<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 33-37848 and 811-06028.
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The Alliance
Stock Funds
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
Prospectus and Application
February 1, 1999
Domestic Stock Funds
o Alliance Premier Growth Fund
o Alliance Growth Fund
o Alliance Technology Fund
o Alliance Quasar Fund
o The Alliance Fund
Total Return Funds
o Alliance Growth & Income Fund
o Alliance Balanced Shares
o Alliance Utility Income Fund
o Alliance Real Estate Investment Fund
Global Stock Funds
o Alliance New Europe Fund
o Alliance Worldwide Privatization Fund
o Alliance International Premier Growth Fund
o Alliance Global Small Cap Fund
o Alliance Global Environment Fund
o Alliance International Fund
o Alliance Greater China '97 Fund
o Alliance All-Asia Investment Fund
o Alliance Global Environment Fund
Alliance Capital [LOGO(R)]
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2
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TABLE OF CONTENTS
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Page
RISK/RETURN SUMMARY ....................................................... 3
Domestic Stock Funds ...................................................... 4
Total Return Funds ........................................................ 9
Global Stock Funds ........................................................ 13
Summary of Principal Risks ................................................ 21
Principal Risks by Fund .................................... ....... 22
FEES AND EXPENSES OF THE FUNDS ............................................ 23
GLOSSARY .................................................................. 26
DESCRIPTION OF THE FUNDS .................................................. 27
Investment Objectives and Policies ........................................ 27
Description of Investment Practices ....................................... 39
Additional Risk Considerations ............................................ 46
MANAGEMENT OF THE FUNDS ................................................... 50
PURCHASE AND SALE OF SHARES ............................................... 53
How The Funds Value Their Shares .......................................... 53
How To Buy Shares ......................................................... 53
How to Exchange Shares .................................................... 53
How To Sell Shares ........................................................ 53
DIVIDENDS, DISTRIBUTIONS AND TAXES ........................................ 54
DISTRIBUTION ARRANGEMENTS ................................................. 55
GENERAL INFORMATION ....................................................... 56
FINANCIAL HIGHLIGHTS ...................................................... 57
APPENDIX A--ADDITIONAL INFORMATION ABOUT THE UNITED KINGDOM, JAPAN,
AND GREATER CHINA COUNTRIES ............................................... 67
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The Funds' investment adviser is Alliance Capital Management L.P., a global
investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Alliance Stock
Funds. You will find additional information about each Fund, including a
detailed description of the risks of an investment in each Fund, after this
Summary.
The Risk/Return Summary describes the Funds' objectives, principal investment
strategies, principal risks and fees. Each Fund's Summary page includes a short
discussion of some of the principal risks of investing in that Fund. A further
discussion of these and other risks is on page 21.
More detailed descriptions of the Funds, including the risks associated with
investing in the Funds, can be found further back in this Prospectus. Please be
sure to read this additional information BEFORE you invest. Each of the Funds
may at times use certain types of investment derivatives such as options,
futures, forwards and swaps. The use of these techniques involves
special risks that are discussed in this Prospectus.
The Risk/Return Summary includes a table for each Fund showing its average
annual returns and a bar chart showing its annual returns. The table and bar
chart provide an indication of the historical risk of an investment in each Fund
by showing:
o how the Fund's average annual returns for one, five, and 10 years
(or over the life of the Fund if the Fund is less than 10 years
old) compare to those of a broad based securities market index; and
o changes in the Fund's performance from year to year over 10 years
(or over the life of the Fund if the Fund is less than 10 years
old).
A Fund's past performance, of course, does not necessarily indicate how it will
perform in the future.
Other important things for you to note:
o You may lose money by investing in the Funds.
o An investment in the Funds is not a deposit in a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation
or any other government agency.
3
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DOMESTIC STOCK FUNDS
The Domestic Stock Funds offer investors seeking capital appreciation a range of
alternative approaches to investing primarily in U.S. equity markets.
ALLIANCE PREMIER GROWTH FUND
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OBJECTIVE:
The Fund's investment objective is long-term growth of capital by investing
predominantly in equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of U.S. companies. Unlike most
equity funds, the Fund focuses on a relatively small number of intensively
researched companies. Alliance selects the Fund's investments from a research
universe of more than 600 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects.
Normally, the Fund invests in about 40-50 companies, with the 25 most highly
regarded of these companies usually constituting approximately 70% of the
Fund's net assets. During market declines, while adding to positions in favored
stocks, the Fund becomes somewhat more aggressive, gradually reducing the
number of companies represented in its portfolio. Conversely, in rising
markets, while reducing or eliminating fully valued positions, the Fund becomes
somewhat more conservative, gradually increasing the number of companies
represented in its portfolio. Through this approach, Alliance seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets. The Fund also may invest up to 20% of its net assets in
convertible securities.
Among the principal risks of investing in the Fund is market risk. Because the
Fund invests in a smaller number of securities than many other equity funds,
your investment has the risk that changes in the value of a single security may
have a more significant effect, either negative or positive, on the Fund's net
asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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Since
1 Year 5 Years Inception*
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Class A 42.97% 26.65% 24.38%
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Class B 44.33% 26.95% 24.48%
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Class C 47.31% 26.97% 26.35%
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S&P 500 Index 28.60% 24.05% 21.60%**
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Since inception of Class C*** 22.41%
The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 9/28/92 for Class A and Class B shares. 5/3/93 for Class
C shares.
** Index return from 9/30/92.
*** Index return from month-end of applicable class inception date.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
89 90 91 92 93 94 95 96 97 98
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n/a n/a n/a n/a 9.98 -5.80 46.87 24.14 32.67 49.31
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 31.05%, 4th quarter, 1998; and Worst Quarter was down
- -12.10%, 3rd quarter, 1998.
4
<PAGE>
Alliance Growth Fund
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OBJECTIVE:
The Fund's investment objective is long-term growth of capital. Current income
is incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of companies with favorable
earnings outlooks and whose long-term growth rates are expected to exceed that
of the U.S. economy over time. The Fund emphasizes investments in large- and
mid-cap companies. The Fund also may invest up to 25% of its total assets in
lower-rated fixed-income securities and convertible bonds and generally up to
15% of its total assets in foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in mid-cap companies may be more volatile then investments in large-cap
companies. To the extent the Fund invests in lower-rated fixed-income
securities and convertible bonds, your investment may have interest rate or
credit risk. The Fund's investments in foreign securities have foreign risk
and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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10 Years
(or Since
1 Year 5 Years Inception)
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Class A 22.71% 19.72% 23.34%*
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Class B 23.23% 19.93% 20.91%
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Class C 26.25% 19.92% 20.22%*
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S&P 500 Index 28.60% 24.05% 19.19%**
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Since inception of Class A*** 21.37%
Since inception of Class C*** 22.74%
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The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 9/4/90 for Class A shares. 8/2/93 for Class C shares.
** Index return from 12/31/88.
*** Index returns from month-end of applicable class inception date.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class B shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
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27.94 -7.96 62.39 9.81 28.21 -1.84 28.65 22.32 26.22 27.23
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 29.47%, 1st quarter, 1991; and Worst Quarter was down
- -20.45%, 3rd quarter, 1990.
5
<PAGE>
Alliance Technology Fund
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OBJECTIVE:
The Fund's investment objective is growth of capital. Current income is
incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in securities of companies that use technology
extensively in the development of new or improved products or processes. Within
this framework, the Fund may invest in any company and industry and in any type
of security with potential for capital appreciation. It invests in well-known,
established companies or in new or unseasoned companies. The Fund also may
invest in debt securities and up to 10% of its total assets in foreign
securities.
Among the principal risks of investing in the Fund is market risk. In addition,
technology stocks, especially those of smaller, less-seasoned companies, tend
to be more volatile than the overall stock market. To the extent the Fund
invests in debt and foreign securities, your investment has credit risk,
currency risk and foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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10 Years
(or Since
1 Year 5 Years Inception)
- --------------------------------------------------------------------------------
Class A 56.22% 29.58% 23.32%
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Class B 57.98% 29.81% 30.87%*
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Class C 60.94% 29.81% 30.87%*
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S&P 500 Index 28.60% 24.05% 19.19%**
- --------------------------------------------------------------------------------
Since inception of Classes B and C*** 22.41%
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The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 5/3/93 for Class B shares and Class C shares.
** Index return from 12/31/88.
*** Index return from month-end of applicable class inception date.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
6.00 -3.08 54.24 15.50 21.63 28.51 45.80 19.41 4.54 63.14
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 39.86%, 4th quarter, 1998; and Worst Quarter was down
- -33.21%, 3rd quarter, 1990.
6
<PAGE>
Alliance Quasar Fund
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OBJECTIVE:
The Fund's investment objective is growth of capital by pursuing aggressive
investment policies. Current income is incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund generally invests in a widely diversified portfolio of equity
securities spread among many industries that offer the possibility of
above-average earnings growth. The Fund currently emphasizes investment in
small-cap companies. The Fund invests in well-known and established companies
and in new and unseasoned companies. The Fund can invest in the equity
securities of any company and industry and in any type of security with
potential for capital appreciation. When selecting securities, Alliance
considers the economic and political outlook, the values of specific securities
relative to other investments, trends in the determinants of corporate profits,
and management capabilities and practices. The Fund also may invest in
non-convertible bonds, preferred stocks, and foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in smaller companies tend to be more volatile than investments in large-cap or
mid-cap companies. To the extent the Fund invests in non-convertible bonds,
preferred stocks, and foreign stocks, your investment has interest rate risk,
credit risk, currency risk and foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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10 Years
(or Since
1 Year 5 Years Inception)
- --------------------------------------------------------------------------------
Class A -8.64% 14.23% 11.84%
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Class B -8.90% 14.35% 13.66%*
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Class C -6.19% 14.36% 15.96%*
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Russell 2000
Index -2.55% 11.87% 12.92%**
Since inception of Class B*** 17.50%
Since inception of Class C*** 12.88%
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The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 9/17/90 for Class B shares. 5/3/93 for Class C shares.
** Index return from 12/31/88.
*** Index returns from month-end of applicable class inception date.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
28.20 -23.44 34.27 2.81 16.16 -7.27 47.64 32.62 17.24 -4.56
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 23.10%, 1st quarter, 1991; and Worst Quarter was down
- -28.46%, 3rd quarter, 1998.
7
<PAGE>
The Alliance Fund
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OBJECTIVE:
The Fund's investment objective is long-term growth of capital and income
primarily through investments in common stocks.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund normally invests substantially all of its assets in high-quality common
stocks that Alliance expects to increase in value. The Fund may invest in a
broad range of companies, from large to small, but tends to emphasize attractive
opportunities in mid-cap companies. While the Fund's diversified and
high-quality investments cannot prevent fluctuations in market values, they tend
to limit investment risk and contribute to achieving the Fund's objective. The
Fund also may invest in convertible securities, U.S. Government securities, and
foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in mid-cap companies may be more volatile than investments in large-cap
companies. To the extent the Fund invests in convertible securities and U.S.
Government securities, your investment may have interest rate or credit risk.
The Fund's investments in foreign securities have currency risk and foreign
risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
10 Years
(or Since
1 Year 5 Years Inception)
- --------------------------------------------------------------------------------
Class A -6.90% 14.39% 15.02%
- --------------------------------------------------------------------------------
Class B -7.00% 14.43% 14.38%*
- --------------------------------------------------------------------------------
Class C -4.62% 14.35% 15.19%*
- --------------------------------------------------------------------------------
S&P Midcap
400 Index 18.25% 18.67% 19.21%**
Since inception of Class B 18.24%
Since inception of Class C 18.26%
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The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 3/4/91 for Class B shares. 5/3/93 for Class C shares.
** Index return from 12/31/88.
*** Index returns from month-end of applicable class inception date.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
23.42 -4.36 33.91 14.70 14.26 -2.51 34.84 17.54 36.01 -2.72
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 23.72%, 4th quarter, 1998; and Worst Quarter was down
- -24.32%, 3rd quarter, 1998.
8
<PAGE>
TOTAL RETURN FUNDS
The Total Return Funds offer investors seeking both growth of capital and
current income a range of investment alternatives.
Alliance Growth & Income Fund
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OBJECTIVE:
The Fund's investment objective is appreciation through investments primarily in
dividend-paying common stocks of good quality, although the Fund also may invest
in fixed-income and convertible securities.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in dividend-paying common stocks of large,
well-established "blue-chip" companies. The Fund also may invest in fixed-income
and convertible securities and in securities of foreign issuers.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. The Fund's investments in foreign securities have
currency risk and foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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10 Years
(or Since
1 Year 5 Years Inception)
- --------------------------------------------------------------------------------
Class A 16.14% 19.62% 16.03%
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Class B 16.24% 19.73% 15.76%*
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Class C 19.59% 19.79% 18.76%*
- --------------------------------------------------------------------------------
S&P 500 Index 28.60% 24.05% 19.19%**
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Since inception of Class B*** 19.58%
Since inception of Class C*** 22.41%
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The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 2/8/91 for Class B shares. 5/3/93 for Class C shares.
** Index return from 12/31/88.
*** Index returns from month-end of applicable class inception date.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
25.56 -1.69 27.08 4.52 9.96 -4.20 37.86 24.13 28.86 21.23
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 23.25%, 4th quarter, 1998; and Worst Quarter was down
- -13.82%, 3rd quarter, 1998.
9
<PAGE>
Alliance Balanced Shares
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OBJECTIVE:
The Fund's investment objective is high return through a combination of current
income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in a diversified portfolio of equity and fixed-income
securities. The percentage of the Fund's assets invested in each type of
security will vary, but at least 25% of the Fund's total assets will be invested
in fixed-income senior securities. The Fund invests in common and preferred
stocks, U.S. Government and agency securities, bonds and senior debt securities.
The Fund's investments in each type of security depends on current economic
conditions and market outlooks. The Fund also may invest up to 15% of its total
assets in foreign equity and fixed-income securities.
Among the principal risks of investing in the Fund are market risk, interest
rate risk, allocation risk and credit risk. To the extent the Fund invests in
foreign securities, your investment has currency risk and foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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10 Years
(or Since
1 Year 5 Years Inception)
- --------------------------------------------------------------------------------
Class A 10.84% 12.95% 11.25%
- --------------------------------------------------------------------------------
Class B 10.78% 13.04% 11.87%*
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Class C 13.89% 13.08% 12.75%*
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S&P 500 Index 28.60% 24.05% 19.19%**
- --------------------------------------------------------------------------------
Since inception of Class B*** 19.58%
Since inception of Class C*** 22.41%
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The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 2/4/91 for Class B shares. 5/3/93 for Class C shares.
** Index return from 12/31/88.
*** Index returns from month-end of applicable class inception date.
BAR CHART
- --------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
14.12 -2.20 20.47 6.81 9.93 -5.79 26.64 9.36 27.13 15.75
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 13.45%, 4th quarter, 1998; and Worst Quarter was down
- -8.21%, 3rd quarter, 1990.
10
<PAGE>
Alliance Utility Income Fund
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OBJECTIVE:
The Fund's investment objective is current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in income-producing equity securities. The Fund
invests in securities of utility companies in the electric, telecommunications,
gas, and water utility industries. The Fund may invest in both U.S. and foreign
utility companies, although the Fund will limit its investments in issuers in
any one foreign country to no more than 15% of its total assets. The Fund may
invest up to 35% of its net assets in lower-rated securities and up to 30% of
its net assets in convertible securities.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. Because the Fund invests a substantial portion of
its assets in companies in a specific industry, there is the risk that factors
affecting utility companies will have a significant effect of the value of the
Fund's investments. To the extent the Fund invests in lower-rated securities,
your investment is subject to more credit risk than a fund that invests in
higher-rated securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year 5 Years Inception*
- --------------------------------------------------------------------------------
Class A 19.09% 13.02% 13.44%
- --------------------------------------------------------------------------------
Class B 19.46% 13.23% 13.56%
- --------------------------------------------------------------------------------
Class C 22.42% 13.25% 13.65%
- --------------------------------------------------------------------------------
NYSE Utilities
Index 33.04% 14.17% 12.58%**
- --------------------------------------------------------------------------------
The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 10/18/93 for Class A shares and Class B shares. 10/27/93
for Class C shares.
** Index return from 10/31/93.
BAR CHART
- --------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
n/a n/a n/a n/a n/a -10.94 22.93 8.28 30.65 24.38
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 15.65%, 4th quarter, 1997; and Worst Quarter was down
- -7.50%, 1st quarter, 1994.
11
<PAGE>
Alliance Real Estate Investment Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is total return from long-term growth of capital
and income principally through investing in equity securities of companies that
are primarily engaged in or related to the real estate industry.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of real estate investment trusts
or "REITs" and other real estate industry companies. The Fund invests in real
estate companies that Alliance believes have strong property fundamentals and
management teams. The Fund seeks to invest in real estate companies whose
underlying portfolios are diversified geographically and by property type. The
Fund may invest up to 35% of its total assets in mortgage-backed securities,
which are securities that directly or indirectly represent participations in, or
are collateralized by and payable from, mortgage loans secured by real property.
Among the principal risks of investing in the Fund are market risk, interest
rate risk, and credit risk.
Because the Fund invests a substantial portion of its assets in the real estate
market, it has many of the same risks as direct ownership of real estate
including the risk that the value of real estate could decline due to a variety
of factors affecting the real estate market. In addition, REITs are dependent on
the capability of their managers, may have limited diversification, and could be
significantly affected by changes in tax laws. The Fund's investments in
mortgage-backed securities have prepayment risk, which is the risk that mortgage
loans will be prepaid when interest rates decline and the Fund will have to
reinvest in securities with lower interest rates. This risk causes
mortgage-backed securities to have significantly greater price and yield
volatility than traditional fixed-income securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
5 Years Inception*
- --------------------------------------------------------------------------------
Class A -23.59% 5.43%
- --------------------------------------------------------------------------------
Class B -23.85% 5.91%
- --------------------------------------------------------------------------------
Class C -21.52% 6.77%
- --------------------------------------------------------------------------------
S&P 500 Index 28.60% 31.43%**
- --------------------------------------------------------------------------------
The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 10/1/96 for Class A, Class B and Class C shares.
** Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
n/a n/a n/a n/a n/a n/a n/a n/a 22.98 -20.22
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 14.55%, 3rd quarter, 1997; and Worst Quarter was down
- -12.33%, 3rd quarter, 1998.
12
<PAGE>
GLOBAL STOCK FUNDS
The Global Stock Funds offer investors seeking long-term capital appreciation a
range of alternative approaches to investing in foreign securities.
Alliance New Europe Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation through
investments primarily in the equity securities of companies based in Europe.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of European companies. The Fund
diversifies its investments among a number of European countries and normally
invests in companies based in at least three of these countries, although it may
invest 25% or more of its assets in issuers in a single country. The Fund may
invest up to 35% of its total assets in high-quality U.S. Dollar or foreign
currency denominated fixed-income securities issued or guaranteed by European
governmental entities, European or multinational companies, or supranational
organizations. At December 31, 1998, the Fund had approximately 26% of its
assets invested in securities of United Kingdom issuers.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. In addition, the Fund's investments in U.S.
Dollar or foreign currency denominated fixed-income securities have interest
rate and credit risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year 5 Years Inception*
- --------------------------------------------------------------------------------
Class A 19.67% 15.92% 11.28%
- --------------------------------------------------------------------------------
Class B 20.12% 16.10% 13.28%
- --------------------------------------------------------------------------------
Class C 23.10% 16.11% 17.74%
- --------------------------------------------------------------------------------
MSCI Europe
Index 28.91% 19.53% 15.40%**
- -------------------------------------------------------------------------------
Since inception of Class B*** 16.58%
Since inception of Class C*** 20.81%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 4/2/90 for Class A shares. 3/5/91 for Class B shares.
5/3/93 for Class C shares.
** Index return from 4/30/90.
*** Index returns from month-end of applicable class inception date.
BAR CHART
- --------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
n/a n/a 3.30 -0.53 34.57 4.64 18.63 20.58 16.83 24.99
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 22.41%, 1st quarter, 1998; and Worst Quarter was down
- -19.73%, 3rd quarter, 1998.
13
<PAGE>
Alliance Worldwide Privatization Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of companies that are
undergoing, or have undergone, privatization. The Fund also invests in
securities of companies that will benefit from privatizations. The Fund takes
advantage of investment opportunities, historically inaccessible to U.S.
individual investors, that result from the privatization of state enterprises in
both established and developing economies. Because privatizations are integral
to a country's economic restructuring, securities sold in initial public
offerings often are attractively priced to secure the issuer's transition to
private sector ownership. In addition, these enterprises often dominate their
local markets and have the potential for significant managerial and operational
efficiency gains.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in four, and usually considerably more, countries. The
Fund may invest up to 30% of its total assets in any one of France, Germany,
Great Britain, Italy, and Japan and may invest all of its assets in a single
world region. The Fund also may invest up to 35% of its total assets in debt
securities and convertible debt securities of privatized companies.
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk. Investments in companies that are undergoing or, have
undergone, privatization could have more risk because they have no operating
history as a private company. In addition, the Fund's investments in U.S. Dollar
or foreign currency denominated fixed-income securities have interest rate and
credit risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Class A 4.25% 9.61%
- --------------------------------------------------------------------------------
Class B 4.55% 9.88%
- --------------------------------------------------------------------------------
Class C 7.22% 13.11%
- --------------------------------------------------------------------------------
MSCI EAFE Index 20.33% 8.53%**
- -------------------------------------------------------------------------------
Since inception of Class C*** 11.52%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 6/2/94 for Class A shares and Class B shares. 2/8/95 for
Class C shares.
** Index return from 6/30/94.
*** Index return from month-end of applicable class inception date.
BAR CHART
- --------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
n/a n/a n/a n/a n/a n/a 4.91 23.14 13.18 8.92
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 16.49%, 1st quarter, 1998; and Worst Quarter was down
- -17.44%, 3rd quarter, 1998.
14
<PAGE>
Alliance International Premier Growth Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital by investing
predominantly in equity securities of a limited number of carefully selected
non-U.S. companies that are judged likely to achieve superior earnings growth.
Current income is incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of comparatively large,
high-quality, non-U.S. companies. The Fund invests in at least four, and usually
considerably more, countries. Normally, the Fund invests no more than 15% of its
total assets in issuers of any one foreign country, but may invest up to 25% of
its total assets in each of Canada, France, Germany, Italy, Japan, The
Netherlands, Switzerland and the United Kingdom. Unlike more typical
international equity funds, the Fund focuses on a relatively small number of
intensively researched companies. Alliance selects the Fund's investments from a
research universe of approximately 900 companies.
Normally, the Fund invests in about 60 companies, with the 30 most highly
regarded of these companies usually constituting approximately 70% of the Fund's
net assets. The Fund invests in companies with market values in the range of
the average weighted market capitalization of companies in the
EAFE index (currently approximately $35 billion). Alliance may take advantage
of market volatility to adjust the Fund's portfolio positions. To the extent
consistent with local market liquidity considerations, the Fund strives to
capitalize on apparently unwarranted price fluctuations, both to purchase or
increase positions on weakness and to sell or reduce overpriced holdings. The
Fund invests primarily in equity securities and also may invest in convertible
securities.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. In addition, since the Fund invests in a smaller
number of securities than many other international equity funds, changes in the
value of a single security may have a more significant effect, either negative
or positive, on the Fund's net asset value.
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
15
<PAGE>
Alliance Global Small Cap Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital through
investment in a global portfolio of equity securities of selected companies with
relatively small market capitalizations.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of global companies, both
domestic and foreign, with relatively small market capitalizations. The Fund's
investments emphasize companies that are in the smallest 20% of the U.S. stock
market (or less than approximately $1.5 billion). Although these companies are
small by U.S. standards, they may be among the largest companies in their own
countries. The Fund may invest up to 35% of its total assets in securities of
companies whose market capitalizations exceed the Fund's size standard. The Fund
invests in at least three countries, including the U.S.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
10 Years
(or Since
1 Year 5 Years Inception)
- --------------------------------------------------------------------------------
Class A -0.85% 9.19% 7.59%
- --------------------------------------------------------------------------------
Class B -0.86% 9.37% 8.99%*
- --------------------------------------------------------------------------------
Class C 1.86% 9.37% 10.97%*
- --------------------------------------------------------------------------------
MSCI World
Index 24.80% 16.19% 11.21%**
- -------------------------------------------------------------------------------
Since inception of Class B*** 15.35%
Since inception of Class C*** 15.54%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 9/17/90 for Class B shares. 5/3/93 for Class C shares.
** Index return from 12/31/88.
*** Index returns from month-end of applicable class inception date.
BAR CHART
- --------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
24.60 -24.89 25.29 -4.89 20.04 -4.55 27.18 19.37 8.08 3.56
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 18.10%, 1st quarter, 1991; and Worst Quarter was down
- -26.77%, 3rd quarter, 1990.
16
<PAGE>
Alliance International Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is total return from long-term growth of capital
and income primarily through investment in a broad portfolio of marketable
securities of established non-U.S. companies, companies participating in
foreign economies with prospects for growth, including U.S. companies having
their principal activities and interests outside the U.S. and in foreign
government securities.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of established non-U.S.
companies, companies participating in foreign economies with prospects for
growth, including U.S. companies having their principal activities and interests
outside the U.S., and foreign government securities. The Fund diversifies its
investments broadly among countries and normally invests in companies in at
least three foreign countries, although it may invest a substantial portion of
its assets in companies in one or more foreign countries.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
10 Years
(or Since
1 Year 5 Years Inception)
- --------------------------------------------------------------------------------
Class A 5.00% 5.84% 5.81%
- --------------------------------------------------------------------------------
Class B 4.90% 5.91% 5.47%*
- --------------------------------------------------------------------------------
Class C 7.81% 5.88% 6.76%*
- -------------------------------------------------------------------------------
MSCI World
Index (minus
the U.S.) 19.11% 9.52% 5.93%**
- --------------------------------------------------------------------------------
Since inception of Class B*** 10.51%
Since inception of Class C*** 9.64%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 9/17/90 for Class B shares. 5/3/93 for Class C shares.
** Index return from 12/31/88.
*** Index returns from month-end of applicable class inception date.
BAR CHART
- --------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
29.62 -20.95 7.72 -5.86 27.51 5.68 10.10 7.20 1.41 9.64
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 15.69%, 4th quarter, 1998; and Worst Quarter was down
- -22.29%, 3rd quarter, 1990.
17
<PAGE>
Alliance Greater China '97 Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation through
investment of at least 80% of its total assets in equity securities of Greater
China companies.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in equity securities of Greater China companies, which are
companies in China, Hong Kong, and Taiwan. Of these countries, the Fund expects
to invest a significant portion of its assets, which may be greater than 50%, in
Hong Kong companies and may invest all of its assets in Hong Kong companies or
companies of either of the other Greater China countries. The Fund also may
invest in convertible securities and equity-linked debt securities issued or
guaranteed by Greater China companies or Greater China Governments, their
agencies, or instrumentalities. As of December 31, 1998, the Fund had
approximately 75% of its assets invested in securities of Hong Kong companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Because it invests in Greater China companies,
the Fund's returns will be significantly more volatile and differ substantially
from U.S. markets generally. Your investment also has the risk that market
changes or other events affecting the Greater China countries, including
political instability and unpredictable economic conditions, may have a more
significant effect on the Fund's net asset value. In addition, the Fund is
"non-diversified" meaning that it invests its assets in a smaller number of
companies than many other international funds. As a result, changes in the
value of a single security may have a more significant effect, either negative
or positive, on the Fund's net asset value. The Fund's investments in debt
securities have interest rate and credit risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Years Inception*
- --------------------------------------------------------------------------------
Class A -11.98% -29.28%
- --------------------------------------------------------------------------------
Class B -12.36% -29.07%
- --------------------------------------------------------------------------------
Class C -9.89% -27.52%
- --------------------------------------------------------------------------------
MSCI China Free Index -43.83% -54.48%**
- --------------------------------------------------------------------------------
MSCIHong Kong Index -2.92% -25.58%**
- --------------------------------------------------------------------------------
MSCITaiwan Index -20.64% -30.14%**
- --------------------------------------------------------------------------------
The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charge and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 9/3/97 for Class A, Class B, and Class C shares.
** Index returns from 9/30/97.
BAR CHART
- --------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
n/a n/a n/a n/a n/a n/a n/a n/a n/a -8.02
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 27.48%, 4th quarter, 1998; and Worst Quarter was down
- -26.95%, 2nd quarter, 1998.
18
<PAGE>
Alliance All-Asia Investment Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund primarily invests in securities of various types of companies based in
Asia. The Fund invests in equity securities, preferred stocks, and equity-
linked debt securities issued by Asian companies and may invest more than 50%
of its total assets in equity securities of Japanese issuers. The Fund also may
invest up to 35% of its total assets in debt securities issued or guaranteed by
Asian companies or by Asian governments, their agencies or instrumentalities,
and may invest up to 25% of its net assets in convertible securities. At
December 31, 1998, the Fund had approximately 60% of its total assets invested
in securities of Japanese companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Because it invests in Asian and Pacific region
countries and emerging markets, the Fund's returns will be significantly more
volatile and may differ substantially from the overall U.S. market generally.
Your investment has the risk that market changes or other factors affecting
Asian and Pacific region countries and other emerging markets, including
political instability and unpredictable economic conditions, may have a more
significant effect on the Fund's net asset value. To the extent that the Fund
invests a substantial amount of its assets in Japanese companies, your
investment has the risk that market changes or other events affecting that
country may have a more significant effect on the Fund's net asset value. In
addition, The Fund's investments in debt securities have interest rate and
credit risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Class A -16.07% -10.73%
- --------------------------------------------------------------------------------
Class B -16.63% -10.41%
- --------------------------------------------------------------------------------
Class C -13.74% -10.34%
- --------------------------------------------------------------------------------
MSCI All Country
Asia Pacific
Index 2.03% -8.48%**
- --------------------------------------------------------------------------------
The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 11/28/94 for Class A, Class B, and Class C shares.
** Index return from 11/30/94.
BAR CHART
- --------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
n/a n/a n/a n/a n/a n/a 10.21 4.58 -35.10 -12.34
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 13.67%, 4th quarter, 1998; and Worst Quarter was down
- -18.81%, 4th quarter, 1997.
19
<PAGE>
Alliance Global Environment Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation through
investment of substantially all of its assets in equity securities of companies
that are expected to benefit from advances or improvements in products,
processes or services intended to foster the protection of the environment.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in environmental companies, which are companies whose
principal business involves the sale of environmental protection systems or
services. The Fund also invests in companies whose principal business lies
outside the environmental sector but who anticipate environmental regulations or
consumer preferences through the development of new products or services that
would contribute to a cleaner and healthier environment. The Fund will invest
substantially all of its assets in these two types of companies. The Fund
invests in securities of companies in at least three, and normally considerably
more, countries. At December 31, 1998, the Fund had approximately 82% invested
in equity securities of U.S. companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Because it invests in non-U.S. companies and in
specific types of companies that provide environmental services, the Fund's
returns will be more volatile and differ, sometimes substantially, from the
overall U.S. market generally. The Fund's investments also have the risk that
government regulations or other action could negatively affect the business of
environmental companies.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
5 Years
(or Since Since
1 Year Inception) Inception)
- --------------------------------------------------------------------------------
Class A -7.60% 11.03% 4.29%*
- --------------------------------------------------------------------------------
Class B -6.16% -7.39%* n/a
- --------------------------------------------------------------------------------
Class C -4.72% -4.28%* n/a
- --------------------------------------------------------------------------------
S&P 500 Index 28.60% 24.05% 18.61%**
- -------------------------------------------------------------------------------
Since inception of Class B*** 30.86%
Since inception of Class C*** 28.13%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table for the periods
ended December 31, 1998 reflect imposition of the maximum front-end or
contingent deferred sales charges, and conversion of Class B shares to Class A
shares after the applicable period.
* Inception Dates: 6/1/90 for Class A shares. 10/6/97 for Class B shares.
11/5/97 for Class C shares.
** Index return from 6/30/90.
*** Index returns from month-end of applicable class inception date.
BAR CHART
- --------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart iun the printed material.]
89 90 91 92 93 94 95 96 97 98
-----------------------------------------------------------------------------
n/a n/a 5.99 -15.18 -0.44 -2.12 19.30 29.95 20.28 -3.49
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 13.50%, 2nd quarter, 1996; and Worst Quarter was down
- -19.87%, 3rd quarter, 1998.
20
<PAGE>
SUMMARY OF PRINCIPAL RISKS
The value of your investment in a Fund will change with changes in the values of
that Fund's investments. Many factors can affect those values. In this Summary,
we describe the principal risks that may affect a Fund's portfolio as a whole.
These risks and the Funds particularly subject to these risks appear in a chart
at the end of the section. All Funds could be subject to additional principal
risks because the types of investments made by each Fund can change over time.
This Prospectus has additional descriptions of the types of investments that
appear in bold type in the discussions under "Description of Investment
Practices" or "Additional Risk Considerations." These sections also include more
information about the Funds, their investments, and related risks.
MARKET RISK
This is the risk that the value of a Fund's investments will fluctuate as the
stock or bond markets fluctuate and that prices overall will decline over short
or longer-term periods. All of the Alliance Stock Funds are subject to market
risk.
SECTOR RISK
This is the risk of investments in a particular industry sector. Market or
economic factors affecting that industry sector could have a major effect on the
value of a Fund's investments. Funds particularly subject to this risk are
Alliance Technology Fund, Alliance Utility Income Fund, Alliance Real Estate
Investment Fund, Alliance Worldwide Privatization Fund and Alliance Global
Environment Fund. This risk may be greater for Alliance Technology Fund because
technology stocks, especially those of smaller, less-seasoned companies, tend to
be more volatile than the overall market.
CAPITALIZATION RISK
This is the risk of investments in small- to mid-capitalization companies.
Investments in mid-cap companies may be more volatile than investments in
large-cap companies. Alliance Growth Fund and The Alliance Fund are particularly
subject to this risk. Investments in small-cap companies tend to be more
volatile than investments in large-cap or mid-cap companies. A Fund's
investments in smaller capitalization stocks may have additional risks because
these companies often have limited product lines, markets or financial
resources. Alliance Quasar Fund and Alliance Global Small Cap Fund are
particularly subject to this risk.
INTEREST RATE RISK
This is the risk that changes in interest rates will affect the value of a
Fund's investments in income-producing, fixed-income (i.e., debt) securities.
Increases in interest rates may cause the value of a Fund's investments to
decline and this decrease in value may not be offset by the higher interest rate
income. Interest rate risk is particularly applicable to Funds that invest in
fixed-income securities and is greater for those Alliance Stock Funds that
invest a substantial portion of their assets in fixed-income securities, such as
Alliance Growth and Income Fund, Alliance Balanced Shares and Alliance Utility
Income Fund. Interest rate risk is greater for those Funds that invest in
lower-rated securities or comparable unrated securities ("junk bonds") such as
Alliance Utility Income Fund. Alliance Real Estate Investment Fund also has more
exposure to interest rate risk because it invests in real estate industry
companies and in mortgage-backed securities.
CREDIT RISK
This is the risk that the issuer of a security or the other party to an
over-the-counter transaction will be unable or unwilling to make timely payments
of interest or principal, or to otherwise honor its obligations. The degree of
risk for a particular security may be reflected in its credit rating. Credit
risk is applicable to Funds that invest in fixed-income securities and is
greater for those Alliance Stock Funds that invest a substantial portion of
their assets in lower-rated securities, such as Alliance Utility Income Fund.
FOREIGN RISK
This is the risk of investments in issuers located in foreign countries. All
Alliance Stock Funds with foreign securities are subject to this risk,
including, in particular, Alliance New Europe Fund, Alliance Worldwide
Privatization Fund, Alliance International Premier Growth Fund, Alliance Global
Small Cap Fund, Alliance International Fund, Alliance Greater China '97 Fund,
Alliance All-Asia Investment Fund and Alliance Global Environment Fund. Fund's
investing in foreign securities may experience more rapid and extreme changes in
value than Funds with investments solely in securities of U.S. companies. This
is because the securities markets of many foreign countries are relatively
small, with a limited number of companies representing a small number of
industries. Additionally, foreign securities issuers are usually not subject to
the same degree of regulation as U.S. issuers. Reporting, accounting, and
auditing standards of foreign countries differ, in some cases significantly,
from U.S. standards. Also, nationalization, expropriation or confiscatory
taxation, currency blockage, or political changes or diplomatic developments
could adversely affect a Fund's investments in a foreign country. In the event
of nationalization, expropriation, or other confiscation, a Fund could lose its
entire investment. To the extent a Fund invests a substantial amount of its
assets in a particular country, your investment has the risk that market changes
or other events affecting that country, including political instability and
unpredictable economic conditions, may have a particularly significant effect on
the Fund's net asset value.
COUNTRY OR GEOGRAPHIC RISK
This is the risk of investments in issuers located in a particular country or
geographic region. Market changes or other factors affecting that country or
region, including political instability and unpredictable economic conditions,
may have a particularly significant effect on a Fund's net asset value. The
Funds particularly subject to this risk are Alliance New Europe Fund, Alliance
Worldwide Privatization Fund, Alliance International Fund, Alliance Greater
China '97 Fund and Alliance All Asia Investment Fund.
21
<PAGE>
CURRENCY RISK
This is the risk that fluctuations in the exchange rates between the U.S. Dollar
and foreign currencies may negatively affect the value of a Fund's investments.
Funds with foreign securities are subject to this risk, including, in
particular, Alliance New Europe
Fund, Alliance Worldwide Privatization Fund, Alliance International Premier
Growth Fund, Alliance Global Small Cap Fund, Alliance International Fund,
Alliance Greater China '97 Fund, Alliance All-Asia Investment Fund and Alliance
Global Environment Fund.
MANAGEMENT RISK
Each Alliance Stock Fund is subject to management risk because it is an actively
managed investment portfolio. Alliance will apply its investment techniques and
risk analyses in making investment decisions for the Funds, but there is no
guarantee that its decisions will produce the intended result.
FOCUSED PORTFOLIO RISK
Funds, such as Alliance Premier Growth Fund and Alliance International Premier
Growth Fund, that invest in a limited number of companies, may have more risk
because changes in the value of a single security may have a more significant
effect, either negative or positive, on the Fund's net asset value. Similarly,
Alliance Greater China '97 Fund may have more risk because it is
"non-diversified," meaning that it can invest more of its assets in a smaller
number of companies than many other international funds.
ALLOCATION RISK
Alliance Balanced Shares has the risk that the allocation of its investments
between equity and debt securities may have a more significant effect on the
Fund's net asset value when one of these asset classes is performing more poorly
than the other.
PRINCIPAL RISKS BY FUND
- --------------------------------------------------------------------------------
The following chart summarizes the principal risks of each Fund. Risks not
marked for a particular Fund may, however, still apply to some extent to that
Fund at various times.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Capital- Interest Country or Focused
Market Sector ization Rate Credit Foreign Geographic Currency Manage- Portfolio Allocation
Fund Risk Risk Risk Risk Risk Risk Risk Risk ment Risk Risk Risk
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Premier Growth Fund o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth Fund o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Technology Fund o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Quasar Fund o o o
- ------------------------------------------------------------------------------------------------------------------------------------
The Alliance Fund o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth and
Income Fund o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Balanced Shares o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Utility Income Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Real Estate
Investment Fund o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance New Europe Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Worldwide
Privatization Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance International
Premier Growth Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Global Small Cap
Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance International Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Greater China '97
Fund o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance All-Asia Investment
Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Global Environment
Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUNDS
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 4.25% None None
Maximum Deferred Sales Charge (Load) None 4.0% 1.0%
(as a percentage of original purchase price or during the 1st during the
redemption proceeds, whichever is lower) year, decreasing 1st year,
1.0% annually to 0% thereafter
0% after the
4th year*
Exchange Fee None None None
</TABLE>
* Class B Shares of every Fund automatically convert to Class A Shares after 8
years.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) and
EXAMPLES
The Examples are to help you compare the cost of investing in the Funds with the
cost of investing in other funds. They assume that you invest $10,000 in each
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods. They also assume that your investment has a 5% return
each year, that the Fund's operating expenses stay the same and that all
dividends and distributions are reinvested. Your actual costs may be higher or
lower.
<TABLE>
<CAPTION>
Operating Expenses Examples
- -------------------------------------------------------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Premier
Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 580 $ 631 $ 231 $ 331 $ 231
Rule 12b-1 fees .33% 1.00% 1.00% After 3 years $ 906 $ 912 $ 712 $ 712 $ 712
Other expenses .26% .28% .28% After 5 years $1,254 $1,220 $1,220 $1,220 $1,220
---- ---- ---- After 10 years $2,224 $2,442(b) $2,442(b) $2,615 $2,615
Total fund
operating expenses 1.59% 2.28% 2.28%
==== ==== ====
Alliance Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .70% .70% .70% After 1 year $ 544 $ 597 $ 197 $ 296 $ 196
Rule 12b-1 fees .30% 1.00% 1.00% After 3 years $ 796 $ 804 $ 609 $ 606 $ 606
Other expenses .22% .24% .23% After 5 years $1,067 $1,047 $1,047 $1,042 $1,042
---- ---- ---- After 10 years $1,840 $2,078(b) $2,078(b) $2,254 $2,254
Total fund
operating expenses 1.22% 1.94% 1.93%
==== ==== ====
Alliance Technology Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.02% 1.02% 1.02% After 1 year $ 587 $ 642 $ 242 $ 343 $ 243
Rule 12b-1 fees .30% 1.00% 1.00% After 3 years $ 926 $ 945 $ 745 $ 748 $ 748
Other expenses .34% .37% .38% After 5 years $1,289 $1,275 $1,275 $1,280 $1,280
---- ---- ---- After 10 years $2,307 $2,545(b) $2,545(b) $2,736 $2,736
Total fund
operating expenses 1.66% 2.39% 2.40%
==== ==== ====
Alliance Quasar Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.04% 1.04% 1.04% After 1 year $ 582 $ 642 $ 242 $ 341 $ 241
Rule 12b-1 fees .26% 1.00% 1.00% After 3 years $ 911 $ 945 $ 745 $ 742 $ 742
Other expenses .31% .35% .34% After 5 years $1,264 $1,275 $1,275 $1,270 $1,270
---- ---- ---- After 10 years $2,255 $2,533(b) $2,5332(b) $2,716 $2,716
Total fund
operating expenses 1.61% 2.39% 2.38%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 25.
