01/92 699,170
The securities shown above are restricted as to sale and have been valued at
fair value in accordance with procedures described in Note A. The value of
these securities at January 31, 1999 was $1,096,910, representing 0.3% of net
assets.
NOTE G: CONCENTRATION OF RISK
Investing in securities of foreign companies involves special risks which
include the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover securities of
many foreign companies and their markets may be less liquid and their prices
more volatile than those of comparable United States companies.
The Fund has invested approximately 24% of its net assets in United Kingdom
equity securities. Political, social or economic changes in this market may
have a greater impact on the value of the Fund's portfolio due to this
concentration.
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
NOTE H: BANK BORROWING
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide for short-term financing if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the six months ended January 31, 1999.
16
FINANCIAL HIGHLIGHTS ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------------------------
SIX MONTHS MARCH 1,
ENDED 1994
JANUARY 31, YEAR ENDED JULY 31, TO YEAR ENDED
1999 -------------------------------------------------- JULY 31, FEBRUARY 28,
(UNAUDITED) 1998 1997 1996 1995 1994(A) 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.85 $18.61 $15.84 $15.11 $12.66 $12.53 $ 9.37
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.06)(b) .05(b) .07(b) .18 .04 .09 .02(b)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.45) 5.28 4.20 1.02 2.50 .043 .14
Net increase (decrease) in net asset
value from operations (.51) 5.33 4.27 1.20 2.54 .133 .16
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- -0- (.15) -0- (.09) -0- -0-
Distributions in excess of net investment
income -0- (.04) (.03) -0- -0- -0- -0-
Distributions from net realized gains on
investments and foreign currency
transactions (2.56) (2.05) (1.32) (.47) -0- -0- -0-
Total dividends and distributions (2.56) (2.09) (1.50) (.47) (.09) -0- -0-
Net asset value, end of period $18.78 $21.85 $18.61 $15.84 $15.11 $12.66 $12.53
TOTAL RETURN
Total investment return based on net
asset value (c) (1.78)% 32.21% 28.78% 8.20% 20.22% 1.04% 33.73%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $127,122 $130,777 $78,578 $74,026 $86,112 $86,739 $90,372
Ratio of expenses to average net assets 1.75%(d)(e) 1.85%(e) 2.05%(e) 2.14% 2.09% 2.06%(d) 2.30%
Ratio of net investment income (loss) to
average net assets (.67)%(d) .25% .40% 1.10% .37% 1.85%(d) .17%
Portfolio turnover rate 47% 99% 89% 69% 74% 35% 94%
</TABLE>
See footnote summary on page 20.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------------------------
SIX MONTHS MARCH 1,
ENDED 1994
JANUARY 31, YEAR ENDED JULY 31, TO YEAR ENDED
1999 -------------------------------------------------- JULY 31, FEBRUARY 28,
(UNAUDITED) 1998 1997 1996 1995 1994(A) 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $20.76 $17.87 $15.31 $14.71 $12.41 $12.32 $ 9.28
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.13)(b) (.08)(b) (.04)(b) .08 (.05) .07 (.05)(b)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.42) 5.02 4.02 .99 2.44 .023 .09
Net increase (decrease) in net asset
value from operations (.55) 4.94 3.98 1.07 2.39 .093 .04
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- -0- -0- -0- (.09) -0- -0-
Distributions in excess of net
investment income -0- -0- (.10) -0- -0- -0- -0-
Distributions from net realized gains
on investments and foreign currency
transactions (2.56) (2.05) (1.32) (.47) -0- -0- -0-
Total dividends and distributions (2.56) (2.05) (1.42) (.47) (.09) -0- -0-
Net asset value, end of period $17.65 $20.76 $17.87 $15.31 $14.71 $12.41 $12.32
TOTAL RETURN
Total investment return based on net
asset value (c) (2.07)% 31.22% 27.76% 7.53% 19.42% .73% 32.76%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $145,893 $137,425 $66,032 $42,662 $34,527 $31,404 $20,729
Ratio of expenses to average net assets 2.46%(d)(e) 2.56%(e) 2.75%(e) 2.86% 2.79% 2.76%(d) 3.02%
Ratio of net investment income (loss)
to average net assets (1.43)%(d) (.40)% (.23)% .59% (.33)% 1.15%(d) (.52)%
Portfolio turnover rate 47% 99% 89% 69% 74% 35% 94%
</TABLE>
See footnote summary on page 20.