23
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- -------------------------------------------------------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Alliance Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .67% .67% .67% After 1 year $ 526 $ 587 $ 187 $ 287 $ 187
Rule 12b-1 fees .20% 1.00% 1.00% After 3 years $ 739 $ 779 $ 579 $ 579 $ 579
Other expenses .16% .17% .17% After 5 years $ 969 $ 995 $ 995 $ 995 $ 995
----- ----- ----- After 10 years $1,631 $1,946(b) $1,946(b) $2,159 $2,159
Total fund
operating expenses 1.03% 1.84% 1.84%
===== ===== =====
Alliance Growth and
Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .48% .48% .48% After 1 year $ 516 $ 575 $ 175 $ 275 $ 175
Rule 12b-1 fees .23% 1.00% 1.00% After 3 years $ 709 $ 742 $ 542 $ 542 $ 542
Other expenses .22% .24% .24% After 5 years $ 918 $ 933 $ 933 $ 933 $ 933
----- ----- ----- After 10 years $1,519 $1,821(b) $1,821(b) $2,030 $2,030
Total fund
operating expenses .93% 1.72% 1.72%
===== ===== =====
Alliance Balanced Shares Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .63% .63% .63% After 1 year $ 553 $ 609 $ 209 $ 308 $ 208
Rule 12b-1 fees .24% 1.00% 1.00% After 3 years $ 820 $ 846 $ 646 $ 643 $ 643
Other expenses .43% .43% .42% After 5 years $1,108 $1,108 $1,108 $1,103 $1,103
----- ----- ----- After 10 years $1,926 $2,195(b) $2,195(b) $2,379 $2,379
Total fund
operating expenses 1.30% 2.06% 2.05%
===== ===== =====
Alliance Utility Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .75% .75% .75% After 1 year $ 571 $ 623 $ 223 $ 323 $ 223
Rule 12b-1 fees .30% 1.00% 1.00% After 3 years $ 879 $ 888 $ 688 $ 688 $ 688
Other expenses 1.43% 1.46% 1.47% After 5 years $1,209 $1,180 $1,180 $1,180 $1,180
----- ----- ----- After 10 years $2,139 $2,357(b) $2,357(b) $2,534 $2,534
Total fund
operating expenses 2.48% 3.21% 3.22%
===== ===== =====
Waiver and/or expense
reimbursement (a) (.98)% (1.01)% (1.02)%
===== ===== =====
Net expenses 1.50% 2.20% 2.20%
===== ===== =====
Alliance Real Estate
Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .90% .90% .90% After 1 year $ 576 $ 629 $ 229 $ 329 $ 229
Rule 12b-1 fees .30% 1.00% 1.00% After 3 years $ 894 $ 906 $ 706 $ 706 $ 706
Other expenses .35% .36% .36% After 5 years $1,234 $1,210 $1,210 $1,210 $1,210
----- ----- ----- After 10 years $2,192 $2,417(b) $2,417(b) $2,595 $2,595
Total fund
operating expenses 1.55% 2.26% 2.26%
===== ===== =====
Alliance New Europe Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.02% 1.02% 1.02% After 1 year $ 605 $ 659 $ 259 $ 359 $ 259
Rule 12b-1 fees .30% 1.00% 1.00% After 3 years $ 982 $ 996 $ 796 $ 796 $ 796
Other expenses .53% .53% .54% After 5 years $1,383 $1,360 $1,360 $1,360 $1,360
----- ----- ----- After 10 years $2,502 $2,722(b) $2,722(b) $2,895 $2,895
Total fund
operating expenses 1.85% 2.56% 2.56%
===== ===== =====
Alliance Worldwide
Privatization Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 593 $ 648 $ 248 $ 347 $ 247
Rule 12b-1 fees .30% 1.00% 1.00% After 3 years $ 947 $ 964 $ 764 $ 761 $ 761
Other expenses .43% .45% .44% After 5 years $1,324 $1,306 $1,306 $1,301 $1,301
----- ----- ----- After 10 years $2,379 $2,609(b) $2,609(b) $2,776 $2,776
Total fund
operating expenses 1.73% 2.45% 2.44%
===== ===== =====
Alliance International
Premier Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 667 $ 723 $ 323 $ 423 $ 323
Rule 12b-1 fees .30% 1.00% 1.00% After 3 years $1,170 $1,186 $ 986 $ 986 $ 986
Other expenses 3.89% 4.14% 4.00% After 5 years $1,699 $1,674 $1,674 $1,674 $1,674
----- ----- ----- After 10 years $3,140 $3,343(b) $3,343(b) $3,503 $3,503
Total fund
operating expenses 5.19% 6.14% 6.00%
===== ===== =====
Waiver and/or expense
reimbursement (a) (2.69)% (2.94)% (2.80)%
===== ===== =====
Net expenses 2.50% 3.20% 3.20%
===== ===== =====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 25.
24
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- -------------------------------------------------------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Global
Small Cap Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 635 $ 691 $ 291 $ 391 $ 291
Rule 12b-1 fees .30% 1.00% 1.00% After 3 years $1,072 $1,092 $ 892 $ 892 $ 892
Other expenses .86% .88% .88% After 5 years $1,535 $1,518 $1,518 $1,518 $1,518
------ ------ ------ After 10 years $2,812 $3,034(b) $3,034(b) $3,204 $3,204
Total fund
operating expenses 2.16% 2.88% 2.88%
====== ====== ======
Alliance International Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
Fund ------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 586 $ 652 $ 252 $ 351 $ 251
Rule 12b-1 fees .21% 1.00% 1.00% After 3 years $ 923 $ 976 $ 776 $ 773 $ 773
Other expenses .59% .64% .63% After 5 years $1,284 $1,326 $1,326 $1,321 $1,321
------ ------ ------ After 10 years $2,296 $2,619(b) $2,619(b) $2,816 $2,816
Total fund
operating expenses 1.80% 2.64% 2.63%
====== ====== ======
Waiver and/or expense
reimbursement (a) (.15)% (.15)% (.15)%
====== ====== ======
Net expenses 1.65% 2.49% 2.48%
====== ====== ======
Alliance Greater
China '97 Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 669 $ 725 $ 325 $ 425 $ 325
Rule 12b-1 fees .30% 1.00% 1.00% After 3 years $1,176 $1,192 $ 992 $ 992 $ 992
Other expenses 16.97% 17.18% 17.37% After 5 years $1,709 $1,683 $1,683 $1,683 $1,683
------ ------ ------ After 10 years $3,157 $3,362(b) $3,362(b) $3,522 $3,522
Total fund
operating expenses 18.27% 19.18% 19.37%
====== ====== ======
Waiver and/or expense
reimbursement (a) (15.75)% (15.96)% (16.15)%
====== ====== ======
Net expenses 2.52% 3.22% 3.22%
====== ====== ======
Alliance All-Asia
Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 715 $ 772 $ 372 $ 472 $ 372
Rule 12b-1 fees .30% 1.00% 1.00% After 3 years $1,313 $1,332 $1,132 $1,132 $1,332
Other expenses After 5 years $1,935 $1,911 $1,911 $1,911 $1,911
Administration fees .15% .15% .15% After 10 years $3,602 $3,797(b) $3,797(b) $3,950 $3,950
Other operating
expenses 3.18% 3.24% 3.27%
------ ------ ------
Total other expenses 3.33% 3.39% 3.42%
------ ------ ------
Total fund operating
expenses 4.63% 5.39% 5.42%
====== ====== ======
Waiver and/or expense
reimbursement (a) (1.63)% (1.69)% (1.72)%
====== ====== ======
Net expenses 3.00% 3.70% 3.70%
====== ====== ======
Alliance Global
Environment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees (c) 1.10% 1.10% 1.10% After 1 year $ 899 $ 974 $ 574 $ 661 $ 561
Rule 12b-1 fees .30% 1.00% 1.00% After 3 years $1,848 $1,908 $1,708 $1,673 $1,673
Other expenses (c) 3.55% 3.66% 3.53% After 5 years $2,798 $2,826 $2,826 $2,771 $2,771
------ ------ ------ After 10 years $5,176 $5,402(b) $5,402(b) $5,456 $5,456
Total fund
operating expenses 4.95% 5.76% 5.63%
====== ====== ======
</TABLE>
- --------------------------------------------------------------------------------
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period.
(a) Reflects Alliance's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses.
(b) Assumes Class B shares convert to Class A shares after eight years.
(c) Management fees and other expenses for Alliance Global Environment Fund
are based on estimated amounts for its current fiscal year.
- --------------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
This Prospectus uses the following terms.
TYPES OF SECURITIES
Convertible securities are fixed-income securities that are convertible into
common stock.
Debt securities are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Equity securities include (i) common stocks, partnership interests, business
trust shares and other equity or ownership interests in business enterprises and
(ii) securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
Fixed-income securities are debt securities and dividend-paying preferred
stocks, including floating rate and variable rate instruments.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold under Rule 144A of the
Securities Act.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
TYPES OF COMPANIES
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Beneficiary Companies are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and healthier
environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous waste.
Eligible Companies are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
Environmental companies are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
Greater China company is an entity that (i) is organized under the laws of a
Greater China country and conducts business in a Greater China country, (ii)
derives 50% or more of its total revenues from businesses in Greater China
countries, or (iii) issues equity or debt securities that are traded principally
on a stock exchange in a Greater China country. A company of a particular
Greater China country is a company that meets any of these criteria with respect
to that country.
Greater China countries are the People's Republic of China ("China"), the Hong
Kong Special Administrative Region of the People's Republic of China ("Hong
Kong") and the Republic of China ("Taiwan").
Non-U.S. Company is an entity that (i) is organized under the laws of a foreign
country and conducts business in a foreign country, (ii) derives 50% or more of
its total revenues from business in foreign countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in a foreign
country.
RATING AGENCIES, RATED SECURITIES and INDEXES
Duff & Phelps is Duff & Phelps Credit Rating Co.
EAFE Index is Morgan Stanley Capital International Europe, Australasia and Far
East ("EAFE") Index.
Fitch is Fitch IBCA, Inc.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or B and above by S&P, Duff & Phelps or Fitch, or determined by Alliance
to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Moody's is Moody's Investors Service, Inc.
26
<PAGE>
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
S&P is Standard & Poor's Ratings Services.
S&P 500 Index is S&P's 500 Composite Stock Price Index, a widely recognized
unmanaged index of market activity.
OTHER
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Commission is the Securities and Exchange Commission.
Exchange is the New York Stock Exchange.
Securities Act is the Securities Act of 1933, as amended.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- --------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of each
Fund's investment objectives, principal strategies and risks. Of course, there
can be no assurance that any Fund will achieve its investment objective.
Please note that:
o Additional discussion of the Funds' investments, including the risks of
the investments, can be found in the discussion under Description of
Investment Practices following this section.
o The description of the principal risks for a Fund may include risks
described in the Summary of Principal Risks above. Additional information
about the risks of investing in a Fund can be found in the discussion
under Additional Risk Considerations.
o Additional descriptions of each Fund's strategies, investments and risks
can be found in the Fund's Statement of Additional Information or SAI.
o Except as noted, (i) the Funds' investment objectives are "fundamental"
and cannot be changed without a shareholder vote, and (ii) the Funds'
investment policies are not fundamental and thus can be changed without a
shareholder vote.
INVESTMENT OBJECTIVES AND POLICIES
DOMESTIC STOCK FUNDS
The Domestic Stock Funds offer investors seeking capital appreciation a range of
alternative approaches to investing in the U.S. equity markets.
Alliance Premier Growth Fund
Alliance Premier Growth Fund seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. As a matter of fundamental policy, the Fund normally invests at
least 85% of its total assets in the equity securities of U.S. companies. A U.S.
company is a company that is organized under United States law, has its
principal office in the United States and issues equity securities that are
traded principally in the United States. Normally, about 40-50 companies will be
represented in the Fund's portfolio, with the 25 most highly regarded of these
companies usually constituting approximately 70% of the Fund's net assets. The
Fund is thus atypical from most equity mutual funds in its focus on a relatively
small number of intensively researched companies. The Fund is designed for those
seeking to accumulate capital over time with less volatility than that
associated with investment in smaller companies.
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more than
600 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies included in the S&P 500 Index.
The Fund also may:
o invest up to 20% of its net assets in convertible securities;
o invest up to 5% of its net assets in rights or warrants;
o invest up to 15% of its total assets in foreign securities;
o purchase and sell exchange-traded index options and stock index futures
contracts; and
27
<PAGE>
o write covered exchange-traded call options on its securities of up to 15%
of its total assets, and purchase and sell exchange-traded call and put
options on common stocks written by others of up to, for all options, 10%
of its total assets.
Because the Fund invests in a smaller number of securities than many other
equity funds, your investment has the risk that changes in the value of a single
security may have a more significant effect, either negative or positive, on the
Fund's net asset value.
Alliance Growth Fund
Alliance Growth Fund seeks long-term growth of capital. Current income is only
an incidental consideration. The Fund seeks to achieve its objective by
investing primarily in equity securities of companies with favorable
earnings outlooks and long-term growth rates that are expected to exceed that of
the U.S. economy over time. The Fund's investment objective is not fundamental.
The Fund also may invest up to 25% of its total assets in lower-rated
fixed-income securities and convertible bonds. The Fund generally will not
invest in securities rated at the time of purchase below Caa- by Moody's and
CCC- by S&P, Duff & Phelps or Fitch or in securities judged by Alliance to be of
comparable investment quality. From time to time, however, the Fund may invest
in securities rated in the lowest grades (i.e., C by Moody's or D or equivalent
by S&P, Duff & Phelps or Fitch) or securities of comparable investment quality
if there are prospects for an upgrade or a favorable conversion into equity
securities. If the credit rating of a security held by the Fund falls below its
rating at the time of purchase (or Alliance determines that the credit quality
of the security has deteriorated), the Fund may continue to hold the security if
such investment is considered appropriate under the circumstances.
The Fund also may:
o invest in zero-coupon and payment-in-kind bonds;
o invest in foreign securities although not generally in excess of 15% of
its total assets;
o buy or sell foreign currencies, options on foreign currencies, and foreign
currency futures contracts (and related options) and deal in forward
foreign currency exchange contracts;
o enter into forward commitments;
o buy and sell stock index futures contracts and options on futures
contracts and on stock indices;
o purchase and sell futures contracts and options on futures contracts and
U.S. Treasury securities;
o write covered call and put options;
o purchase and sell put and call options;
o make loans of portfolio securities of up to 25% of its total assets; and
o enter into repurchase agreements of up to 25% of its total assets.
Alliance Technology Fund
Alliance Technology Fund emphasizes growth of capital and invests for capital
appreciation. Current income is only an incidental consideration. The Fund may
seek income by writing listed call options. The Fund invests primarily in
securities of companies expected to benefit from technological advances and
improvements (i.e., companies that use technology extensively in the development
of new or improved products or processes). The Fund will normally have at least
80% of its assets invested in the securities of these companies. The Fund
normally will have substantially all its assets invested in equity securities,
but it also invests in debt securities offering an opportunity for price
appreciation. The Fund will invest in listed and unlisted securities, in U.S.
securities and up to 10% of its total assets in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund also may:
o write covered call options on its securities of up to 15% of its total
assets and purchase exchange-listed call and put options, including
exchange-traded index put options of up to, for all options, 10% of its
total assets;
o invest up to 10% of its total assets in warrants; and
o make loans of portfolio securities of up to 30% of its total assets.
Because the Fund invests primarily in technology companies, factors affecting
those types of companies could have a significant effect on the Fund's net asset
value. In addition, the Fund's investments in technology stocks, especially
those of smaller, less seasoned companies, tend to be more volatile than the
overall market. The Fund's investments in debt and foreign securities have
credit risk and foreign risk.
Alliance Quasar Fund
Alliance Quasar Fund seeks growth of capital by pursuing aggressive investment
policies. The Fund invests for capital appreciation and only incidentally for
current income. The Fund's practice of selecting securities based on the
possibility of appreciation cannot,of course, ensure against a loss in value.
Moreover, because the Fund's investment policies are aggressive, an investment
in the Fund is risky and investors who want assured income or preservation of
capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities for the
Fund, Alliance considers the economic and political outlook, the values of
specific securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and
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preferred stocks. The Fund invests in listed and unlisted U.S. and foreign
securities. The Fund can periodically invest in the securities of companies that
are expected to appreciate due to a development particularly or uniquely
applicable to that company regardless of general business conditions or
movements of the market as a whole.
The Fund also may:
o make short sales of securities against the box but not more than 15% of
its net assets may be deposited on short sales; and
o write covered call options of up to 15% of its total assets and purchase
and sell put and call options written by others of up to, for all options,
10% of its total assets.
Investments in smaller companies may have more risk because they tend to be more
volatile than the overall stock market. The Fund's investments in
non-convertible bonds, preferred stocks and foreign stocks may have credit risk
and foreign risk.
The Alliance Fund
The Alliance Fund seeks long-term growth of capital and income primarily through
investment in common stocks. The Fund normally invests substantially all of its
assets in common stocks that Alliance believes will appreciate in value. The
Fund also may invest in other types of securities such as convertible
securities, investment grade instruments, U.S. Government securities and high
quality, short-term obligations such as repurchase agreements, bankers'
acceptances and domestic certificates of deposit. The Fund may invest without
limit in foreign securities. The Fund generally does not effect portfolio
transactions in order to realize short-term trading profits or exercise
control.
The Fund also may:
o write exchange-traded covered call options on up to 25% of its total
assets;
o make secured loans of portfolio securities of up to 25% of its total
assets;
o enter into repurchase agreements of up to seven days' duration with
commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily
available market quotations do not exceed 10% of its net assets;
While the diversification and generally high quality of the Fund's investments
cannot prevent fluctuations in market values, they tend to limit investment risk
and contribute to achieving the Fund's objective.
TOTAL RETURN FUNDS
The Total Return Funds provide a range of investment alternatives to investors
seeking both growth of capital and current income.
Alliance Growth and Income Fund
Alliance Growth and Income Fund seeks appreciation through investments primarily
in dividend-paying common stocks of good quality. The Fund also may invest in
fixed-income securities and convertible securities.
The Fund also may try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund restricts its investments in these securities to issues of high
quality. The Fund also may purchase and sell financial forward and futures
contracts and options on these securities for hedging purposes.
Alliance Balanced Shares
Alliance Balanced Shares seeks a high return through a combination of current
income and capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced" fund as a matter of fundamental policy.
The Fund invests in equity securities of high-quality, financially strong,
dividend-paying companies. Normally, the Fund's investments will consist of
about 60% in stocks, but stocks may make up to 75% of its investments. The Fund
will invest at least 25% of its total assets in investment grade debt
securities. These investments may include short- and long-term debt securities,
preferred stocks, convertible debt securities and convertible preferred stocks
to the extent that their values are attributable to their fixed-income
characteristics. Other than this restriction, the percentage of the Fund's
assets invested in each type of security will vary.
The Fund invests in U.S. Government securities, bonds, senior debt securities,
and preferred and common stocks in such proportions and of such type as Alliance
deems best adapted to the current economic and market outlooks. The Fund may
invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above.
The Fund also may:
o enter into contracts for the purchase or sale for future delivery of
foreign currencies;
o purchase and write put and call options on foreign currencies and enter
into forward foreign currency exchange contracts for hedging purposes; and
o subject to market conditions, write covered call options listed on a
domestic exchange to realize income.
As a balanced fund, the Fund has the risk that the allocation of its investments
between equity and debt securities may have a more significant effect on the
Fund's net asset value when one of these asset classes is performing more poorly
than the other.
Alliance Utility Income Fund
Alliance Utility Income Fund seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. As a fundamental policy, the Fund normally invests at least
65% of its total assets in securities of companies in the utilities industry.
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The Fund seeks to take advantage of the characteristics and historical
performance of securities of utility companies, many of which pay regular
dividends and increase their common stock dividends over time. The Fund
considers a company to be in the utilities industry if, during the most recent
twelve-month period, at least 50% of the company's gross revenues, on a
consolidated basis, were derived from its utilities activities.
The Fund may invest in securities of both U.S. and foreign issuers, although the
Fund will invest no more than 15% of its total assets in issuers in any one
foreign country. The Fund invests at least 65% of its total assets in
income-producing securities, but there is otherwise no limit on the allocation
of the Fund's investments between equity securities and fixed-income securities.
The Fund may invest up to 35% of its net assets in lower-rated securities. The
Fund will not retain a security that is downgraded below B or determined by
Alliance to have undergone similar credit quality deterioration following
purchase.
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies. These securities include U.S. Government securities and
repurchase agreements for those securities, foreign government securities,
corporate fixed-income securities of domestic issuers, corporate fixed-income
securities of foreign issuers denominated in foreign currencies or in U.S.
dollars (in each case including fixed-income securities of an issuer in one
country denominated in the currency of another country), qualifying bank
deposits, and prime commercial paper.
The Fund also may:
o invest up to 30% of its net assets in convertible securities;
o invest up to 5% of its net assets in rights or warrants;
o invest in depositary receipts, securities of supranational entities
denominated in the currency of any country, securities denominated in
European Currency Units, and "semi-governmental securities";
o write covered call and put options, purchase call and put options on
securities of the types in which it is permitted to invest that are
exchange-traded and over-the-counter, and write uncovered call options for
cross-hedging purposes;
o purchase and sell exchange-traded options on any securities index composed
of the types of securities in which it may invest;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including an index of U.S. Government securities,
foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts;
o purchase and write call and put options on foreign currencies traded on
U.S. and foreign exchanges or over-the-counter for hedging purposes;
o purchase or sell forward contracts;
o enter into interest rate swaps and purchase or sell interest rate caps and
floors;
o enter into forward commitments;
o enter into standby commitment agreements;
o make short sales of securities or maintain a short position;
o make secured loans of portfolio securities of up to 20% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
The Fund's principal risks include those that arise from its investing primarily
in electric utility companies. Factors affecting that industry sector can have a
significant effect on the Fund's net asset value. The U.S. utilities industry
has experienced significant changes in recent years. Electric utility companies
in general have been favorably affected by lower fuel costs, the full or near
completion of major construction programs and lower financing costs. In
addition, many utility companies have generated cash flows in excess of current
operating expenses and construction expenditures, permitting some degree of
diversification into unregulated businesses. Regulatory changes, however, could
increase costs or impair the ability of nuclear and conventionally fueled
generating facilities to operate their facilities and reduce their ability to
make dividend payments on their securities. Rates of return of utility companies
generally are subject to review and limitation by state public utilities
commissions and tend to fluctuate with marginal financing costs. Rate changes
ordinarily lag behind changes in financing costs and can favorably or
unfavorably affect the earnings or dividend pay-outs of utilities stocks
depending upon whether the rates and costs are declining or rising.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition, and regulatory
changes. There also can be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although the regulation may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their
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respective governments than utility companies located in the U.S. As in the
U.S., utility companies generally are required to seek government approval for
rate increases. In addition, many foreign utility companies use fuels that cause
more pollution than those used in the U.S. and may yet be required to invest in
pollution control equipment. Foreign utility regulatory systems vary from
country to country and may evolve in ways different from regulation in the U.S.
The percentage of the Fund's assets invested in issuers of particular countries
will vary.
Increases in interest rates may cause the value of the Fund's investments to
decline and the decrease in value may not be offset by higher interest rate
income. The Fund's investments in lower-rated securities may be subject to more
credit risk than a fund that invests in higher-rated securities.
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund seeks a total return from long-term growth
of capital and from income principally through investing in a portfolio of
equity securities of issuers that are primarily engaged in or related to the
real estate industry.
The Fund normally invests at least 65% of its total assets in equity securities
of real estate investment trusts, or REITs, and other real estate industry
companies. A "real estate industry company" is a company that derives at least
50% of its gross revenues or net profits from the ownership, development,
construction, financing, management, or sale of commercial, industrial, or
residential real estate or interests in these properties. The Fund invests in
equity securities that include common stock, shares of beneficial interest of
REITs, and securities with common stock characteristics, such as preferred stock
or convertible securities ("Real Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit certificates ("REMICs") and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These securities are
described below.
In selecting Real Estate Equity Securities, Alliance's analysis will focus on
determining the degree to which the company involved can achieve sustainable
growth in cash flow and dividend paying capability. Alliance believes that the
primary determinant of this capability is the economic viability of property
markets in which the company operates and that the secondary determinant of this
capability is the ability of management to add value through strategic focus and
operating expertise. The Fund will purchase Real Estate Equity Securities when,
in the judgment of Alliance, their market price does not adequately reflect this
potential. In making this determination, Alliance will take into account
fundamental trends in underlying property markets as determined by proprietary
models, site visits conducted by individuals knowledgeable in local real estate
markets, price-earnings ratios (as defined for real estate companies), cash flow
growth and stability, the relationship between asset value and market price of
the securities, dividend payment history, and such other factors that Alliance
may determine from time to time to be relevant. Alliance will attempt to
purchase for the Fund Real Estate Equity Securities of companies whose
underlying portfolios are diversified geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles that invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs, or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
The Fund's investment strategy with respect to Real Estate Equity Securities is
based on the premise that property market fundamentals are the primary
determinant of growth underlying the performance of Real Estate Equity
Securities. Value and management further distinguishes the most attractive Real
Estate Equity Securities. The Fund's research and investment process is designed
to identify those companies with strong property fundamentals and strong
management teams. This process is comprised of real estate market research,
specific property inspection, and securities analysis. Alliance believes that
this process will result in a portfolio that will consist of Real Estate Equity
Securities of companies that own assets in the most desirable markets across the
country, diversified geographically and by property type.
To implement the Fund's research and investment process, Alliance has retained
the consulting services of CB Richard Ellis, Inc. ("CBRE"), a publicly held
company and the largest real estate services company in the United States.
CBRE's business includes real estate brokerage, property and facilities
management, and real estate finance and investment advisory activities. The
universe of property-owning real estate industry firms consists of approximately
142 companies of sufficient size and quality to merit consideration for
investment by the Fund. As consultant to Alliance, CBRE provides access to its
proprietary model, REIT-Score, which analyzes the approximately 18,000
properties owned by these 142 companies. Using proprietary databases and
algorithms, CBRE analyzes local market rent, expenses, occupancy trends, market
specific transaction pricing, demographic and economic trends, and leading
indicators of real estate supply such as building permits. Over 1,000 asset-type
specific geographic markets are analyzed and ranked on a relative scale by CBRE
in compiling its REIT-Score database. The relative attractiveness of these real
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estate industry companies is similarly ranked based on the composite rankings of
the properties they own.
Once the universe of real estate industry companies has been distilled through
the market research process, CBRE's local market presence provides the
capability to perform site specific inspections of key properties. This analysis
examines specific location, condition, and sub-market trends. CBRE's use of
locally based real estate professionals provides Alliance with a window on the
operations of the portfolio companies as information can immediately be put in
the context of local market events. Only those companies whose specific property
portfolios reflect the promise of their general markets will be considered for
investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance makes extensive use of CBRE's network
of industry analysts in order to assess trends in tenant industries. This
information is then used to further evaluate management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
The Fund may invest in short-term investments including: corporate commercial
paper and other short-term commercial obligations, in each case rated or issued
by companies with similar securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; obligations (including
certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not rated, of equivalent credit quality as determined
by Alliance. The Fund expects that it will not retain a debt security that is
downgraded below BBB or Baa or, if unrated, determined by Alliance to have
undergone similar credit quality deterioration, subsequent to purchase by the
Fund.
The Fund also may:
o invest up to 15% of its net assets in convertible securities;
o enter into forward commitments;
o enter into standby commitment agreements; and
o make short sales of securities or maintain a short position but only if at
all times when a short position is open not more than 25% of the Fund's
net assets is held as collateral for such sales.
o invest up to 10% of its net assets in rights or warrants;
o make loans of portfolio securities of up to 25% of its total assets; and
o enter into repurchase agreements of up to seven days' duration.
Because the Fund invests a substantial portion of its assets in the real estate
market, it is subject to many of the same risks involved in direct ownership of
real estate. For example, the value of real estate could decline due to a
variety of factors affecting the real estate market generally, such as
overbuilding, increases in interest rates, or declines in rental rates. In
addition, REITs are dependent on the capability of their managers, may have
limited diversification, and could be significantly affected by changes in tax
laws.
The Fund's investments in mortgage-backed securities have prepayment risk, which
is the risk that mortgage loans will be prepaid when interest rates decline and
the Fund will have to reinvest in securities with lower interest rates. This
risk causes mortgage-backed securities to have significantly greater price and
yield volatility than traditional fixed-income securities. The Fund's
investments in REMICs, CMOs and other types of mortgage-backed securities may be
subject to special risks that are described under "Description of Investment
Practices."
GLOBAL STOCK FUNDS
The Global Stock Funds offer investors the opportunity to participate in the
potential for long-term capital appreciation available from investment in
foreign securities.
Alliance New Europe Fund
Alliance New Europe Fund seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in these securities. The Fund may invest up to 35% of
its total assets in high-quality U.S. Dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth. In addition, the emergence of new market economies in Europe and
the broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund invests in companies that Alliance
believes possess rapid growth potential. The Fund emphasizes investments in
larger, established companies, but also invests in smaller, emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek
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investment opportunities among these companies and, as opportunities
become available, within the former "east bloc."The Fund will not invest more
than 20% of its total assets in these companies, or more than 10% of its total
assets in issuers based in any one country.
The Fund diversifies its investments among a number of European countries and
normally invests in companies based in at least three of these countries. The
Fund, however, may invest without limit in a single European country. While the
Fund does not intend to concentrate its investments in a single country, at
times 25% or more of its assets may be invested in companies located in a
single country. During such times, the Fund would be subject to a
correspondingly greater risk of loss due to adverse political or
regulatory developments, or an economic downturn, within that country.
The Fund also may:
o invest up to 20% of its total assets in rights or warrants;
o invest in depositary receipts or other securities convertible into
securities of companies based in European countries, debt securities of
supranational entities denominated in the Euro or the currency of any
European country, debt securities denominated in the Euro of an
issuer in a European country (including supranational issuers), and
"semi-governmental securities";
o purchase and sell forward contracts;
o write covered call or put options and sell and purchase exchange-traded
put and call options, including exchange-traded index options;
o enter into financial futures contracts, including contracts for the
purchase or sale for future delivery of foreign currencies and futures
contracts based on stock indices, and purchase and write options on
futures contracts;
o purchase and write put options on foreign currencies traded on securities
exchanges or boards of trade or over-the-counter;
o enter into forward commitments;
o enter into standby commitment agreements; and
o make secured loans of portfolio securities of up to 30% of its total
assets.
The Fund's investments in non-U.S. countries and smaller countries may have more
risk because they tend to be more volatile than the overall stock market. To the
extent the Fund invests a substantial amount of its assets in a particular
European country, your investment is subject to the risk that market changes or
other events affecting that country may have a more significant effect on the
Fund's net asset value. The Fund's investments in U.S. Dollar- or foreign
currency-denominated fixed-income securities have interest rate and credit risk.
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund seeks long-term capital appreciation. As a
fundamental policy, the Fund invests at least 65% of its total assets in equity
securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies. These companies include those in Western
Europe and Scandinavia, Australia, New Zealand, Latin America, Asia, Eastern and
Central Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering
of publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy and the
Fund will thus emphasize investments in such enterprises.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established economies, including France,
Great Britain, Germany, and Italy, and those with developing economies,
including Argentina, Mexico, Chile, Indonesia, Malaysia, Poland, and Hungary,
are engaged in privatizations. The Fund will invest in any country believed to
present attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively to secure the issuer's successful transition to private sector
ownership. Additionally, these enterprises often dominate their local markets
and typically have the potential for significant managerial and operational
efficiency gains.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. The Fund may invest up to 15% of its total assets in issuers in any
one foreign
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country, except that the Fund may invest up to 30% of its total assets in
issuers in any one of France, Germany, Great Britain, Italy and Japan. The Fund
may invest all of its assets within a single region of the world.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities. The Fund may invest up to 5% of its net assets in
lower-rated securities. The Fund will not retain a non-convertible security
that is downgraded below C or determined by Alliance to have undergone similar
credit quality deterioration following purchase.
The Fund also may:
o invest up to 20% of its total assets in rights or warrants;
o write covered call and put options, purchase put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options, and write uncovered options for
cross-hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
foreign government securities, or common stock, and may purchase and write
options on future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into forward commitments;
o enter into standby commitment agreements;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain a short position;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
Investments in non-U.S. companies and smaller companies may have more risk
because they tend to be more volatile than the overall stock market. The Fund's
investments in debt securities and convertible securities have interest risk and
credit risk.
Alliance International Premier Growth Fund
Alliance International Premier Growth Fund seeks long term capital appreciation
by investing predominately in the equity securities of a limited number of
carefully selected non-U.S. companies that are judged likely to achieve superior
earnings growth. As a matter of fundamental policy, the Fund will invest under
normal circumstances at least 85% of its total assets in equity securities. The
Fund makes investments based upon their potential for capital appreciation.
Current income is incidental to that objective.
In the main, the Fund's investments will be in comparatively large, high-quality
companies. Normally, about 60 companies will be represented in the Fund's
portfolio, and the 30 most highly regarded of these companies usually will
constitute approximately 70% of the Fund's net assets. The Fund thus differs
from more typical international equity mutual funds by focusing on a relatively
small number of intensively researched companies. The Fund is designed for
investors seeking to accumulate capital over time. Because of market risks
inherent in any investment, the selection of securities on the basis of their
appreciation possibilities cannot ensure against possible loss in value. There
is, of course, no assurance that the Fund's investment objective will be met.
Alliance expects the market capitalization of the companies represented in the
Fund's portfolio normally will be in the range of the average weighted market
capitalization of the companies comprising the EAFE Index. As of December 31,
1998, the average weighted market capitalization of companies in the EAFE Index
was approximately $35 billion.
Within the investment framework of the Fund, Alliance's Large Cap Growth Group,
headed by Alfred Harrison, Alliance's Vice Chairman, has responsibility for
managing the Fund's portfolio. As discussed below, in selecting the Fund's
portfolio investments Alliance's Large Cap Growth Group will follow a
structured, disciplined research and investment process that is essentially
similar to that which it employs in managing Premier Growth Fund.
In managing the Fund's assets, Alliance's investment strategy will emphasize
stock selection and investment in the securities of a limited number of issuers.
Alliance depends heavily upon the fundamental analysis and research of its large
global equity research team situated in numerous locations around the world. Its
global equity analysts follow a research universe of approximately 900
companies. As one of the largest multinational investment management firms,
Alliance has access to considerable information concerning the companies in its
research universe, an in-depth understanding of the products, services, markets,
and competition of these companies, and a good knowledge of their management.
Research emphasis is placed on the identification of companies whose superior
prospective earnings growth is not fully reflected in current market valuations.
Alliance constantly adds to and deletes from this universe as fundamentals and
valuations change. Alliance's global equity analysts rate companies in three
categories. The performance of each analyst's ratings is an important
determinant of his or her incentive compensation. The equity securities of
"one-rated" companies are expected to significantly outperform the local market
in local currency terms. All equity securities purchased for the Fund's
portfolio will be selected from the universe of approximately 100 "one-rated"
companies. As noted above, the Fund usually invests approximately 70% of its
net assets in the approximately 30 most highly regarded of these companies.
The Fund's portfolio emphasis upon particular industries or sectors will be a
by-product of the stock selection process rather than the result of assigned
targets or ranges.
The Fund's diversifies its investments among at least four, and usually
considerably more, countries. No more than 15% of the Fund's total assets will
be invested in issuers in any one foreign country, except that the Fund may
invest up to 25% of its total assets in issuers in each of Canada, France,
Germany, Italy, Japan, The Netherlands, Switzerland, and the United Kingdom.
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Within these limits, geographic distribution of the Fund's investments among
countries or regions also will be a product of the stock selection process
rather than a predetermined allocation. To the extent that the Fund
concnetrates its assets within one region, the Fund may be subject to any
special risks that may be associated with that region. While the Fund may
engage in currency hedging programs in periods in which Alliance perceives
extreme exchange rate risk, the Fund normally will not make significant use of
currency hedging strategies.
In the management of the Fund's investment portfolio, Alliance will seek to
utilize market volatility judiciously (assuming no change in company
fundamentals) to adjust the Fund's portfolio positions. To the extent consistent
with local market liquidity considerations, the Fund will strive to capitalize
on apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. Under normal
circumstances, the Fund will remain substantially fully invested in equity
securities and will not take significant cash positions for market timing
purposes. Rather, through "buying into declines" and "selling into strength,"
Alliance seeks superior relative returns over time.
The Fund also may:
o invest up to 20% of its total assets in convertible securities;
o invest up to 20% of its total assets in rights or warrants;
o write covered call and put options, purchase put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options, and write uncovered options for cross
hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
foreign government securities, or common stock and may purchase and write
options on such future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into standby commitment agreements;
o enter into forward commitments;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain short positions of no more than
5% of its net assets as collateral for short sales; and
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
Because the Fund invests in a smaller number of securities than many other
equity funds, your investment also has the risk that changes in the value of a
single security may have a more significant effect, either negative or positive,
on the Fund's net asset value.
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund seeks long-term growth of capital through
investment in a global portfolio of the equity securities of selected companies
with relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1.5 billion. Because
the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization companies. These companies are located in at least
three countries, one of which may be the U.S. The Fund may invest up to 35% of
its total assets in securities of companies whose market capitalizations
exceed the Fund's size standard. The Fund's portfolio securities may be listed
on a U.S. or foreign exchange or traded over-the-counter.
The Fund also may:
o invest up to 20% of its total assets in warrants to purchase equity
securities;
o invest in depositary receipts or other securities representing securities
of companies based in countries other than the U.S.;
o purchase or sell forward foreign currency contracts;
o write covered call options on its securities of up to 15% of its total
assets, and purchase exchange-traded call and put options, including put
options on market indices of up to, for all options, 10% of its total
assets; and
o make secured loans of portfolio securities of up to 30% of its total
assets.
One of the Fund's principal risks is its investments in smaller capitalization
companies. Alliance believes that smaller capitalization companies often have
sales and earnings growth rates exceeding those of larger companies and that
these growth rates tend to cause more rapid share price appreciation.
Investing in smaller capitalization stocks, however, involves greater risk than
is associated with larger, more established companies. For example, smaller
capitalization companies often have limited product lines, markets, or financial
resources. They may be dependent for management on one or a few key persons and
can be more susceptible to losses and risks of bankruptcy. Their securities may
be thinly traded (and therefore have to be sold at a discount from current
market prices or sold in small lots over an extended period of time), may be
followed by fewer investment research analysts, and may be subject to wider
price swings. For these reasons, the Fund's investments may have a greater
chance of loss than investments in securities of larger
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capitalization companies. In addition, transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund's investments in non-U.S. companies and in smaller companies will be
more volatile and may differ substantially from the overall U.S. market.
Alliance International Fund
Alliance International Fund seeks a total return on its assets from long-term
growth of capital and from income primarily through a broad portfolio of
marketable securities of established non-U.S. companies, companies participating
in foreign economies with prospects for growth, including U.S. companies having
their principal activities and interests outside the U.S. and foreign government
securities. Normally, the Fund will invest more than 80% of its assets in these
types of companies.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities. The Fund may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of these countries. The Fund
may invest in companies, wherever organized, that Alliance judges have their
principal activities and interests outside the U.S. These companies may be
located in developing countries, which involves exposure to economic structures
that are generally less diverse and mature, and to political systems that can
be expected to have less stability than those of developed countries. The Fund
currently does not intend to invest more than 10% of its total assets in
companies in, or governments of, developing countries.
The Fund also may:
o purchase or sell forward foreign currency exchange contracts;
o write covered call or put options, sell and purchase U.S. or foreign
exchange-listed put and call options, including exchange-traded index
options;
o enter into financial futures contracts, including contracts for the
purchase or sale for future delivery of foreign currencies and stock index
futures, and purchase and write put and call options on futures contracts
traded on U.S. or foreign exchanges or over-the-counter;
o purchase and write put options on foreign currencies traded on securities
exchanges or boards of trade or over-the-counter;
o make loans of portfolio securities of up to 30% of its total assets; and
o enter into repurchase agreements of up to seven days' duration for up to
10% of the Fund's total assets.
Investments in non-U.S. countries may have more risk because they tend to be
more volatile than the U.S. stock market. To the extent that the Fund invests a
substantial amount of its assets in a particular foreign country, an investment
in the Fund has the risk that market changes or other events affecting that
country may have a more significant effect, either negative or positive, on the
Fund's net asset value.
Alliance Greater China '97 Fund
Alliance Greater China '97 Fund is a non-diversified investment company that
seeks long-term capital appreciation through investment of at least 80% of its
total assets in equity securities issued by Greater China companies. The Fund
expects to invest a significant portion, which may be greater than 50%, of its
assets in equity securities of Hong Kong companies and may invest, from time to
time, all of its assets in Hong Kong companies or companies of either of the
other Greater China countries.
In recent years, China, Hong Kong and Taiwan have each experienced a high level
of real economic growth, although growth is expected to slow in 1999. This
growth has resulted from advantageous economic conditions, including favorable
demographics, competitive wage rates, and rising per capita income and consumer
demand. Significantly, the growth has also been fueled by an easing by both
China and Taiwan of government restrictions and an increased receptivity to
foreign investment. This expanded, if not yet complete, openness to foreign
investment extends as well to the securities markets of both countries. Hong
Kong's free-market economy has historically included securities markets
completely open to foreign investments. All three countries have regulated stock
exchanges upon which shares of an increasing number of Greater China companies
are traded.
With its population estimated at more than 1.2 billion as a driving force, and
notwithstanding its continuing political rigidity, China's economic growth has
been coupled with significantly reduced government economic intervention and
basic economic structural change. Recent years have seen large increases in
industrial production with a significant decline in the state sector share of
industrial output, and increased involvement of local governmental units and the
private sector in establishing new business enterprises.
With China's growth has come an increasing direct and indirect economic
involvement of all three Greater China countries. For some time, Hong Kong, a
world financial and trade center in its own right, with a large stock exchange
and offices of many of the world's multinational companies, has been the gateway
to trade with and foreign investment in China. With the transfer
on July 1, 1997 of the sovereignty of Hong Kong from Great Britain to China,
not only the political but the economic ties between China and Hong Kong are
expected to continue to intensify, with the continuation of Hong Kong's
economic system as provided for in the law governing its sovereignty.
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Notwithstanding the, at times considerable, political tension between the two
countries, it is generally recognized that substantially increased trade and
investment with China has been generated from Taiwan, in many cases through Hong
Kong. Along with this increased interaction with China, Taiwan is becoming a
regional technological and telecommunication center, while continuing the
process of opening its economy up to foreign investment. Although geographically
limited, Taiwan boasts an economy among the world's 20 largest and its foreign
exchange reserves are third largest in the world measured in U.S. dollars. As
China's economy continues to expand, it is expected that Taiwan's economic
interaction with China will likewise increase.
Alliance believes that over the long-term conditions are favorable for
continuing and expanding economic growth in all three Greater China countries.
It is this potential which the Fund hopes to take advantage of by investing both
in established and new and emerging companies. Appendix A has additional
Information about the Greater China countries.
In addition to investing in equity securities of Greater China companies, the
Fund may invest up to 20% of its total assets in (i) debt securities issued or
guaranteed by Greater China companies or by Greater China governments, their
agencies or instrumentalities and (ii) equity or debt securities issued by
issuers other than Greater China companies. The Fund will invest only in
investment grade securities. The Fund will normally sell a security that is
downgraded below investment grade or is determined by Alliance to have
undergone a similar credit quality deterioration.
The Fund also may:
o invest up to 25% of its net assets in the convertible securities;
o invest up to 20% of its net assets in rights or warrants;
o invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
o invest up to 25% of its net assets in equity-linked debt securities with
the objective of realizing capital appreciation;
o invest up to 20% of its net assets in loans and other direct debt
securities;
o write covered call and put options, sell or purchase exchange-traded index
options, and write uncovered options for cross-hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
securities issued by foreign government entities, or common stock, and may
purchase and write options on future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into interest rate swaps and purchase or sell interest rate caps and
floors;
o enter into forward commitments;
o enter into standby commitment agreements;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain a short position, in each case
only if against the box;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
All or some of the policies and practices listed above may not be available to
the Fund in the Greater China countries and the Fund will utilize these policies
only to the extent permissible.
The Fund's investments in Greater China companies will be significantly more
volatile and differ from the overall U.S. market. Your investment also has
the risk that market changes or other events affecting the Greater China
countries may have a more significant effect on the Fund's net asset value.
In addition the Fund is "non-diversified" meaning that it invests its assets
in a smaller number of companies than many other international funds. As a
result, changes in the value of a single security may have a more significant
effect, either negative or positive, on the Fund's net asset value.
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund's investment objective is long-term capital
appreciation. The Fund invests at least 65% of its total assets in equity
securities (for the purposes of this investment policy, rights, warrants, and
options to purchase common stocks are not deemed to be equity securities),
preferred stocks and equity-linked debt securities issued by Asian companies.
The Fund may invest up to 35% of its total assets in debt securities issued or
guaranteed by Asian companies or by Asian governments, their agencies or
instrumentalities. The Fund will invest at least 80% of its total assets in
Asian companies and Asian debt securities but also may invest in securities
issued by non-Asian issuers. The Fund expects to invest, from time to time, a
significant portion, which may be in excess of 50%, of its assets in equity
securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries that create the potential for
continued rapid economic growth. These conditions include favorable
demographics and competitive wage rates, increasing levels of foreign direct
investment, rising per capita incomes and consumer demand, a high savings rate,
and numerous privatization programs. Asian countries also are becoming more
industrialized and are increasing their intra-
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Asian exports while reducing their dependence on Western export demand.
Alliance believes that these conditions are important to the long-term economic
growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies that have securities listed
on exchanges in more developed Asian countries will be participants in the rapid
economic growth of the less-developed countries. These companies generally offer
the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume, and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. The Fund also offers investors the opportunity to access relatively
restricted markets. Alliance believes that investment opportunities in Asian
countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications, and consumer services.
The Fund will invest primarily in investment grade debt securities but may
invest up to 5% of its net assets in lower-rated securities, lower-rated
loans, and other lower-rated direct debt instruments. The Fund will not retain
a security that is downgraded below C or determined by Alliance to have
undergone similar credit quality deterioration following purchase.
The Fund also may:
o invest up to 25% of its net assets in the convertible securities;
o invest up to 20% of its net assets in rights or warrants;
o invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
o invest up to 25% of its net assets in equity-linked debt securities with
the objective of realizing capital appreciation;
o invest up to 25% of its net assets in loans and other direct debt
instruments;
o write covered call and put options, sell or purchase exchange-traded index
options, and write uncovered options for cross-hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
securities issued by foreign government entities, or common stock and may
purchase and write options on future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into interest rate swaps and purchase or sell interest rate caps and
floors;
o enter into forward commitments;
o enter into standby commitment agreements;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain a short position, in each case
only if against the box;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
The Fund's investments in Asian and Pacific region countries will be
significantly more volatile and may differ significantly from the overall U.S.
market. To the extent the Fund invests a substantial amount of its assets in
Japanese companies, your investment has the risk that market changes or other
events affecting that country may have a more significant effect on the Fund's
net assets value. The Fund's investments in debt securities have interest rate
and credit risk.
Alliance Global Environment Fund
Alliance Global Environment Fund is a non-diversified investment company that
seeks long-term capital appreciation through investment in equity securities of
Eligible Companies. For purposes of the Fund's investment objective and
investment policies, "equity securities" are common stocks (but not preferred
stocks), rights or warrants to subscribe for or purchase common stocks, and
preferred stocks or debt securities that are convertible into common stocks
without the payment of any further consideration.
The Fund invests in two categories of Eligible Companies--Environmental
Companies and Beneficiary Companies. The Fund may invest in a company with a
broadly diversified business only a part of which provides such products,
processes, or services, when Alliance believes that these products, processes or
services will yield a competitive advantage that significantly enhances the
issuer's growth prospects. As a matter of fundamental policy, the Fund will,
under normal circumstances, invest substantially all of its total assets in
equity securities of Eligible Companies.
A major premise of the Fund's investment approach is that environmental
concerns will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous
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waste treatment and disposal, pulp and paper recycling, waste-to-energy
alternatives, biodegradable cartons, packages, plastics and other products,
remedial projects and emergency cleanup efforts, manufacture of environmental
supplies and equipment, the achievement of purer air, groundwater, and foods,
and the detection, evaluation and treatment of both existing and potential
environmental problems including, among others, air pollution and acid rain.
The environmental services industry generally is positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded substantial
opportunities for growth. Beneficiary Companies may also derive an advantage to
the extent that they have anticipated environmental regulation and are therefore
at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena that are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies that protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund spreads investment risk among the capital markets
of a number of countries and invests in equity securities of companies based in
at least three, and normally considerably more, such countries. The percentage
of the Fund's assets invested in securities of companies in a particular country
or denominated in a particular currency will vary in accordance with Alliance's
assessment of the appreciation potential of such securities and the strength of
that currency.
The Fund also may:
o invest up to 20% of its total assets in warrants to purchase equity
securities;
o invest in depositary receipts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o enter into forward foreign currency transactions for hedging purposes;
o invest in currency futures and options on such futures for hedging
purposes; and
o make secured loans of portfolio securities of up to 30% of its total
assets.
The Fund's investments in non-U.S. companies and in specific types of companies
that provide environmental services will be more volatile and may differ
substantially from the overall U.S. market. The Fund's investments also have the
risk that government regulations or other action could negatively affect the
business of environmental companies.
DESCRIPTION OF INVESTMENT PRACTICES
This section describes the Funds' investment practices and associated risks.
Unless otherwise noted, a Fund's use of any of these practices was specified in
the previous section.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables, and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which generally
provide a stable stream of income with yields that are generally higher than
those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying equity security, although the higher yield tends to make the
convertible security less volatile than the underlying equity security. As with
debt securities, the market value of convertible securities tends to decrease as
interest rates rise and increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying
common stock. Convertible debt securities that are rated Baa or lower by
Moody's or BBB or lower by S&P, Duff & Phelps or Fitch and comparable unrated
securities as determined by Alliance may share some or all of the risks of
non-convertible debt securities with those ratings.
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Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. A Fund will not enter into any currency swap
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the counterparty is rated in the highest rating category of at least
one nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the counterparty to the transaction, the
Fund will have contractual remedies under the transaction agreements.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by an U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or an U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities, except with respect to Alliance Growth Fund, where
investments in ADRs are deemed to be investments in securities issued by U.S.
issuers and those in GDRs and other types of depositary receipts are deemed to
be investments in the underlying securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions that are not backed by its full faith and credit and
general taxing powers.
Equity-Linked Debt Securities. Equity-linked debt securities are securities on
which the issuer is obligated to pay interest and/or principal that is linked to
the to the performance of a specified index of equity securities. The interest
or principal payments may be significantly greater or less than payment
obligations for other types of debt securities. Adverse changes in equity
securities indices and other adverse changes in the securities markets may
reduce payments made under, and/or the principal of, equity-linked debt
securities held by a Fund. As with any debt securities, the values of
equity-linked debt securities will generally vary inversely with changes in
interest rates. A Fund's ability to dispose of equity-linked debt securities
will depend on the availability of liquid markets for such securities.
Investment in equity-linked debt securities may be considered to be speculative.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but a Fund may negotiate settlements beyond two months.
Securities purchased or sold under a forward commitment are subject to market
fluctuations and no interest or dividends accrue to the purchaser prior to the
settlement date.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a
when-issued or forward commitment basis to obtain the benefit of currently
higher cash yields. If, however, Alliance were to forecast incorrectly the
direction of interest rate movements, a Fund might be required to complete such
when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by Alliance Utility Income
Fund, Alliance Real Estate Investment Fund, Alliance New Europe Fund, Alliance
Worldwide Privatization Fund, Alliance International Premier Growth Fund,
Alliance Greater China '97 Fund or Alliance All-Asia Investment Fund if, as a
result, the Fund's aggregate commitments under the transactions would be more
than 30% of its total assets. In the event the other party to a forward
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commitment transaction were to default, a Fund might lose the opportunity to
invest money at favorable rates or to dispose of securities at favorable prices.
Forward Foreign Currency Exchange Contracts. A Fund may purchase or sell forward
foreign currency exchange contracts to minimize the risk of adverse changes in
the relationship between the U.S. Dollar and other currencies. A forward
contract is an obligation to purchase or sell a specific currency for an agreed
price at a future date, and is individually negotiated and privately traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. Dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. Dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. Dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. Dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. Alliance New Europe Fund,
Alliance Global Small Cap Fund and Alliance International Fund will not enter
into a forward contract with a term of more than one year or if, as a result,
more than 50% of its total assets would be committed to such contracts. Alliance
New Europe Fund's, Alliance Global Small Cap Fund's and Alliance International
Fund's investments in forward contracts will be limited to hedging involving
either specific transactions or portfolio positions. Alliance Growth Fund also
may purchase and sell foreign currency on a spot basis.
Illiquid Securities. The Funds will limit their investments in illiquid
securities to no more than 15% of their net assets, except that the limit is 10%
for Alliance Technology Fund, Alliance Quasar Fund, Alliance New Europe Fund,
and Alliance Global Small Cap Fund and 5% for The Alliance Fund and Alliance
Growth Fund. Illiquid securities generally include (i) direct placements or
other securities that are subject to legal or contractual restrictions on
resale or for which there is no readily available market (e.g., when trading in
the security is suspended or, in the case of unlisted securities, when market
makers do not exist or will not entertain bids or offers), including many
individually negotiated currency swaps and any assets used to cover currency
swaps and most privately negotiated investments in state enterprises that have
not yet conducted an initial equity offering, (ii) over-the-counter options and
assets used to cover over-the-counter options, and (iii) repurchase agreements
not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. Alliance will monitor the
liquidity of a Fund's investments in illiquid securities. Rule 144A securities
will not be treated as "illiquid" for purposes of this limit on investments.
A Fund that invests in securities for which there is no ready market may not be
able to readily sell such securities. Such securities are unlike securities that
are traded in the open market and can be expected to be sold immediately if the
market is adequate. The sale price of illiquid securities may be lower or higher
than Alliance's most recent estimate of their fair value. Generally, less public
information is available about the issuers of such securities than about
companies whose securities are traded on an exchange. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resales of non-publicly traded foreign securities.
Interest Rate Transactions (Swaps, Caps, and Floors). Each Fund that may enter
into interest rate transactions expects to do so primarily to preserve a return
or spread on a particular investment or portion of its portfolio or to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date. The Funds do not intend to use these transactions in a
speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving
or paying, as the case may be, only the net amount of the two payments). With
respect to Alliance Utility Income Fund, Alliance Greater China '97 Fund and
Alliance All-Asia Investment Fund, the exchange commitments can involve payments
in the same currency or in different currencies. The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on a
contractually-based principal amount from the party selling such interest rate
cap. The purchase of an interest rate floor entitles the purchaser, to the
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extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on an agreed principal amount from the party
selling the interest rate floor.
A Fund may enter into interest rate swaps, caps, and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. A Fund will not enter into an interest rate swap, cap, or
floor transaction unless the unsecured senior debt or the claims-paying ability
of the other party is rated in the highest rating category of at least one
nationally recognized rating organization. Alliance will monitor the
creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the
counterparty to an interest rate transaction defaults, a Fund's risk of loss
consists of the net amount of interest payments that the Fund contractually is
entitled to receive.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to a Fund in the event of fraud or misrepresentation than
debt securities. In addition, loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. Direct debt instruments may
also include standby financing commitments that obligate a Fund to supply
additional cash to the borrower on demand. Loans and other direct debt
instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. Failure to receive scheduled interest or principal payments on these
types of investments could adversely affect a Fund's net asset value and yield.
Loans that are fully secured offer a Fund more protection than unsecured loans
in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral can be liquidated.
Making loans to borrowers whose creditworthiness is poor may involve substantial
risks and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of government issuers will also involve a risk that the
governmental entities responsible for the repayment of the debt may be unable,
or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a Fund. For
example, if a loan is foreclosed, a Fund could become part owner of any
collateral and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of a Fund were determined to be subject
to the claims of the agent's general creditors, the Fund might incur certain
costs and delays in realizing payment on the loan or loan participation and
could suffer a loss of principal or interest.
Direct indebtedness purchased by a Fund may include letters of credit, revolving
credit facilities, or other standby financing commitments obligating a Fund to
pay additional cash on demand. These commitments may have the effect of
requiring a Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any
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income from the securities. The Fund may invest any cash collateral in
portfolio securities and earn additional income or receive an agreed-upon
amount of income from a borrower who has delivered equivalent collateral.
Each Fund will have the right to regain record ownership of loaned securities
or equivalent securities in order to exercise ownership rights such as voting
rights, subscription rights and rights to dividends, interest, or
distributions. A Fund may pay reasonable finders', administrative, and
custodial fees in connection with a loan.
Mortgage-Backed Securities and Associated Risks. Interest and principal payments
(including prepayments) on the mortgages underlying mortgage-backed securities
are passed through to the holders of the securities. As a result of the
pass-through of prepayments of principal on the underlying securities,
mortgage-backed securities are often subject to more rapid prepayment of
principal than their stated maturity would indicate. Prepayments occur when the
mortgagor on a mortgage prepays the remaining principal before the mortgage's
scheduled maturity date. Because the prepayment characteristics of the
underlying mortgages vary, it is impossible to predict accurately the realized
yield or average life of a particular issue of pass-through certificates.
Prepayments are important because of their effect on the yield and price of the
mortgage-backed securities. During periods of declining interest rates,
prepayments can be expected to accelerate and a Fund that invests in these
securities would be required to reinvest the proceeds at the lower interest
rates then available. Conversely, during periods of rising interest rates, a
reduction in prepayments may increase the effective maturity of the securities,
subjecting them to a greater risk of decline in market value in response to
rising interest rates. In addition, prepayments of mortgages underlying
securities purchased at a premium could result in capital losses.
Mortgage-Backed Securities include mortgage pass-through certificates and
multiple-class pass-through securities, such as REMIC pass-through certificates,
CMOs and stripped mortgage-backed securities ("SMBS"), and other types of
Mortgage-Backed Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Alliance Real Estate Investment
Fund may invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation, for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates that may be issued by, among others, U.S. Government
agencies and instrumentalities as well as private lenders. CMOs and REMIC
certificates are issued in multiple classes and the principal of and interest on
the mortgage assets may be allocated among the several classes of CMOs or REMIC
certificates in various ways. Each class of CMOs or REMIC certificates, often
referred to as a "tranche," is issued at a specific adjustable or fixed interest
rate and must be fully retired no later than its final distribution date.
Generally, interest is paid or accrues on all classes of CMOs or REMIC
certificates on a monthly basis. Alliance Real Estate Investment Fund will not
invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts, although Alliance Real
Estate Investment Fund does not intend to invest in residual interests.
Options on Securities. An option gives the purchaser of the option, upon payment
of a premium, the right to deliver to (in the case of a put) or receive from (in
the case of a call) the writer a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by a Fund is
"covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it has written. A
put option written by a Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than that of
the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire. A
Fund would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
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case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. Entering into a closing transaction
(i.e., by disposing of the option prior to its exercise) could reduce these
risks. A Fund retains the premium received from writing a put or call option
whether or not the option is exercised. The writing of covered call options
could result in increases in a Fund's portfolio turnover rate, especially during
periods when market prices of the underlying securities appreciate.
Alliance Technology Fund and Alliance Global Small Cap Fund will not write a
call option if the premium to be received by the Fund would not produce an
annualized return of at least 15% of the then current market value of the
securities subject to the option (without giving effect to commissions, stock
transfer taxes and other expenses that are deducted from premium receipts.
Options purchased or written by a Fund in negotiated transactions are illiquid
and it may not be possible for the Fund to effect a closing transaction at an
advantageous time.
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates and incur losses.
The purchase of an option on a foreign currency may constitute an effective
hedge against fluctuations in exchange rates although, in the event of rate
movements adverse to a Fund's position, it may forfeit the entire amount of the
premium plus related transaction costs. For Fund's that may invest in options on
foreign currencies, see the Fund's SAI for further discussion of the use, risks,
and costs of options on foreign currencies.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
A Fund may purchase options on futures contracts written or purchased by a Fund
that are traded on U.S. or foreign exchanges or over-the-counter. These
investment techniques will be used only to hedge against anticipated future
changes in market conditions and interest or exchange rates which otherwise
might either adversely affect the value of the Fund's portfolio securities or
adversely affect the prices of securities which the Fund intends to purchase at
a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, or in the case of
Alliance International Premier Growth Fund 100% of its total assets. Alliance
Premier Growth Fund and Alliance Growth and Income Fund may not purchase or sell
a stock index future if immediately thereafter more than 30% of its total assets
would be hedged by stock index futures. Alliance Premier Growth Fund and
Alliance Growth and Income Fund may not purchase or sell a stock index future
if, immediately thereafter, the sum of the amount of margin deposits on the
Fund's existing futures positions would exceed 5% of the market value of the
Fund's total assets.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements.
Rights and Warrants. A Fund will invest in rights or warrants only if Alliance
deems the underlying equity securities themselves appropriate for inclusion in
the Fund's portfolio. Rights and warrants entitle the holder to buy equity
securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security,
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although the value of a right or warrant may decline because of a decrease in
the value of the underlying security, the passage of time or a change in
perception as to the potential of the underlying security, or any combination
of these factors. If the market price of the underlying security is below the
exercise price of the warrant on the expiration date, the warrant will expire
worthless. Moreover, a right or warrant ceases to have value if it is not
exercised prior to the expiration date.
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or, if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Alliance Utility Income Fund, Alliance
Worldwide Privatization Fund, Alliance Greater China '97 Fund and Alliance
All-Asia Investment Fund, each may make short sales of securities or maintain
short positions only for the purpose of deferring realization of gain or loss
for U.S. federal income tax purposes, provided that at all times when a short
position is open the Fund owns an equal amount of securities of the same issue
as, and equal in amount to, the securities sold short. In addition, each of
those Funds may not make a short sale if as a result more than 10% of the Fund's
net assets would be held as collateral for short sales, except that Alliance
Real Estate Investment Fund, Alliance Greater China '97 Fund and Alliance
All-Asia Investment Fund may not make a short sale if as a result more than 25%
of the Fund's net assets would be held as collateral for short sales. If the
price of the security sold short increases between the time of the short sale
and the time a Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement, the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. Investments in standby
commitments will be limited so that the aggregate purchase price of the
securities subject to the commitments will not exceed 25% with respect to
Alliance Real Estate Investment Fund and Alliance New Europe Fund 50% with
respect to Alliance Worldwide Privatization Fund, Alliance International Premier
Growth Fund, Alliance Greater China '97 Fund and Alliance All-Asia Investment
Fund and 20% with respect to Alliance Utility Income Fund, of the Fund's assets
at the time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. These bonds may involve greater credit risks
than bonds paying interest currently. Although these bonds do not pay current
interest in cash, a Fund is nonetheless required to accrue interest income on
such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund, or are not available but may yet be developed, to the
extent such investment practices are consistent with the Fund's investment
objective and legally permissible for the Fund. Such investment practices, if
they arise, may involve risks that exceed those involved in the activities
described above.
General. The successful use of the investment practices described above draws
upon Alliance's special skills and experience and usually depends on Alliance's
ability to forecast price movements, interest rates, or currency exchange rate
movements correctly. Should interest rates, prices or exchange rates move
unexpectedly, a Fund may not achieve the anticipated benefits of the
transactions or may realize losses and thus be in a worse position than if such
strategies had not been used. Unlike many exchange-traded futures contracts and
options on futures contracts, there are no daily price fluctuation limits for
certain options and forward contracts, and adverse market movements could
therefore continue to an unlimited extent over a period of time. In addition,
the correlation between movements in the prices of futures contracts, options
and forward contracts and movements in the prices of the securities
and currencies hedged or used for cover will not be perfect and could produce
unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options, and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to
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predict the amount of trading interest that may exist in various types of
futures contracts, options, and forward contracts. If a secondary market does
not exist for an option purchased or written by a Fund, it might not be
possible to effect a closing transaction in the option (i.e., dispose of the
option), with the result that (i) an option purchased by the Fund would have to
be exercised in order for the Fund to realize any profit and (ii) the Fund may
not be able to sell currencies or portfolio securities covering an option
written by the Fund until the option expires or it delivers the underlying
security, futures contract or currency upon exercise. Therefore, no assurance
can be given that the Funds will be able to utilize these instruments
effectively. In addition, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations and the use of certain
hedging techniques may adversely impact the characterization of income to a
Fund for U.S. federal income tax purposes.
Portfolio Turnover. The portfolio turnover rate for each Fund is included in the
Financial Highlights section. The Funds are actively managed and, in some cases
in response to market conditions, a Fund's portfolio turnover may exceed 100%. A
higher rate of portfolio turnover increases brokerage and other expenses, which
must be borne by the Fund and its shareholders. High portfolio turnover also may
result in the realization of substantial net short-term capital gains, which,
when distributed, are taxable to shareholders.
Temporary Defensive Position. For temporary defensive purposes, each Fund may
reduce its position in equity securities and invest in, without limit, certain
types of short-term, liquid, high grade or high quality (depending on the Fund)
debt securities. These securities may include U.S. Government securities,
qualifying bank deposits, money market instruments, prime commercial paper and
other types of short-term debt securities including notes and bonds. For Funds
that may invest in foreign countries, such securities also may include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies, and supranational
organizations. While the Funds are investing for temporary defensive purposes,
they may not meet their investment objectives.
ADDITIONAL RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. Certain of these risks may be heightened when investing in
emerging markets.
Currency Considerations. Substantially all of the assets of Alliance New Europe
Fund, Alliance Worldwide Privatization Fund, Alliance International Premier
Growth Fund, Alliance International Fund, Alliance Greater China '97 Fund and
Alliance All-Asia Investment Fund, and a substantial portion of the assets of
Alliance Global Small Cap Fund and Alliance Global Environment Fund are invested
in securities denominated in foreign currencies. The Funds receive a
corresponding portion of their revenues in foreign currencies. Therefore, the
dollar equivalent of their net assets, distributions, and income will be
adversely affected by reductions in the value of certain foreign currencies
relative to the U.S. Dollar. If the value of the foreign currencies in which a
Fund receives its income falls relative to the U.S. Dollar between receipt of
the income and the making of Fund distributions, the Fund may be required to
liquidate securities in order to make distributions if it has insufficient cash
in U.S. Dollars to meet distribution requirements that the Fund must satisfy to
qualify as a regulated investment company for federal income tax purposes.
Similarly, if an exchange rate declines between the time a Fund incurs expenses
in U.S. Dollars and the time cash expenses are paid, the amount of the currency
required to be converted into U.S. Dollars in order to pay expenses in U.S.
Dollars could be greater than the equivalent amount of such expenses in the
currency at the time they were incurred. In light of these risks, a Fund may
engage in currency hedging transactions, as described above, which involve
certain special risks.
Foreign Securities. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes foreign
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties.
Certain foreign countries require governmental approval prior to investments by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities that may have less advantageous terms (including price) than
securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital, or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority. If
a deterioration occurs in a country's balance of payments, the country could
impose temporary restrictions on foreign capital remittances.
A Fund also could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
of other restrictions on
investment. Investing in local markets may require a Fund to adopt special
procedures that may involve additional costs to a Fund. These factors may affect
the liquidity of a Fund's investments in any country and Alliance will monitor
the effect of any such factor or factors on a Fund's investments. Furthermore,
transaction costs including brokerage commissions for transactions both on and
off the securities exchanges in many foreign countries are generally higher than
in the United States.
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Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects and less information
may be available to investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available about certain
non-U.S. issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, or diplomatic
developments could affect adversely the economy of a foreign country and the
Fund's investments. In the event of expropriation, nationalization or other
confiscation, a Fund could lose its entire investment in the country involved.
In addition, laws in foreign countries governing business organizations,
bankruptcy and insolvency may provide less protection to security holders such
as the Fund than that provided by U.S. laws.
Alliance International Fund, Alliance Greater China '97 Fund and Alliance
All-Asia Investment Fund may invest substantial amounts of their assets in
United Kingdom issuers, Japanese issuers, and/or Greater China issuers.
Please refer to Appendix A for a discussion of risks associated
with investments in these countries.
Investment in Privatized Enterprises by Alliance Worldwide Privatization Fund.
In certain jurisdictions, the ability of foreign entities, such as the Fund, to
participate in privatizations may be limited by local law, or the price or terms
on which the Fund may be able to participate may be less advantageous than for
local investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Alliance New Europe Fund and Alliance Global Small Cap Fund
will emphasize investment in, and Alliance All-Asia Investment Fund, Alliance
Greater China '97 Fund and Alliance Global Environment Fund may emphasize
investment in, smaller, emerging companies. Investment in such companies
involves greater risks than is customarily associated with securities of more
established companies. Companies in the earlier stages of their development
often have products and management personnel which have not been thoroughly
tested by time or the marketplace; their financial resources may not be as
substantial as those of more established companies. The securities of smaller
companies may have relatively limited marketability and may be subject to more
abrupt or erratic market movements than securities of larger companies or broad
market indices. The revenue flow of such companies may be erratic and their
results of operations may fluctuate widely and may also contribute to stock
price volatility.
Extreme Governmental Action; Less Protective Laws. In contrast to investing in
the U.S., foreign investment may involve in certain situations greater risk of
nationalization, expropriation, confiscatory taxation, currency blockage or
other extreme governmental action which could adversely impact a Fund's
investments. In the event of certain such actions, a Fund could lose its entire
investment in the country involved. In addition, laws in various foreign
countries, including in certain respects each of the Greater China countries,
governing, among other subjects, business organization and practices, securities
and securities trading, bankruptcy and insolvency may provide less protection to
investors such as the Fund than provided under United States laws.
Investments in Environmental Companies by Alliance Global Environment Fund.
Governmental regulations or other action can inhibit an Environmental Company's
performance, and it
may take years to translate environmental legislation into sales and profits.
Environmental Companies generally face competition in fields often characterized
by relatively short product cycles and competitive pricing policies. Losses may
result from large product development or expansion costs, unprotected marketing
or distribution systems, erratic revenue flows and low profit margins.
Additional risks that Environmental Companies may face include difficulty in
financing the high cost of technological development, uncertainties due to
changing
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governmental regulation or rapid technological advances, potential
liabilities associated with hazardous components and operations, and difficulty
in finding experienced employees.
The Real Estate Industry. Although Alliance Real Estate Investment Fund does not
invest directly in real estate, it invests primarily in Real Estate Equity
Securities and has a policy of concentration of its investments in the real
estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates. To the extent that assets underlying the Fund's
investments are concentrated geographically, by property type or in certain
other respects, the Fund may be subject to certain of the foregoing risks to a
greater extent.
In addition, if Alliance Real Estate Investment Fund receives rental income or
income from the disposition of real property acquired as a result of a default
on securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company.
Investments by the Fund in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax-free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) also are subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P 500 Index.
Mortgage-Backed Securities. Investing in Mortgage-Backed Securities involves
certain unique risks in addition to those risks associated with investment in
the real estate industry in general. These risks include the failure of a
counterparty to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. When interest rates decline, the
value of an investment in fixed rate obligations can be expected to rise.
Conversely, when interest rates rise, the value of an investment in fixed rate
obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Alliance Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social, and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage
pass-through securities in particular, may be less effective than other types of
U.S. Government securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may
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<PAGE>
be creditable or deductible by U.S. shareholders for U.S. income tax purposes.
No assurance can be given that applicable tax laws and interpretations will not
change in the future. Moreover, non-U.S. investors may not be able to credit or
deduct such foreign taxes.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of Alliance All-Asia Investment Fund, between five
and 25 years in the case of Alliance Utility Income Fund, and between one year
or less and 30 years in the case of all other Funds that invest in such
securities. In periods of increasing interest rates, each of the Funds may, to
the extent it holds mortgage-backed securities, be subject to the risk that the
average dollar-weighted maturity of the Fund's portfolio of debt or other
fixed-income securities may be extended as a result of lower than anticipated
prepayment rates.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater credit risk or loss of principal and interest than
higher-rated securities. They also are generally considered to be subject to
greater market risk than higher-rated securities. The capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing the securities for the purpose of computing a Fund's net asset value. In
addition, adverse publicity and investor perceptions about lower-rated
securities, whether or not factual, may tend to impair their market value and
liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in
lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund.
Certain lower-rated securities may contain call or buy-back features that permit
the issuers thereof to call or repurchase such securities. Such securities may
present risks based on prepayment expectations. If an issuer exercises such a
provision, a Fund may have to replace the called security with a lower-yielding
security, resulting in a decreased rate of return to the Fund.
Year 2000. Many computer systems and applications in use today process
transactions using two-digit date fields for the year of the transaction, rather
than the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year "1900," which could
result in processing inaccuracies and computer system failures. This is commonly
known as the Year 2000 problem. Should any of the computer systems employed by
the Funds' major service providers fail to process Year 2000 related information
properly, that could have a significant negative impact on the Funds' operations
and the services that are provided to the Funds' shareholders. In addition, to
the extent that the operations of issuers of securities held by the Funds are
impaired by the Year 2000 problem, or prices of securities held by the Funds
decline as a result of real or perceived problems relating to the Year 2000, the
value of the Funds' shares may be materially affected.
With respect to the Year 2000, the Funds have been advised that Alliance, each
Fund's investment adviser, Alliance Fund Distributors, Inc, ("AFD"), each Fund's
principal underwriter, and Alliance Fund Services, Inc. ("AFS"), each Fund's
registrar, transfer agent and dividend disbursing agent (collectively,
"Alliance") began to address the Year 2000 issue several years ago in connection
with the replacement or upgrading of certain computer systems and applications.
During 1997, Alliance began a formal Year 2000 initiative, which established a
structured and coordinated process to deal with the Year 2000 issue. Alliance
reports that it has completed its assessment of the Year 2000 issues on its
domestic and international computer systems and applications. Currently,
management of Alliance expects that the required modifications for the majority
of its significant systems and applications that will be in use on
January 1, 2000, will be completed and tested in early 1999. Full integration
testing of these systems and testing of interfaces with third-party suppliers
will continue through 1999. At this time, management of Alliance believes that
the costs associated with resolving this issue will not have a material adverse
effect on its operations or on its ability to provide the level of services it
currently provides to the Funds.
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The Funds and Alliance have been advised by the Funds' Custodians that they are
also in the process of reviewing their systems with the same goals. As of the
date of this prospectus, the Funds and Alliance have no reason to believe that
the Custodians will be unable to achieve these goals.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Each Fund's Adviser is Alliance Capital Management, L.P., 1345 Avenue of the
Americas, New York, NY 10105. Alliance is a leading international investment
adviser supervising client accounts with assets as of December 31, 1998 totaling
more than $ 286 billion (of which approximately $118 billion represented assets
of investment companies). Alliance's clients are primarily major corporate
employee benefit plans, public employee retirement systems, investment
companies, foundations, and endowment funds. The 54 registered investment
companies, with more than 118 separate portfolios, managed by Alliance currently
have over 3.5 million shareholder accounts. As of December 31, 1998, Alliance
was retained as investment manager for over 35 of the FORTUNE 100 Companies.
Alliance provides investment advisory services and order placement facilities
for the Funds. For these advisory services, the Funds paid Alliance as a
percentage of average daily net assets:
Fee as a percentage of Fiscal
Fund average daily net assets* Year Ending
- ---- ------------------------- -----------
Alliance Premier Growth
Fund 1.00% 11/30/98
Alliance Growth Fund .70 10/31/98
Alliance Technology Fund 1.02 11/30/98
Alliance Quasar Fund 1.04 9/30/98
The Alliance Fund .67 11/30/98
Alliance Growth and Income
Fund .48 10/31/98
Alliance Balanced Shares
Fund .625 7/31/98
Alliance Utility Income
Fund -0- 11/30/98
Alliance Real Estate
Investment Fund .90 8/31/98
Alliance New Europe
Fund 1.02 7/31/98
Alliance Worldwide
Privatization Fund 1.00% 6/30/98
Alliance International
Premier Growth Fund -0- 11/30/98
Alliance Global Small
Cap Fund 1.00 7/31/98
Alliance International
Fund .85 6/30/98
Alliance Greater China
'97 Fund -0- 7/31/98
Alliance All-Asia Investment
Fund .24 10/31/98
Alliance Global Environment
Fund 1.10 10/31/98
- --------------------------------------------------------------------------------
* Fees are stated net of any waivers and/or reimbursements. See the "Fee
Table" at the beginning of the Prospectus for more information about fee
waivers.
In connection with providing advisory services to Alliance Greater China '97
Fund, Alliance has, at its expense, retained as a consultant New Alliance, a
joint venture company headquartered in Hong Kong, which was formed in 1997 by
Alliance and Sun Hung Kai Properties Limited. New Alliance provides Alliance
with ongoing, current, and comprehensive information and analysis of conditions
and developments in Greater China countries.
In connection with investments in real estate securities, Alliance has, at its
expense, retained as a consultant CB Richard Ellis, Inc. ("CBRE"). CBRE is a
publicly held company and the largest real estate services company in the United
States, comprised of real estate brokerage, property and facilities management,
real estate finance, and investment advisory services.
Portfolio Manager
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible for the Fund, and each person's
principal occupation during the past five years.
Principal Occupation
During the Past
Fund Employee; Year; Title Five (5) Years*
- --------------------------------------------------------------------------------
Alliance Premier Alfred Harrison; since Associated with
Growth Fund inception--Vice Chairman Alliance
of Alliance Capital
Management Corporation
(ACMC)**
Alliance Growth Tyler Smith; since inception Associated with
Fund --Senior Vice President Alliance
of ACMC
Alliance Technology Peter Anastos; since 1992 Associated with
Fund --Senior Vice President Alliance
of ACMC
Gerald T. Malone; since 1992 Associated with
--Senior Vice President Alliance
of ACMC
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During the Past
Fund Employee; Year; Title Five (5) Years*
- --------------------------------------------------------------------------------
Alliance Quasar Alden M. Stewart; since 1994 Associated with
Fund --Executive Vice President Alliance
of ACMC
Randall E. Haase; since 1994 Associated with
--Senior Vice President Alliance
of ACMC
Principal Occupation
The Alliance Fund Alden M. Stewart; since 1997 (see above)
--(see above)
Randall E. Haase; since 1997 (see above)
--(see above)
Alliance Growth and Paul Rissman; since 1994 Associated with
Income Fund --Senior Vice President Alliance
of ACMC
Alliance Balanced Paul Rissman; since 1997 (see above)
Shares --(see above)
Alliance Utility Paul Rissman; since 1996 (see above)
Income Fund --(see above)
Alliance Real Estate Daniel G. Pine; since 1996 Associated with
Investment Fund --Senior Vice President Alliance since 1996;
of ACMC prior thereto; Senior
Vice President of Desai
Capital Management
David Kruth; since 1997 Associated with
--Vice President of ACMC Alliance since 1997;
prior thereto; Senior
Vice President of
Yarmouth Group
Alliance New Steven Beinhacker; since 1997 Associated with
Europe Fund --Vice President of ACMC Alliance
Alliance Worldwide Mark H. Breedon; since Associated with
Privatization Fund inception Senior Vice Alliance
President of ACMC and
Director and Vice President
of Alliance Capital Limited***
Alliance International Alfred Harrison; since 1998 (see above)
Premier Growth --(see above)
Fund
Thomas Kamp; since 1998 Associated with
--Senior Vice President Alliance
of ACMC
Alliance Global Alden M. Stewart; since 1994 (see above)
Small Cap Fund --(see above)
Randall E. Haase; since 1994 (see above)
--(see above)
Mark H. Breedon; since 1998 (see above)
--(see above)
Alliance Nicholas D.P. Carn; Associated with
International Fund since 1998 Alliance since 1995;
--Senior Vice President prior thereto; Chief
of ACMC. Investment Officer of
Dracott Partners, Inc.
Alliance Greater Matthew W.S. Lee; since 1997 Associated with
China '97 Fund --Vice President of ACMC Alliance since 1997;
prior thereto;
associated with National
Mutual Funds Management
(Asia) and James Capel
and Co. since prior to
1994
Alliance All-Asia Hiroshi Motoki; since 1998 Associated with
Investment Fund --Senior Vice President Alliance since 1994;
of ACMC and director of prior thereto;
Japanese/Asian Equity associated with
research Ford Motor Company
Alliance Global Linda Bolton Weiser; Associated with
Environment Fund since 1998--Vice President Alliance
of ACMC
- --------------------------------------------------------------------------------
* Unless indicated otherwise, persons associated with Alliance have been
employed in a portfolio management, research or investment capacity.
** The sole general partner of Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Alliance Premier Growth Fund, Mr. Harrison has ultimate responsibility for
the management of discretionary tax-exempt accounts of institutional clients
managed as described below without significant client-imposed restrictions
("Historical Portfolios"). These accounts have substantially the same investment
objectives and policies and are managed in accordance with essentially the same
investment strategies and techniques as those for Alliance Premier Growth Fund,
except for the ability of Alliance Premier Growth Fund to use futures and
options as hedging tools and to invest in warrants. The Historical Portfolios
also are not subject to certain limitations, diversification requirements and
other restrictions imposed under the 1940 Act and the Code to which Alliance
Premier Growth Fund, as a registered investment company, is subject and which,
if applicable to the Historical Portfolios, may have adversely affected the
performance results of the Historical Portfolios. See "Investment Objectives
and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the nineteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios as an employee of Alliance
and cumulatively through December 31, 1998. As of December 31, 1998, the assets
in the Historical Portfolios totaled approximately $15.9 billion and the average
size of an institutional account in the Historical Portfolio was $529 million.
Each Historical Portfolio has a nearly identical composition of investment
holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be payable by Alliance
Premier Growth Fund, which are higher than the fees imposed on the Historical
Portfolio and will result in a higher expense ratio and lower returns for
Alliance Premier Growth Fund. Expenses associated with the distribution of Class
A, Class B, and Class C shares of Alliance Premier Growth Fund in accordance
with the plan adopted by Alliance Premier Growth Fund's Board of Directors
pursuant to Rule 12b-1 under the 1940 Act ("distribution fees") are also
excluded. The performance data has also not been adjusted for corporate or
individual taxes, if any, payable by the account owners.
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<PAGE>
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The total returns set forth below are
calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation. In contrast with
the securities in the Russell Price-Driven Indices, companies in the Growth
Index tend to exhibit higher price-to-book and price-earnings ratios, lower
dividend yield and higher forecasted growth values.
To the extent Alliance Premier Growth Fund does not invest in U.S. common stocks
or utilizes investment techniques such as futures or options, the S&P 500 Index
and Russell 1000 Growth Index may not be substantially comparable to Alliance
Premier Growth Fund. The S&P 500 Index and Russell 1000 Growth Index are
included to illustrate material economic and market factors that existed during
the time period shown. The S&P 500 Index and Russell 1000 Growth Index do not
reflect the deduction of any fees. If Alliance Premier Growth Fund were to
purchase a portfolio of securities substantially identical to the securities
comprising the S&P 500 Index or the Russell 1000 Growth Index, Alliance Premier
Growth Fund's performance relative to the index would be reduced by Alliance
Premier Growth Fund's expenses, including brokerage commissions, advisory fees,
distribution fees, custodial fees, transfer agency costs and other
administrative expenses, as well as by the impact on Alliance Premier Growth
Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the Alliance Premier
Growth Fund as measured against certain broad based market indices and against
the composite performance of other open-end growth mutual funds. Investors
should not rely on the following performance data of the Historical Portfolios
as an indication of future performance of Alliance Premier Growth Fund. The
composite investment performance for the periods presented may not be indicative
of future rates of return. Other methods of computing investment performance may
produce different results, and the results for different periods may vary.
Schedule of Composite Investment Performance--Historical Portfolios*
<TABLE>
<CAPTION>
Russell Lipper
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
<S> <C> <C> <C> <C> <C>
Year ended December:
1998*** ......... 42.97% 52.16% 28.60% 38.71% 25.69%
1997*** ......... 27.05 34.64 33.36 30.49 25.30
1996*** ......... 18.84 22.06 22.96 23.12 17.48
1995*** ......... 40.66 39.83 37.58 37.19 32.65
1994 ............ (9.78) (4.82) (1.32) 2.66 (1.57)
1993 ............ 5.35 10.54 10.08 2.90 11.98
1992 ............ -- 12.18 7.62 5.00 7.63
1991 ............ -- 38.91 30.47 41.16 35.20
1990 ............ -- (1.57) (3.10) (0.26) (5.00)
1989 ............ -- 38.80 31.69 35.92 28.60
1988 ............ -- 10.88 16.61 11.27 15.80
1987 ............ -- 8.49 5.25 5.31 1.00
1986 ............ -- 27.40 18.67 15.36 15.90
1985 ............ -- 37.41 31.73 32.85 30.30
1984 ............ -- (3.31) 6.27 (.95) (2.80)
1983 ............ -- 20.80 22.56 15.98 22.30
1982 ............ -- 28.02 21.55 20.46 20.20
1981 ............ -- (1.09) (4.92) (11.31) (8.40)
1980 ............ -- 50.73 32.50 39.57 37.30
1979 ............ -- 30.76 18.61 23.91 27.40
Cumulative total
return for
the period
January 1, 1979 to
December 31, 1998 -- 4708% 2525% 2373% 2003%
</TABLE>
- --------------------------------------------------------------------------------
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion. Total returns for Alliance Premier Growth Fund are
for Class A shares, with imposition of the maximum 4.25% sales charge.
** Assumes imposition of the maximum advisory fee charged by Alliance for any
Historical Portfolio for the period involved.
*** During this period, the Historical Portfolios differed from Alliance
Premier Growth Fund in that Alliance Premier Growth Fund invested a
portion of its net assets in warrants on equity securities in which the
Historical Portfolios were unable, by their investment restrictions, to
purchase. In lieu of warrants, the Historical Portfolios acquired the
common stock upon which the warrants were based.
52
<PAGE>
The average annual total returns presented below are based upon the cumulative
total return as of December 31, 1998 and, for more than one year, assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Russell Lipper
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
<S> <C> <C> <C> <C> <C>
One year ........ 42.97% 52.16% 28.60% 38.71% 25.69%
Three years ..... 33.03 35.74 28.23 30.62 23.67
Five years ...... 26.65 27.19 24.05 25.70 19.82
Ten years ....... 24.38+ 22.86 19.19 20.57 17.21
Since January 1,
1979 ............ -- 21.37 17.75 17.40 16.45
</TABLE>
- --------------------------------------------------------------------------------
+ Since inception on 9/28/92
The Funds' SAIs have more detailed information about Alliance and other Fund
service providers.
- --------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
- --------------------------------------------------------------------------------
HOW THE FUNDS VALUE THEIR SHARES
The Funds' net asset value or NAV is calculated at 4 p.m. Eastern time each day
the Exchange is open for business. To calculate NAV, a Fund's assets are valued
and totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares outstanding. The Funds' value their securities
at their current market value determined on the basis of market quotations, or,
if such quotations are not readily available, such other methods as the Funds'
directors believe accurately reflect fair market value.
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is accepted by the Fund. Your purchase of Fund
shares may be subject to an initial sales charge. Sales of Fund shares may be
subject to a contingent deferred sales charge or CDSC. See the next section of
this Prospectus, Distribution Arrangements, for details.
HOW TO BUY SHARES
You may purchase a Funds' shares through broker-dealers, banks, or other
financial intermediaries. You also may purchase shares directly from the Funds'
principal underwriter, Alliance Fund Distributors, Inc., or AFD.
Minimum investment amounts are:
--Initial: $250
--Subsequent: $ 50
--Automatic Investment Program: $ 25
If you are an existing Fund shareholder, you may purchase shares by electronic
funds transfer in amounts not exceeding $500,000 if you have completed the
appropriate section of the Shareholder Application. Call 800-221-5672 to arrange
a transfer from your bank account.
A Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number. To avoid this, you
must provide your correct Tax Identification Number (Social Security Number for
most investors) on your account application.
A Fund may refuse any order to purchase shares. In particular, the Funds reserve
the right to restrict purchases of shares (including through exchanges) when
they appear to evidence a pattern of frequent purchases and sales made in
response to short-term considerations.
HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of the same class of other Alliance
Mutual Funds (including AFD Exchange Reserves, a money market fund managed by
Alliance). Exchanges of shares are made at the next determined NAV, without
sales or service charges. You may request an exchange by mail or telephone. You
must call by 4:00 p.m. Eastern time to receive that day's NAV. The Funds may
change, suspend, or terminate the exchange service on 60 days' written notice.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to a Fund) on any day the
Exchange is open, either directly or through your financial intermediary. Your
sales price will be the next-determined NAV, less any applicable CDSC, after the
Fund receives your sales request in proper form. Normally, proceeds will be sent
to you within 7 days. If you recently purchased your shares by check or
electronic funds transfer, your redemption payment may be delayed until the Fund
is reasonably satisfied that the check or electronic funds transfer has been
collected (which may take up to 15 days).
o Selling Shares Through Your Broker
Your broker must receive your sales request by 4:00 p.m., Eastern time, and
submit it to the Fund by 5:00 p.m., Eastern time, for you to receive that day's
NAV, less any applicable CDSC. Your broker is responsible for submitting all
necessary documentation to the Fund and may charge you for this service.
o Selling Shares Directly to the Fund
By Mail:
-- Send a signed letter of instruction or stock power, along with
certificates, to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
-- For your protection, a bank, a member firm of a national stock
exchange, or other eligible guarantor institution, must guarantee
signatures. Stock power forms are available from your financial
intermediary, AFS, and many commercial banks. Additional
documentation is required for the sale of shares by corporations,
intermediaries,
53
<PAGE>
fiduciaries, and surviving joint owners. If you have any questions
about these procedures, contact AFS.
By Telephone:
-- You may redeem your shares for which no stock certificates have been
issued by telephone request. Call AFS at 800-221-5672 with
instructions on how you wish to receive your sale proceeds.
-- A telephone redemption request must be received by 4:00 p.m. Eastern
time for you to receive that day's NAV, less any applicable CDSC.
-- If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your
bank. Otherwise, the proceeds will be mailed to you.
-- Redemption requests by electronic funds transfer may not exceed
$100,000 per day and redemption requests by check cannot exceed
$50,000 per day.
-- Telephone redemption is not available for shares held in nominee or
"street name" accounts, retirement plan accounts, or shares held by
a shareholder who has changed his or her address of record within
the previous 30 calendar days.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
- --------------------------------------------------------------------------------
AND TAXES
- --------------------------------------------------------------------------------
Each Fund's income dividends and capital gains distributions, if any, declared
by a Fund on its outstanding shares will, at the election of each shareholder,
be paid in cash or in additional shares of the same class of shares of that
Fund. If paid in additional shares, the shares will have an aggregate net asset
value as of the close of business on the day following the declaration date of
the dividend or distribution equal to the cash amount of the dividend or
distribution. You may make an election to receive dividends and distributions in
cash or in shares at the time you purchase shares. Your election can be changed
at any time prior to a record date for a dividend. There is no sales or other
charge in connection with the reinvestment of dividends or capital gains
distributions. Cash dividends may be paid in check, or at your election,
electronically via the ACH network. There is no sales or other charge on the
reinvestment of Fund dividends and distributions.
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing the dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
The Funds expect that their distributions will consist either of net income or
long-term capital gains. For federal income tax purposes, the Fund's dividend
distributions of net income (or short-term taxable gains) will be taxable to you
as ordinary income. Any long-term capital gains distributions may be taxable to
you as long-term capital gains. A Fund's distributions also may be subject to
certain state and local taxes.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any dividend or distribution will depend
on the realization by the Fund of income and capital gains from investments.
There is no fixed dividend rate and there can be no assurance that a Fund will
pay any dividends or realize any capital gains. Since REITs pay distributions
based on cash flow, without regard to depreciation and amortization, it is
likely that a portion of the distributions paid to Alliance Real Estate
Investment Fund and subsequently distributed to shareholders may be a nontaxable
return of capital. The final determination of the amount of a Fund's return of
capital distributions for the period will be made after the end of each calendar
year.
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so. Furthermore, a
shareholder's ability to claim a foreign tax credit or deduction for foreign
taxes paid by a Fund may be subject to certain limitations imposed by the Code,
as a result of which a shareholder may not be permitted to claim a full credit
or deduction for the amount of such taxes.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant), any further returns of capital will be taxable as capital gain.
See the Fund's SAI for a further explanation of these tax issues.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
54
<PAGE>
Each year shortly after December 31, the Funds will send you tax information
stating the amount and type of all its distributions for the year. Consult your
tax adviser about the federal, state, and local tax consequences in your
particular circumstances.
- --------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS
- --------------------------------------------------------------------------------
Share Classes. The Funds offer three classes of shares.
CLASS A SHARES--INITIAL SALES CHARGE ALTERNATIVE
You can purchase Class A shares at NAV with an initial sales charge as follows:
Initial Sales Charge
As % of As % of Commission
Net Amount Offering to Dealer/
Invested Price Agent as
% of
Offering
Amount Purchased Price
- --------------------------------------------------------------------------------
Up to $100,000 4.44% 4.25% 4.00%
$100,000 up to $250,000 3.36 3.25 3.00
$250,000 up to $500,000 2.30 2.25 2.00
$500,000 up to $1,000,000 1.78 1.75 1.50
You pay no initial sales charge on purchases of Class A Shares in the amount of
$1,000,000 or more, but may pay a 1% CDSC if you redeem your shares within 1
year. Alliance may pay the dealer or agent a fee of up to 1% of the dollar
amount purchased. Certain purchases of Class A shares may qualify for reduced or
eliminated sales charges under a Fund's Combined Purchase Privilege, Cumulative
Quantity Discount, Statement of Intention, Privilege for Certain Retirement
Plans, Reinstatement Privilege and Sales at Net Asset Value Programs. Consult
the Subscription Application and a Fund's SAI for additional information about
these options.
CLASS B SHARES--DEFERRED SALES CHARGE ALTERNATIVE
You can purchase Class B Shares at NAV without an initial sales charge. A Fund
will thus receive the full amount of your purchase. Your investment, however,
will be subject to a CDSC if you redeem shares within 4 years of purchase. The
CDSC varies depending of the number of years you hold the shares. The CDSC
amounts are:
Years Since Purchase CDSC
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
If you exchange your shares for the Class B shares of another Alliance Mutual
Fund, the CDSC also will apply to those Class B shares. The CDSC period begins
with the date of your original purchase, not the date of exchange for the other
Class B shares.
The Fund's Class B shares purchased for cash automatically convert to Class A
shares eight years after the end of the month of your purchase. If you purchase
shares by exchange for the Class B shares of another Alliance Mutual Fund, the
conversion period runs from the date of your original purchase.
CLASS C SHARES--ASSET-BASED SALES CHARGE ALTERNATIVE
You can purchase shares at NAV without an initial sales charge. A Fund will thus
receive the full amount of your purchase. Your investment, however, will be
subject to a 1% CDSC if you redeem your shares within 1 year. If you exchange
your shares for the Class C shares of another Alliance Mutual Fund, the 1% CDSC
also will apply to those Class C shares. The 1-year period for the CDSC begins
with the date of your original purchase, not the date of the exchange for the
other Class C shares.
Class C shares do not convert to any other class of shares of the Fund.
Asset-based Sales Charge or Rule 12b-1 Fees. Each Fund has adopted a plan under
Commission Rule 12b-1 that allows the Fund to pay asset-based sales charges or
distribution and service fees for the distribution and sale of its shares. The
amount of these fees for each class of the Fund's shares is:
Rule 12b-1 Fee (As a Percentage of
Aggregate Average Daily Net Assets)
Class A .30%*
Class B 1.00%
Class C 1.00%
- --------------------------------------------------------------------------------
The fee under the Rule 12b-1 Plan for the Class A shares of Alliance
Growth Fund and Alliance Premier Growth Fund is .50% of the aggregate
average daily net assets. The Directors of Alliance Growth Fund
currently limit the payments to .30%. The Directors of Alliance Premier
Growth Fund limit payments for Class A shares purchased after November
1993 to .30% of aggregate average daily net assets.
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales fees. Class B and Class C shares are subject to
higher distribution fees than Class A shares (Class B shares are subject to
these higher fees for a period of eight years, after which they convert to Class
A shares). The higher fees mean a higher expense ratio, so Class B and Class C
shares pay correspondingly lower dividends and may have a lower net asset value
than Class A shares.
Choosing a Class of Shares. The decision as to which class of shares is more
beneficial to you depends on the amount and intended length of your investment.
If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider purchasing Class A shares. If you are making a
smaller investment, you might consider purchasing Class B shares because 100% of
your purchase is invested immediately. If you are unsure of the length of your
investment, you might consider Class C shares because there is no initial sales
charge and no CDSC as long as the shares are held for one year or more. Dealers
and agents may receive differing compensation for selling Class A, Class B, or
Class C shares. There is no size limit on purchases of Class A shares. The
maximum purchase of Class B shares is $250,000. The maximum purchase of Class C
shares is $1,000,000.
55
<PAGE>
You should consult your financial agent to assist in choosing a class of Fund
shares.
Application of the CDSC. The CDSC is applied to the lesser of the original cost
of shares being redeemed or NAV at the time of redemption (or, as to Fund shares
acquired through an exchange, the cost of the Alliance Mutual Fund shares
originally purchased for cash). Shares obtained from dividend or distribution
reinvestment are not subject to the CDSC. The Fund may waive the CDSC on
redemptions of shares following the death or disability of a shareholder, to
meet the requirements of certain qualified retirement plans, or under a monthly,
bimonthly, or quarterly systematic withdrawal plan. See the Fund's SAI for
further information about CDSC waivers.
Other. A transaction, service, administrative or other similar fee may be
charged by your broker-dealer, agent, financial intermediary, or other financial
representative with respect to the purchase, sale, or exchange of Class A, Class
B, or Class C shares made through your financial representative. The financial
intermediaries also may impose requirements on the purchase, sale, or exchange
of shares that are different from, or in addition to, those imposed by a Fund,
including requirements as to the minimum initial and subsequent investment
amounts.
In addition to the discount or commission paid to dealers or agents, AFD from
time to time pays additional cash or other incentives to dealers or agents for
the sale of shares of the Funds. These additional amounts may be utilized, in
whole or in part, in some cases together with other revenues of such dealers or
agents, to provide additional compensation to registered representatives who
sell shares of the Funds. On some occasions, the cash or other incentives will
be conditioned upon the sale of a specified minimum dollar amount of the shares
of a Fund and/or other Alliance Mutual Funds during a specific period of time.
The incentives may take the form of payment for attendance at seminars, meals,
sporting events or theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel by persons associated with a
dealer or agent to urban or resort locations within or outside the U.S. The
dealer or agent may elect to receive cash incentives of equivalent amount in
lieu of such payments.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $200 for 90 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed.
During drastic economic or market developments, you might have difficulty in
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephone requests to
purchase, sell, or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephone requests. The telephone
service may be suspended or terminated at any time without notice.
Shareholder Services. AFS offers a variety of shareholder services. For more
information about these services or your account, call AFS's toll-free number,
800-221-5672. Some services are described in the attached Subscription
Application. You also may request a shareholder's manual explaining all
available services by calling 800-227-4618.
Employee Benefit Plans. Certain employee benefit plans, including
employer-sponsored tax-qualified 401(k) plans and other defined contribution
retirement plans ("Employee Benefit Plans"), may establish requirements as to
the purchase, sale or exchange of shares, including maximum and minimum initial
investment requirements, that are different from those described in this
Prospectus. Employee Benefit Plans also may not offer all classes of shares of
the Funds. In order to enable participants investing through Employee Benefit
Plans to purchase shares of the Funds, the maximum and minimum investment
amounts may be different for shares purchased through Employee Benefit Plans
from those described in this Prospectus. In addition, the Class A, Class B, and
Class C CDSC may be waived for investments made through Employee Benefit Plans.
56
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
share of each Fund. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, the independent accountants for The
Alliance Fund, Alliance Growth Fund, Alliance Premier Growth Fund, Alliance
International Premier Growth Fund, Alliance Balanced Shares, Alliance Utility
Income Fund, Alliance Worldwide Privatization Fund, and Alliance Growth and
Income Fund, and by Ernst & Young LLP, the independent accountants for Alliance
All-Asia Investment Fund, Alliance Technology Fund, Alliance Quasar Fund,
Alliance International Fund, Alliance New Europe Fund, Alliance Global Small Cap
Fund, Alliance Global Environment Fund, Alliance Greater China '97 Fund and
Alliance Real Estate Investment Fund, whose reports along with each Fund's
financial statements, are included in the SAI, which is available upon request.
57
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations Less Dividends and Distributions
-------------------------------------------- -----------------------------------------
Net Gains
Net Asset or Losses on Dividends Distributions
Value, Securities Total from from Net in Excess of Distributions
Beginning Net Investment (both realized Investment Investment Net Investment from
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations Income Income Capital Gains
--------------------- --------- -------------- -------------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Premier
Growth Fund
Class A
Year ended 11/30/98 ..... $ 22.00 $ (.15)(b) $ 7.11 $ 6.96 $ 0.00 $ 0.00 $ (1.46)
Year ended 11/30/97 ..... 17.98 (.10)(b) 5.20 5.10 0.00 0.00 (1.08)
Year ended 11/30/96 ..... 16.09 (.04)(b) 3.20 3.16 0.00 0.00 (1.27)
Year ended 11/30/95 ..... 11.41 (.03) 5.38 5.35 0.00 0.00 (.67)
Year ended 11/30/94 ..... 11.78 (.09) (.28) (.37) 0.00 0.00 0.00
Class B
Year ended 11/30/98 ..... $ 21.26 $ (.30)(b) $ 6.83 $ 6.53 $ 0.00 $ 0.00 $ (1.46)
Year ended 11/30/97 ..... 17.52 (.23)(b) 5.05 4.82 0.00 0.00 (1.08)
Year ended 11/30/96 ..... 15.81 (.14)(b) 3.12 2.98 0.00 0.00 (1.27)
Year ended 11/30/95 ..... 11.29 (.11) 5.30 5.19 0.00 0.00 (.67)
Year ended 11/30/94 ..... 11.72 (.15) (.28) (.43) 0.00 0.00 0.00
Class C
Year ended 11/30/98 ..... $ 21.29 $ (.31)(b) $ 6.84 $ 6.53 $ 0.00 $ 0.00 $ (1.46)
Year ended 11/30/97 ..... 17.54 (.24)(b) 5.07 4.83 0.00 0.00 (1.08)
Year ended 11/30/96 ..... 15.82 (.14)(b) 3.13 2.99 0.00 0.00 (1.27)
Year ended 11/30/95 ..... 11.30 (.08) 5.27 5.19 0.00 0.00 (.67)
Year ended 11/30/94 ..... 11.72 (.09) (.33) (.42) 0.00 0.00 0.00
Alliance Growth Fund
Class A
Year ended 10/31/98 ..... $ 43.95 $ (.05)(b) $ 6.18 $ 6.13 $ 0.00 $ 0.00 $ (2.91)
Year ended 10/31/97 ..... 34.91 (.10)(b) 10.17 10.07 0.00 0.00 (1.03)
Year ended 10/31/96 ..... 29.48 .05 6.20 6.25 (.19) 0.00 (.63)
Year ended 10/31/95 ..... 25.08 .12 4.80 4.92 (.11) 0.00 (.41)
5/1/94 to 10/31/94** .... 23.89 .09 1.10 1.19 0.00 0.00 0.00
Year ended 4/30/94 ...... 22.67 (.01)(c) 3.55 3.54 0.00 0.00 (2.32)
Class B
Year ended 10/31/98 ..... $ 36.31 $ (.31)(b) $ 5.06 $ 4.75 $ 0.00 $ 0.00 $ (2.91)
Year ended 10/31/97 ..... 29.21 (.31)(b) 8.44 8.13 0.00 0.00 (1.03)
Year ended 10/31/96 ..... 24.78 (.12) 5.18 5.06 0.00 0.00 (.63)
Year ended 10/31/95 ..... 21.21 (.02) 4.01 3.99 (.01) 0.00 (.41)
5/1/94 to 10/31/94** .... 20.27 .01 .93 .94 0.00 0.00 0.00
Year ended 4/30/94 ...... 19.68 (.07)(c) 2.98 2.91 0.00 0.00 (2.32)
Class C
Year ended 10/31/98 ..... $ 36.33 $ (.31)(b) $ 5.06 $ 4.75 $ 0.00 $ 0.00 $ (2.91)
Year ended 10/31/97 ..... 29.22 (.31)(b) 8.45 8.14 0.00 0.00 (1.03)
Year ended 10/31/96 ..... 24.79 (.12) 5.18 5.06 0.00 0.00 (.63)
Year ended 10/31/95 ..... 21.22 (.03) 4.02 3.99 (.01) 0.00 (.41)
5/1/94 to 10/31/94** .... 20.28 .01 .93 .94 0.00 0.00 0.00
8/2/93++ to 4/30/94 ..... 21.47 (.02)(c) 1.15 1.13 0.00 0.00 (2.32)
Alliance Technology Fund
Class A
Year ended 11/30/98 ..... $ 54.44 $ (.68)(b) $ 15.42 $ 14.74 $ 0.00 $ 0.00 $ (.58)
Year ended 11/30/97 ..... 51.15 (.51)(b) 4.22 3.71 0.00 0.00 (.42)
Year ended 11/30/96 ..... 46.64 (.39)(b) 7.28 6.89 0.00 0.00 (2.38)
Year ended 11/30/95 ..... 31.98 (.30)(b) 18.13 17.83 0.00 0.00 (3.17)
1/1/94 to 11/30/94** .... 26.12 (.32) 6.18 5.86 0.00 0.00 0.00
Class B
Year ended 11/30/98 ..... $ 52.58 $ (1.08)(b) $ 14.83 $ 13.75 $ 0.00 $ 0.00 $ (.58)
Year ended 11/30/97 ..... 49.76 (.88)(b) 4.12 3.24 0.00 0.00 (.42)
Year ended 11/30/96 ..... 45.76 (.70)(b) 7.08 6.38 0.00 0.00 (2.38)
Year ended 11/30/95 ..... 31.61 (.60)(b) 17.92 17.32 0.00 0.00 (3.17)
1/1/94 to 11/30/94** .... 25.98 (.23) 5.86 5.63 0.00 0.00 0.00
Class C
Year ended 11/30/98 ..... $ 52.57 $ (1.08)(b) $ 14.83 $ 13.75 $ 0.00 $ 0.00 $ (.58)
Year ended 11/30/97 ..... 49.76 (.88)(b) 4.11 3.23 0.00 0.00 (.42)
Year ended 11/30/96 ..... 45.77 (.70)(b) 7.07 6.37 0.00 0.00 (2.38)
Year ended 11/30/95 ..... 31.61 (.58)(b) 17.91 17.33 0.00 0.00 (3.17)
1/1/94 to 11/30/94** .... 25.98 (.24) 5.87 5.63 0.00 0.00 0.00
Alliance Quasar Fund
Class A
Year ended 9/30/98 ...... $ 30.37 $ (.17)(b) $ (6.70) $ (6.87) $ 0.00 $ 0.00 $ (1.23)
Year ended 9/30/97 ...... 27.92 (.24)(b) 6.80 6.56 0.00 0.00 (4.11)
Year ended 9/30/96 ...... 24.16 (.25) 8.82 8.57 0.00 0.00 (4.81)
Year ended 9/30/95 ...... 22.65 (.22)(b) 5.59 5.37 0.00 0.00 (3.86)
Year ended 9/30/94 ...... 24.43 (.60) (.36) (.96) 0.00 0.00 (.82)
Class B
Year ended 9/30/98 ...... $ 27.83 $ (.36)(b) $ (6.07) $ (6.43) $ 0.00 $ 0.00 $ (1.23)
Year ended 9/30/97 ...... 26.13 (.42)(b) (6.23) 5.81 0.00 0.00 (4.11)
Year ended 9/30/96 ...... 23.03 (.20) 8.11 7.91 0.00 0.00 (4.81)
Year ended 9/30/95 ...... 21.92 (.37)(b) 5.34 4.97 0.00 0.00 (3.86)
Year ended 9/30/94 ...... 23.88 (.53) (.61) (1.14) 0.00 0.00 (.82)
- ------------------------------------------------------------------------------------------------------------------------------------
Please refer to the footnotes on page 66.
<CAPTION>
Less Distributions Ratios/Supplemental Data
------------------ --------------------------------------------------------------
Total Net Asset Ratio of Ratio of Net
Dividends Value, Net Assets, Expenses Income/Loss
and End of Total End of Period to Average to Average Portfolio
Fiscal Year or Period Distributions Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------- --------- ---------- --------------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Premier
Growth Fund
Class A
Year ended 11/30/98 .... $ (1.46) $ 27.50 33.94% $1,418,262 1.59%(f) (.59)% 82%
Year ended 11/30/97 .... (1.08) 22.00 30.46 373,099 1.57 (.52) 76
Year ended 11/30/96 .... (1.27) 17.98 21.52 172,870 1.65 (.27) 95
Year ended 11/30/95 .... (.67) 16.09 49.95 72,366 1.75 (.28) 114
Year ended 11/30/94 .... 0.00 11.41 (3.14) 35,146 1.96 (.67) 98
Class B
Year ended 11/30/98 .... $ (1.46) $ 26.33 33.04% $2,799,288 2.28%(f) (1.27)% 82%
Year ended 11/30/97 .... (1.08) 21.26 29.62 858,449 2.25 (1.20) 76
Year ended 11/30/96 .... (1.27) 17.52 20.70 404,137 2.32 (.94) 95
Year ended 11/30/95 .... (.67) 15.81 49.01 238,088 2.43 (.95) 114
Year ended 11/30/94 .... 0.00 11.29 (3.67) 139,988 2.47 (1.19) 98
Class C
Year ended 11/30/98 .... $ (1.46) $ 26.36 32.99% $ 862,193 2.28%(f) (1.30)% 82%
Year ended 11/30/97 .... (1.08) 21.29 29.64 177,923 2.24 (1.22) 76
Year ended 11/30/96 .... (1.27) 17.54 20.76 60,194 2.32 (.94) 95
Year ended 11/30/95 .... (.67) 15.82 48.96 20,679 2.42 (.97) 114
Year ended 11/30/94 .... 0.00 11.30 (3.58) 7,332 2.47 (1.16) 98
Alliance Growth Fund
Class A
Year ended 10/31/98 .... $ (2.91) $ 47.17 14.56% $1,008,093 1.22%(f) (.11)% 61%
Year ended 10/31/97 .... (1.03) 43.95 29.54 783,110 1.26(f) (.25) 48
Year ended 10/31/96 .... (.82) 34.91 21.65 499,459 1.30 .15 46
Year ended 10/31/95 .... (.52) 29.48 20.18 285,161 1.35 .56 61
5/1/94 to 10/31/94** ... 0.00 25.08 4.98 167,800 1.35* .86* 24
Year ended 4/30/94 ..... (2.32) 23.89 15.66 102,406 1.40(d) .32 87
Class B
Year ended 10/31/98 .... $ (2.91) $ 38.15 13.78% $4,230,756 1.94%(f) (.83)% 61%
Year ended 10/31/97 .... (1.03) 36.31 28.64 3,578,806 1.96(f) (.94) 48
Year ended 10/31/96 .... (.63) 29.21 20.82 2,498,097 1.99 (.54) 46
Year ended 10/31/95 .... (.42) 24.78 19.33 1,052,020 2.05 (.15) 61
5/1/94 to 10/31/94** ... 0.00 21.21 4.64 751,521 2.05* .16* 24
Year ended 4/30/94 ..... (2.32) 20.27 14.79 394,227 2.10(d) (.36) 87
Class C
Year ended 10/31/98 .... $ (2.91) $ 38.17 13.76% $ 718,688 1.93%(f) (.83)% 61%
Year ended 10/31/97 .... (1.03) 36.33 28.66 599,449 1.97(f) (.95) 48
Year ended 10/31/96 .... (.63) 29.22 20.81 403,478 2.00 (.55) 46
Year ended 10/31/95 .... (.42) 24.79 19.32 226,662 2.05 (.15) 61
5/1/94 to 10/31/94** ... 0.00 21.22 4.64 114,455 2.05* .16* 24
8/2/93++ to 4/30/94 .... (2.32) 20.28 5.27 64,030 2.10*(d) (.31)* 87
Alliance Technology Fund
Class A
Year ended 11/30/98 .... $ (.58) $ 68.60 27.36% $ 824,636 1.66%(f) (1.13)% 67%
Year ended 11/30/97 .... (.42) 54.44 7.32 624,716 1.67(f) (.97) 51
Year ended 11/30/96 .... (2.38) 51.15 16.05 594,861 1.74 (.87) 30
Year ended 11/30/95 .... (3.17) 46.64 61.93 398,262 1.75 (.77) 55
1/1/94 to 11/30/94** ... 0.00 31.98 22.43 202,929 1.66* (1.22)* 55
Class B
Year ended 11/30/98 .... $ (.58) $ 65.75 26.44% $1,490,578 2.39%(f) (1.86)% 67%
Year ended 11/30/97 .... (.42) 52.58 6.57 1,053,436 2.38(f) (1.70) 51
Year ended 11/30/96 .... (2.38) 49.76 15.20 660,921 2.44 (1.61) 30
Year ended 11/30/95 .... (3.17) 45.76 60.95 277,111 2.48 (1.47) 55
1/1/94 to 11/30/94** ... 0.00 31.61 21.67 18,397 2.43* (1.95)* 55
Class C
Year ended 11/30/98 .... $ (.58) $ 65.74 26.44% $ 271,320 2.40%(f) (1.87)% 67%
Year ended 11/30/97 .... (.42) 52.57 6.55 184,194 2.38(f) (1.70) 51
Year ended 11/30/96 .... (2.38) 49.76 15.17 108,488 2.44 (1.60) 30
Year ended 11/30/95 .... (3.17) 45.77 60.98 43,161 2.48 (1.47) 55
1/1/94 to 11/30/94** ... 0.00 31.61 21.67 7,470 2.41* (1.94)* 55
Alliance Quasar Fund
Class A
Year ended 9/30/98 ..... $ (1.23) $ 22.27 (23.45)% $ 495,070 1.61%(f) (.59)% 109%
Year ended 9/30/97 ..... (4.11) 30.37 27.81 402,081 1.67 (.91) 135
Year ended 9/30/96 ..... (4.81) 27.92 42.42 229,798 1.79 (1.11) 168
Year ended 9/30/95 ..... (3.86) 24.16 30.73 146,663 1.83 (1.06) 160
Year ended 9/30/94 ..... (.82) 22.65 (4.05) 155,470 1.67 (1.15) 110
Class B
Year ended 9/30/98 ..... $ (1.23) $ 20.17 (24.03)% $ 625,147 2.39%(f) (1.36)% 109%
Year ended 9/30/97 ..... (4.11) 27.83 26.70 503,037 2.51 (1.73) 135
Year ended 9/30/96 ..... (4.81) 26.13 41.48 112,490 2.62 (1.96) 168
Year ended 9/30/95 ..... (3.86) 23.03 29.78 16,604 2.65 (1.88) 160
Year ended 9/30/94 ..... (.82) 21.92 (4.92) 13,901 2.50 (1.98) 110
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
58 & 59
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations Less Dividends and Distributions
-------------------------------------------- -----------------------------------------
Net Gains
Net Asset or Losses on Dividends Distributions
Value, Securities Total from from Net in Excess of Distributions
Beginning Net Investment (both realized Investment Investment Net Investment from
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations Income Income Capital Gains
--------------------- --------- -------------- -------------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Quasar
Fund (continued)
Class C
Year ended 9/30/98 ...... $ 27.85 $ (.35)(b) $ (6.09) $ (6.44) $ 0.00 $ 0.00 $ (1.23)
Year ended 9/30/97 ...... 26.14 (.42)(b) 6.24 5.82 0.00 0.00 (4.11)
Year ended 9/30/96 ...... 23.05 (.20) 8.10 7.90 0.00 0.00 (4.81)
Year ended 9/30/95 ...... 21.92 (.37)(b) 5.36 4.99 0.00 0.00 (3.86)
Year ended 9/30/94 ...... 23.88 (.36) (.78) (1.14) 0.00 0.00 (.82)
The Alliance Fund
Class A
Year ended 11/30/98 ..... $ 8.70 $ (.02)(b) $ (.54) $ (.56) $ 0.00 $ 0.00 $ (2.17)
Year ended 11/30/97 ..... 7.71 (.02)(b) 2.09 2.07 (.02) 0.00 (1.06)
Year ended 11/30/96 ..... 7.72 .02(b) 1.06 1.08 (.02) 0.00 (1.07)
Year ended 11/30/95 ..... 6.63 .02 2.08 2.10 (.01) 0.00 (1.00)
1/1/94 to 11/30/94** .... 6.85 .01 (.23) (.22) 0.00 0.00 0.00
Class B
Year ended 11/30/98 ..... $ 8.25 $ (.07)(b) $ (.50) $ (.57) $ 0.00 $ 0.00 $ (2.17)
Year ended 11/30/97 ..... 7.40 (.08)(b) 1.99 1.91 0.00 0.00 (1.06)
Year ended 11/30/96 ..... 7.49 (.01) .99 .98 0.00 0.00 (1.07)
Year ended 11/30/95 ..... 6.50 (.03)(b) 2.02 1.99 0.00 0.00 (1.00)
1/1/94 to 11/30/94** .... 6.76 (.03) (.23) (.26) 0.00 0.00 0.00
Class C
Year ended 11/30/98 ..... $ 8.26 $ (.07)(b) $ (.52) $ (.59) $ 0.00 $ 0.00 $ (2.17)
Year ended 11/30/97 ..... 7.41 (.08)(b) 1.99 1.91 0.00 0.00 (1.06)
Year ended 11/30/96 ..... 7.50 (.02) 1.00 .98 0.00 0.00 (1.07)
Year ended 11/30/95 ..... 6.50 (.03)(b) 2.03 2.00 0.00 0.00 (1.00)
1/1/94 to 11/30/94** .... 6.77 (.03) (.24) (.27) 0.00 0.00 0.00
5/3/93++ to 12/31/93 .... 6.67 (.02) .88 .86 0.00 0.00 (.76)
Alliance Growth and
Income Fund
Class A
Year ended 10/31/98 ..... $ 3.48 $ .03(b) $ .43 $ .46 $ (.04) $ 0.00 $ (.46)
Year ended 10/31/97 ..... 3.00 .04(b) .87 .91 (.05) 0.00 (.38)
Year ended 10/31/96 ..... 2.71 .05 .50 .55 (.05) 0.00 (.21)
Year ended 10/31/95 ..... 2.35 .02 .52 .54 (.06) 0.00 (.12)
Year ended 10/31/94 ..... 2.61 .06 (.08) (.02) (.06) 0.00 (.18)
Class B
Year ended 10/31/98 ..... $ 3.45 $ .01(b) $ .43 $ .44 $ (.02) $ 0.00 $ (.46)
Year ended 10/31/97 ..... 2.99 .02(b) .85 .87 (.03) 0.00 (.38)
Year ended 10/31/96 ..... 2.69 .03 .51 .54 (.03) 0.00 (.21)
Year ended 10/31/95 ..... 2.34 .01 .49 .50 (.03) 0.00 (.12)
Year ended 10/31/94 ..... 2.60 .04 (.08) (.04) (.04) 0.00 (.18)
Class C
Year ended 10/31/98 ..... $ 3.45 $ .01(b) $ .43 $ .44 $ (.02) $ 0.00 $ (.46)
Year ended 10/31/97 ..... 2.99 .02(b) .85 .87 (.03) 0.00 (.38)
Year ended 10/31/96 ..... 2.70 .03 .50 .53 (.03) 0.00 (.21)
Year ended 10/31/95 ..... 2.34 .01 .50 .51 (.03) 0.00 (.12)
Year ended 10/31/94 ..... 2.60 .04 (.08) (.04) (.04) 0.00 (.18)
Alliance Balanced Shares
Class A
Year ended 7/31/98 ...... $ 16.17 $ .33(b) $ 1.86 $ 2.19 $ (.32) $ 0.00 $ (2.07)
Year ended 7/31/97 ...... 14.01 .31(b) 3.97 4.28 (.32) 0.00 (1.80)
Year ended 7/31/96 ...... 15.08 .37 .45 .82 (.41) 0.00 (1.48)
Year ended 7/31/95 ...... 13.38 .46 1.62 2.08 (.36) 0.00 (.02)
Period ended 7/31/94** .. 14.40 .29 (.74) (.45) (.28) 0.00 (.29)
Class B
Year ended 7/31/98 ...... $ 15.83 $ .21(b) $ 1.81 $ 2.02 $ (.24) $ 0.00 $ (2.07)
Year ended 7/31/97 ...... 13.79 .19(b) 3.89 4.08 (.24) 0.00 (1.80)
Year ended 7/31/96 ...... 14.88 .28 .42 .70 (.31) 0.00 (1.48)
Year ended 7/31/95 ...... 13.23 .30 1.65 1.95 (.28) 0.00 (.02)
Period ended 7/31/94** .. 14.27 .22 (.75) (.53) (.22) 0.00 (.29)
Class C
Year ended 7/31/98 ...... $ 15.86 $ .21(b) $ 1.81 $ 2.02 $ (.24) $ 0.00 $ (2.07)
Year ended 7/31/97 ...... 13.81 .20(b) 3.89 4.09 (.24) 0.00 (1.80)
Year ended 7/31/96 ...... 14.89 .26 .45 .71 (.31) 0.00 (1.48)
Year ended 7/31/95 ...... 13.24 .30 1.65 1.95 (.28) 0.00 (.02)
Period ended 7/31/94** .. 14.28 .24 (.77) (.53) (.22) 0.00 (.29)
Alliance Utility Income Fund
Class A
Year ended 11/30/98 ..... $ 12.48 $ .30(b)(c) $ 2.69 $ 2.99 $ (.32) $ 0.00 $ (.47)
Year ended 11/30/97 ..... 10.59 .32(b)(c) 2.04 2.36 (.34) 0.00 (.13)
Year ended 11/30/96 ..... 10.22 .18(b)(c) .65 .83 (.46) 0.00 0.00
Year ended 11/30/95 ..... 8.97 .27(c) 1.43 1.70 (.45) 0.00 0.00
Year ended 11/30/94 ..... 9.92 .42(c) (.89) (.47) (.48) 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Please refer to the footnotes on page 66.
<CAPTION>
Less Distributions Ratios/Supplemental Data
------------------ -----------------------------------------------------------
Total Net Asset Ratio of Ratio of Net
Dividends Value, Net Assets, Expenses Income/Loss
and End of Total End of Period to Average to Average Portfolio
Fiscal Year or Period Distributions Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------- --------- ---------- --------------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Quasar
Fund (continued)
Class C
Year ended 9/30/98 ...... $ (1.23) $ 20.18 (24.05)% $ 182,110 2.38%(f) (1.35)% 109%
Year ended 9/30/97 ...... (4.11) 27.85 26.74 145,494 2.50 (1.72) 135
Year ended 9/30/96 ...... (4.81) 26.14 41.46 28,541 2.61 (1.94) 168
Year ended 9/30/95 ...... (3.86) 23.05 29.87 1,611 2.64* (1.76)* 160
Year ended 9/30/94 ...... (.82) 21.92 (4.92) 1,220 2.48 (1.96) 110
The Alliance Fund
Class A
Year ended 11/30/98 ..... $ (2.17) $ 5.97 (8.48)% $ 953,181 1.03% (.36)% 106%
Year ended 11/30/97 ..... (1.08) 8.70 31.82 1,201,435 1.03 (.29) 158
Year ended 11/30/96 ..... (1.09) 7.71 16.49 999,067 1.04 .30 80
Year ended 11/30/95 ..... (1.01) 7.72 37.87 945,309 1.08 .31 81
1/1/94 to 11/30/94** .... 0.00 6.63 (3.21) 760,679 1.05* .21* 63
Class B
Year ended 11/30/98 ..... $ (2.17) $ 5.51 (9.27)% $ 85,456 1.84% (1.17)% 106%
Year ended 11/30/97 ..... (1.06) 8.25 30.74 70,461 1.85 (1.12) 158
Year ended 11/30/96 ..... (1.07) 7.40 15.47 44,450 1.87 (.53) 80
Year ended 11/30/95 ..... (1.00) 7.49 36.61 31,738 1.90 (.53) 81
1/1/94 to 11/30/94** .... 0.00 6.50 (3.85) 18,138 1.89* (.60)* 63
Class C
Year ended 11/30/98 ..... $ (2.17) $ 5.50 (9.58)% $ 21,231 1.84% (1.18)% 106%
Year ended 11/30/97 ..... (1.06) 8.26 30.72 18,871 1.83 (1.10) 158
Year ended 11/30/96 ..... (1.07) 7.41 15.48 13,899 1.86 (.51) 80
Year ended 11/30/95 ..... (1.00) 7.50 36.79 10,078 1.89 (.51) 81
1/1/94 to 11/30/94** .... 0.00 6.50 (3.99) 6,230 1.87* (.59)* 63
5/3/93++ to 12/31/93 .... (.76) 6.77 13.95 4,006 1.94* (.74)* 66
Alliance Growth and
Income Fund
Class A
Year ended 10/31/98 ..... $ (.50) $ 3.44 14.70% $ 988,965 .93%(f) .96% 89%
Year ended 10/31/97 ..... (.43) 3.48 33.28 787,566 .92(f) 1.39 88
Year ended 10/31/96 ..... (.26) 3.00 21.51 553,151 .97 1.73 88
Year ended 10/31/95 ..... (.18) 2.71 24.21 458,158 1.05 1.88 142
Year ended 10/31/94 ..... (.24) 2.35 (.67) 414,386 1.03 2.36 68
Class B
Year ended 10/31/98 ..... $ (.48) $ 3.41 14.07% $ 787,730 1.72%(f) .17% 89%
Year ended 10/31/97 ..... (.41) 3.45 31.83 456,399 1.72(f) .56 88
Year ended 10/31/96 ..... (.24) 2.99 21.20 235,263 1.78 .91 88
Year ended 10/31/95 ..... (.15) 2.69 22.84 136,758 1.86 1.05 142
Year ended 10/31/94 ..... (.22) 2.34 (1.50) 102,546 1.85 1.56 68
Class C
Year ended 10/31/98 ..... $ (.48) $ 3.41 14.07% $ 179,487 1.72%(f) .18% 89%
Year ended 10/31/97 ..... (.41) 3.45 31.83 106,526 1.71(f) .58 88
Year ended 10/31/96 ..... (.24) 2.99 20.72 61,356 1.76 .93 88
Year ended 10/31/95 ..... (.15) 2.70 23.30 35,835 1.84 1.04 142
Year ended 10/31/94 ..... (.22) 2.34 (1.50) 19,395 1.84 1.61 68
Alliance Balanced Shares
Class A
Year ended 7/31/98 ...... $ (2.39) $ 15.97 14.99% $ 123,623 1.30%(f) 2.07% 145%
Year ended 7/31/97 ...... (2.12) 16.17 33.46 115,500 1.47(f) 2.11 207
Year ended 7/31/96 ...... (1.89) 14.01 5.23 102,567 1.38 2.41 227
Year ended 7/31/95 ...... (.38) 15.08 15.99 122,033 1.32 3.12 179
Period ended 7/31/94** .. (.57) 13.38 (3.21) 157,637 1.27* 2.50* 116
Class B
Year ended 7/31/98 ...... $ (2.31) $ 15.54 14.13% $ 47,782 2.06%(f) 1.34% 145%
Year ended 7/31/97 ...... (2.04) 15.83 32.34 24,192 2.25(f) 1.32 207
Year ended 7/31/96 ...... (1.79) 13.79 4.45 18,393 2.16 1.61 227
Year ended 7/31/95 ...... (.30) 14.88 15.07 15,080 2.11 2.30 179
Period ended 7/31/94** .. (.51) 13.23 (3.80) 14,347 2.05* 1.73* 116
Class C
Year ended 7/31/98 ...... $ (2.31) $ 15.57 14.09% $ 10,855 2.05%(f) 1.36% 145%
Year ended 7/31/97 ...... (2.04) 15.86 32.37 5,510 2.23(f) 1.37 207
Year ended 7/31/96 ...... (1.79) 13.81 4.52 6,096 2.15 1.63 227
Year ended 7/31/95 ...... (.30) 14.89 15.06 5,108 2.09 2.32 179
Period ended 7/31/94** .. (.51) 13.24 (3.80) 6,254 2.03* 1.81* 116
Alliance Utility Income Fund
Class A
Year ended 11/30/98 ..... $ (.79) $ 14.68 24.99% $ 9,793 1.50%(d) 2.23% 16%
Year ended 11/30/97 ..... (.47) 12.48 23.10 4,117 1.50(d) 2.89 37
Year ended 11/30/96 ..... (.46) 10.59 8.47 3,294 1.50(d) 1.67 98
Year ended 11/30/95 ..... (.45) 10.22 19.58 2,748 1.50(d) 2.48 162
Year ended 11/30/94 ..... (.48) 8.97 (4.86) 1,068 1.50(d) 4.13 30
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
60 & 61
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations Less Dividends and Distributions
-------------------------------------------- -----------------------------------------
Net Gains
Net Asset or Losses on Dividends Distributions
Value, Securities Total from from Net in Excess of Distributions
Beginning Net Investment (both realized Investment Investment Net Investment from
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations Income Income Capital Gains
--------------------- --------- -------------- -------------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Utility Income Fund
(continued)
Class B
Year ended 11/30/98 ..... $ 12.46 $ .21(b)(c) $ 2.67 $ 2.88 $ (.25) $ 0.00 $ (.47)
Year ended 11/30/97 ..... 10.57 .25(b)(c) 2.04 2.29 (.27) 0.00 (.13)
Year ended 11/30/96 ..... 10.20 .10(b)(c) .67 .77 (.40) 0.00 0.00
Year ended 11/30/95 ..... 8.96 .18(c) 1.45 1.63 (.39) 0.00 0.00
Year ended 11/30/94 ..... 9.91 .37(c) (.91) (.54) (.41) 0.00 0.00
Class C
Year ended 11/30/98 ..... $ 12.47 $ .21(b)(c) $ 2.69 $ 2.90 $ (.25) $ 0.00 $ (.47)
Year ended 11/30/97 ..... 10.59 .25(b)(c) 2.03 2.28 (.27) 0.00 (.13)
Year ended 11/30/96 ..... 10.22 .11(b)(c) .66 .77 (.40) 0.00 0.00
Year ended 11/30/95 ..... 8.97 .18(c) 1.46 1.64 (.39) 0.00 0.00
Year ended 11/30/94 ..... 9.92 .39(c) (.93) (.54) (.41) 0.00 0.00
Alliance Real Estate
Investment Fund
Class A
Year ended 8/31/98 ...... $ 12.80 $ .52(b) $ (2.33) $ (1.81) $ (.51) $ 0.00 $ (.01)
10/1/96+ to 8/31/97 ..... 10.00 .30(b) 2.88 3.18 (.38)(g) 0.00 0.00
Class B
Year ended 8/31/98 ...... $ 12.79 $ .42(b) $ (2.33) $ (1.91) $ (.43) $ 0.00 $ (.01)
10/1/96+ to 8/31/97 ..... 10.00 .23(b) 2.89 3.12 (.33)(g) 0.00 0.00
Class C
Year ended 8/31/98 ...... $ 12.79 $ .42(b) $ (2.33) $ (1.91) $ (.43) $ 0.00 $ (.01)
10/1/96+ to 8/31/97 ..... 10.00 .23(b) 2.89 3.12 (.33)(g) 0.00 0.00
Alliance New Europe Fund
Class A
Year ended 7/31/98 ...... $ 18.61 $ .05(b) $ 5.28 $ 5.33 $ 0.00 $ (.04) $ (2.05)
Year ended 7/31/97 ...... 15.84 .07(b) 4.20 4.27 (.15) (.03) (1.32)
Year ended 7/31/96 ...... 15.11 .18 1.02 1.20 0.00 0.00 (.47)
Year ended 7/31/95 ...... 12.66 .04 2.50 2.54 (.09) 0.00 0.00
Period ended 7/31/94** .. 12.53 .09 .04 .13 0.00 0.00 0.00
Class B
Year ended 7/31/98 ...... $ 17.87 $ (.08)(b) $ 5.02 $ 4.94 $ 0.00 $ 0.00 $ (2.05)
Year ended 7/31/97 ...... 15.31 (.04)(b) 4.02 3.98 0.00 (.10) (1.32)
Year ended 7/31/96 ...... 14.71 .08 .99 1.07 0.00 0.00 (.47)
Year ended 7/31/95 ...... 12.41 (.05) 2.44 2.39 (.09) 0.00 0.00
Period ended 7/31/94** .. 12.32 .07 .02 .09 0.00 0.00 0.00
Class C
Year ended 7/31/98 ...... $ 17.89 $ (.08)(b) $ 5.01 $ 4.93 $ 0.00 $ 0.00 $ (2.05)
Year ended 7/31/97 ...... 15.33 (.04)(b) 4.02 3.98 0.00 (.10) (1.32)
Year ended 7/31/96 ...... 14.72 .08 1.00 1.08 0.00 0.00 (.47)
Year ended 7/31/95 ...... 12.42 (.07) 2.46 2.39 (.09) 0.00 0.00
Period ended 7/31/94** .. 12.33 .06 .03 .09 0.00 0.00 0.00
Alliance Worldwide
Privatization Fund
Class A
Year ended 6/30/98 ...... $ 13.26 $ .10(b) $ .85 $ .95 $ (.18) $ 0.00 $ (1.36)
Year ended 6/30/97 ...... 12.13 .15(b) 2.55 2.70 (.15) 0.00 (1.42)
Year ended 6/30/96 ...... 10.18 .10(b) 1.85 1.95 0.00 0.00 0.00
Year ended 6/30/95 ...... 9.75 .06 .37 .43 0.00 0.00 0.00
6/2/94+ to 6/30/94 ...... 10.00 .01 (.26) (.25) 0.00 0.00 0.00
Class B
Year ended 6/30/98 ...... $ 13.04 $ .02(b) $ .82 $ .84 $ (.15) $ 0.00 $ (1.36)
Year ended 6/30/97 ...... 11.96 .08(b) 2.50 2.58 (.08) 0.00 (1.42)
Year ended 6/30/96 ...... 10.10 (.02) 1.88 1.86 0.00 0.00 0.00
Year ended 6/30/95 ...... 9.74 .02 .34 .36 0.00 0.00 0.00
6/2/94+ to 6/30/94 ...... 10.00 .00 (.26) (.26) 0.00 0.00 0.00
Class C
Year ended 6/30/98 ...... $ 13.04 $ .05(b) $ .79 $ .84 $ (.15) $ 0.00 $ (1.36)
Year ended 6/30/97 ...... 11.96 .12(b) 2.46 2.58 (.08) 0.00 (1.42
Year ended 6/30/96 ...... 10.10 .03 1.83 1.86 0.00 0.00 0.00
2/8/95++ to 6/30/95 ..... 9.53 .05 .52 .57 0.00 0.00 0.00
Alliance International
Premier Growth
Class A
3/2/98+ to 11/30/98 ..... $ 10.00 $ (.08)(b)(c) $ (.29) $ (.37) $ 0.00 $ 0.00 $ 0.00
Class B
3/2/98+ to 11/30/98 ..... $ 10.00 $ (.13)(b)(c) $ (.29) $ (.42) $ 0.00 $ 0.00 $ 0.00
Class C
3/2/98+ to 11/30/98 ..... $ 10.00 $ (.15)(b)(c) $ (.28) $ (.43) $ 0.00 $ 0.00 $ 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Please refer to the footnotes on page 66.