18
ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
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(F)
JANUARY 31, YEAR ENDED JULY 31, TO TO
1999 -------------------------------------------------- JULY 31, FEBRUARY 28,
(UNAUDITED) 1998 1997 1996 1995 1994(A) 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $20.77 $17.89 $15.33 $14.72 $12.42 $12.33 $10.21
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.13)(b) (.08)(b) (.04)(b) .08 (.07) .06 (.04)(b)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.41) 5.01 4.02 1.00 2.46 .032 .16
Net increase (decrease) in net asset
value from operations (.54) 4.93 3.98 1.08 2.39 .092 .12
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- -0- -0- -0- (.09) -0- -0-
Distributions in excess of net
investment income -0- -0- (.10) -0- -0- -0- -0-
Distributions from net realized gains
on investments and foreign currency
transactions (2.56) (2.05) (1.32) (.47) -0- -0- -0-
Total dividends and distributions (2.56) (2.05) (1.42) (.47) (.09) -0- -0-
Net asset value, end of period $17.67 $20.77 $17.89 $15.33 $14.72 $12.42 $12.33
TOTAL RETURN
Total investment return based on net
asset value (c) (2.02)% 31.13% 27.73% 7.59% 19.40% .73% 20.77%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $44,436 $39,618 $16,907 $10,141 $7,802 $11,875 $10,886
Ratio of expenses to average net assets 2.46%(d)(e) 2.56%(e) 2.74%(e) 2.87% 2.78% 2.76%(d) 3.00%(d)
Ratio of net investment income (loss)
to average net assets (1.41)%(d) (.41)% (.23)% .58% (.33)% 1.15%(d) (.52)%(d)
Portfolio turnover rate 47% 99% 89% 69% 74% 35% 94%
</TABLE>
See footnote summary on page 20.
19
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ADVISOR CLASS
------------------------------------
SIX MONTHS OCTOBER 2,
ENDED 1996(F)
JANUARY 31, YEAR ENDED TO
1999 JULY 31, JULY 31,
(UNAUDITED) 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $21.79 $18.57 $16.25
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (b) (.04) .08 .11
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.43) 5.28 3.76
Net increase (decease) in net asset
value from operations (.47) 5.36 3.87
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- -0- (.09)
Distribution in excess of net investment
income -0- (.09) (.14)
Distributions from net realized gains on
investments and foreign currency
transactions (2.56) (2.05) (1.32)
Total dividends and distributions (2.56) (2.14) (1.55)
Net asset value, end of period $18.76 $21.79 $18.57
TOTAL RETURN
Total investment return based on net
asset value (c) (1.59)% 32.55% 25.76%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $4,082 $3,143 $4,130
Ratio of expenses to average net
assets (e) 1.46%(d) 1.56% 1.71%(d)
Ratio of net investment income (loss) to
average net assets (.43)%(d) .39% .77%(d)
Portfolio turnover rate 47% 99% 89%
</TABLE>
(a) The Fund changed its fiscal year end from February 28 to July 31.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales 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.
(d) Annualized.
(e) Ratios reflect expenses grossed up for expense offset arrangement with the
Transfer Agent. For the periods shown below, the net expense ratios were as
follows:
SIX MONTHS
ENDED YEAR ENDED JULY 31,
JANUARY 31, ------------------------
1999 1998 1997
----------- ----------- -----------
Class A 1.74% 1.84% 2.04%
Class B 2.44% 2.54% 2.74%
Class C 2.44% 2.54% 2.73%
Advisor Class 1.44% 1.54% 1.71%
(f) Commencement of distribution.
20
ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
W.H. HENDERSON (1)
STIG HOST (1)
ALAN J. STOGA (1)
OFFICERS
THOMAS J. BARDONG, VICE PRESIDENT
STEPHEN M. BEINHACKER, VICE PRESIDENT
RUSSELL BRODY, VICE PRESIDENT
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
EDMUND P. BERGAN, JR., SECRETARY
VINCENT S. NOTO, CONTROLLER
CUSTODIAN
THE BANK OF NEW YORK
One 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 LLP
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.
21
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 High Yield Fund
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term U.S. Government Fund
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 Environment Fund
Alliance Growth Fund
Alliance Premier Growth Fund
Alliance/Regent Sector Opportunity Fund
Select Investors Series - Premier Portfolio
GROWTH & INCOME
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Real Estate Investment Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Global Small Cap Fund
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance Greater China '97 Fund
Alliance International Fund
Alliance International Premier Growth Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
INSTITUTIONAL
Premier Growth
Quasar
Real Estate Investment
CLOSED-END FUNDS
Alliance All-Market Advantage 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
Alliance Capital Reserves
Alliance Government Reserves
Alliance Institutional Reserves
Prime Portfolio
Government Portfolio
Tax-Free Portfolio
Trust Portfolio
Treasury Portfolio
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
Massachusetts Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
22
ALLIANCE NEW EUROPE FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
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