<CAPTION>
Less Distributions Ratios/Supplemental Data
------------------ -----------------------------------------------------------
Total Net Asset Ratio of Ratio of Net
Dividends Value, Net Assets, Expenses Income/Loss
and End of Total End of Period to Average to Average Portfolio
Fiscal Year or Period Distributions Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------- --------- ---------- --------------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Utility Income
Fund (continued)
Class B
Year ended 11/30/98 .... $ (.72) $ 14.62 24.02% $ 35,550 2.20%(d) 1.56% 16%
Year ended 11/30/97 .... (.40) 12.46 22.35 14,782 2.20(d) 2.27 37
Year ended 11/30/96 .... (.40) 10.57 7.82 13,561 2.20(d) .95 98
Year ended 11/30/95 .... (.39) 10.20 18.66 10,988 2.20(d) 1.60 162
Year ended 11/30/94 .... (.41) 8.96 (5.59) 2,353 2.20(d) 3.53 30
Class C
Year ended 11/30/98 .... $ (.72) $ 14.65 24.16% $ 7,298 2.20%(d) 1.54% 16%
Year ended 11/30/97 .... (.40) 12.47 22.21 3,413 2.20(d) 2.27 37
Year ended 11/30/96 .... (.40) 10.59 7.81 3,376 2.20(d) .94 98
Year ended 11/30/95 .... (.39) 10.22 18.76 3,500 2.20(d) 1.88 162
Year ended 11/30/94 .... (.41) 8.97 (5.58) 2,651 2.20(d) 3.60 30
Alliance Real Estate
Investment Fund
Class A
Year ended 8/31/98 ..... $ (.52) $ 10.47 (14.90)% $ 51,214 1.55% 3.87% 23%
10/1/96+ to 8/31/97 .... (.38) 12.80 32.24 37,638 1.77*(f) 2.73* 20
Class B
Year ended 8/31/98 ..... $ (.44) $ 10.44 (15.56)% $268,856 2.26% 3.16% 23%
10/1/96+ to 8/31/97 .... (.33) 12.79 31.49 186,802 2.44*(f) 2.08* 20
Class C
Year ended 8/31/98 ..... $ (.44) $ 10.44 (15.56)% $ 69,575 2.26% 3.15% 23%
10/1/96+ to 8/31/97 .... (.33) 12.79 31.49 42,719 2.43*(f) 2.06* 20
Alliance New Europe Fund
Class A
Year ended 7/31/98 ..... $ (2.09) $ 21.85 32.21% $130,777 1.85%(f) .25% 99%
Year ended 7/31/97 ..... (1.50) 18.61 28.78 78,578 2.05(f) .40 89
Year ended 7/31/96 ..... (.47) 15.84 8.20 74,026 2.14 1.10 69
Year ended 7/31/95 ..... (.09) 15.11 20.22 86,112 2.09 .37 74
Period ended 7/31/94** . 0.00 12.66 1.04 86,739 2.06* 1.85* 35
Class B
Year ended 7/31/98 ..... $ (2.05) $ 20.76 31.22% $137,425 2.56%(f) (.40)% 99%
Year ended 7/31/97 ..... (1.42) 17.87 27.76 66,032 2.75(f) (.23) 89
Year ended 7/31/96 ..... (.47) 15.31 7.53 42,662 2.86 .59 69
Year ended 7/31/95 ..... (.09) 14.71 19.42 34,527 2.79 (.33) 74
Period ended 7/31/94** . 0.00 12.41 .73 31,404 2.76* 1.15* 35
Class C
Year ended 7/31/98 ..... $ (2.05) $ 20.77 31.19% $ 39,618 2.56%(f) (.41)% 99%
Year ended 7/31/97 ..... (1.42) 17.89 27.73 16,907 2.74(f) (.23) 89
Year ended 7/31/96 ..... (.47) 15.33 7.59 10,141 2.87 .58 69
Year ended 7/31/95 ..... (.09) 14.72 19.40 7,802 2.78 (.33) 74
Period ended 7/31/94** . 0.00 12.42 .73 11,875 2.76* 1.15* 35
Alliance Worldwide
Privatization Fund
Class A
Year ended 6/30/98 ..... $ (1.54) $ 12.67 9.11% $467,960 1.73% .80% 53%
Year ended 6/30/97 ..... (1.57) 13.26 25.16 561,793 1.72 1.27 48
Year ended 6/30/96 ..... 0.00 12.13 19.16 672,732 1.87 .95 28
Year ended 6/30/95 ..... 0.00 10.18 4.41 13,535 2.56 .66 36
6/2/94+ to 6/30/94 ..... 0.00 9.75 (2.50) 4,990 2.75* 1.03* 0
Class B
Year ended 6/30/98 ..... $ (1.51) $ 12.37 8.34% $156,348 2.45% .20% 53%
Year ended 6/30/97 ..... (1.50) 13.04 24.34 121,173 2.43 .66 48
Year ended 6/30/96 ..... 0.00 11.96 18.42 83,050 2.83 (.20) 28
Year ended 6/30/95 ..... 0.00 10.10 3.70 79,359 3.27 .01 36
6/2/94+ to 6/30/94 ..... 0.00 9.74 (2.60) 22,859 3.45* .33* 0
Class C
Year ended 6/30/98 ..... $ (1.51) $ 12.37 8.34% $ 26,635 2.44% .38% 53%
Year ended 6/30/97 ..... (1.50) 13.04 24.33 12,929 2.42 1.06 48
Year ended 6/30/96 ..... 0.00 11.96 18.42 2,383 2.57 .63 28
2/8/95++ to 6/30/95 .... 0.00 10.10 5.98 338 3.27* 1.04* 36
Alliance International
Premier Growth
Class A
3/3/98+ to 11/30/98 .... $ 0.00 $9.63 (3.70)% $ 7,255 2.50%*(d) (.90)%* 151%
Class B
3/3/98+ to 11/30/98 .... $ 0.00 $9.58 (4.20)% $ 11,710 3.20%*(d) (1.41)%* 151%
Class C
3/3/98+ to 11/30/98 .... $ 0.00 $9.57 (4.30)% $ 3,120 3.20%*(d) (1.69)%* 151%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
62 & 63
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations Less Dividends and Distributions
-------------------------------------------- -----------------------------------------
Net Gains
Net Asset or Losses on Dividends Distributions
Value, Securities Total from from Net in Excess of Distributions
Beginning Net Investment (both realized Investment Investment Net Investment from
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations Income Income Capital Gains
--------------------- --------- -------------- -------------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Global
Small Cap Fund
Class A
Year ended 7/31/98 ..... $ 12.87 $ (.11)(b) $ .37 $ .26 $ 0.00 $ 0.00 $ (.99)
Year ended 7/31/97 ..... 11.61 (.15)(b) 2.97 2.82 0.00 0.00 (1.56)
Year ended 7/31/96 ..... 10.38 (.14)(b) 1.90 1.76 0.00 0.00 (.53)
Year ended 7/31/95 ..... 11.08 (.09) 1.50 1.41 0.00 0.00 (2.11)(e)
Period ended 7/31/94** . 11.24 (.15)(b) (.01) (.16) 0.00 0.00 0.00
Class B
Year ended 7/31/98 ..... $ 12.03 $ (.18)(b) $ .34 $ .16 $ 0.00 $ 0.00 $ (.99)
Year ended 7/31/97 ..... 11.03 (.21)(b) 2.77 2.56 0.00 0.00 (1.56)
Year ended 7/31/96 ..... 9.95 (.20)(b) 1.81 1.61 0.00 0.00 (.53)
Year ended 7/31/95 ..... 10.78 (.12) 1.40 1.28 0.00 0.00 (2.11)(e)
Period ended 7/31/94** . 11.00 (.17)(b) (.05) (.22) 0.00 0.00 0.00
Class C
Year ended 7/31/98 ..... $ 12.05 $ (.19)(b) $ .35 $ .16 $ 0.00 $ 0.00 $ (.99)
Year ended 7/31/97 ..... 11.05 (.22)(b) 2.78 2.56 0.00 0.00 (1.56)
Year ended 7/31/96 ..... 9.96 (.20)(b) 1.82 1.62 0.00 0.00 (.53)
Year ended 7/31/95 ..... 10.79 (.17) 1.45 1.28 0.00 0.00 (2.11)(e)
Period ended 7/31/94** . 11.00 (.17)(b) (.04) (.21) 0.00 0.00 0.00
Alliance International Fund
Class A
Year ended 6/30/98 ..... $ 18.69 $ (.01)(b) $ 1.13 $ 1.12 $ (.05) $ 0.00 $ (1.21)
Year ended 6/30/97 ..... 18.32 .06(b) 1.51 1.57 (.12) 0.00 (1.08)
Year ended 6/30/96 ..... 16.81 .05(b) 2.51 2.56 0.00 0.00 (1.05)
Year ended 6/30/95 ..... 18.38 .04 .01 .05 0.00 0.00 (1.62)
Year ended 6/30/94 ..... 16.01 (.09) 3.02 2.93 0.00 0.00 (.56)
Class B
Year ended 6/30/98 ..... $ 17.71 $ (.16)(b) $ 1.07 $ .91 $ 0.00 $ 0.00 $ (1.21)
Year ended 6/30/97 ..... 17.45 (.09)(b) 1.43 1.34 0.00 0.00 (1.08)
Year ended 6/30/96 ..... 16.19 (.07)(b) 2.38 2.31 0.00 0.00 (1.05)
Year ended 6/30/95 ..... 17.90 (.01) (.08) (.09) 0.00 0.00 (1.62)
Year ended 6/30/94 ..... 15.74 (.19)(b) 2.91 2.72 0.00 0.00 (.56)
Class C
Year ended 6/30/98 ..... $ 17.73 $ (.15)(b) $ 1.05 $ .90 $ 0.00 $ 0.00 $ (1.21)
Year ended 6/30/97 ..... 17.46 (.09)(b) 1.44 1.35 0.00 0.00 (1.08)
Year ended 6/30/96 ..... 16.20 (.07)(b) 2.38 2.31 0.00 0.00 (1.05)
Year ended 6/30/95 ..... 17.91 (.14) .05 (.09) 0.00 0.00 (1.62)
Year ended 6/30/94 ..... 15.74 (.11) 2.84 2.73 0.00 0.00 (.56)
Alliance Greater
China '97 Fund
Class A
9/3/97+ to 7/31/98 ..... $ 10.00 $ .08(b)(c) $ (5.18) $ (5.10) $ (.06) $ 0.00 $ 0.00
Class B
9/3/97+ to 7/31/98 ..... $ 10.00 $ .03(b)(c) $ (5.17) $ (5.14) $ (.03) $ (.01) $ 0.00
Class C
9/3/97+ to 7/31/98 ..... $ 10.00 $ .03(b)(c) $ (5.17) $ (5.14) $ (.03) $ (.01) $ 0.00
Alliance All-Asia
Investment Fund
Class A
Year ended 10/31/98 .... $ 7.54 $ (.10)(b)(c) $ (1.58) $ (1.68) $ 0.00 $ 0.00 $ 0.00
Year ended 10/31/97 .... 11.04 (.21)(b)(c) (2.95) (3.16) 0.00 0.00 (.34)
Year ended 10/31/96 .... 10.45 (.21)(b)(c) .88 .67 0.00 0.00 (.08)
11/28/94+ to 10/31/95 .. 10.00 (.19)(c) .64 .45 0.00 0.00 0.00
Class B
Year ended 10/31/98 .... $ 7.39 $ (.14)(b)(c) $ (1.54) $ (1.68) $ 0.00 $ 0.00 $ 0.00
Year ended 10/31/97 .... 10.90 (.28)(b)(c) (2.89) (3.17) 0.00 0.00 (.34)
Year ended 10/31/96 .... 10.41 (.28)(b)(c) .85 .57 0.00 0.00 (.08)
11/28/94+ to 10/31/95 .. 10.00 (.25)(c) .66 .41 0.00 0.00 0.00
Class C
Year ended 10/31/98 .... $ 7.40 $ (.14)(b)(c) $ (1.54) $ (1.68) $ 0.00 $ 0.00 $ 0.00
Year ended 10/31/97 .... 10.91 (.27)(b)(c) (2.90) (3.17) 0.00 0.00 (.34)
Year ended 10/31/96 .... 10.41 (.28)(b)(c) .86 .58 0.00 0.00 (.08)
11/28/94+ to 10/31/95 .. 10.00 (.35)(c) .76 .41 0.00 0.00 0.00
Alliance Global
Environment Fund (h)
Class A
Year ended 10/31/98 .... $ 18.77 $ (.24)(b) $ (1.12) $ (1.36) $ 0.00 $ 0.00 $ (9.07)
Year ended 10/31/97 .... 16.48 (.23)(b) 3.65 3.42 0.00 0.00 (1.13)
Year ended 10/31/96 .... 12.37 (.13) 4.26 4.13 (.02) 0.00 0.00
Year ended 10/31/95 .... 11.74 .03 .60 .63 0.00 0.00 0.00
Year ended 10/31/94 .... 10.97 0.00 .77 .77 0.00 0.00 0.00
Class B
Year ended 10/31/98 .... $ 18.76 $ (.27)(b) $ (1.12) $ (1.39) $ 0.00 $ 0.00 $ (9.07)
10/3/97++ to 10/31/97 .. 19.92 (.20)(b) (.96) (1.16) 0.00 0.00 0.00
Class C
11/5/97++ to 10/31/98 .. $ 19.15 $ (.27)(b) $ (1.54) $ (1.81) $ 0.00 $ 0.00 $ (9.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Please refer to the footnotes on page 66.
<CAPTION>
Less Distributions Ratios/Supplemental Data
------------------ -------------------------------------------------------------
Total Net Asset Ratio of Ratio of Net
Dividends Value, Net Assets, Expenses Income/Loss
and End of Total End of Period to Average to Average Portfolio
Fiscal Year or Period Distributions Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------- --------- ---------- --------------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Global
Small Cap Fund
Class A
Year ended 7/31/98 ..... $ (.99) $ 12.14 2.49% $ 82,843 2.16%(f) (.88)% 113%
Year ended 7/31/97 ..... (1.56) 12.87 26.47 85,217 2.41(f) (1.25) 129
Year ended 7/31/96 ..... (.53) 11.61 17.46 68,623 2.51 (1.22) 139
Year ended 7/31/95 ..... (2.11) 10.38 16.62 60,057 2.54(d) (1.17) 128
Period ended 7/31/94** . 0.00 11.08 (1.42) 61,372 2.42* (1.26)* 78
Class B
Year ended 7/31/98 ..... $ (.99) $ 11.20 1.80% $ 38,827 2.88%(f) (1.58)% 113%
Year ended 7/31/97 ..... (1.56) 12.03 25.42 31,946 3.11(f) (1.92) 129
Year ended 7/31/96 ..... (.53) 11.03 16.69 14,247 3.21 (1.88) 139
Year ended 7/31/95 ..... (2.11) 9.95 15.77 5,164 3.20(d) (1.92) 128
Period ended 7/31/94** . 0.00 10.78 (2.00) 3,889 3.15* (1.93)* 78
Class C
Year ended 7/31/98 ..... $ (.99) $ 11.22 1.79% $ 9,471 2.88%(f) (1.59)% 113%
Year ended 7/31/97 ..... (1.56) 12.05 25.37 8,718 3.10(f) (1.93) 129
Year ended 7/31/96 ..... (.53) 11.05 16.77 4,119 3.19 (1.85) 139
Year ended 7/31/95 ..... (2.11) 9.96 15.75 1,407 3.25(d) (2.10) 128
Period ended 7/31/94** . 0.00 10.79 (1.91) 1,330 3.13* (1.92)* 78
Alliance International Fund
Class A
Year ended 6/30/98 ..... $ (1.26) $ 18.55 6.79% $131,565 1.65%(d) (.05)% 121%
Year ended 6/30/97 ..... (1.20) 18.69 9.30 190,173 1.74(f) .31 94
Year ended 6/30/96 ..... (1.05) 18.32 15.83 196,261 1.72 .31 78
Year ended 6/30/95 ..... (1.62) 16.81 .59 165,584 1.73 .26 119
Year ended 6/30/94 ..... (.56) 18.38 18.68 201,916 1.90 (.50) 97
Class B
Year ended 6/30/98 ..... $ (1.21) $ 17.41 5.92% $ 71,370 2.49%(d) (.90)% 121%
Year ended 6/30/97 ..... (1.08) 17.71 8.37 77,725 2.59(f) (.51) 94
Year ended 6/30/96 ..... (1.05) 17.45 14.87 72,470 2.55 (.46) 78
Year ended 6/30/95 ..... (1.62) 16.19 (.22) 48,998 2.57 (.62) 119
Year ended 6/30/94 ..... (.56) 17.90 17.65 29,943 2.78 (1.15) 97
Class C
Year ended 6/30/98 ..... $ (1.21) $ 17.42 5.85% $ 20,428 2.48%(d) (.90)% 121%
Year ended 6/30/97 ..... (1.08) 17.73 8.42 23,268 2.58(f) (.51) 94
Year ended 6/30/96 ..... (1.05) 17.46 14.85 26,965 2.53 (.47) 78
Year ended 6/30/95 ..... (1.62) 16.20 (.22) 19,395 2.54 (.88) 119
Year ended 6/30/94 ..... (.56) 17.91 17.72 13,503 2.78 (1.12) 97
Alliance Greater
China '97 Fund
Class A
9/3/97+ to 7/31/98 ..... $ (.06) $ 4.84 (51.20)% $ 445 2.52%(d)(f)* 1.20%* 58%
Class B
9/3/97+ to 7/31/98 ..... $ (.04) $ 4.82 (51.53)% $ 1,551 3.22%(d)(f)* .53%* 58%
Class C
9/3/97+ to 7/31/98 ..... $ (.04) $ 4.82 (51.53)% $ 102 3.22%(d)(f)* .50%* 58%
Alliance All-Asia
Investment Fund
Class A
Year ended 10/31/98 .... $ 0.00 $ 5.86 (22.28)% $ 3,778 3.74%(d) (1.50)% 93%
Year ended 10/31/97 .... (.34) 7.54 (29.61) 5,916 3.45(d) (1.97) 70
Year ended 10/31/96 .... (.08) 11.04 6.43 12,284 3.37*(d) (1.75) 66
11/28/94+ to 10/31/95 .. 0.00 10.45 4.50 2,870 4.42*(d) (1.87)* 90
Class B
Year ended 10/31/98 .... $ 0.00 $ 5.71 (22.73)% $ 8,844 4.49%(d) (2.22)% 93%
Year ended 10/31/97 .... (.34) 7.39 (30.09) 11,439 4.15(d) (2.67) 70
Year ended 10/31/96 .... (.08) 10.90 5.49 23,784 4.07(d) (2.44) 66
11/28/94+ to 10/31/95 .. 0.00 10.41 4.10 5,170 5.20*(d) (2.64)* 90
Class C
Year ended 10/31/98 .... $ 0.00 $ 5.72 (22.70)% $ 1,717 4.48%(d) 2.20% 93%
Year ended 10/31/97 .... (.34) 7.40 (30.06) 1,859 4.15(d) (2.66) 70
Year ended 10/31/96 .... (.08) 10.91 5.59 4,228 4.07(d) (2.42) 66
11/28/94+ to 10/31/95 .. 0.00 10.41 4.10 597 5.84*(d) (3.41) 90
Alliance Global
Environment Fund (h)
Class A
Year ended 10/31/98 .... $ (9.07) $ 8.34 (10.51)% $ 13,295 2.80%(f) (2.27)% 205%
Year ended 10/31/97 .... (1.13) 18.77 23.51 52,378 2.39 (1.35) 145
Year ended 10/31/96 .... (.02) 16.48 33.48 100,271 1.60 (.85) 268
Year ended 10/31/95 .... 0.00 12.37 5.37 85,416 1.57 .21 109
Year ended 10/31/94 .... 0.00 11.74 7.02 81,102 1.67 (.04) 42
Class B
Year ended 10/31/98 .... $ (9.07) $ 8.30 (10.79)% $ 152 3.52%(f) (2.93)% 205%
10/3/97++ to 10/31/97 .. 0.00 18.76 (5.82) 235 20.84 (1.03) 145
Class C
11/5/97++ to 10/31/98 .. $ (9.07) $ 8.27 (12.88)% $ 31 3.39%(f) (2.75)% 205%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
64 & 65
<PAGE>
+ Commencement of operations.
++ Commencement of distribution.
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and
a redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment returns calculated for periods
of less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and expense reimbursement.
(d) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, without giving effect to the expense offset arrangement
described in (i) below, would have been as follows:
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Alliance All-Asia Investment Fund
Class A -- 10.57%* 3.61% 3.57% 4.63%
Class B -- 11.32%* 4.33% 4.27% 5.39%
Class C -- 11.38%* 4.30% 4.27% 5.42%
Alliance Growth Fund
Class A 1.46% -- -- -- --
Class B 2.13% -- -- -- --
Class C 2.13%* -- -- -- --
Alliance Global Small Cap Fund
Class A -- 2.61% -- -- --
Class B -- 3.27% -- -- --
Class C -- 3.31% -- -- --
Alliance Utility Income Fund
Class A 13.72% 4.86%* 3.38% 3.55% 2.48%
Class B 14.42% 5.34%* 4.08% 4.28% 3.21%
Class C 14.42% 5.99%* 4.07% 4.28% 3.22%
Alliance International Fund
Class A -- -- -- -- 1.80%
Class B -- -- -- -- 2.64%
Class C -- -- -- -- 2.63%
Alliance Greater China '97 Fund
Class A -- -- -- -- 18.27%*
Class B -- -- -- -- 19.18%*
Class C -- -- -- -- 19.37%*
Alliance International Premier Growth Fund
Class A -- -- -- -- 5.19%
Class B -- -- -- -- 6.14%
Class C -- -- -- -- 6.00%
</TABLE>
- --------------------------------------------------------------------------------
For the expense ratios of the Funds in years prior to fiscal year 1993, assuming
the Funds had borne all expenses, please see the Financial Statements in each
Fund's Statement of Additional Information.
(e) "Distributions from Net Realized Gains" includes a return of capital of
$(.12).
(f) Amounts do not reflect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offset arrangements, the
ratio of expenses to average net assets, assuming the assumption and/or
waiver/reimbursement of expenses described in (f) above, would have been
as follows:
Alliance Balanced Shares 1997 1998
Class A 1.46% 1.29%
Class B 2.24% 2.05%
Class C 2.22% 2.04%
Alliance Real Estate
Investment Fund 1997 1998
Class A 1.77% --
Class B 2.43% --
Class C 2.42% --
Alliance Growth Fund 1997 1998
Class A 1.25% 1.21%
Class B 1.95% 1.93%
Class C 1.95% 1.92%
Alliance International Fund 1997 1998
Class A 1.73% --
Class B 2.58% --
Class C 2.56% --
Alliance Global
Small Cap Fund 1997 1998
Class A 2.38% 2.14%
Class B 3.08% 2.86%
Class C 3.08% 2.85%
Alliance Technology Fund 1997 1998
Class A 1.66% 1.65%
Class B 2.36% 2.38%
Class C 2.37% 2.38%
Alliance Greater
China '97 Fund 1997 1998
Class A -- 2.50%
Class B -- 3.20%
Class C -- 3.20%
Alliance New Europe Fund 1997 1998
Class A 2.04% 1.84%
Class B 2.74% 2.54%
Class C 2.73% 2.54%
Alliance Growth and
Income Fund 1997 1998
Class A .91% .92%
Class B 1.71% 1.71%
Class C 1.70% 1.71%
Alliance Quasar Fund 1997 1998
Class A -- 1.60
Class B -- 2.38
Class C -- 2.37
Alliance Premier Growth Fund 1997 1998
Class A -- 1.58%
Class B -- 2.27%
Class C -- 2.27%
Alliance Global Environment 1997 1998
Class A -- 2.79%
Class B -- 3.51%
Class C -- 3.38%
(g) Distributions from net investment income include a tax return of capital
of $.08, $.09 and $.08 for Class A, B and C shares, respectively.
(h) Alliance Global Environment Fund operated as a closed-end investment
company through October 3, 1997, when it converted to an open-end
investment company and all shares of its common stock then outstanding
were reclassified as Class A shares.
66
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
The following is additional information about the United Kingdom, Japan and
Greater China countries.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
Dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling-dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. Dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. Dollar. The pound sterling has since recovered due to
interest rate cuts throughout Europe and an upturn in the economy of the United
Kingdom. The average exchange rate of the U.S. Dollar to the pound sterling was
1.50 in 1993 and 1.66 in 1998. On January 22, 1999 the U.S. Dollar-pound
sterling exchange rate was 1.66.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
5,882.6 at the end of 1998, up approximately 15% from the end of 1997. On
October 5, 1998 the FT-SE 100 index closed at 4648.7, the lowest close in the
12-month period prior to that date, after reaching a high of 6179.0 on July 20,
1998. The FT-SE 100 index closed at 5861.2 on January 22, 1999.
The Economic and Monetary Union ("EMU") became effective on January 1, 1999.
When fully implemented in 2002, the EMU will establish a common currency for
European countries that meet the eligibility criteria and choose to
participate. Although the United Kingdom meets the eligibility criteria, the
government has not taken any action to join the EMU.
From 1979 until 1997 the Conservative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. Dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar, but has since
fallen from its post-World War II high (in 1995) against the U.S. Dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1997. On
December 31, 1998 the TOPIX closed at 1086.99, down approximately 7% from the
end of 1997. Certain valuation measures, such as price-to-book value and
price-to-cash flow ratios, indicate that the Japanese stock market is near its
lowest level in the last twenty years relative to other world markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan returned to a single-party government led by Ryutaro Hashimoto, a member
of the Liberal Democratic Party ("LDP"). While the LDP does not control a
majority of the seats in the parliament, subsequent to the 1996 elections it
established a majority in the House of Representatives as individual members
joined the ruling party. The popularity of the LDP declined, however, due to
the dissatisfaction with Mr. Hashimoto's leadership. In the July 1998 House of
Councillors election, the LDP's representation fell to 103 seats from 120
seats. As a result of the LDP's defeat, Mr. Hashimoto resigned as prime
minister and leader of the LDP. Mr. Hashimoto was replaced by Keizo Obuchi.
On January 14, 1999, the LDP formed a coalition government with a major
opposition party. As a result, Mr. Obuchi's administrtion strnghtened its
position in the parliament, where it increased its majority in the House of
Representatives and reduced its shortfall in the House of Councillors. For the
past several years, Japan's banking industry has been weakened by a significant
amount of problem loans.
67
<PAGE>
Japan's banks also have significant exposure to the current financial turmoil
in other Asian markets. Following the insolvency of one of Japan's largest
banks in November 1997, the government proposed several plans designed to
strengthen the weakened banking sector. In October 1998, the Japanese
parliament approved several new laws that will make $508 billion in public
funds available to increase the capital of Japanese banks, to guarantee
depositors' accounts and to nationalize the weakest banks. It is unclear
whether these new laws will achieve their intended effect. For further
information regarding Japan, see the Statements of Additional Information of
Alliance International Fund and Alliance All-Asia Investment Fund.
Investment in Greater China Issuers. China, in particular, but Hong Kong and
Taiwan, as well, in significant measure because of their existing and increasing
economic, and now in the case of Hong Kong, direct political ties with China,
may be subject to a greater degree of economic, political and social instability
than is the case in the United States.
China's economy is very much in transition. While the government still controls
production and pricing in major economic sectors, significant steps have been
taken toward capitalism and China's economy has become increasingly market
oriented. China's strong economic growth and ability to attract significant
foreign investment in recent years stem from the economic liberalization
initiated by Deng Xiaoping who assumed power in the late 1970s. The economic
growth, however, has not been smooth and has been marked by extremes in many
respects of inordinate growth, which has not been tightly controlled, followed
by rigid measures of austerity.
The rapidity and erratic nature of the growth have resulted in inefficiencies
and dislocations, including at times high rates of inflation.
China's economic development has occurred notwithstanding the continuation of
the power of China's Communist Party and China's authoritarian government
control, not only of centrally planned economic decisions, but of many aspects
of the social structure. While a significant portion of China's population has
benefited from China's economic growth, the conditions of many leave much room
for improvement. Notwithstanding restrictions on freedom of expression and the
absence of a free press, and notwithstanding the extreme manner in which past
unrest has been dealt with, the 1989 Tianamen Square uprising being a recent
reminder, the potential for renewed popular unrest associated with demands for
improved social, political and economic conditions cannot be dismissed.
Following the death of Deng Xiaoping in February 1997, Jian Zemin became the
leader of China's Communist Party. The transfer of political power has
progressed smoothly and Jiang's popularity and credibility have gradually
increased. Jiang continues to consolidate his power, but as of yet does not
appear to have the same degree of control as did Deng Xiaoping. Jiang has
continued the market-oriented policies of Deng. Currently, China's major
economic challenge centers on reforming or eliminating inefficient state-owned
enterprises without creating an unacceptable level of unemployment. Recent
capitalistic policies have in many respects effectively outdated the Communist
Party and the governmental structure, but both remain entrenched. The Communist
Party still controls access to governmental positions and closely monitors
governmental action. Essentially there exists an inefficient set of parallel
bureaucracies and attendant opportunities for corruption.
In addition to the economic impact of China's internal political uncertainties,
the potential effect of China's actions, not only on China Itself, but on Hong
Kong and Taiwan as well, could also be significant.
China is heavily dependent on foreign trade, particularly with Hong Kong,
Japan, the U.S., South Korea and Taiwan. Political developments adverse to its
trading partners, as well as political and social repression, could cause the
U.S. and others to alter their trading policy towards China. For example, in
the the U.S., the continued extension of most favored nation trading status to
China which is reviewed regularly and was reviewed in 1998 is an issue of
significant controversy. Loss of that status would clearly hurt China's economy
by reducing its exports. With much of China's trading activity being funneled
through Hong Kong and with trade through Taiwan becoming increasingly
significant, any sizable reduction in demand for goods from China would have
negative implications for both countries. China is believed to be the largest
investor in Hong Kong and its markets and an economic downturn in China would
be expected to reverberate through Hong Kong's markets as well.
China has committed by treaty to preserve Hong Kong's autonomy and its
economic, political and social freedoms for fifty years from the July 1, 1997
transfer of sovereignty from Great Britain to China. Hong Kong is headed by a
chief executive, appointed by the central government of China, whose power is
checked by both the government of China and a Legislative Council. Although Hong
Kong voters voted overwhelmingly for pro-democracy candidates in the recent
election, it remains possible that China could exert its authority so as to
alter the economic structure, political structure or existing social policy of
Hong Kong. Investor and business confidence in Hong Kong can be significantly
affected by such developments, which in turn can affect markets and business
performance. In this connection, it is noted that a substantial portion of the
companies listed on the Hong Kong Stock Exchange are involved in real
estate-related activities.
The securities markets of China and to a lesser extent Taiwan, are relatively
small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, Alliance Greater China '97 Fund may experience greater
price volatility and significantly lower liquidity than a portfolio invested
solely in equity securities of U.S. companies. These markets may be subject to
greater influence by adverse events generally affecting the market, and by large
investors trading significant blocks of securities, than is usual in the U.S.
securities settlements may in some instances be subject to delays and related
administrative uncertainties.
Foreign investment in the securities markets of China and Taiwan is restricted
or controlled to varying degrees. These restrictions or controls, which apply to
the Alliance Greater China '97 Fund may at times limit or preclude investment in
68
<PAGE>
certain securities and may increase the cost and expenses of the Fund. China and
Taiwan require governmental approval prior to investments by foreign persons or
limit investment by foreign persons to only a specified percentage of an
issuer's outstanding securities or a specific class of securities which may have
less advantageous terms (including price) than securities of the company
available for purchase by nationals. In addition, the repatriation of investment
income, capital or the proceeds of sales of securities from China and Taiwan is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose restrictions on foreign
capital remittances.
Alliance Greater China '97 Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental approval for repatriation, as well
as by the application to it of other restrictions on investment. The liquidity
of the Fund's investments in any country in which any of these factors exists
could be affected by any such factor or factors on the Fund's investments. The
limited liquidity in certain Greater China markets is a factor to be taken into
account in the Fund's valuation of portfolio securities in this category and may
affect the Fund's ability to dispose of securities in order to meet redemption
requests at the price and time it wishes to do so. It is also anticipated that
transaction costs, including brokerage commissions for transactions both on and
off the securities exchanges in Greater China countries, will be higher than in
the U.S.
Issuers of securities in Greater China countries are generally not subject to
the same degree of regulation as are U.S. issuers with respect to such matters
as timely disclosure of information, insider trading rules, restrictions on
market manipulation and shareholder proxy requirements. Reporting, accounting
and auditing standards of Greater China countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in securities of Greater China country issuers
than to investors in securities of U.S. issuers.
Investment in Greater China companies which are in the initial stages of their
development involves greater risk than is customarily associated with securities
of more established companies. The securities of such companies may have
relatively limited marketability and may be subject to more abrupt or erratic
market movements than securities of established companies or broad market
indices.
69
<PAGE>
For more information about the Funds, the following documents are available upon
request:
o Annual/Semi-Annual Reports to Shareholders
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected a Fund's performance during its last fiscal year.
o Statement of Additional Information (SAI)
Each Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Funds' SAIs are
incorporated by reference into (and is legally part of) this prospectus.
You may request a free copy of the current annual/semi-annual report or the SAI,
by contacting your broker or other financial intermediary, or by contacting
Alliance:
By Mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
By Phone: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
In Person: at the Commission's Public Reference Room in Washington, D.C.
By Phone: 1-800-SEC-0330
By Mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
On the Internet: www.sec.gov
Your also may find more information about Alliance and the Funds on the Internet
at: www.Alliancecapital.com
70
<PAGE>
- ----------------------------
Alliance Stock Funds
Subscription Application
- ----------------------------
The Alliance Fund
Growth Fund
Premier Growth Fund
Technology Fund
Quasar Fund
International Fund
International Premier Growth Fund
Worldwide Privatization Fund
New Europe Fund
All-Asia Investment Fund
Alliance Greater China `97 Fund
Global Small Cap Fund
Global Environment Fund
Balanced Shares
Utility Income Fund
Growth & Income Fund
Real Estate Investment Fund
To Open Your New Alliance Account...
Please complete the application and mail it to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration (Required)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
o Individuals, Joint Tenants, Transfer on Death and Gift/Transfer to a
Minor:
o Indicate your name(s) exactly as it appears on your social
security card.
o Transfer on Death:
o Ensure that your state participates
o Trust/Other:
o Indicate the name of the entity exactly as it appeared on the
notice you received from the IRS when your Employer
Identification number was assigned.
Section 2 Your Address (Required)
Complete in full.
o Non-Resident Alien:
o Indicate your permanent country of residence.
Section 3 Your Initial Investment (Required)
For each fund in which you are investing: (1) Write the three digit fund
number in the column titled `Indicate three digit fund number located below'.
(2) Write the dollar amount of your initial purchase in the column titled
`Indicate Dollar Amount'.
(If you are eligible for a reduced sales charge, you must also complete Section
4F). (3) Check off a distribution option for your dividends. (4) Check off a
distribution option for your capital gains. All distributions (dividends and
capital gains) will be reinvested into your fund account unless you direct
otherwise. If you want distributions sent directly to your bank account, then
you must complete Section 4D and attach a preprinted, voided check for that
account. If you want your distributions sent to a third party you must complete
Section 4E.
Section 4 Your Shareholder Options
(Complete only those options you want)
A. Automatic Investment Plans (AIP) - You can make periodic investments into any
of your Alliance Funds in one of three ways. First, by a periodic withdrawal
($25 minimum) directly from your bank account and invested into an Alliance
Fund. Second, you can direct your distributions (dividends and capital gains)
from one Alliance Fund into another Fund. Or third, you can automatically
exchange monthly ($25 minimum) shares of one Alliance Fund for shares of another
Fund. To elect one of these options, complete the appropriate portion of Section
4A & 4D. If more than one dividend direction or monthly exchange is desired,
please call our Literature Center to obtain a Shareholder Account Services
Options Form for completion.
B. Telephone Transactions via EFT - Complete this option if you would like to be
able to transact via telephone between your fund account and your bank account.
C. Systematic Withdrawal Plans (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be made
via Electronic Funds Transfer (EFT) to your bank account or by check.
D. Bank Information - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a preprinted, voided check of the account you wish to use to this
section of the application.
E. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person and/or
address other than those provided in section 1 or 2, complete this option.
Medallion Signature Guarantee is required if your account is not maintained by a
broker dealer.
F. Reduced Charges (Class A only) - Complete if you would like to link fund
accounts that have combined balances that might exceed $100,000 so that future
purchases will receive discounts. Complete if you intend to purchase over
$100,000 within 13 months.
Section 5 Shareholder Authorization
(Required) All owners must sign. If it is a custodial, corporate, or trust
account, the custodian, an authorized officer, or the trustee respectively must
sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At: (800)
221-5672.
---------------------------------------
For Literature Call: (800) 227-4618
---------------------------------------
<PAGE>
The Alliance Stock Funds Subscription Application
- --------------------------------------------------------------------------------
1. Your Account Registration (Please Print in Capital Letters and Mark Check
Boxes Where Applicable)
- --------------------------------------------------------------------------------
|_| Individual Account [ |_| Male |_| Female ] - or - |_| Joint Account - or -
|_| Transfer On Death [ |_| Male |_| Female ] - or - Gift/Transfer to a Minor
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Owner or Custodian (First Name) (MI) (Last Name)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
(First Name) Joint Owner*, (MI) (Last Name)
Transfer On Death Beneficiary
or Minor
|_| |_| |_| - |_| |_| - |_| |_| |_| |_|
Social Security Number of Owner or Minor
(required to open account)
If Uniform Gift/Transfer
to Minor Account:
|_| |_| Minor's State of Residence
If Joint Tenants Account: * The Account will be registered "Joint Tenants with
right of Survivorship" unless you indicate otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust - or - |_| Corporation - or - |_| Other
-------------------------------
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name of Trustee if applicable (MI) (Last Name)
(First Name)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name of Trust or Corporation or Other Entity
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name of Trust or Corporation or Other Entity continued
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Trust Dated (MM, DD, YYYY) Tax ID Number (required to open account)
|_| Employer ID Number - OR - |_| Social Security
Number
- --------------------------------------------------------------------------------
2. Your Address
- --------------------------------------------------------------------------------
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Street Number Street Name
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
City State Zip code
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_| |_| |_| - |_| |_| |_| |_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
90062GEN-TASFApp-P1 Alliance Capital [LOGO](R)
1
<PAGE>
- --------------------------------------------------------------------------------
3. Your Initial Investment
- --------------------------------------------------------------------------------
I hereby subscribe for shares of the following Alliance Stock Fund(s) Advisor
Class and elect distribution options as indicated.
- ---------------------------------------
Broker/Dealer Use Only: Wire Confirm #
|_| |_| |_| |_| |_| |_| |_| |_|
- ---------------------------------------
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
C Send my distributions in cash to the address I have provided in Section 2.
(Complete Section 4D for direct deposit to your bank account. Complete
Section 4E for payment to a third party).
D Direct my distributions to another Alliance fund. Complete the appropriate
portion of Section 4A to direct your distributions (dividends and capital
gains) to another Alliance Fund.
- ----------- ------------- ---------------------- ---------------------------
Make all Distribution Options
checks* Indicate three *Check One
payable to: digit Fund Indicate Dollar Amount ---------------------------
Alliance number Dividends Capital Gains
Funds located below R C D R C D
- ----------- ------------- ---------------------- ----------- -------------
|_| |_| |_| $ |__________________| |R| |C| |D| |R| |C| |D|
|_| |_| |_| $ |__________________| |R| |C| |D| |R| |C| |D|
|_| |_| |_| $ |__________________| |R| |C| |D| |R| |C| |D|
|_| |_| |_| $ |__________________| |R| |C| |D| |R| |C| |D|
- ----------------------
Total Investment $ |__________________|
- ----------------------
* Cash and money orders are not accepted
- --------------------------------------------------------------------------------
Alliance Stock Fund Names and Numbers
- --------------------------------------------------------------------------------
------------- -------------- ------------
Contingent
Initial Sales Deferred Sales Asset-Based
Charge Charge Sales Charge
A B C
------------- -------------- ------------
The Alliance Fund 044 043 344
----------------------------------------------------------------------
Growth Fund 031 001 331
----------------------------------------------------------------------
Domestic Premier Growth Fund 078 079 378
----------------------------------------------------------------------
Technology Fund 082 282 382
----------------------------------------------------------------------
Quasar Fund 026 029 326
- --------------------------------------------------------------------------------
International Fund 040 041 340
----------------------------------------------------------------------
International Premier Growth 179 279 379
----------------------------------------------------------------------
Worldwide Privatization Fund 112 212 312
----------------------------------------------------------------------
Global New Europe Fund 062 058 362
----------------------------------------------------------------------
All-Asia Investment Fund 118 218 318
----------------------------------------------------------------------
Alliance Greater China '97
Fund 160 260 360
----------------------------------------------------------------------
Global Small Cap Fund 045 048 345
- --------------------------------------------------------------------------------
Global Environment Fund 181 281 381
- --------------------------------------------------------------------------------
Balanced Shares 096 075 396
----------------------------------------------------------------------
Utility Income Fund 009 209 309
Total ----------------------------------------------------------------------
Return Growth & Income Fund 094 074 394
----------------------------------------------------------------------
Real Estate Investment Fund 110 210 310
- --------------------------------------------------------------------------------
90062GEN-TASFApp-P2
2
<PAGE>
- --------------------------------------------------------------------------------
4. Your Shareholder Options
- --------------------------------------------------------------------------------
A. Automatic Investment Plans (AIP)
|_| Withdraw From My Bank Account Via EFT* I authorize Alliance to draw on my
bank account for investment in my fund account(s) as indicated below
(Complete Section 4D also for the bank account you wish to use).
1 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
2 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
3 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
Frequency: M = monthly Q = quarterly A = annually
* Electronic Funds Transfer. Your bank must be a member of the
National Automated Clearing House Association (NACHA)
|_| Direct My Distributions As indicated in Section 3, I would like my
dividends and/or capital gains directed to the same class of shares of
another Alliance Fund.
FROM: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
TO: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
|_| Exchange My Shares Monthly I authorize Alliance to transact monthly
exchanges, within the same class of shares, between my fund accounts as
listed below.
FROM: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
|_| |_| , |_| |_| |_|.00 |_| |_|
Amount ($25 minimum) Day of Exchange**
TO: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
** Shares exchanged will be redeemed at the net asset value on the "Day of
Exchange" (If the "Day of Exchange" is not a fund business day, the
exchange transaction will be processed on the next fund business day). The
exchange privilege is not available if stock certificates have been
issued.
B. Purchases and Redemptions Via EFT
You can call our toll-free number 1-800-221-5672 and instruct Alliance
Fund Services, Inc. in a recorded conversation to purchase, redeem or
exchange shares for your account. Purchase and redemption requests will be
processed via electronic funds transfer (EFT) to and from your bank
account.
Instructions: o Review the information in the Prospectus about
telephone transaction services.
o If you select the telephone purchase or redemption
privilege, you must write "VOID" across the face
of a check from the bank account you wish to use
and attach it to Section 4D of this application.
|_| Purchases and Redemptions via EFT
I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected.
- --------------------------------------------------------------------------------
For shares recently purchased by check or electronic funds transfer
redemption proceeds will not be made available until the Fund is
reasonably assured the check or electronic funds transfer has been
collected, normally 15 calendar days after the purchase date.
- --------------------------------------------------------------------------------
90062GEN-TASFApp-P3
3
<PAGE>
- --------------------------------------------------------------------------------
4. Your Shareholder Options (CONTINUED)
- --------------------------------------------------------------------------------
C. Systematic Withdrawal Plans (SWP)
In order to establish a SWP, you must reinvest all dividends and capital
gains.
|_| I authorize Alliance to transact periodic redemptions from my fund
account and send the proceeds to me as indicated below.
1 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
2 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
3 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
Frequency: M = monthly Q = quarterly A = annually
Please send my SWP proceeds to:
|_| My Address of Record (via check)
|_| The Payee and address specified in section 4E (via check) (Medallion
Signature Guarantee required)
|_| My checking account-via EFT (complete section 4D) Your bank must be
a member of the National Automated Clearing House Association
(NACHA) in order for you to receive SWP proceeds directly into your
bank account. Otherwise payment will be made by check
D. Bank Information This bank account information will be used for:
|_| Distributions (Section 3)
|_| Automatic Investments (Section 4A)
|_| Telephone Transactions (Section 4B)
|_| Withdrawals (Section 4C)
- --------------------------------------------------------------------------------
Please Tape a Pre-printed Voided Check Here*
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
* The above services cannot be established without a pre-printed voided
check.
For EFT transactions, the fund requires signatures of bank account owners
exactly as they appear on bank records. If the registration at the bank
differs from that on the Alliance mutual fund, all parties must sign in
Section 5.
|_| |_| |_| |_| |_| |_| |_| |_| |_|
Your Bank's ABA Routing Number
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Your Bank Account Number
|_| Checking Account |_| Savings Account
90062GEN-TASFApp-P4
4
<PAGE>
- --------------------------------------------------------------------------------
4. Your Shareholder Options (CONTINUED)
- --------------------------------------------------------------------------------
E. Third Party Payment Details Your signature(s) in Section 5 must be
Medallion Signature Guaranteed if your account is not maintained by a
broker/dealer. This third party payee information will be used for:
|_| Distributions (section 3) |_| Systematic Withdrawals (section 4C)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name (First Name) (MI) (Last Name)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Street Number Street Name
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
City State Zip code
F. Reduced Charges (Class A only) If you, your spouse or minor children own
shares in other Alliance funds, you may be eligible for a reduced sales
charge. Please complete the Right to Accumulation section or the Statement
of Intent section.
|_| A. Right of Accumulation
Please link the tax identification numbers or account numbers
listed below for Right of Accumulation privileges, so that this and
future purchases will receive any discount for which they are
eligible.
________________________ ________________________
________________________ ________________________
Tax ID or Account Number Tax ID or Account Number
________________________
________________________
Tax ID or Account Number
|_| B. Statement of Intent
I want to reduce my sales charge by agreeing to invest the
following amount over a 13-month period:
|_| $100,000 |_| $250,000 |_| $500,000 |_| $1,000,000
If the full amount indicated is not purchased within 13 months, I
understand that an additional sales charge must be paid from my
account.
- --------------------------------------------------------------------------------
Dealer/Agent Authorization - For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 5, as well as the legal capacity of the
shareholder.
____________________________________ ______________________________________
Dealer/Agent Firm Authorized Signature
___________________________ |_| ______________________________________
Representative First Name MI Last Name
____________________________________ ______________________________________
Dealer/Agent Firm Number Representative Number
____________________________________ ______________________________________
Branch Number Branch Telephone Number
______________________________________________________________________________
Branch Office Address
____________________________________ |_| |_| ____________________________
City State Zip Code
90062GEN-TASFApp-P5
5
<PAGE>
- --------------------------------------------------------------------------------
5. Shareholder Authorization -- This section MUST be completed
- --------------------------------------------------------------------------------
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of an investment dealer or agent requesting a
redemption or exchange on my behalf. (NOTE: Telephone exchanges may only
be processed between accounts that have identical registrations.)
Telephone redemption checks will only be mailed to the name and address of
record; and the address must not have changed within the last 30 days. The
maximum telephone redemption amount is $50,000 for redemptions by check.
|_| I do not elect the telephone exchange service
|_| I do not elect the telephone redemption by check service
By selecting any of the above telephone privileges, I agree that neither
the Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund
Services, Inc. or other Fund Agent will be liable for any loss, injury,
damage or expense as a result of acting upon telephone instructions
purporting to be on my behalf, that the Fund reasonably believes to be
genuine, and that neither the Fund nor any such party will be responsible
for the authenticity of such telephone instructions. I understand that any
or all of these privileges may be discontinued by me or the Fund at any
time. I understand and agree that the Fund reserves the right to refuse
any telephone instructions and that my investment dealer or agent reserves
the right to refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the
best of my knowledge and belief, I qualify as a foreign person as
indicated in Section 2.
I am of legal age and capacity and have received and read the Prospectus
and agree to its terms.
I certify under penalty of perjury that the number shown in Section 1 of
this form is my correct tax identification number or I am waiting for a
number to be issued to me and that I have not been notified that this
account is subject to backup withholding.
The Internal Revenue Service does not require your consent to any
provision of this document other than the certification required to avoid
backup withholding.
- ----------------------------------------------------------- -------------
Signature Date
- ----------------------------------------------------------- -------------
Signature Date
- --------------------------------------------
Medallion Signature Guarantee required if
completing Section 4E and your mutual
fund is not maintained by a broker dealer
90062GEN-TASFApp-P6 Alliance Capital [LOGO](R)
6
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 33-37848 and 811-06028.
<PAGE>
The Alliance
Stock Funds
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return.
Advisor Class Prospectus and Application
February 1, 1999
Domestic Stock Funds
o Alliance Premier Growth Fund
o Alliance Growth Fund
o Alliance Technology Fund
o Alliance Quasar Fund
o The Alliance Fund
Total Return Funds
o Alliance Growth & Income Fund
o Alliance Balanced Shares
o Alliance Utility Income Fund
o Alliance Real Estate
Investment Fund
Global Stock Funds
o Alliance New Europe Fund
o Alliance Worldwide
Privatization Fund
o Alliance International
Premier Growth Fund
o Alliance Global Small Cap Fund
o Alliance International Fund
o Alliance Greater China '97 Fund
o Alliance All-Asia Investment Fund
o Alliance Global Environment Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
Alliance Capital [LOGO](R)
<PAGE>
2
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page
RISK/RETURN SUMMARY......................................................... 3
Domestic Stock Funds........................................................ 4
Total Return Funds.......................................................... 9
Global Stock Funds.......................................................... 13
Summary of Principal Risks.................................................. 21
Principal Risks by Fund..................................................... 22
FEES AND EXPENSES OF THE FUNDS.............................................. 23
GLOSSARY.................................................................... 26
DESCRIPTION OF THE FUNDS.................................................... 27
Investment Objectives and Policies.......................................... 27
Description of Investment Practices......................................... 39
Additional Risk Considerations.............................................. 46
MANAGEMENT OF THE FUNDS..................................................... 50
PURCHASE AND SALE OF SHARES................................................. 53
How The Funds Value Their Shares............................................ 53
How To Buy Shares........................................................... 53
How to Exchange Shares...................................................... 53
How To Sell Shares.......................................................... 53
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................................... 54
CONVERSION FEATURE.......................................................... 55
GENERAL INFORMATION......................................................... 56
FINANCIAL HIGHLIGHTS........................................................ 57
APPENDIX A--ADDITIONAL INFORMATION
ABOUT THE UNITED KINGDOM, JAPAN, AND
GREATER CHINA COUNTRIES..................................................... 61
- --------------------------------------------------------------------------------
The Funds' investment adviser is Alliance Capital Management L.P., a global
investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Alliance Stock
Funds. You will find additional information about each Fund, including a
detailed description of the risks of an investment in each Fund, after this
Summary.
The Risk/Return Summary describes the Funds' objectives, principal investment
strategies, principal risks and fees. Each Fund's Summary page includes a
short discussion of some of the principal risks of investing in that Fund. A
further discussion of these and other risks is on page 21.
More detailed descriptions of the Funds, including the risks associated with
investing in the Funds, can be found further back in this Prospectus. Please be
sure to read this additional information BEFORE you invest. Each of the Funds
also may at times use certain types of investment derivatives such as options,
futures, forwards, and swaps. The use of these techniques involves special risks
that are discussed in this Prospectus.
The Summary includes a table for each Fund showing its average annual returns
and a bar chart showing its annual returns. The table and bar chart provide an
indication of the historical risk of an investment in each Fund by showing:
o how the Fund's average annual returns for one, five, and 10 years
(or over the life of the Fund if the Fund is less than 10 years
old) compare to those of a broad based securities market index; and
o changes in the Fund's performance from year to year over 10 years
(or over the life of the Fund if the Fund is less than 10 years
old).
A Fund's past performance, of course, does not necessarily indicate how it will
perform in the future.
Other important things for you to note:
o You may lose money by investing in the Funds.
o An investment in the Funds is not a deposit in a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation
or any other government agency.
3
<PAGE>
DOMESTIC STOCK FUNDS
The Domestic Stock Funds offer investors seeking capital appreciation a range of
alternative approaches to investing primarily in U.S. equity markets.
Alliance Premier Growth Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital by investing
predominantly in equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of U.S. companies. Unlike most
equity funds, the Fund focuses on a relatively small number of intensively
researched companies. Alliance selects the Fund's investments from a research
universe of more than 600 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects.
Normally, the Fund invests in about 40-50 companies, with the 25 most highly
regarded of these companies usually constituting approximately 70% of the Fund's
net assets. During market declines, while adding to positions in favored stocks,
the Fund becomes somewhat more aggressive, gradually reducing the number of
companies represented in its portfolio. Conversely, in rising markets, while
reducing or eliminating fully-valued positions, the Fund becomes somewhat more
conservative, gradually increasing the number of companies represented in its
portfolio. Through this approach, Alliance seeks to gain positive returns in
good markets while providing some measure of protection in poor markets. The
Fund also may invest up to 20% of its net assets in convertible securities.
Among the principal risks of investing in the Fund is market risk. Because the
Fund invests in a smaller number of securities than many other equity funds,
your investment has the risk that changes in the value of a single security
may have a more significant effect, either negative or positive, on the Fund's
net asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class 49.85% 42.97%
- --------------------------------------------------------------------------------
S&P 500 Index 28.60% 31.43%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
n/a n/a n/a n/a n/a n/a n/a n/a 33.11 49.85
- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 31.15%, 4th quarter, 1998; and Worst Quarter was down
- -12.02%, 3rd quarter, 1998.
4
<PAGE>
Alliance Growth Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital. Current income
is incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of companies with favorable
earnings outlooks and whose long-term growth rates are expected to exceed that
of the U.S. economy over time. The Fund emphasizes investments in large- and
mid-cap companies. The Fund also may invest up to 25% of its total assets in
lower-rated fixed-income securities and convertible bonds and generally up to
15% of its total assets in foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in mid-cap companies may be more volatile then investments in large-cap
companies. To the extent the Fund invests in lower-rated fixed-income
securities and convertible bonds, your investment may have interest rate or
credit risk. The Fund's investments in foreign securities have foreign risk
and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class 28.55% 29.34%
- --------------------------------------------------------------------------------
S&P 500 Index 28.60% 31.43%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
n/a n/a n/a n/a n/a n/a n/a n/a 27.46 28.55
- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 28.97%, 4th quarter, 1998; and Worst Quarter was down
- -16.20%, 3rd quarter, 1998.
5
<PAGE>
Alliance Technology Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is growth of capital. Current income is
incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in securities of companies that use technology
extensively in the development of new or improved products or processes. Within
this framework, the Fund may invest in any company and industry and in any type
of security with potential for capital appreciation. It invests in well-known,
established companies or in new or unseasoned companies. The Fund also may
invest in debt securities and up to 10% of its total assets in foreign
securities.
Among the principal risks of investing in the Fund is market risk. In addition,
technology stocks, especially those of smaller, less-seasoned companies, tend
to be more volatile than the overall stock market. To the extent the Fund
invests in debt and foreign securities, your investment has credit risk,
currency risk and foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class 63.68% 30.01%
- --------------------------------------------------------------------------------
S&P 500 Index 28.60% 31.43%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
n/a n/a n/a n/a n/a n/a n/a n/a 4.84 63.68
- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 39.98%, 4th quarter, 1998; and Worst Quarter was down
- -16.43%, 4th quarter, 1997.
6
<PAGE>
Alliance Quasar Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is growth of capital by pursuing aggressive
investment policies. Current income is incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund generally invests in a widely-diversified portfolio of equity
securities spread among many industries that offer the possibility of
above-average earnings growth. The Fund currently emphasizes investment in small
cap companies. The Fund invests in well-known and established companies and in
new and unseasoned companies. The Fund can invest in the equity securities of
any company and industry and in any type of security with potential for capital
appreciation. When selecting securities, Alliance considers the economic and
political outlook, the values of specific securities relative to other
investments, trends in the determinants of corporate profits, and management
capabilities and practices. The Fund also may invest in non-convertible bonds,
preferred stocks, and foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in smaller companies tend to be more volatile than investments in large-cap or
mid-cap companies. To the extent the Fund invests in non-convertible bonds,
preferred stocks, and foreign stocks, your investment has interest rate risk,
credit risk, currency risk and foreign risks.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class -4.30% 6.74%
- --------------------------------------------------------------------------------
Russell 2000 Index -2.55% 11.83%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
n/a n/a n/a n/a n/a n/a n/a n/a 17.48 -4.30
- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 17.44%, 4th quarter, 1998; and Worst Quarter was down
- -28.39%, 3rd quarter, 1998.
7
<PAGE>
The Alliance Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital and income
primarily through investments in common stocks.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund normally invests substantially all of its assets in high-quality common
stocks that Alliance expects to increase in value. The Fund may invest in a
broad range of companies, from large to small, but tends to emphasize attractive
opportunities in mid-cap companies. While the Fund's diversified and
high-quality investments cannot prevent fluctuations in market values, they tend
to limit investment risk and contribute to achieving the Fund's objective. The
Fund also may invest in convertible securities, U.S. Government securities, and
foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in mid-cap companies may be more volatile than investments in large-cap
companies. To the extent the Fund invests in convertible securities and U.S.
Government securities, your investment may have interest rate or credit risk.
The Fund's investments in foreign securities have currency risk and foreign
risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class -2.41% 18.30%
- --------------------------------------------------------------------------------
S&P 400 Mid-Cap Index 18.25% 26.14%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
n/a n/a n/a n/a n/a n/a n/a n/a 36.27 -2.41
- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 23.88%, 4th quarter, 1998; and Worst Quarter was down
- -24.17%, 3rd quarter, 1998.
8
<PAGE>
TOTAL RETURN FUNDS
The Total Return Funds offer investors seeking both growth of capital and
current income a range of investment alternatives.
Alliance Growth & Income Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is appreciation through investments primarily in
dividend-paying common stocks of good quality, although the Fund also may invest
in fixed-income and convertible securities.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in dividend-paying common stocks of large,
well-established "blue-chip" companies. The Fund also may invest in fixed-income
and convertible securities and in securities of foreign issuers.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. The Fund's investments in foreign securities have
currency risk and foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class 21.48% 27.57%
- --------------------------------------------------------------------------------
S&P 500 Index 28.60% 31.43%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
n/a n/a n/a n/a n/a n/a n/a n/a 29.57 21.48
- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 23.28%, 4th quarter, 1998; and Worst Quarter was down
- -13.76%, 3rd quarter, 1998.
9
<PAGE>
Alliance Balanced Shares
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is high return through a combination of current
income and capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in a diversified portfolio of equity and fixed-income
securities. The percentage of the Fund's assets invested in each type of
security will vary, but at least 25% of the Fund's total assets will be invested
in fixed-income senior securities. The Fund invests in common and preferred
stocks, U.S. Government and agency securities, bonds and senior debt
securities. The Fund's investments in each type of security depends on current
economic conditions and market outlooks. The Fund also may invest up to 15% of
its total assets in foreign equity and fixed-income securities.
Among the principal risks of investing in the Fund are market risk, interest
rate risk, allocation risk and credit risk. To the extent the Fund invests in
foreign securities, your investment has currency risk and foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class 16.03% 21.61%
- --------------------------------------------------------------------------------
S&P 500 Index 28.60% 31.43%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
n/a n/a n/a n/a n/a n/a n/a n/a 27.43 16.03
- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 13.52%, 4th quarter, 1998; and Worst Quarter was down
- -6.36%, 3rd quarter, 1998.
10
<PAGE>
Alliance Utility Income Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in income-producing equity securities. The Fund
invests in securities of utility companies in the electric, telecommunications,
gas, and water utility industries. The Fund may invest in both U.S. and foreign
utility companies, although the Fund will limit its investments in issuers in
any one foreign country to no more than 15% of its total assets. The Fund may
invest up to 35% of its net assets in lower-rated securities and up to 30% of
its net assets in convertible securities.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. Because the Fund invests a substantial portion of
its assets in companies in a specific industry, there is the risk that factors
affecting utility companies will have a significant effect of the value of the
Fund's investments. To the extent the Fund invests in lower-rated securities,
your investment is subject to more credit risk than a fund that invests in
higher-rated securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class 24.83% 28.57%
- --------------------------------------------------------------------------------
NYSE Utility 33.04% 30.13%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
n/a n/a n/a n/a n/a n/a n/a n/a 31.16 24.83
- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 15.63%, 4th quarter, 1997; and Worst Quarter was down
- -3.01%, 1st quarter, 1997.
11
<PAGE>
Alliance Real Estate Investment Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is total return from long-term growth of capital
and income principally through investing in equity securities of companies that
are primarily engaged in or related to the real estate industry.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of real estate investment trusts
or "REITs" and other real estate industry companies. The Fund invests in real
estate companies that Alliance believes have strong property fundamentals and
management teams. The Fund seeks to invest in real estate companies whose
underlying portfolios are diversified geographically and by property type. The
Fund may invest up to 35% of its total assets in mortgage-backed securities,
which are securities that directly or indirectly represent participations in, or
are collateralized by and payable from, mortgage loans secured by real property.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. Because the Fund invests a substantial portion of
its assets in the real estate market, it has many of the same risks as direct
ownership of real estate including the risk that the value of real estate could
decline due to a variety of factors affecting the real estate market. In
addition, REITs are dependent on the capability of their managers, may have
limited diversification, and could be significantly affected by changes in tax
laws. The Fund's investments in mortgage-backed securities have prepayment risk,
which is the risk that mortgage loans will be prepaid when interest rates
decline and the Fund will have to reinvest in securities with lower interest
rates. This risk causes mortgage-backed securities to have significantly greater
price and yield volatility than traditional fixed-income securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class -20.05% 7.79%
- --------------------------------------------------------------------------------
S&P 500 Index 28.60% 31.43%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
n/a n/a n/a n/a n/a n/a n/a n/a 23.27 -20.05
- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 14.51%, 3rd quarter, 1997; and Worst Quarter was down
- -12.33%, 3rd quarter, 1998.
12
<PAGE>
GLOBAL STOCK FUNDS
The Global Stock Funds offer investors seeking long-term capital appreciation a
range of alternative approaches to investing in foreign securities.
Alliance New Europe Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation through
investments primarily in the equity securities of companies based in Europe.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of European companies. The Fund
diversifies its investments among a number of European countries and normally
invests in companies based in at least three of these countries, although it may
invest 25% or more of its assets in issuers in a single country. The Fund may
invest up to 35% of its total assets in high-quality U.S. Dollar or foreign
currency denominated fixed-income securities issued or guaranteed by European
governmental entities, European or multinational companies, or supranational
organizations. At December 31, 1998, the Fund had approximately 26% of its
assets invested in securities of United Kingdom issuers.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. In addition, the Fund's investments in U.S.
Dollar or foreign currency denominated fixed-income securities have interest
rate and credit risks.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class 25.39% 23.61%
- --------------------------------------------------------------------------------
MSCI Europe Index 28.91% 28.30%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
n/a n/a n/a n/a n/a n/a n/a n/a 17.08 25.39
- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 22.56%, 1st quarter, 1998; and Worst Quarter was down
- -19.61%, 3rd quarter, 1998.
13
<PAGE>
Alliance Worldwide Privatization Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of companies that are
undergoing, or have undergone, privatization. The Fund also invests in
securities of companies that will benefit from privatizations. The Fund takes
advantage of investment opportunities, historically inaccessible to U.S.
individual investors, that result from the privatization of state enterprises in
both established and developing economies. Because privatizations are integral
to a country's economic restructuring, securities sold in initial public
offerings often are attractively priced to secure the issuer's transition to
private sector ownership. In addition, these enterprises often dominate their
local markets and have the potential for significant managerial and operational
efficiency gains.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in four, and usually considerably more, countries. The
Fund may invest up to 30% of its total assets in any one of France, Germany,
Great Britain, Italy, and Japan and may invest all of its assets in a single
world region. The Fund also may invest up to 35% of its total assets in debt
securities and convertible debt securities of privatized companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Investments in companies that are undergoing or,
have undergone, privatization could have more risk because they have no
operating history as a private company. In addition, the Fund's investments in
U.S. Dollar or foreign currency denominated fixed-income securities have
interest rate and credit risks.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class 9.33% 13.04%
- --------------------------------------------------------------------------------
MSCI EAFE Index 20.33% 11.30%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
89 90 91 92 93 94 95 96 97 98
- --------------------------------------------------------------------------------
n/a n/a n/a n/a n/a n/a n/a n/a 13.45 9.33
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 16.58%, 1st quarter, 1998; and Worst Quarter was down
- -17.42%, 3rd quarter, 1998.
14
<PAGE>
Alliance International Premier Growth Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital by investing
predominantly in equity securities of a limited number of carefully selected
non-U.S. companies that are judged likely to achieve superior earnings growth.
Current income is incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of comparatively large,
high-quality, non-U.S. companies. The Fund invests in at least four, and usually
considerably more, countries. Normally, the Fund invests no more than 15% of its
total assets in issuers of any one foreign country, but may invest up to 25% of
its total assets in each of Canada, France, Germany, Italy, Japan, The
Netherlands, Switzerland and the United Kingdom. Unlike more typical
international equity funds, the Fund focuses on a relatively small number of
intensively researched companies. Alliance selects the Fund's investments from a
research universe of approximately 900 companies.
Normally, the Fund invests in about 60 companies, with the 30 most highly
regarded of these companies usually constituting approximately 70% of the Fund's
net assets. The Fund invests in companies with market values in the range
of the average weighted market capitalizations of companies in the EAFE
index (currently approximately $35 billion). Alliance may take advantage of
market volatility to adjust the Fund's portfolio positions. To the extent
consistent with local market liquidity considerations, the Fund strives
to capitalize on apparently unwarranted price fluctuations, both to
purchase or increase positions on weakness and to sell or reduce overpriced
holdings. The Fund invests primarily in equity securities and also may invest
in convertible securities.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. In addition, since the Fund invests in a smaller
number of securities than many other international equity funds, changes in
the value of a single security may have a more significant effect, either
negative or positive, on the Fund's net asset value.
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
15
<PAGE>
Alliance Global Small Cap Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital through
investment in a global portfolio of equity securities of selected companies with
relatively small market capitalizations.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of global companies, both
domestic and foreign, with relatively small market capitalizations. The Fund's
investments emphasize companies that are in the smallest 20% of the U.S. stock
market (or less than approximately $1.5 billion). Although these companies are
small by U.S. standards, they may be among the largest companies in their own
countries. The Fund may invest up to 35% of its total assets in securities of
companies whose market capitalizations exceed the Fund's size standard. The Fund
invests in at least three countries including the U.S.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class 3.81% 6.59%
- --------------------------------------------------------------------------------
MSCI World Index 24.80% 20.87%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
89 90 91 92 93 94 95 96 97 98
- --------------------------------------------------------------------------------
n/a n/a n/a n/a n/a n/a n/a n/a 8.44 3.81
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 17.82%, 4th quarter, 1998; and Worst Quarter was down
- -22.96%, 3rd quarter, 1998.
16
<PAGE>
Alliance International Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is total return from long-term growth of capital
and income primarily through investment in a broad portfolio of marketable
securities of established non-U.S. companies, companies participating in
foreign economies with prospects for growth, including U.S. companies having
their principal activities and interests outside the U.S. and in foreign
government securities.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of established non-U.S.
companies, companies participating in foreign economies with prospects for
growth, including U.S. companies having their principal activities and interests
outside the U.S., and foreign government securities. The Fund diversifies its
investments broadly among countries and normally invests in companies in at
least three foreign countries, although it may invest a substantial portion of
its assets in companies in one or more foreign countries.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class 9.96% 5.85%
- --------------------------------------------------------------------------------
MSCI World Index
(minus the U.S.) 19.11% 11.05%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
89 90 91 92 93 94 95 96 97 98
- --------------------------------------------------------------------------------
n/a n/a n/a n/a n/a n/a n/a n/a 1.59 9.96
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 15.81%, 4th quarter, 1998; and Worst Quarter was down
- -17.80%, 3rd quarter, 1998.
17
<PAGE>
Alliance Greater China '97 Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation through
investment of at least 80% of its total assets in equity securities of Greater
China companies.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in equity securities of Greater China companies, which are
companies in China, Hong Kong, and Taiwan. Of these countries, the Fund expects
to invest a significant portion of its assets, which may be greater than 50%, in
Hong Kong companies and may invest all of its assets in Hong Kong companies or
companies of either of the other Greater China countries. The Fund also may
invest in convertible securities and equity-linked debt securities issued or
guaranteed by Greater China companies or Greater China Governments, their
agencies, or instrumentalities. As of December 31, 1998 the Fund had
approximately 75% of its assets invested in securities of Hong Kong companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Because it invests in Greater China companies,
the Fund's returns will be significantly more volatile and differ
substantially from U.S. markets generally. Your investment also has the
risk that market changes or other events affecting the Greater China
countries, including political instability and unpredictable economic
conditions, may have a more significant effect on the Fund's net asset value.
In addition, the Fund is "non-diversified" meaning that it invests its assets
in a smaller number of companies than many other international funds. As a
result, changes in the value of a single security may have a more significant
effect, either negative or positive, on the Fund's net asset value. The Fund's
investments in debt securities have interest rate and credit risks.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class -7.87% -26.74%
- --------------------------------------------------------------------------------
MSCI China Free Index -43.83% -54.48%
- --------------------------------------------------------------------------------
MSCI Hong Kong Index -2.92% -25.58%
- --------------------------------------------------------------------------------
MSCI Taiwan Index -20.64% -30.14%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 9/3/97. Index returns from 9/30/97.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
89 90 91 92 93 94 95 96 97 98
- --------------------------------------------------------------------------------
n/a n/a n/a n/a n/a n/a n/a n/a n/a -7.87
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 27.38%, 4th quarter, 1998; and Worst Quarter was down
- -26.92%, 2nd quarter, 1998.
18
<PAGE>
Alliance All-Asia Investment Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund primarily invests in securities of various types of companies based
in Asia. The Fund invests in equity securities, preferred stocks, and
equity-linked debt securities issued by Asian companies and may invest more
than 50% of its total assets in equity securities of Japanese issuers. The
Fund also may invest up to 35% of its total assets in debt securities issued
or guaranteed by Asian companies or by Asian governments, their agencies or
instrumentalities, and may invest up to 25% of its net assets in convertible
securities. At December 31, 1998, the Fund had approximately 60% of its total
assets invested in securities of Japanese companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Because it invests in Asian and Pacific region
countries and emerging markets, the Fund's returns will be significantly more
volatile and may differ substantially from the overall U.S. market generally.
Your investment has the risk that market changes or other factors affecting
Asian and Pacific region countries and other emerging markets, including
political instability and unpredictable economic conditions, may have a more
significant effect on the Fund's net asset value. To the extent that the
Fund invests a substantial amount of its assets in Japanese companies, your
investment has the risk that market changes or other events affecting that
country may have a more significant effect on the Fund's net asset value. In
addition, the Fund's investments in debt securities have interest rate and
credit risks.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class -12.15% -22.56%
- --------------------------------------------------------------------------------
MSCI All Country Asia
Pacific Index 2.03% -13.49%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 10/1/96. Index return from 10/31/96.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
n/a n/a n/a n/a n/a n/a n/a n/a -34.83 -12.15
- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 13.57%, 4th quarter, 1998; and Worst Quarter was down
- -18.65%, 4th quarter, 1997.
19
<PAGE>
Alliance Global Environment Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation through
investment of substantially all of its assets in equity securities of companies
that are expected to benefit from advances or improvements in products,
processes or services intended to foster the protection of the environment.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in environmental companies, which are companies whose
principal business involves the sale of environmental protection systems or
services. The Fund also invests in companies whose principal business lies
outside the environmental sector but who anticipate environmental regulations or
consumer preferences through the development of new products or services that
would contribute to a cleaner and healthier environment. The Fund will invest
substantially all of its assets in these two types of companies. The Fund
invests in securities of companies in at least three, and normally
considerably more, countries. At December 31, 1998, the Fund had approximately
82% invested in equity securities of U.S. companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Because it invests in non-U.S. companies and in
specific types of companies that provide environmental services, the Fund's
returns will be more volatile and differ, sometimes substantially, from the
overall U.S. market generally. The Fund's investments also have the risk that
government regulations or other action could negatively affect the business of
environmental companies.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year Inception*
- --------------------------------------------------------------------------------
Advisor Class -2.99% 0.09%
- --------------------------------------------------------------------------------
S&P 500 Index 28.60% 28.60%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1998.
*Advisor Class shares inception date: 12/29/97. Index return from 12/31/97.
BAR CHART
- --------------------------------------------------------------------------------
The following chart shows the annual return for the Advisor Class shares since
inception.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
n/a n/a n/a n/a n/a n/a n/a n/a n/a -2.99
- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best Quarter was up 15.74%, 1st quarter, 1998; and Worst Quarter was down
- -19.83%, 3rd quarter, 1998.
20
<PAGE>
SUMMARY OF PRINCIPAL RISKS
The value of your investment in a Fund will change with changes in the values of
that Fund's investments. Many factors can affect those values. In this Summary,
we describe the principal risks that may affect a Fund's portfolio as a whole.
These risks and the Funds particularly subject to these risks appear in a chart
at the end of the section. All Funds could be subject to additional principal
risks because the types of investments made by each Fund can change over time.
This Prospectus has additional descriptions of the types of investments that
appear in bold type in the discussions under "Description of Investment
Practices" or "Additional Risk Considerations." These sections also include more
information about the Funds, their investments, and related risks.
MARKET RISK
This is the risk that the value of a Fund's investments will fluctuate as the
stock or bond markets fluctuate and that prices overall will decline over short
or longer-term periods. All of the Alliance Stock Funds are subject to market
risk.
SECTOR RISK
This is the risk of investments in a particular industry sector. Market or
economic factors affecting that industry sector could have a major effect on the
value of a Fund's investments. Funds particularly subject to this risk are
Alliance Technology Fund, Alliance Utility Income Fund, Alliance Real Estate
Investment Fund, Alliance Worldwide Privatization Fund and Alliance Global
Environment Fund. This risk may be greater for Alliance Technology Fund because
technology stocks, especially those of smaller, less-seasoned companies, tend to
be more volatile than the overall market.
CAPITALIZATION RISK
This is the risk of investments in small- to mid-capitalization companies.
Investments in mid-cap companies may be volatile than investments in large-cap
companies. Alliance Growth Fund and The Alliance Fund are particularly subject
to this risk. Investments in small-cap companies tend to be more volatile than
investments in large-cap or mid-cap companies. A Fund's investments in smaller
capitalization stocks may have additional risks because these companies often
have limited product lines, markets or financial resources. Alliance Quasar
Fund and Alliance Global Small Cap Fund are particularly subject to this risk.
INTEREST RATE RISK
This is the risk that changes in interest rates will affect the value of a
Fund's investments in income-producing, fixed-income (i.e., debt) securities.
Increases in interest rates may cause the value of a Fund's investments to
decline and this decrease in value may not be offset by the higher interest rate
income. Interest rate risk is particularly applicable to Funds that invest in
fixed-income securities and is greater for those Alliance Stock Funds that
invest a substantial portion of their assets in fixed-income securities, such as
Alliance Growth and Income Fund, Alliance Balanced Shares and Alliance Utility
Income Fund. Interest rate risk is greater for those Funds that invest in
lower-rated securities or comparable unrated securities ("junk bonds") such as
Alliance Utility Income Fund. Alliance Real Estate Investment Fund also has more
exposure to interest rate risk because it invests in real estate industry
companies and in mortgage-backed securities.
CREDIT RISK
This is the risk that the issuer of a security or the other party to an
over-the-counter transaction, will be unable or unwilling to make timely
payments of interest or principal, or to otherwise honor its obligations. The
degree of risk for a particular security may be reflected in its credit rating.
Credit risk is applicable to Funds that invest in fixed-income securities and is
greater for those Alliance Stock Funds that invest a substantial portion of
their assets in lower-rated securities, such as Alliance Utility Income Fund.
FOREIGN RISK
This is the risk of investments in issuers located in foreign countries. All
Alliance Stock Funds with foreign securities are subject to this risk,
including, in particular, Alliance New Europe Fund, Alliance Worldwide
Privatization Fund, Alliance International Premier Growth Fund, Alliance Global
Small Cap Fund, Alliance International Fund, Alliance Greater China '97 Fund,
Alliance All-Asia Investment Fund and Alliance Global Environment Fund. Fund's
investing in foreign securities may experience more rapid and extreme changes in
value than Funds with investments solely in securities of U.S. companies. This
is because the securities markets of many foreign countries are relatively
small, with a limited number of companies representing a small number of
industries. Additionally, foreign securities issuers are usually not subject to
the same degree of regulation as U.S. issuers. Reporting, accounting, and
auditing standards of foreign countries differ, in some cases significantly,
from U.S. standards. Also, nationalization, expropriation or confiscatory
taxation, currency blockage, or political changes or diplomatic developments
could adversely affect a Fund's investments in a foreign country. In the event
of nationalization, expropriation, or other confiscation, a Fund could lose its
entire investment.
COUNTRY OR GEOGRAPHIC RISK
This is the risk of investments in issuers located in a particular country or
geographic region. Market changes or other factors affecting that country or
region, including political instability and unpredictable economic conditions,
may have a particularly significant effect on a Fund's net asset value. The
Funds particularly subject to this risk are Alliance New Europe Fund,
21
<PAGE>
Alliance Worldwide Privatization Fund, Alliance International Fund,
Alliance Greater China '97 Fund and Alliance All-Asia Investment Fund.
CURRENCY RISK
This is the risk that fluctuations in the exchange rates between the U.S.
Dollar and foreign currencies may negatively affect the value of a Fund's
investments. Funds with foreign securities are subject to this risk,
including, in particular, Alliance New Europe Fund, Alliance Worldwide
Privatization Fund, Alliance International Premier Growth Fund, Alliance Global
Small Cap Fund, Alliance International Fund, Alliance Greater China '97 Fund,
Alliance All-Asia Investment Fund and Alliance Global Environment Fund.
MANAGEMENT RISK
Each Alliance Stock Fund is subject to management risk because it is an actively
managed investment portfolio. Alliance will apply its investment techniques and
risk analyses in making investment decisions for the Funds, but there is no
guarantee that its decisions will produce the intended result.
FOCUSED PORTFOLIO RISK
Funds, such as Alliance Premier Growth Fund and Alliance International Premier
Growth Fund, that invest in a limited number of companies, may have more risk
because changes in the value of a single security may have a more significant
effect, either negative or positive, on the Fund's net asset value. Similarly,
Alliance Greater China '97 Fund may have more risk because it is
"non-diversified," meaning that it can invest more of its assets in a smaller
number of companies than many other international funds.
ALLOCATION RISK
Alliance Balanced Shares has the risk that the allocation of its investments
between equity and debt securities may have a more significant effect on the
Fund's net asset value when one of these asset classes is performing more poorly
than the other.
PRINCIPAL RISKS BY FUND
- --------------------------------------------------------------------------------
The following chart summarizes the principal risks of each Fund. Risks not
marked for a particular Fund may, however, still apply to some extent to that
Fund at various times.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Capital- Interest Country or Focused
Market Sector ization Rate Credit Foreign Geographic Currency Manage- Portfolio Allocation
Fund Risk Risk Risk Risk Risk Risk Risk Risk ment Risk Risk Risk
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Premier
Growth Fund o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth Fund o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Technology Fund o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Quasar Fund o o o
- ------------------------------------------------------------------------------------------------------------------------------------
The Alliance Fund o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth and
Income Fund o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Balanced Shares o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Utility
Income Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Real Estate
Investment Fund o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance New Europe Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Worldwide
Privatization Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance International
Premier Growth Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Global
Small Cap Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance International
Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Greater China
'97 Fund o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance All-Asia
Investment Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Global
Environment Fund o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUNDS
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds.
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
Advisor Class Share
-------------------
Maximum Front-end or Deferred Sales Charge (Load) None
(as a percentage of original purchase
price or redemption proceeds,
whichever is lower)
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) and
EXAMPLES
The Examples are to help you compare the cost of investing in the Funds with the
cost of investing in other funds. They assume that you invest $10,000 in each
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods. They also assume that your investment has a 5% return
each year, that the Fund's operating expenses stay the same and that all
dividends and distributions are reinvested. Your actual costs may be higher or
lower.
Operating Expenses Examples
- ---------------------------------------- ---------------------------------
Alliance Premier Growth Fund
Management fees 1.00% After 1 year $ 128
12b-1 fees None After 3 years $ 400
Other expenses .26% After 5 years $ 692
----- After 10 years $ 1,523
Total fund operating expenses 1.26%
=====
Alliance Growth Fund
Management fees .70% After 1 year $ 95
12b-1 fees None After 3 years $ 296
Other expenses .23% After 5 years $ 515
----- After 10 years $ 1,143
Total fund operating expenses 0.93%
=====
Alliance Technology Fund
Management fees 1.02% After 1 year $ 139
12b-1 fees None After 3 years $ 434
Other expenses .35% After 5 years $ 750
----- After 10 years $ 1,646
Total fund operating expenses 1.37%
=====
Alliance Quasar Fund
Management fees 1.04% After 1 year $ 140
12b-1 fees None After 3 years $ 437
Other expenses .34% After 5 years $ 755
----- After 10 years $ 1,657
Total fund operating expenses 1.38%
=====
The Alliance Fund
Management fees .67% After 1 year $ 85
12b-1 fees None After 3 years $ 265
Other expenses .16% After 5 years $ 460
----- After 10 years $ 1,025
Total fund operating expenses 0.83%
=====
Alliance Growth and Income Fund
Management fees .48% After 1 year $ 78
12b-1 fees None After 3 years $ 243
Other expenses .28% After 5 years $ 422
----- After 10 years $ 942
Total fund operating expenses 0.76%
=====
Alliance Balanced Shares Fund
Management fees .63% After 1 year $ 108
12b-1 fees None After 3 years $ 337
Other expenses .43% After 5 years $ 585
----- After 10 years $ 1,294
Total fund operating expenses 1.06%
=====
23
<PAGE>
Operating Expenses Examples
- ---------------------------------------- ---------------------------------
Alliance Utility Income Fund
Management fees .75% After 1 year $ 122
12b-1 fees None After 3 years $ 381
Other expenses 1.46% After 5 years $ 660
----- After 10 years $ 1,455
Total fund operating expenses 2.21%
=====
Waiver and/or expense
reimbursement (a) (1.01)%
=====
Net expenses 1.20%
=====
Alliance Real Estate Investment Fund
Management fees .90% After 1 year $ 127
12b-1 fees None After 3 years $ 397
Other expenses .35% After 5 years $ 686
----- After 10 years $ 1,511
Total fund operating expenses 1.25%
=====
Alliance New Europe Fund
Management fees 1.02% After 1 year $ 159
12b-1 fees None After 3 years $ 493
Other expenses .54% After 5 years $ 850
----- After 10 years $ 1,856
Total fund operating expenses 1.56%
=====
Alliance Worldwide Privatization Fund
Management fees 1.00% After 1 year $ 148
12b-1 fees None After 3 years $ 459
Other expenses .45% After 5 years $ 792
----- After 10 years $ 1,735
Total fund operating expenses 1.45%
=====
Alliance International Premier Growth Fund
Management fees 1.00% After 1 year $ 223
12b-1 fees None After 3 years $ 688
Other expenses 5.28% After 5 years $ 1,180
----- After 10 years $ 2,534
Total fund operating expenses 6.28%
=====
Waiver and/or expense
reimbursement (a) (4.08)%
Net expenses 2.20%
=====
Alliance Global Small Cap Fund
Management Fees 1.00% After 1 year $ 190
12b-1 Fees None After 3 years $ 588
Other Expenses .87% After 5 years $ 1,011
----- After 10 years $ 2,190
Total fund operating expenses 1.87%
=====
Alliance International Fund
Management fees 1.00% After 1 year $ 150
12b-1 fees None After 3 years $ 465
Other expenses .62% After 5 years $ 803
----- After 10 years $ 1,757
Total fund operating expenses 1.62%
=====
Waiver and/or expense
reimbursement (a) (.15)%
Net expenses 1.47%
=====
Alliance Greater China '97 Fund
Management fees 1.00% After 1 year $ 225
12b-1 fees None After 3 years $ 694
Other expenses 17.13% After 5 years $ 1,190
----- After 10 years $ 2,554
Total fund operating expenses 18.13%
=====
Waiver and/or expense
reimbursement (a) (15.91)%
=====
Net expenses 2.22%
=====
24
<PAGE>
Operating Expenses Examples
- ---------------------------------------- ---------------------------------
Alliance All-Asia Investment Fund
Management fees 1.00% After 1 year $ 273
12b-1 fees None After 3 years $ 838
Administration fees .15% After 5 years $ 1,430
Other operating expenses 3.24% After 10 years $ 3,032
-----
Total fund operating expenses 4.39%
=====
Waiver and/or expense
reimbursement (a) (1.69)%
=====
Net Expenses 2.70%
=====
Alliance Global Environment Fund
Management Fees(b) 1.10% After 1 year $ 472
12b-1 Fees None After 3 years $ 1,419
Other Expenses(b) 3.61% After 5 years $ 2,372
----- After 10 years $ 4,779
Total fund operating expenses 4.71%
=====
(a) Reflects Alliance's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses.
(b) Management fees and other expenses for Alliance Global Environment Fund
are based on estimated amounts for its current fiscal year.
25
<PAGE>
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
This Prospectus uses the following terms.
TYPES OF SECURITIES
Convertible securities are fixed-income securities that are convertible into
common stock.
Debt securities are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Equity securities include (i) common stocks, partnership interests, business
trust shares and other equity or ownership interests in business enterprises and
(ii) securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
Fixed-income securities are debt securities and dividend-paying preferred
stocks, including floating rate and variable rate instruments.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold under Rule 144A of the
Securities Act.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
TYPES OF COMPANIES
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Beneficiary Companies are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and healthier
environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous waste.
Eligible Companies are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
Environmental companies are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
Greater China company is an entity that (i) is organized under the laws of a
Greater China country and conducts business in a Greater China country, (ii)
derives 50% or more of its total revenues from businesses in Greater China
countries, or (iii) issues equity or debt securities that are traded principally
on a stock exchange in a Greater China country. A company of a particular
Greater China country is a company that meets any of these criteria with respect
to that country.
Greater China countries are the People's Republic of China ("China"), the Hong
Kong Special Administrative Region of the People's Republic of China ("Hong
Kong") and the Republic of China ("Taiwan").
Non-U.S. Company is an entity that (i) is organized under the laws of a foreign
country and conducts business in a foreign country, (ii) derives 50% or more of
its total revenues from business in foreign countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in a foreign
country.
RATING AGENCIES, RATED SECURITIES and INDEXES
Duff & Phelps is Duff & Phelps Credit Rating Co.
EAFE Index is Morgan Stanley Capital International Europe, Australasia and Far
East ("EAFE") Index.
Fitch is Fitch IBCA, Inc.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or B and above by S&P, Duff & Phelps or Fitch, or determined by Alliance
to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Moody's is Moody's Investors Service, Inc.
26
<PAGE>
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
S&P is Standard & Poor's Ratings Services.
S&P 500 Index is S&P's 500 Composite Stock Price Index, a widely recognized
unmanaged index of market activity.
OTHER
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Commission is the Securities and Exchange Commission.
Exchange is the New York Stock Exchange.
Securities Act is the Securities Act of 1933, as amended.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- --------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
Funds' investment objectives, principal strategies and risks. Of course, there
can be no assurance that any Fund will achieve its investment objective.
Please note that:
o Additional discussion of the Funds' investments, including the risks of
the investments, can be found in the discussion under Description of
Investment Practices following this section.
o The description of the principal risks for a Fund may include risks
described in the Summary of Principal Risks above. Additional information
about the risks of investing in a Fund can be found in the discussion
under Additional Risk Considerations.
o Additional descriptions of each Fund's strategies, investments and risks
can be found in the Fund's Statement of Additional Information or SAI.
o Except as noted, (i) the Funds' investment objectives are "fundamental"
and cannot be changed without a shareholder vote, and (ii) the Funds'
investment policies are not fundamental and thus can be changed without a
shareholder vote.
INVESTMENT OBJECTIVES AND POLICIES
DOMESTIC STOCK FUNDS
The Domestic Stock Funds offer investors seeking capital appreciation a range of
alternative approaches to investing in the U.S. equity markets.
Alliance Premier Growth Fund
Alliance Premier Growth Fund seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. As a matter of fundamental policy, the Fund normally invests at
least 85% of its total assets in the equity securities of U.S. companies. A U.S.
company is a company that is organized under United States law, has its
principal office in the United States and issues equity securities that are
traded principally in the United States. Normally, about 40-50 companies will be
represented in the Fund's portfolio, with the 25 most highly regarded of these
companies usually constituting approximately 70% of the Fund's net assets. The
Fund is thus atypical from most equity mutual funds in its focus on a relatively
small number of intensively researched companies. The Fund is designed for those
seeking to accumulate capital over time with less volatility than that
associated with investment in smaller companies.
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more than
600 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies included in the S&P 500 Index.
The Fund also may:
o invest up to 20% of its net assets in convertible securities;
o invest up to 5% of its net assets in rights or warrants;
o invest up to 15% of its total assets in foreign securities;
o purchase and sell exchange-traded index options and stock index futures
contracts; and
27
<PAGE>
o write covered exchange-traded call options on its securities of up to 15%
of its total assets, and purchase and sell exchange-traded call and put
options on common stocks written by others of up to, for all options, 10%
of its total assets.
Because the Fund invests in a smaller number of securities than many other
equity funds, your investment has the risk that changes in the value of a single
security may have a more significant effect, either negative or positive, on the
Fund's net asset value.
Alliance Growth Fund
Alliance Growth Fund seeks long-term growth of capital. Current income is only
an incidental consideration. The Fund seeks to achieve its objective by
investing primarily in equity securities of companies with favorable
earnings outlooks and long-term growth rates that are expected to exceed that of
the U.S. economy over time. The Fund's investment objective is not fundamental.
The Fund also may invest up to 25% of its total assets in lower-rated
fixed-income securities and convertible bonds. The Fund generally will not
invest in securities rated at the time of purchase below Caa- by Moody's and
CCC- by S&P, Duff & Phelps or Fitch or in securities judged by Alliance to be of
comparable investment quality. From time to time, however, the Fund may invest
in securities rated in the lowest grades (i.e., C by Moody's or D or equivalent
by S&P, Duff & Phelps or Fitch) or securities of comparable investment quality
if there are prospects for an upgrade or a favorable conversion into equity
securities. If the credit rating of a security held by the Fund falls below its
rating at the time of purchase (or Alliance determines that the credit quality
of the security has deteriorated), the Fund may continue to hold the security if
such investment is considered appropriate under the circumstances.
The Fund also may:
o invest in zero-coupon and payment-in-kind bonds;
o invest in foreign securities although not generally in excess of 15% of
its total assets;
o buy or sell foreign currencies, options on foreign currencies, and foreign
currency futures contracts (and related options) and deal in forward
foreign currency exchange contracts;
o enter into forward commitments;
o buy and sell stock index futures contracts and options on future contracts
and on stock indices;
o purchase and sell futures contracts and options on futures contracts and
U.S. Treasury securities;
o write covered call and put options;
o purchase and sell put and call options;
o make loans of portfolio securities of up to 25% of its total assets; and
o enter into repurchase agreements of up to 25% of its total assets;
Alliance Technology Fund
Alliance Technology Fund emphasizes growth of capital and invests for capital
appreciation. Current income is only an incidental consideration. The Fund may
seek income by writing listed call options. The Fund invests primarily in
securities of companies expected to benefit from technological advances and
improvements (i.e., companies that use technology extensively in the development
of new or improved products or processes). The Fund will normally have at least
80% of its assets invested in the securities of these companies. The Fund
normally will have substantially all its assets invested in equity securities,
but it also invests in debt securities offering an opportunity for price
appreciation. The Fund will invest in listed and unlisted securities, in U.S.
securities, and up to 10% of its total assets in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund also may:
o write covered call options on its securities of up to 15% of its total
assets and purchase exchange-listed call and put options, including
exchange-traded index put options of up to, for all options, 10% of its
total assets;
o invest up to 10% of its total assets in warrants; and
o make loans of portfolio securities of up to 30% of its total assets.
Because the Fund invests primarily in technology companies, factors affecting
those types of companies could have a significant effect on the Fund's net asset
value. In addition, the Fund's investments in technology stocks, especially
those of smaller, less seasoned companies, tend to be more volatile than the
overall market. The Fund's investments in debt and foreign securities have
credit risk and foreign risk.
Alliance Quasar Fund
Alliance Quasar Fund seeks growth of capital by pursuing aggressive investment
policies. The Fund invests for capital appreciation and only incidentally for
current income. The Fund's practice of selecting securities based on the
possibility of appreciation cannot, of course, ensure against a loss in value.
Moreover, because the Fund's investment policies are aggressive, an investment
in the Fund is risky and investors who want assured income or preservation of
capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities for the
Fund, Alliance considers the economic and political outlook, the values of
specific securities relative to other investments, trends in the determinants of
corporate profits, and management capability and practices.
28
<PAGE>
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund can periodically
invest in the securities of companies that are expected to appreciate due to a
development particularly or uniquely applicable to a company regardless of
general business conditions or movements of the market as a whole.
The Fund also may:
o make short sales of securities against the box but not more than 15% of
its net assets may be deposited on short sales; and
o write covered call options of up to 15% of its total assets and purchase
and sell put and call options written by others of up to, for all options,
10% of its total assets.
Investments in smaller companies may have more risk because they tend to be more
volatile than the overall stock market. The Fund's investments in
non-convertible bonds, preferred stocks and foreign stocks may have credit risk
and foreign risk.
The Alliance Fund
The Alliance Fund seeks long-term growth of capital and income primarily through
investment in common stocks. The Fund normally invests substantially all of its
assets in common stocks that Alliance believes will appreciate in value. The
Fund also may invest in other types of securities such as convertible
securities, investment grade instruments, U.S. Government securities and high
quality, short-term obligations such as repurchase agreements, bankers'
acceptances and domestic certificates of deposit. The Fund may invest without
limit in foreign securities. The Fund generally does not effect portfolio
transactions in order to realize short-term trading profits or exercise control.
The Fund also may:
o write exchange-traded covered call options on up to 25% of its total
assets;
o make secured loans of portfolio securities of up to 25% of its total
assets;
o enter into repurchase agreements of up to seven days' duration with
commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily
available market quotations do not exceed 10% of its net assets;
While the diversification and generally high quality of the Fund's investments
cannot prevent fluctuations in market values, they tend to limit investment risk
and contribute to achieving the Fund's objective.
TOTAL RETURN FUNDS
The Total Return Funds provide a range of investment alternatives to investors
seeking both growth of capital and current income.
Alliance Growth and Income Fund
Alliance Growth and Income Fund seeks appreciation through investments primarily
in dividend-paying common stocks of good quality. The Fund also may invest in
fixed-income securities and convertible securities.
The Fund also may try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund restricts its investments in these securities to issues of high
quality. The Fund also may purchase and sell financial forward and futures
contracts and options on these securities for hedging purposes.
Alliance Balanced Shares
Alliance Balanced Shares seeks a high return through a combination of current
income and capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced" fund as a matter of fundamental policy.
The Fund invests in equity securities of high-quality, financially strong,
dividend-paying companies. Normally, the Fund's investments will consist of
about 60% in stocks, but stocks may make up to 75% of its investments. The Fund
will invest at least 25% of its total assets in investment grade debt
securities. These investments may include short- and long-term debt securities,
preferred stocks, convertible debt securities and convertible preferred stocks
to the extent that their values are attributable to their fixed-income
characteristics. Other than this restriction, the percentage of the Fund's
assets invested in each type of security will vary.
The Fund invests in U.S. Government securities, bonds, senior debt securities,
and preferred and common stocks in such proportions and of such type as Alliance
deems best adapted to the current economic and market outlooks. The Fund may
invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above.
The Fund also may:
o enter into contracts for the purchase or sale for future delivery of
foreign currencies;
o purchase and write put and call options on foreign currencies and enter
into forward foreign currency exchange contracts for hedging purposes; and
o subject to market conditions, write covered call options listed on a
domestic exchange to realize income.
As a balanced fund, the Fund has the risk that the allocation of its investments
between equity and debt securities may have a more significant effect on the
Fund's net asset value when one of these asset classes is performing more poorly
than the other.
Alliance Utility Income Fund
Alliance Utility Income Fund seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. As a
29
<PAGE>
fundamental policy, the Fund normally invests at least 65% of its total assets
in securities of companies in the utilities industry.
The Fund seeks to take advantage of the characteristics and historical
performance of securities of utility companies, many of which pay regular
dividends and increase their common stock dividends over time. The Fund
considers a company to be in the utilities industry if, during the most recent
twelve-month period, at least 50% of the company's gross revenues, on a
consolidated basis, were derived from its utilities activities.
The Fund may invest in securities of both U.S. and foreign issuers, although the
Fund will invest no more than 15% of its total assets in issuers in any one
foreign country. The Fund invests at least 65% of its total assets in
income-producing securities, but there is otherwise no limit on the allocation
of the Fund's investments between equity securities and fixed-income securities.
The Fund may invest up to 35% of its net assets in lower-rated securities. The
Fund will not retain a security that is downgraded below B or determined by
Alliance to have undergone similar credit quality deterioration following
purchase.
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies. These securities include U.S. Government securities and
repurchase agreements for those securities, foreign government securities,
corporate fixed-income securities of domestic issuers, corporate fixed-income
securities of foreign issuers denominated in foreign currencies or in U.S.
dollars (in each case including fixed-income securities of an issuer in one
country denominated in the currency of another country), qualifying bank
deposits, and prime commercial paper.
The Fund also may:
o invest up to 30% of its net assets in convertible securities;
o invest up to 5% of its net assets in rights or warrants;
o invest in depositary receipts, securities of supranational entities
denominated in the currency of any country, securities denominated in
European Currency Units, and "semi-governmental securities";
o write covered call and put options, purchase call and put options on
securities of the types in which it is permitted to invest that are
exchange-traded and over-the-counter, and write uncovered call options for
cross-hedging purposes;
o purchase and sell exchange-traded options on any securities index composed
of the types of securities in which it may invest;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including an index of U.S. Government securities,
foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts;
o purchase and write call and put options on foreign currencies traded on
U.S. and foreign exchanges or over-the-counter for hedging purposes;
o purchase or sell forward contracts;
o enter into interest rate swaps and purchase or sell interest rate caps and
floors;
o enter into forward commitments;
o enter into standby commitment agreements;
o enter into repurchase agreements for U.S. Government securities;
o make short sales of securities or maintain a short position; and
o make secured loans of portfolio securities of up to 20% of its total
assets.
The Fund's principal risks include those that arise from its investing primarily
in electric utility companies. Factors affecting that industry sector can have a
significant effect on the Fund's net asset value. The U.S. utilities industry
has experienced significant changes in recent years. Electric utility companies
in general have been favorably affected by lower fuel costs, the full or near
completion of major construction programs and lower financing costs. In
addition, many utility companies have generated cash flows in excess of current
operating expenses and construction expenditures, permitting some degree of
diversification into unregulated businesses. Regulatory changes, however, could
increase costs or impair the ability of nuclear and conventionally fueled
generating facilities to operate their facilities and reduce their ability to
make dividend payments on their securities. Rates of return of utility companies
generally are subject to review and limitation by state public utilities
commissions and tend to fluctuate with marginal financing costs. Rate changes
ordinarily lag behind changes in financing costs and can favorably or
unfavorably affect the earnings or dividend pay-outs of utilities stocks
depending upon whether the rates and costs are declining or rising.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition, and regulatory
changes. There also can be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
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Foreign utility companies, like those in the U.S., are generally subject to
regulation, although the regulation may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. As in the U.S., utility companies generally are required to seek government
approval for rate increases. In addition, many foreign utility companies use
fuels that cause more pollution than those used in the U.S. and may yet be
required to invest in pollution control equipment. Foreign utility regulatory
systems vary from country to country and may evolve in ways different from
regulation in the U.S. The percentage of the Fund's assets invested in issuers
of particular countries will vary.
Increases in interest rates may cause the value of the Fund's investments to
decline and the decrease in value may not be offset by higher interest rate
income. The Fund's investments in lower-rated securities may be subject to more
credit risk than a fund that invests in higher-rated securities.
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund seeks a total return from long-term growth
of capital and from income principally through investing in a portfolio of
equity securities of issuers that are primarily engaged in or related to the
real estate industry.
The Fund normally invests at least 65% of its total assets in equity securities
of real estate investment trusts, or REITs, and other real estate industry
companies. A "real estate industry company" is a company that derives at least
50% of its gross revenues or net profits from the ownership, development,
construction, financing, management, or sale of commercial, industrial, or
residential real estate or interests in these properties. The Fund invests in
equity securities that include common stock, shares of beneficial interest of
REITs, and securities with common stock characteristics, such as preferred stock
or convertible securities ("Real Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit certificates ("REMICs") and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These securities are
described below.
In selecting Real Estate Equity Securities, Alliance's analysis will focus on
determining the degree to which the company involved can achieve sustainable
growth in cash flow and dividend paying capability. Alliance believes that the
primary determinant of this capability is the economic viability of property
markets in which the company operates and that the secondary determinant of this
capability is the ability of management to add value through strategic focus and
operating expertise. The Fund will purchase Real Estate Equity Securities when,
in the judgment of Alliance, their market price does not adequately reflect this
potential. In making this determination, Alliance will take into account
fundamental trends in underlying property markets as determined by proprietary
models, site visits conducted by individuals knowledgeable in local real estate
markets, price-earnings ratios (as defined for real estate companies), cash flow
growth and stability, the relationship between asset value and market price of
the securities, dividend payment history, and such other factors that Alliance
may determine from time to time to be relevant. Alliance will attempt to
purchase for the Fund Real Estate Equity Securities of companies whose
underlying portfolios are diversified geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles that invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs, or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
The Fund's investment strategy with respect to Real Estate Equity Securities is
based on the premise that property market fundamentals are the primary
determinant of growth underlying the performance of Real Estate Equity
Securities. Value and management further distinguishes the most attractive Real
Estate Equity Securities. The Fund's research and investment process is designed
to identify those companies with strong property fundamentals and strong
management teams. This process is comprised of real estate market research,
specific property inspection, and securities analysis. Alliance believes that
this process will result in a portfolio that will consist of Real Estate Equity
Securities of companies that own assets in the most desirable markets across the
country, diversified geographically and by property type.
To implement the Fund's research and investment process, Alliance has retained
the consulting services of CB Richard Ellis, Inc. ("CBRE"), a publicly held
company and the largest real estate services company in the United States.
CBRE's business includes real estate brokerage, property and facilities
management, and real estate finance and investment advisory activities. The
universe of property-owning real estate industry firms consists of approximately
142 companies of sufficient size and quality to merit consideration for
investment by the Fund. As consultant to Alliance, CBRE provides access to its
proprietary model, REIT-Score, which analyzes the approximately 18,000
properties owned by these 142 companies. Using proprietary databases and
algorithms, CBRE analyzes local market rent, expenses, occupancy trends, market
specific transaction pricing, demographic and economic trends, and leading
indicators of real estate supply such as building
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permits. Over 1,000 asset-type specific geographic markets are analyzed and
ranked on a relative scale by CBRE in compiling its REIT-Score database. The
relative attractiveness of these real estate industry companies is similarly
ranked based on the composite rankings of the properties they own.
Once the universe of real estate industry companies has been distilled through
the market research process, CBRE's local market presence provides the
capability to perform site specific inspections of key properties. This analysis
examines specific location, condition, and sub-market trends. CBRE's use of
locally based real estate professionals provides Alliance with a window on the
operations of the portfolio companies as information can immediately be put in
the context of local market events. Only those companies whose specific property
portfolios reflect the promise of their general markets will be considered for
investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance makes extensive use of CBRE's network
of industry analysts in order to assess trends in tenant industries. This
information is then used to further evaluate management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
The Fund may invest in short-term investments including: corporate commercial
paper and other short-term commercial obligations, in each case rated or issued
by companies with similar securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; obligations (including
certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not rated, of equivalent credit quality as determined
by Alliance. The Fund expects that it will not retain a debt security that is
downgraded below BBB or Baa or, if unrated, determined by Alliance to have
undergone similar credit quality deterioration, subsequent to purchase by the
Fund.
The Fund also may:
o invest up to 15% of its net assets in convertible securities;
o enter into forward commitments;
o enter into standby commitment agreements; and
o make short sales of securities or maintain a short position but only if at
all times when a short position is open not more than 25% of the Fund's
net assets is held as collateral for such sales.
o invest up to 10% of its net assets in rights or warrants;
o make loans of portfolio securities of up to 25% of its total assets; and
o enter into repurchase agreements of up to seven days' duration.
Because the Fund invests a substantial portion of its assets in the real estate
market, it is subject to many of the same risks involved in direct ownership of
real estate. For example, the value of real estate could decline due to a
variety of factors affecting the real estate market generally, such as
overbuilding, increases in interest rates, or declines in rental rates. In
addition, REITs are dependent on the capability of their managers, may have
limited diversification, and could be significantly affected by changes in tax
laws.
The Fund's investments in mortgage-backed securities have prepayment risk, which
is the risk that mortgage loans will be prepaid when interest rates decline and
the Fund will have to reinvest in securities with lower interest rates. This
risk causes mortgage-backed securities to have significantly greater price and
yield volatility than traditional fixed-income securities. The Fund's
investments in REMICs, CMOs and other types of mortgage-backed securities may be
subject to special risks that are described under "Description of Investment
Practices."
GLOBAL STOCK FUNDS
The Global Stock Funds offer investors the opportunity to participate in the
potential for long-term capital appreciation available from investment in
foreign securities.
Alliance New Europe Fund
Alliance New Europe Fund seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in these securities. The Fund may invest up to 35% of
its total assets in high-quality U.S. Dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth. In addition, the emergence of new market economies in Europe and
the broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund invests in companies that Alliance
believes possess rapid growth potential. The Fund emphasizes investments in
larger, established companies, but also invests in smaller, emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European
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countries have been strengthened. Alliance believes that as this strengthening
continues, some Western European financial institutions and other companies
will have special opportunities to facilitate East-West transactions. The
Fund will seek investment opportunities among these companies and, as
opportunities become available, within the former "east bloc." The Fund will
not invest more than 20% of its total assets in these companies or more than
10% of its total assets in issuers based in any one country.
The Fund diversifies its investments among a number of European countries
and normally invests in companies based in at least three of these countries.
The Fund, however, may invest without limit in a single European country.
While the Fund does not intend to concentrate its investments in a single
country, at times 25% or more of its assets may be invested in companies
located in a single country. During such times, the Fund would be subject to a
correspondingly greater risk of loss due to adverse political or regulatory
developments, or an economic downturn, within that country.
The Fund also may:
o invest up to 20% of its total assets in rights or warrants;
o invest in depositary receipts or other securities convertible into
securities of companies based in European countries, debt securities of
supranational entities denominated in the Euro or the currency of any
European country, debt securities denominated in the Euro of an
issuer in a European country (including supranational issuers), and
"semi-governmental securities";
o purchase and sell forward contracts;
o write covered call or put options and sell and purchase exchange-traded
put and call options, including exchange-traded index options;
o enter into financial futures contracts, including contracts for the
purchase or sale for future delivery of foreign currencies and futures
contracts based on stock indices, and purchase and write options on
futures contracts;
o purchase and write put options on foreign currencies traded on securities
exchanges or boards of trade or over-the-counter;
o enter into standby commitment agreements;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into forward commitments.
The Fund's investments in non-U.S. countries and smaller countries may have more
risk because they tend to be more volatile than the overall stock market. To the
extent the Fund invests a substantial amount of its assets in a particular
European country, your investment is subject to the risk that market changes or
other events affecting that country may have a more significant effect on the
Fund's net asset value. The Fund's investments in U.S. Dollar- or foreign
currency-denominated fixed-income securities have interest rate and credit risk.
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund seeks long-term capital appreciation. As a
fundamental policy, the Fund invests at least 65% of its total assets in equity
securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies. These companies include those in Western
Europe and Scandinavia, Australia, New Zealand, Latin America, Asia, Eastern and
Central Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy and the
Fund will thus emphasize investments in such enterprises.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established economies, including France,
Great Britain, Germany, and Italy, and those with developing economies,
including Argentina, Mexico, Chile, Indonesia, Malaysia, Poland, and Hungary,
are engaged in privatizations. The Fund will invest in any country believed to
present attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively to secure the issuer's successful transition to private sector
ownership. Additionally, these enterprises often dominate their local markets
and typically have the potential for significant managerial and operational
efficiency gains.
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The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. The Fund may invest up to 15% of its total assets in issuers in any
one foreign country, except that the Fund may invest up to 30% of its total
assets in issuers in any one of France, Germany, Great Britain, Italy and Japan.
The Fund may invest all of its assets within a single region of the world.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities. The Fund may invest up to 5% of its net assets in
lower-rated securities. The Fund will not retain a non-convertible security that
is downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund also may:
o invest up to 20% of its total assets in rights or warrants;
o write covered call and put options, purchase put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options, and write uncovered options for
cross-hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
foreign government securities, or common stock, and may purchase and write
options on future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into forward commitments;
o enter into standby commitment agreements;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain a short position;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
Investments in non-U.S. companies and smaller companies may have more risk
because they tend to be more volatile than the overall stock market. The Fund's
investments in debt securities and convertible securities have interest risk and
credit risk.
Alliance International Premier Growth Fund
Alliance International Premier Growth Fund seeks long term capital appreciation
by investing predominately in the equity securities of a limited number of
carefully selected non-U.S. companies that are judged likely to achieve superior
earnings growth. As a matter of fundamental policy, the Fund will invest under
normal circumstances at least 85% of its total assets in equity securities. The
Fund makes investments based upon their potential for capital appreciation.
Current income is incidental to that objective.
In the main, the Fund's investments will be in comparatively large, high-quality
companies. Normally, about 60 companies will be represented in the Fund's
portfolio, and the 30 most highly regarded of these companies usually will
constitute approximately 70% of the Fund's net assets. The Fund thus differs
from more typical international equity mutual funds by focusing on a relatively
small number of intensively researched companies. The Fund is designed for
investors seeking to accumulate capital over time. Because of market risks
inherent in any investment, the selection of securities on the basis of their
appreciation possibilities cannot ensure against possible loss in value. There
is, of course, no assurance that the Fund's investment objective will be met.
Alliance expects the market capitalization of the companies represented in the
Fund's portfolio normally will be in the range of the average weighted market
capitalization of the companies comprising the EAFE Index. As of December 31,
1998, the average weighted market capitalization of companies in the EAFE
index was approximately $35 billion.
Within the investment framework of the Fund, Alliance's Large Cap Growth Group,
headed by Alfred Harrison, Alliance's Vice Chairman, has responsibility for
managing the Fund's portfolio. As discussed below, in selecting the Fund's
portfolio investments Alliance's Large Cap Growth Group will follow a
structured, disciplined research and investment process that is essentially
similar to that which it employs in managing Premier Growth Fund.
In managing the Fund's assets, Alliance's investment strategy will emphasize
stock selection and investment in the securities of a limited number of issuers.
Alliance depends heavily upon the fundamental analysis and research of its large
global equity research team situated in numerous locations around the world. Its
global equity analysts follow a research universe of approximately 900
companies. As one of the largest multinational investment management firms,
Alliance has access to considerable information concerning the companies in its
research universe, an in-depth understanding of the products, services, markets,
and competition of these companies, and a good knowledge of their management.
Research emphasis is placed on the identification of companies whose superior
prospective earnings growth is not fully reflected in current market valuations.
Alliance constantly adds to and deletes from this universe as fundamentals and
valuations change. Alliance's global equity analysts rate companies in three
categories. The performance of each analyst's ratings is an important
determinant of his or her incentive compensation. The equity securities of
"one-rated" companies are expected to significantly outperform the local market
in local currency terms. All equity securities purchased for the Fund's
portfolio will be selected from the universe of approximately 100 "one-rated"
companies. As noted above, the Fund usually invests approximately 70% of its
net assets in approximately 30 most highly regarded of these companies.
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The Fund's portfolio emphasis upon particular industries or sectors
will be a by-product of the stock selection process rather than the result of
assigned targets or ranges.
The Fund diversifies its investments among at least four, and usually
considerably more, countries. No more than 15% of the Fund's total assets will
be invested in issuers in any one foreign country, except that the Fund may
invest up to 25% of its total assets in issuers in each of Canada, France,
Germany, Italy, Japan, The Netherlands, Switzerland, and the United Kingdom.
Within these limits, geographic distribution of the Fund's investments among
countries or regions also will be a product of the stock selection process
rather than a predetermined allocation. To the extent that the Fund
concentrates its assets within one region, the Fund may be subject to any
special risks associated with that region. While the Fund may engage in
currency hedging programs in periods in which Alliance perceives extreme
exchange rate risk, the Fund normally will not make significant use of
currency hedging strategies.
In the management of the Fund's investment portfolio, Alliance will seek to
utilize market volatility judiciously (assuming no change in company
fundamentals) to adjust the Fund's portfolio positions. To the extent consistent
with local market liquidity considerations, the Fund will strive to capitalize
on apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. Under normal
circumstances, the Fund will remain substantially fully invested in equity
securities and will not take significant cash positions for market timing
purposes. Rather, through "buying into declines" and "selling into strength,"
Alliance seeks superior relative returns over time.
The Fund also may:
o invest up to 20% of its total assets in convertible securities;
o invest up to 20% of its total assets in rights or warrants;
o write covered call and put options, purchase put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options, and write uncovered options for cross
hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
foreign government securities, or common stock and may purchase and write
options on such future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into standby commitment agreements;
o enter into forward commitments;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain short positions of no more than
5% of its net assets as collateral for short sales; and
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
Because the Fund invests in a smaller number of securities than many other
equity funds, your investment also has the risk that changes in the value of a
single security may have a more significant effect, either negative or positive,
on the Fund's net asset value.
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund seeks long-term growth of capital through
investment in a global portfolio of the equity securities of selected companies
with relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1.5 billion. Because
the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization companies. These companies are located in at least
three countries, one of which may be the U.S. The Fund may invest up to 35% of
its total assets in securities of companies whose market capitalizations
exceed the Fund's size standard. The Fund's portfolio securities may be listed
on a U.S. or foreign exchange or traded over-the-counter.
The Fund also may:
o invest up to 20% of its total assets in warrants to purchase equity
securities;
o invest in depositary receipts or other securities representing securities
of companies based in countries other than the U.S.;
o purchase or sell forward foreign currency contracts;
o write covered call options on its securities of up to 15% of its total
assets, and purchase exchange-traded call and put options, including put
options on market indices of up to, for all options, 10% of its total
assets; and
o make secured loans of portfolio securities of up to 30% of its total
assets.
One of the Fund's principal risks is its investments in smaller capitalization
companies. Alliance believes that smaller capitalization companies often have
sales and earnings growth rates exceeding those of larger companies and that
these growth rates tend to cause more rapid share price appreciation. Investing
in smaller capitalization stocks, however, involves greater risk than is
associated with larger, more established
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companies. For example, smaller capitalization companies often have limited
product lines, markets, or financial resources. They may be dependent for
management on one or a few key persons and can be more susceptible to losses and
risks of bankruptcy. Their securities may be thinly traded (and therefore have
to be sold at a discount from current market prices or sold in small lots over
an extended period of time), may be followed by fewer investment research
analysts, and may be subject to wider price swings. For these reasons, the
Fund's investments may have a greater chance of loss than investments in
securities of larger capitalization companies. In addition, transaction costs in
small capitalization stocks may be higher than in those of larger capitalization
companies.
The Fund's investments in non-U.S. companies and in smaller companies will be
more volatile and may differ substantially from the overall U.S. market.
Alliance International Fund
Alliance International Fund seeks a total return on its assets from long-term
growth of capital and from income primarily through a broad portfolio of
marketable securities of established non-U.S. companies, companies participating
in foreign economies with prospects for growth, including U.S. companies having
their principal activities and interests outside the U.S. and foreign government
securities. Normally, the Fund will invest more than 80% of its assets in these
types of companies.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities. The Fund may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of these countries. The Fund
may invest in companies, wherever organized, that Alliance judges have their
principal activities and interests outside the U.S. These companies may be
located in developing countries, which involves exposure to economic structures
that are generally less diverse and mature and to political systems that can
be expected to have less stability than those of developed countries. The Fund
currently does not intend to invest more than 10% of its total assets in
companies in, or governments of, developing countries.
The Fund also may:
o purchase or sell forward foreign currency exchange contracts;
o write covered call or put options, sell and purchase U.S. or foreign
exchange-listed put and call options, including exchange-traded index
options;
o enter into financial futures contracts, including contracts for the
purchase or sale for future delivery of foreign currencies and stock index
futures, and purchase and write put and call options on futures contracts
traded on U.S. or foreign exchanges or over-the-counter;
o purchase and write put options on foreign currencies traded on securities
exchanges or boards of trade or over-the-counter;
o make loans of portfolio securities of up to 30% of its total assets; and
o enter into repurchase agreements of up to seven days' duration for up to
10% of the Fund's total assets.
Investments in non-U.S. countries may have more risk because they tend to be
more volatile than the U.S. stock market. To the extent that the Fund invests a
substantial amount of its assets in a particular foreign country, an investment
in the Fund has the risk that market changes or other events affecting that
country may have a more significant effect, either negative or positive, on the
Fund's net asset value.
Alliance Greater China '97 Fund
Alliance Greater China '97 Fund is a non-diversified investment company that
seeks long-term capital appreciation through investment of at least 80% of its
total assets in equity securities issued by Greater China companies. The Fund
expects to invest a significant portion, which may be greater than 50%, of its
assets in equity securities of Hong Kong companies and may invest, from time to
time, all of its assets in Hong Kong companies or companies of either of the
other Greater China countries.
In recent years, China, Hong Kong and Taiwan have each experienced a high level
of real economic growth, although growth is expected to slow in 1999. This
growth has resulted from advantageous economic conditions, including favorable
demographics, competitive wage rates, and rising per capita income and consumer
demand. Significantly, the growth has also been fueled by an easing by both
China and Taiwan of government restrictions and an increased receptivity to
foreign investment. This expanded, if not yet complete, openness to foreign
investment extends as well to the securities markets of both countries. Hong
Kong's free-market economy has historically included securities markets
completely open to foreign investments. All three countries have regulated stock
exchanges upon which shares of an increasing number of Greater China companies
are traded.
With its population estimated at more than 1.2 billion as a driving force, and
notwithstanding its continuing political rigidity, China's economic growth has
been coupled with significantly reduced government economic intervention and
basic economic structural change. Recent years have seen large increases in
industrial production with a significant decline in the state sector share of
industrial output, and increased involvement of local governmental units and the
private sector in establishing new business enterprises.
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With China's growth has come an increasing direct and indirect economic
involvement of all three Greater China countries. For some time, Hong Kong, a
world financial and trade center in its own right, with a large stock exchange
and offices of many of the world's multinational companies, has been the gateway
to trade with and foreign investment in China. With the transfer on
July 1, 1997 of the sovereignty of Hong Kong from Great Britain to China, not
only the political but the economic ties between China and Hong Kong are
expected to continue to intensify, with the continuation of Hong Kong's economic
system as provided for in the law governing its sovereignty.
Notwithstanding the, at times considerable, political tension between the two
countries, it is generally recognized that substantially increased trade and
investment with China has been generated from Taiwan, in many cases through Hong
Kong. Along with this increased interaction with China, Taiwan is becoming a
regional technological and telecommunication center, while continuing the
process of opening its economy up to foreign investment. Although geographically
limited, Taiwan boasts an economy among the world's 20 largest and its foreign
exchange reserves are third largest in the world measured in U.S. dollars. As
China's economy continues to expand, it is expected that Taiwan's economic
interaction with China will likewise increase.
Alliance believes that over the long-term conditions are favorable for
continuing and expanding economic growth in all three Greater China countries.
It is this potential which the Fund hopes to take advantage of by investing both
in established and new and emerging companies. Appendix A has additional
Information about the Greater China countries.
In addition to investing in equity securities of Greater China companies, the
Fund may invest up to 20% of its total assets in (i) debt securities issued or
guaranteed by Greater China companies or by Greater China governments, their
agencies or instrumentalities, and (ii) equity or debt securities issued by
issuers other than Greater China companies. The Fund will invest only in
investment grade securities. The Fund will sell a security that is downgraded
below investment grade or is determined by Alliance to have undergone a
similar credit quality deterioration, the Fund will sell of that security.
The Fund also may:
o invest up to 25% of its net assets in the convertible securities;
o invest up to 20% of its net assets in rights or warrants;
o invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
o invest up to 25% of its net assets in equity-linked debt securities with
the objective of realizing capital appreciation;
o invest up to 20% of its net assets in loans and other direct debt
securities;
o write covered call and put options, sell or purchase exchange-traded index
options, and write uncovered options for cross-hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
securities issued by foreign government entities, or common stock, and may
purchase and write options on future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into interest rate swaps and purchase or sell interest rate caps and
floors;
o enter into forward commitments;
o enter into standby commitment agreements;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain a short position, in each case
only if against the box;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
All or some of the policies and practices listed above may not be available to
the Fund in the Greater China countries and the Fund will utilize these policies
only to the extent permissible.
The Fund's investments in Greater China companies will be significantly more
volatile and differ from the overall U.S. market. Your investment also has the
risk that market changes or other events affecting the Greater China countries
may have a more significant effect on the Fund's net asset value. In addition
the Fund is "non-diversified" meaning that it invests its assets in a smaller
number of companies than many other international funds. As a result, changes
in the value of a single security may have a more significant effect, either
negative or positive, on the Fund's net asset value.
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund's investment objective is long-term capital
appreciation. The Fund invests at least 65% of its total assets in equity
securities (for the purposes of this investment policy, rights, warrants, and
options to purchase common stocks are not deemed to be equity securities),
preferred stocks and equity-linked debt securities issued by Asian companies.
The Fund may invest up to 35% of its total assets in debt securities issued or
guaranteed by Asian companies or by Asian governments, their agencies or
instrumentalities. The Fund will invest at least 80% of its total assets in
Asian companies and Asian debt securities, but also may invest in securities
issued by non-Asian issuers. The Fund expects to invest, from time to time, a
significant portion, which
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may be in excess of 50%, of its assets in equity securities of
Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries that create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate, and numerous
privatization programs. Asian countries also are becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies that have securities listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser-developed countries. These companies generally
offer the advantages of more experienced management and more developed
market regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume, and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. The Fund also offers investors the opportunity to access relatively
restricted markets. Alliance believes that investment opportunities in Asian
countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications, and consumer services.
The Fund will primarily invest in investment grade debt securities, but may
invest up to 5% of its net assets in lower-rated securities, lower-rated
loans, and other lower-rated direct debt instruments. The Fund will not retain
a security that is downgraded below C or determined by Alliance to have
undergone similar credit quality deterioration following purchase.
The Fund also may:
o invest up to 25% of its net assets in the convertible securities;
o invest up to 20% of its net assets in rights or warrants;
o invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
o invest up to 25% of its net assets in equity-linked debt securities with
the objective of realizing capital appreciation;
o invest up to 25% of its net assets in loans and other direct debt
instruments;
o write covered call and put options, sell or purchase exchange-traded index
options, and write uncovered options for cross-hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
securities issued by foreign government entities, or common stock and may
purchase and write options on future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into interest rate swaps and purchase or sell interest rate caps and
floors;
o enter into forward commitments;
o enter into standby commitment agreements;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain a short position, in each case
only if against the box;
o make secured loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
The Fund's investments in Asian and Pacific region countries will be
significantly more volatile and may differ significantly from the overall U.S.
market. To the extent the Fund invests a substantial amount of its assets in
Japanese companies, your investment has the risk that market changes or other
events affecting that country may have a more significant effect on the Fund's
net assets value. The Fund's investments in debt securities have interest rate
and credit risk.
Alliance Global Environment Fund
Alliance Global Environment Fund is a non-diversified investment company that
seeks long-term capital appreciation through investment in equity securities of
Eligible Companies. For purposes of the Fund's investment objective and
investment policies, "equity securities" are common stocks (but not preferred
stocks), rights or warrants to subscribe for or purchase common stocks, and
preferred stocks or debt securities that are convertible into common stocks
without the payment of any further consideration. The Fund invests in two
categories of Eligible Companies--Environmental Companies and Beneficiary
Companies. The Fund
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may invest in a company with a broadly diversified business only a part of
which provides such products, processes, or services, when Alliance believes
that these products, processes or services will yield a competitive
advantage that significantly enhances the issuer's growth prospects. As a
matter of fundamental policy, the Fund will, under normal circumstances, invest
substantially all of its total assets in equity securities of Eligible
Companies.
A major premise of the Fund's investment approach is that environmental concerns
will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous waste treatment and disposal,
pulp and paper recycling, waste-to-energy alternatives, biodegradable cartons,
packages, plastics and other products, remedial projects and emergency cleanup
efforts, manufacture of environmental supplies and equipment, the achievement of
purer air, groundwater, and foods, and the detection, evaluation and treatment
of both existing and potential environmental problems including, among others,
air pollution and acid rain.
The environmental services industry generally is positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded substantial
opportunities for growth. Beneficiary Companies may also derive an advantage to
the extent that they have anticipated environmental regulation and are therefore
at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena that are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies that protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund spreads investment risk among the capital markets
of a number of countries and invests in equity securities of companies based in
at least three, and normally considerably more, such countries. The percentage
of the Fund's assets invested in securities of companies in a particular country
or denominated in a particular currency will vary in accordance with Alliance's
assessment of the appreciation potential of such securities and the strength of
that currency.
The Fund also may:
o invest up to 20% of its total assets in warrants to purchase equity
securities;
o invest in depositary receipts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o enter into forward foreign currency transactions for hedging purposes;
o invest in currency futures and options on such futures for hedging
purposes; and
o make secured loans of portfolio securities of up to 30% of its total
assets.
The Fund's investments in non-U.S. companies and in specific types of companies
that provide environmental services will be more volatile and may differ
substantially from the overall market. The Fund's investments also have the risk
that government regulations or other action could negatively affect the business
of environmental companies.
DESCRIPTION OF INVESTMENT PRACTICES
This section describes the Funds' investment practices and associated risks.
Unless otherwise noted, a Fund's use of any of these practices was specified in
the previous section.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables, and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which generally
provide a stable stream of income with yields that are generally higher than
those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying equity security, although the higher yield tends to
make the convertible security less volatile than
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the underlying equity security. As with debt securities, the market value
of convertible securities tends to decrease as interest rates rise and increase
as interest rates decline. While convertible securities generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality, they offer investors the potential to benefit from increases in the
market price of the underlying common stock. Convertible debt securities that
are rated Baa or lower by Moody's or BBB or lower by S&P, Duff & Phelps or
Fitch and comparable unrated securities as determined by Alliance may share
some or all of the risks of non-convertible debt securities with those ratings.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. A Fund will not enter into any currency swap
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the counterparty is rated in the highest rating category of at least
one nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the counterparty to the transaction, the
Fund will have contractual remedies under the transaction agreements.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by an U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or an U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities, except with respect to Alliance Growth Fund, where
investments in ADRs are deemed to be investments in securities issued by U.S.
issuers and those in GDRs and other types of depositary receipts are deemed to
be investments in the underlying securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions that are not backed by its full faith and credit and
general taxing powers.
Equity-Linked Debt Securities. Equity-linked debt securities are securities on
which the issuer is obligated to pay interest and/or principal that is linked to
the to the performance of a specified index of equity securities. The interest
or principal payments may be significantly greater or less than payment
obligations for other types of debt securities. Adverse changes in equity
securities indices and other adverse changes in the securities markets may
reduce payments made under, and/or the principal of, equity-linked debt
securities held by a Fund. As with any debt securities, the values of
equity-linked debt securities will generally vary inversely with changes in
interest rates. A Fund's ability to dispose of equity-linked debt securities
will depend on the availability of liquid markets for such securities.
Investment in equity-linked debt securities may be considered to be speculative.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but a Fund may negotiate settlements beyond two months.
Securities purchased or sold under a forward commitment are subject to market
fluctuations and no interest or dividends accrue to the purchaser prior to the
settlement date.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a
when-issued or forward commitment basis to obtain the benefit of currently
higher cash yields. If, however, Alliance were to forecast incorrectly the
direction of interest rate movements, a Fund might be required to complete such
when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition or dispose of
its right to deliver or receive against a forward
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commitment, it may incur a gain or loss. Any significant commitment of Fund
assets to the purchase of securities on a "when, as and if issued" basis may
increase the volatility of the Fund's net asset value. No forward commitments
will be made by Alliance Utility Income Fund, Alliance Real Estate Investment
Fund, Alliance New Europe Fund, Alliance Worldwide Privatization Fund, Alliance
International Premier Growth Fund, Alliance Greater China '97 Fund or Alliance
All-Asia Investment Fund if, as a result, the Fund's aggregate commitments under
the transactions would be more than 30% of its total assets. In the event the
other party to a forward commitment transaction were to default, a Fund might
lose the opportunity to invest money at favorable rates or to dispose of
securities at favorable prices.
Forward Foreign Currency Exchange Contracts. A Fund may purchase or sell forward
foreign currency exchange contracts to minimize the risk of adverse changes in
the relationship between the U.S. Dollar and other currencies. A forward
contract is an obligation to purchase or sell a specific currency for an agreed
price at a future date, and is individually negotiated and privately traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. Dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. Dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. Dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. Dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. Alliance New Europe Fund,
Alliance Global Small Cap Fund and Alliance International Fund will not enter
into a forward contract with a term of more than one year or if, as a result,
more than 50% of its total assets would be committed to such contracts. Alliance
New Europe Fund's, Alliance Global Small Cap Fund's and Alliance International
Fund's investments in forward contracts will be limited to hedging involving
either specific transactions or portfolio positions. Alliance Growth Fund also
may purchase and sell foreign currency on a spot basis.
Illiquid Securities. The Funds will limit their investments in illiquid
securities to no more than 15% of their net assets, except the limit is 10% for
Alliance Technology Fund, Alliance Quasar Fund, Alliance New Europe Fund, and
Alliance Global Small Cap Fund and 5% for The Alliance Fund and Alliance
Growth Fund. Illiquunlisted securities, when market makers do not exist or will
not entertain bids or offers), including many individually negotiated currency
swaps and any assets used to cover currency swaps and most privately negotiated
investments in state enterprises that have not yet conducted an initial equity
offering, (ii) over-the-counter options and assets used to cover
over-the-counter options, and (iii) repurchase agreements not terminable within
seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. Alliance will monitor the
liquidity of a Fund's investments in illiquid securities. Rule 144A securities
will not be treated as "illiquid" for purposes of this limit on investments.
A Fund that invests in securities for which there is no ready market may not be
able to readily sell such securities. Such securities are unlike securities that
are traded in the open market and can be expected to be sold immediately if the
market is adequate. The sale price of illiquid securities may be lower or higher
than Alliance's most recent estimate of their fair value. Generally, less public
information is available about the issuers of such securities than about
companies whose securities are traded on an exchange. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resales of non-publicly traded foreign securities.
Interest Rate Transactions (Swaps, Caps, and Floors). Each Fund that may enter
into interest rate transactions expects to do so primarily to preserve a return
or spread on a particular investment or portion of its portfolio or to protect
against any increase in the price of securities the Fund anticipates
purchasing at a later date. The Funds do not intend to use these transactions in
a speculative manner.
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Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to Alliance Utility Income Fund, Alliance Greater China '97 Fund and
Alliance All-Asia Investment Fund, the exchange commitments can involve payments
in the same currency or in different currencies. The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on a
contractually-based principal amount from the party selling such interest rate
cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on an agreed principal amount from the party
selling the interest rate floor.
A Fund may enter into interest rate swaps, caps, and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. A Fund will not enter into an interest rate swap, cap, or
floor transaction unless the unsecured senior debt or the claims-paying ability
of the other party is rated in the highest rating category of at least one
nationally recognized rating organization. Alliance will monitor the
creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the
counterparty to an interest rate transaction defaults, a Fund's risk of loss
consists of the net amount of interest payments that the Fund contractually is
entitled to receive.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to a Fund in the event of fraud or misrepresentation than
debt securities. In addition, loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. Direct debt instruments may
also include standby financing commitments that obligate a Fund to supply
additional cash to the borrower on demand. Loans and other direct debt
instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. Failure to receive scheduled interest or principal payments on these
types of investments could adversely affect a Fund's net asset value and yield.
Loans that are fully secured offer a Fund more protection than unsecured loans
in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral can be liquidated.
Making loans to borrowers whose creditworthiness is poor may involve substantial
risks and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of government issuers will also involve a risk that the
governmental entities responsible for the repayment of the debt may be unable,
or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a Fund. For
example, if a loan is foreclosed, a Fund could become part owner of any
collateral and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of a Fund were determined to be subject
to the claims of the agent's general creditors, the Fund might incur certain
costs and delays in realizing payment on the loan or loan participation and
could suffer a loss of principal or interest.
Direct indebtedness purchased by a Fund may include letters of credit, revolving
credit facilities, or other standby financing commitments obligating a Fund to
pay additional cash on
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demand. These commitments may have the effect of requiring a Fund to increase
its investment in a borrower at a time when it would not otherwise have done
so, even if the borrower's condition makes it unlikely that the amount will
ever be repaid.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income from the
securities. The Fund may invest any cash collateral in portfolio securities and
earn additional income or receive an agreed-upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest, or distributions. A Fund may pay reasonable
finders', administrative, and custodial fees in connection with a loan.
Mortgage-Backed Securities and Associated Risks. Interest and principal payments
(including prepayments) on the mortgages underlying mortgage-backed securities
are passed through to the holders of the securities. As a result of the
pass-through of prepayments of principal on the underlying securities,
mortgage-backed securities are often subject to more rapid prepayment of
principal than their stated maturity would indicate. Prepayments occur when the
mortgagor on a mortgage prepays the remaining principal before the mortgage's
scheduled maturity date. Because the prepayment characteristics of the
underlying mortgages vary, it is impossible to predict accurately the realized
yield or average life of a particular issue of pass-through certificates.
Prepayments are important because of their effect on the yield and price of the
mortgage-backed securities. During periods of declining interest rates,
prepayments can be expected to accelerate and a Fund that invests in these
securities would be required to reinvest the proceeds at the lower interest
rates then available. Conversely, during periods of rising interest rates, a
reduction in prepayments may increase the effective maturity of the securities,
subjecting them to a greater risk of decline in market value in response to
rising interest rates. In addition, prepayments of mortgages underlying
securities purchased at a premium could result in capital losses.
Mortgage-Backed Securities include mortgage pass-through certificates and
multiple-class pass-through securities, such as REMIC pass-through certificates,
CMOs and stripped mortgage-backed securities ("SMBS"), and other types of
Mortgage-Backed Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Alliance Real Estate Investment
Fund may invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation, for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates that may be issued by, among others, U.S. Government
agencies and instrumentalities as well as private lenders. CMOs and REMIC
certificates are issued in multiple classes and the principal of and interest on
the mortgage assets may be allocated among the several classes of CMOs or REMIC
certificates in various ways. Each class of CMOs or REMIC certificates, often
referred to as a "tranche," is issued at a specific adjustable or fixed interest
rate and must be fully retired no later than its final distribution date.
Generally, interest is paid or accrues on all classes of CMOs or REMIC
certificates on a monthly basis. Alliance Real Estate Investment Fund will not
invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts, although Alliance Real
Estate Investment Fund does not intend to invest in residual interests.
Options on Securities. An option gives the purchaser of the option, upon payment
of a premium, the right to deliver to (in the case of a put) or receive from (in
the case of a call) the writer a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by a Fund is
"covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it has written. A
put option written by a Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than that of
the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge
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against a decline in value in another security which the Fund owns or has
the right to acquire. A Fund would write a call option for cross-hedging
purposes, instead of writing a covered call option, when the premium to be
received from the cross-hedge transaction would exceed that which would be
received from writing a covered call option, while at the same time
achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. Entering into a closing transaction
(i.e., by disposing of the option prior to its exercise) could reduce these
risks. A Fund retains the premium received from writing a put or call option
whether or not the option is exercised. The writing of covered call options
could result in increases in a Fund's portfolio turnover rate, especially during
periods when market prices of the underlying securities appreciate.
Alliance Technology Fund and Alliance Global Small Cap Fund will not write a
call option if the premium to be received by the Fund would not produce an
annualized return of at least 15% of the then current market value of the
securities subject to the option (without giving effect to commissions, stock
transfer taxes and other expenses that are deducted from premium receipts.
Options purchased or written by a Fund in negotiated transactions are illiquid
and it may not be possible for the Fund to effect a closing transaction at an
advantageous time.
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates and incur losses.
The purchase of an option on a foreign currency may constitute an effective
hedge against fluctuations in exchange rates although, in the event of rate
movements adverse to a Fund's position, it may forfeit the entire amount of the
premium plus related transaction costs. For Fund's that may invest in options on
foreign currencies, see the Fund's SAI for further discussion of the use, risks,
and costs of options on foreign currencies.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
A Fund will purchase options on futures contracts written or purchased by a Fund
that are traded on U.S. or foreign exchanges or over-the-counter. These
investment techniques will be used only to hedge against anticipated future
changes in market conditions and interest or exchange rates which otherwise
might either adversely affect the value of the Fund's portfolio securities or
adversely affect the prices of securities which the Fund intends to purchase at
a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, or in the case of
Alliance International Premier Growth Fund 100% of its total assets. Alliance
Premier Growth Fund and Alliance Growth and Income Fund may not purchase or sell
a stock index future if immediately thereafter more than 30% of its total assets
would be hedged by stock index futures. Alliance Premier Growth Fund and
Alliance Growth and Income Fund may not purchase or sell a stock index future
if, immediately thereafter, the sum of the amount of margin deposits on the
Fund's existing futures positions would exceed 5% of the market value of the
Fund's total assets.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements.
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Rights and Warrants. A Fund will invest in rights or warrants only if Alliance
deems the underlying equity securities themselves appropriate for inclusion in
the Fund's portfolio. Rights and warrants entitle the holder to buy equity
securities at a specific price for a specific period of time. Rights are similar
to warrants except that they have a substantially shorter duration. Rights and
warrants may be considered more speculative than certain other types of
investments in that they do not entitle a holder to dividends or voting rights
with respect to the underlying securities nor do they represent any rights in
the assets of the issuing company. The value of a right or warrant does not
necessarily change with the value of the underlying security, although the value
of a right or warrant may decline because of a decrease in the value of the
underlying security, the passage of time or a change in perception as to the
potential of the underlying security, or any combination of these factors. If
the market price of the underlying security is below the exercise price of the
warrant on the expiration date, the warrant will expire worthless. Moreover, a
right or warrant ceases to have value if it is not exercised prior to the
expiration date.
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or, if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Alliance Utility Income Fund, Alliance
Worldwide Privatization Fund, Alliance Greater China '97 Fund and Alliance
All-Asia Investment Fund, each may make short sales of securities or maintain
short positions only for the purpose of deferring realization of gain or loss
for U.S. federal income tax purposes, provided that at all times when a short
position is open the Fund owns an equal amount of securities of the same issue
as, and equal in amount to, the securities sold short. In addition, each of
those Funds may not make a short sale if as a result more than 10% of the Fund's
net assets would be held as collateral for short sales, except that Alliance
Real Estate Investment Fund, Alliance Greater China '97 Fund and Alliance
All-Asia Investment Fund may not make a short sale if as a result more than 25%
of the Fund's net assets would be held as collateral for short sales. If the
price of the security sold short increases between the time of the short sale
and the time a Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement, the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. Investments in standby
commitments will be limited so that the aggregate purchase price of the
securities subject to the commitments will not exceed 25% with respect to
Alliance Real Estate Investment Fund and Alliance New Europe Fund 50% with
respect to Alliance Worldwide Privatization Fund, Alliance International Premier
Growth Fund, Alliance Greater China '97 Fund and Alliance All-Asia Investment
Fund and 20% with respect to Alliance Utility Income Fund, of the Fund's assets
at the time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. These bonds may involve greater credit risks
than bonds paying interest currently. Although these bonds do not pay current
interest in cash, a Fund is nonetheless required to accrue interest income on
such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund, or are not available but may yet be developed, to the
extent such investment practices are consistent with the Fund's investment
objective and legally permissible for the Fund. Such investment practices, if
they arise, may involve risks that exceed those involved in the activities
described above.
General. The successful use of the investment practices described above draws
upon Alliance's special skills and experience and usually depends on Alliance's
ability to forecast price movements, interest rates, or currency exchange rate
movements correctly. Should interest rates, prices or exchange rates move
unexpectedly, a Fund may not achieve the anticipated benefits of the
transactions or may realize losses and thus be in a worse position than if such
strategies had not been used. Unlike many exchange-traded futures contracts and
options on futures contracts, there are no daily price fluctuation limits for
certain options and forward contracts, and adverse market movements could
therefore continue to an unlimited
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extent over a period of time. In addition, the correlation between movements in
the prices of futures contracts, options and forward contracts and movements in
the prices of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options, and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options, and forward contracts. If a secondary market does not exist for an
option purchased or written by a Fund, it might not be possible to effect a
closing transaction in the option (i.e., dispose of the option), with the result
that (i) an option purchased by the Fund would have to be exercised in order for
the Fund to realize any profit and (ii) the Fund may not be able to sell
currencies or portfolio securities covering an option written by the Fund until
the option expires or it delivers the underlying security, futures contract or
currency upon exercise. Therefore, no assurance can be given that the Funds will
be able to utilize these instruments effectively. In addition, a Fund's ability
to engage in options and futures transactions may be limited by tax
considerations and the use of certain hedging techniques may adversely impact
the characterization of income to a Fund for U.S. federal income tax purposes.
Portfolio Turnover. The portfolio turnover rate for each Fund is included in the
Financial Highlights section. The Funds are actively managed and, in some cases
in response to market conditions, a Fund's portfolio turnover may exceed 100%. A
higher rate of portfolio turnover increases brokerage and other expenses, which
must be borne by the Fund and its shareholders. High portfolio turnover also may
result in the realization of substantial net short-term capital gains, which,
when distributed, are taxable to shareholders.
Temporary Defensive Position. For temporary defensive purposes, each Fund may
reduce its position in equity securities and invest in, without limit, certain
types of short-term, liquid, high grade or high quality (depending on the Fund)
debt securities. These securities may include U.S. Government securities,
qualifying bank deposits, money market instruments, prime commercial paper and
other types of short-term debt securities including notes and bonds. For Funds
that may invest in foreign countries, such securities also may include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies, and supranational
organizations. While the Funds are investing for temporary defensive purposes,
they may not achieve their investment objectives.
ADDITIONAL RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Currency Considerations. Substantially all of the assets of Alliance New Europe
Fund, Alliance Worldwide Privatization Fund, Alliance International Premier
Growth Fund, Alliance International Fund, Alliance Greater China '97 Fund and
Alliance All-Asia Investment Fund, and a substantial portion of the assets of
Alliance Global Small Cap Fund and Alliance Global Environment Fund are invested
in securities denominated in foreign currencies. The Funds receive a
corresponding portion of their revenues in foreign currencies. Therefore, the
dollar equivalent of their net assets, distributions, and income will be
adversely affected by reductions in the value of certain foreign currencies
relative to the U.S. Dollar. If the value of the foreign currencies in which a
Fund receives its income falls relative to the U.S. Dollar between receipt of
the income and the making of Fund distributions, the Fund may be required to
liquidate securities in order to make distributions if it has insufficient cash
in U.S. Dollars to meet distribution requirements that the Fund must satisfy to
qualify as a regulated investment company for federal income tax purposes.
Similarly, if an exchange rate declines between the time a Fund incurs expenses
in U.S. Dollars and the time cash expenses are paid, the amount of the currency
required to be converted into U.S. Dollars in order to pay expenses in U.S.
Dollars could be greater than the equivalent amount of such expenses in the
currency at the time they were incurred. In light of these risks, a Fund may
engage in currency hedging transactions, as described above, which involve
certain special risks.
Foreign Securities. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes foreign
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties.
Certain foreign countries require governmental approval prior to investments by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities that may have less advantageous terms (including price) than
securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital, or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority. If
a deterioration occurs in a country's balance of payments, the country could
impose temporary restrictions on foreign capital remittances.
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A Fund also could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
of other restrictions on investment. Investing in local markets may require a
Fund to adopt special procedures that may involve additional costs to a Fund.
These factors may affect the liquidity of a Fund's investments in any country
and Alliance will monitor the effect of any such factor or factors on a Fund's
investments. Furthermore, transaction costs including brokerage commissions for
transactions both on and off the securities exchanges in many foreign countries
are generally higher than in the United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects and less information
may be available to investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available about certain
non-U.S. issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, or diplomatic
developments could affect adversely the economy of a foreign country and the
Fund's investments. In the event of expropriation, nationalization or other
confiscation, a Fund could lose its entire investment in the country involved.
In addition, laws in foreign countries governing business organizations,
bankruptcy and insolvency may provide less protection to security holders such
as the Fund than that provided by U.S. laws.
Alliance International Fund, Alliance Greater China '97 Fund and Alliance
All-Asia Investment Fund may invest substantial amounts of their assets in
United Kingdom issuers, Japanese issuers, and/or Greater China issuers. Please
refer to Appendix A for a discussion of risks associated with investments in
these countries.
Investment in Privatized Enterprises by Alliance Worldwide Privatization Fund.
In certain jurisdictions, the ability of foreign entities, such as the Fund, to
participate in privatizations may be limited by local law, or the price or terms
on which the Fund may be able to participate may be less advantageous than for
local investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Alliance New Europe Fund and Alliance Global Small Cap Fund
will emphasize investment in, and Alliance All-Asia Investment Fund, Alliance
Greater China '97 Fund and Alliance Global Environment Fund may emphasize
investment in, smaller, emerging companies. Investment in such companies
involves greater risks than is customarily associated with securities of more
established companies. Companies in the earlier stages of their development
often have products and management personnel which have not been thoroughly
tested by time or the marketplace; their financial resources may not be as
substantial as those of more established companies. The securities of smaller
companies may have relatively limited marketability and may be subject to more
abrupt or erratic market movements than securities of larger companies or broad
market indices. The revenue flow of such companies may be erratic and their
results of operations may fluctuate widely and may also contribute to stock
price volatility.
Extreme Governmental Action; Less Protective Laws. In contrast to investing in
the U.S., foreign investment may involve in certain situations greater risk of
nationalization, expropriation, confiscatory taxation, currency blockage or
other extreme governmental action which could adversely impact a Fund's
investments. In the event of certain such actions, a Fund could lose its entire
investment in the country involved. In addition, laws in various foreign
countries, including in certain respects each of the Greater China countries,
governing, among other subjects, business organization and practices, securities
and securities trading, bankruptcy and insolvency may provide less protection to
investors such as the Fund than provided under United States laws.
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Investments in Environmental Companies by Alliance Global Environment Fund.
Governmental regulations or other action can inhibit an Environmental Company's
performance, and it may take years to translate environmental legislation into
sales and profits. Environmental Companies generally face competition in fields
often characterized by relatively short product cycles and competitive pricing
policies. Losses may result from large product development or expansion costs,
unprotected marketing or distribution systems, erratic revenue flows and low
profit margins. Additional risks that Environmental Companies may face include
difficulty in financing the high cost of technological development,
uncertainties due to changing governmental regulation or rapid technological
advances, potential liabilities associated with hazardous components and
operations, and difficulty in finding experienced employees.
The Real Estate Industry. Although Alliance Real Estate Investment Fund does not
invest directly in real estate, it invests primarily in Real Estate Equity
Securities and has a policy of concentration of its investments in the real
estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates. To the extent that assets underlying the Fund's
investments are concentrated geographically, by property type or in certain
other respects, the Fund may be subject to certain of the foregoing risks to a
greater extent.
In addition, if Alliance Real Estate Investment Fund receives rental income or
income from the disposition of real property acquired as a result of a default
on securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company.
Investments by the Fund in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax-free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) also are subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P 500 Index.
Mortgage-Backed Securities. Investing in Mortgage-Backed Securities involves
certain unique risks in addition to those risks associated with investment in
the real estate industry in general. These risks include the failure of a
counterparty to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. When interest rates decline, the
value of an investment in fixed rate obligations can be expected to rise.
Conversely, when interest rates rise, the value of an investment in fixed rate
obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Alliance Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social, and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or
48
<PAGE>
indirect governmental or agency guarantee. When the Fund reinvests amounts
representing payments and unscheduled prepayments of principal, it may receive a
rate of interest that is lower than the rate on existing adjustable rate
mortgage pass-through securities. Thus, Mortgage-Backed Securities, and
adjustable rate mortgage pass-through securities in particular, may be less
effective than other types of U.S. Government securities as a means of "locking
in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of Alliance All-Asia Investment Fund, between five
and 25 years in the case of Alliance Utility Income Fund, and between one year
or less and 30 years in the case of all other Funds that invest in such
securities. In periods of increasing interest rates, each of the Funds may, to
the extent it holds mortgage-backed securities, be subject to the risk that the
average dollar-weighted maturity of the Fund's portfolio of debt or other
fixed-income securities may be extended as a result of lower than anticipated
prepayment rates.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater credit risk or loss of principal and interest than
higher-rated securities. They also are generally considered to be subject to
greater market risk than higher-rated securities. The capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing the securities for the purpose of computing a Fund's net asset value. In
addition, adverse publicity and investor perceptions about lower-rated
securities, whether or not factual, may tend to impair their market value and
liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in
lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund.
Certain lower-rated securities may contain call or buy-back features that permit
the issuers thereof to call or repurchase such securities. Such securities may
present risks based on prepayment expectations. If an issuer exercises such a
provision, a Fund may have to replace the called security with a lower-yielding
security, resulting in a decreased rate of return to the Fund.
Year 2000. Many computer systems and applications in use today process
transactions using two-digit date fields for the year of the transaction, rather
than the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year "1900," which could
result in processing inaccuracies and computer system failures. This is commonly
known as the Year 2000 problem. Should any of the computer systems employed by
the Funds' major service providers fail to process Year 2000 related information
properly, that could have a significant negative impact on the Funds' operations
and the services that are provided to the Funds' shareholders. In addition, to
the extent that the operations of issuers of securities held by the Funds are
impaired by the Year 2000 problem, or prices of securities held by the Funds
decline as a result of real or perceived problems relating to the Year 2000, the
value of the Funds' shares may be materially affected.
With respect to the Year 2000, the Funds have been advised that Alliance, each
Fund's investment adviser, Alliance Fund Distributors, Inc, ("AFD"), each Fund's
principal underwriter, and Alliance Fund Services, Inc. ("AFS"), each Fund's
registrar, transfer agent and dividend disbursing agent (collectively,
"Alliance") began to address the Year 2000 issue several years ago in connection
with the replacement or upgrading of certain computer systems and applications.
During 1997, Alliance began a formal Year 2000 initiative, which established a
structured and coordinated process to deal with the Year 2000
49
<PAGE>
issue. Alliance reports that it has completed its assessment of the Year 2000
issues on its domestic and international computer systems and applications.
Currently, management of Alliance expects that the required modifications for
the majority of its significant systems and applications that will be in use on
January 1, 2000, will be completed and tested in early 1999. Full integration
testing of these systems and testing of interfaces with third-party suppliers
will continue through 1999. At this time, management of Alliance believes that
the costs associated with resolving this issue will not have a material adverse
effect on its operations or on its ability to provide the level of services it
currently provides to the Funds.
The Funds and Alliance have been advised by the Funds' Custodians that they are
also in the process of reviewing their systems with the same goals. As of the
date of this prospectus, the Funds and Alliance have no reason to believe that
the Custodians will be unable to achieve these goals.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Each Fund's Adviser is Alliance Capital Management, L.P., 1345 Avenue of the
Americas, New York, NY 10105. Alliance is a leading international investment
adviser supervising client accounts with assets as of December 31, 1998 totaling
more than $286 billion (of which approximately $115 billion represented assets
of investment companies). Alliance's clients are primarily major corporate
employee benefit plans, public employee retirement systems, investment
companies, foundations, and endowment funds. The 54 registered investment
companies, with more than 118 separate portfolios, managed by Alliance
currently have over 3.5 million shareholder accounts. As of December 31, 1998,
Alliance was retained as investment manager for over 35 of the FORTUNE 100
Companies.
Alliance provides investment advisory services and order placement facilities
for the Funds. For these advisory services, the Funds paid Alliance as a
percentage of average daily net assets:
Fee as a percentage of Fiscal
Fund average daily net assets* Year Ending
- ---- ------------------------- -----------
Alliance Premier Growth Fund 1.00% 11/30/98
Alliance Growth Fund .70 10/31/98
Alliance Technology Fund 1.02 11/30/98
Alliance Quasar Fund 1.04 9/30/98
The Alliance Fund .67 11/30/98
Alliance Growth and Income Fund .48 10/31/98
Alliance Balanced Shares Fund .625 7/31/98
Alliance Utility Income Fund -0-% 11/30/98
Alliance Real Estate Investment Fund .90 8/31/98
Alliance New Europe Fund 1.02 7/31/98
Alliance Worldwide Privatization Fund 1.00 6/30/98
Alliance International Premier Growth Fund -0- 11/30/98
Alliance Global Small Cap Fund 1.00 7/31/98
Alliance International Fund .85 6/30/98
Alliance Greater China '97 Fund -0- 7/31/98
Alliance All-Asia Investment Fund .24 10/31/98
Alliance Global Environment Fund 1.10 10/31/98
- --------------------------------------------------------------------------------
* Fees are stated net of any waivers and/or reimbursements. See the "Fee
Table" at the beginning of the Prospectus for more information about fee
waivers.
In connection with providing advisory services to Alliance Greater China '97
Fund, Alliance has, at its expense, retained as a consultant New Alliance, a
joint venture company headquartered in Hong Kong, which was formed in 1997 by
Alliance and Sun Hung Kai Properties Limited. New Alliance provides Alliance
with ongoing, current, and comprehensive information and analysis of conditions
and developments in Greater China countries.
In connection with investments in real estate securities, Alliance has, at its
expense, retained as a consultant CB Richard Ellis, Inc. ("CBRE"). CBRE is a
publicly held company and the largest real estate services company in the United
States, comprised of real estate brokerage, property, and facilities management,
and real estate finance, and investment advisory services.
Portfolio Manager
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible for the Fund, and each person's
principal occupation during the past five years.
Principal Occupation
During the Past
Fund Employee; Year; Title Five (5) Years*
- -------------------------------------------------------------------------------
Alliance Premier Alfred Harrison; since Associated with
Growth Fund inception--Vice Chairman Alliance
of Alliance Capital
Management Corporation
(ACMC)**
Alliance Growth Tyler Smith; since inception Associated with
Fund --Senior Vice President Alliance
of ACMC
50
<PAGE>
Principal Occupation
During the Past
Fund Employee; Year; Title Five (5) Years*
- -------------------------------------------------------------------------------
Alliance Technology Peter Anastos; since 1992 Associated with
Fund --Senior Vice President Alliance
of ACMC
Gerald T. Malone; since 1992 Associated with
--Senior Vice President Alliance
of ACMC
Alliance Quasar Alden M. Stewart; since 1994 Associated with
Fund --Executive Vice President Alliance
of ACMC
Randall E. Haase; since 1994 Associated with
--Senior Vice President Alliance
of ACMC
The Alliance Fund Alden M. Stewart; since 1997 (see above)
--(see above)
Randall E. Haase; since 1997 (see above)
--(see above)
Alliance Growth and Paul Rissman; since 1994 Associated with
Income Fund --Senior Vice President Alliance
of ACMC
Alliance Balanced Paul Rissman; since 1997 (see above)
Shares Fund --(see above)
Alliance Utility Paul Rissman; since 1996 (see above)
Income Fund --(see above)
Alliance Real Daniel G. Pine; since 1996 Associated with
Estate Investment --Senior Vice President Alliance since 1996;
Fund of ACMC prior thereto;
Senior Vice
President of
Desai Capital
Management
David Kruth; since 1997 Associated with
--Vice President of ACMC Alliance since 1997;
prior thereto; Senior
Vice President of
Yarmouth Group
Alliance New Europe Steven Beinhacker; since 1997 Associated with
Fund --Vice President of ACMC Alliance
Alliance Worldwide Mark H. Breedon; since Associated with
Privatization Fund inception Senior Vice Alliance
President of ACMC and
Director and Vice President
of Alliance Capital Limited***
Alliance Alfred Harrison; since 1998 (see above)
International --(see above)
Premier Growth Fund
Thomas Kamp; since 1998 Associated with
--Senior Vice President Alliance
of ACMC
Alliance Global Alden M. Stewart; since 1994 (see above)
Small Cap Fund --(see above)
Randall E. Haase; since 1994 (see above)
--(see above)
Mark D. Breedon; since 1998 (see above)
--(see above)
Alliance
International Fund Nicholas D.P.Carn; since 1998 Associated with
--Senior Vice President Alliance since 1995;
of ACMC prior thereto; Chief
Investment Officer of
Draycott Partners,
Inc.
Alliance Greater Matthew W.S. Lee; since 1997 Associated with
China '97 Fund --Vice President of ACMC Alliance since 1997;
prior thereto;
associated with
National Mutual Funds
Management (Asia) and
James Capel and Co.
since prior to 1994
Alliance All-Asia Hiroshi Motoki; since 1998 Associated with
Investment Fund --Senior Vice President Alliance since 1994;
of ACMC and director of prior thereto;
Japanese/Asian Equity associated with
research Ford Motor Company
Alliance Global Linda Bolton Weiser; Associated with
Environment Fund since 1998--Vice President Alliance
of ACMC
* Unless indicated otherwise, persons associated with Alliance have been
employed in a portfolio management, research or investment capacity.
** The sole general partner of Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Alliance Premier Growth Fund, Mr. Harrison has ultimate responsibility for
the management of discretionary tax-exempt accounts of institutional clients
managed as described below without significant client-imposed restrictions
("Historical Portfolios"). These accounts have substantially the same investment
objectives and policies and are managed in accordance with essentially the same
investment strategies and techniques as those for Alliance Premier Growth Fund,
except for the ability of Alliance Premier Growth Fund to use futures and
options as hedging tools and to invest in warrants. The Historical Portfolios
also are not subject to certain limitations, diversification requirements and
other restrictions imposed under the 1940 Act and the Code to which Alliance
Premier Growth Fund, as a registered investment company, is subject and which,
if applicable to the Historical Portfolios, may have adversely affected the
performance results of the Historical Portfolios. See "Investment Objectives
and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the nineteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios as an employee of Alliance
and cumulatively through December 31, 1998. As of December 31, 1998, the assets
in the Historical Portfolios totaled approximately $15.9 billion and the average
size of an institutional account in the Historical Portfolio was $529 million.
Each Historical Portfolio has a nearly identical composition of investment
holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be payable by Alliance
Premier Growth Fund, which are higherthan the fees imposed on the Historical
Portfolio and will result in a higher
51
<PAGE>
expense ratio and lower returns for Alliance Premier Growth Fund. Expenses
associated with the distribution of Class A, Class B, and Class C shares of
Alliance Premier Growth Fund in accordance with the plan adopted by Alliance
Premier Growth Fund's Board of Directors pursuant to Rule 12b-1 under the 1940
Act ("distribution fees") are also excluded. The performance data has also not
been adjusted for corporate or individual taxes, if any, payable by the account
owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The total returns set forth below are
calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation. In contrast with
the securities in the Russell Price-Driven Indices, companies in the Growth
Index tend to exhibit higher price-to-book and price-earnings ratios, lower
dividend yield and higher forecasted growth values.
To the extent Alliance Premier Growth Fund does not invest in U.S. common stocks
or utilizes investment techniques such as futures or options, the S&P 500 Index
and Russell 1000 Growth Index may not be substantially comparable to Alliance
Premier Growth Fund. The S&P 500 Index and Russell 1000 Growth Index are
included to illustrate material economic and market factors that existed during
the time period shown. The S&P 500 Index and Russell 1000 Growth Index do not
reflect the deduction of any fees. If Alliance Premier Growth Fund were to
purchase a portfolio of securities substantially identical to the securities
comprising the S&P 500 Index or the Russell 1000 Growth Index, Alliance Premier
Growth Fund's performance relative to the index would be reduced by Alliance
Premier Growth Fund's expenses, including brokerage commissions, advisory fees,
distribution fees, custodial fees, transfer agency costs and other
administrative expenses, as well as by the impact on Alliance Premier Growth
Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the Alliance Premier
Growth Fund as measured against certain broad based market indices and against
the composite performance of other open-end growth mutual funds. Investors
should not rely on the following performance data of the Historical Portfolios
as an indication of future performance of Alliance Premier Growth Fund. The
composite investment performance for the periods presented may not be indicative
of future rates of return. Other methods of computing investment performance may
produce different results, and the results for different periods may vary.
Schedule of Composite Investment Performance--Historical Portfolios*
<TABLE>
<CAPTION>
Russell Lipper
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
<S> <C> <C> <C> <C> <C>
Year ended December:
1998*** ........... 42.97% 52.16% 28.60% 38.71% 25.69%
1997*** ........... 27.05 34.64 33.36 30.49 25.30
1996*** ........... 18.84 22.06 22.96 23.12 17.48
1995*** ........... 40.66 39.83 37.58 37.19 32.65
1994 .............. (9.78) (4.82) (1.32) 2.66 (1.57)
1993 .............. 5.35 10.54 10.08 2.90 11.98
1992 .............. -- 12.18 7.62 5.00 7.63
1991 .............. -- 38.91 30.47 41.16 35.20
1990 .............. -- (1.57) (3.10) (0.26) (5.00)
1989 .............. -- 38.80 31.69 35.92 28.60
1988 .............. -- 10.88 16.61 11.27 15.80
1987 .............. -- 8.49 5.25 5.31 1.00
1986 .............. -- 27.40 18.67 15.36 15.90
1985 .............. -- 37.41 31.73 32.85 30.30
1984 .............. -- (3.31) 6.27 (.95) (2.80)
1983 .............. -- 20.80 22.56 15.98 22.30
1982 .............. -- 28.02 21.55 20.46 20.20
1981 .............. -- (1.09) (4.92) (11.31) (8.40)
1980 .............. -- 50.73 32.50 39.57 37.30
1979 .............. -- 30.76 18.61 23.91 27.40
Cumulative total
return for
the period
January 1, 1979 to
December 31, 1998 -- 4708% 2525% 2373% 2003%
</TABLE>
- --------------------------------------------------------------------------------
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
52
<PAGE>
distributions.
The basis of preparation of this data is described in the preceding
discussion. Total returns for Alliance Premier Growth Fund are for Class A
shares, with imposition of the maximum 4.25% sales charge.
** Assumes imposition of the maximum advisory fee charged by Alliance for any
Historical Portfolio for the period involved.
*** During this period, the Historical Portfolios differed from Alliance
Premier Growth Fund in that Alliance Premier Growth Fund invested a
portion of its net assets in warrants on equity securities in which the
Historical Portfolios were unable, by their investment restrictions, to
purchase. In lieu of warrants, the Historical Portfolios acquired the
common stock upon which the warrants were based.
The average annual total returns presented below are based upon the cumulative
total return as of December 31, 1998 and, for more than one year, assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Russell Lipper
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
<S> <C> <C> <C> <C> <C>
One year ......... 42.97% 52.16% 28.60% 38.71% 25.69%
Three years ...... 33.03 35.74 28.23 30.62 23.67
Five years ....... 26.65 27.19 24.05 25.70 19.82
Ten years ........ 24.38+ 22.86 19.19 20.57 17.21
Since January 1,
1979 ............. -- 21.37 17.75 17.40 16.45
</TABLE>
- --------------------------------------------------------------------------------
+ Since inception on 9/28/92
The Funds' SAIs have more detailed information about Alliance and other Fund
service providers.
- --------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
- --------------------------------------------------------------------------------
HOW THE FUNDS VALUE THEIR SHARES
The Funds' net asset value or NAV is calculated at 4 p.m. Eastern time each day
the Exchange is open for business. To calculate NAV, a Fund's assets are valued
and totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares outstanding. The Funds' value their securities
at their current market value determined on the basis of market quotations, or,
if such quotations are not readily available, such other methods as the Funds'
directors believe accurately reflect fair market value.
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is accepted by the Fund.
HOW TO BUY SHARES
You may purchase Advisor Class shares through your financial representative at
NAV. Advisor Class shares are not subject to any initial or contingent sales
charges or distribution expenses. You may purchase and hold shares solely:
o through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary
and approved by the Fund's principal underwriter, Alliance Fund
Distributors, Inc. or AFD;
o through a self-directed defined contribution employee benefit plan (e.g.,
a 401(k) plan) that has at least 1,000 participants or $25 million in
assets;
o by investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Funds; and
o through registered investment advisers or other financial intermediaries
who charge a management, consulting or other fee for their services and
who purchase shares through a broker or agent approved by AFD and clients
of such registered investment advisers or financial intermediaries whose
accounts are linked to the master account of such investment adviser or
financial intermediary on the books of such approved broker or agent.
Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares to be approved by AFD
for investment in Advisor Class shares. The Fund's Statement of Additional
Information has more detailed information about who may purchase and hold
Advisor Class shares.
A Fund may refuse any order to purchase Advisor Class shares. In particular, the
Funds' reserve the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence a pattern of
frequent purchases and sales made in response to short-term considerations.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares for Advisor Class shares of other
Alliance Mutual Funds. Exchanges of Advisor Class shares are made at the
next-determined NAV, without any sales or service charge. You may request an
exchange by mail or telephone. You must call by 4:00 p.m. Eastern time to
receive that day's NAV. The Funds may change, suspend, or terminate the exchange
service on 60 days' written notice.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to a Fund) on any day the
Exchange is open, either directly or through your financial intermediary. Your
sales price will be the next-determined NAV after the Fund receives your sales
request in proper form. Normally, proceeds will be sent to you within 7 days. If
you recently purchased your shares by check or electronic funds transfer, your
redemption payment may be delayed until the Fund is reasonably satisfied that
the check or electronic funds transfer has been collected (which may take up to
15 days). If you are in doubt about what procedures or documents are required by
your fee-based program or employee benefit plan to sell your shares, you should
contact your financial representative.
o Selling Shares Through Your Financial Representative
Your financial representative must receive your sales request by 4:00 p.m.,
Eastern time, and submit it to the Fund by 5:00 p.m., Eastern time, for you to
receive that day's NAV. Your financial representative is responsible for
submitting all
53
<PAGE>
necessary documentation to the Fund and may charge you for this service.
o Selling Shares Directly to the Fund
By Mail:
-- Send a signed letter of instruction or stock power, along with
certificates, to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
-- For your protection, a bank, a member firm of a national stock
exchange, or other eligible guarantor institution, must guarantee
signatures. Stock power forms are available from your financial
intermediary, AFS, and many commercial banks. Additional
documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries, and surviving joint owners. If you have
any questions about these procedures, contact AFS.
By Telephone:
-- You may redeem your shares for which no stock certificates have been
issued by telephone request. Call AFS at 800-221-5672 with
instructions on how you wish to receive your sale proceeds.
-- A telephone redemption request must be received by 4:00 p.m. Eastern
time for you to receive that day's NAV.
-- If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your
bank. Otherwise, the proceeds will be mailed to you.
-- Redemption requests by electronic funds transfer may not exceed
$100,000 per day and redemption requests by check cannot exceed
$50,000 per day.
-- Telephone redemption is not available for shares held in nominee or
"street name" accounts, retirement plan accounts, or shares held by
a shareholder who has changed his or her address of record within
the previous 30 calendar days.
OTHER
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale, or exchange of Advisor Class shares of a Fund that are different
from those described in this prospectus. A transaction, service, administrative
or other similar fee may be charged by your broker-dealer, agent, financial
intermediary or other financial representative with respect to the purchase,
sale or exchange of Advisor Class shares made through such financial
representative. Such financial intermediaries may also impose requirements with
respect to the purchase, sale or exchange of shares that are different from, or
in addition to, those imposed by a Fund, including requirements as to the
minimum initial and subsequent investment amounts.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Each Fund's income dividends and capital gains distributions, if any, declared
by a Fund on its outstanding shares will, at the election of each shareholder,
be paid in cash or in additional shares of the same class of shares of that
Fund. If paid in additional shares, the shares will have an aggregate NAV as of
the close of business on the day following the declaration date of the dividend
or distribution equal to the cash amount of the dividend or distribution. You
may make an election to receive dividends and distributions in cash or in shares
at the time you purchase shares. Your election can be changed at any time prior
to a record date for a dividend. There is no sales or other charge in connection
with the reinvestment of dividends or capital gains distributions. Cash
dividends may be paid in check, or at your election, electronically via the ACH
network. There is no sales or other charge on the reinvestment of Fund dividends
and distributions.
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing the dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
The Funds expect that their distributions will consist either of net income or
long-term capital gains. For federal income tax purposes, the Fund's dividend
distributions of net income (or short-term taxable gains) will be taxable to you
as ordinary income. Any long-term capital gains distributions may be taxable to
you as long-term capital gains. A Fund's distributions also may be subject to
certain state and local taxes.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any dividend or distribution will depend
on the realization by the Fund of income and capital gains from investments.
There is no fixed dividend rate and there can be no assurance that a Fund will
pay any dividends or realize any capital gains. Since REITs pay distributions
based on cash flow, without regard to depreciation and amortization, it is
likely that a portion of the distributions paid to Alliance Real Estate
Investment Fund and subsequently distributed to shareholders may be a nontaxable
return of capital. The final determination of the amount of a Fund's return of
capital distributions for the period will be made after the end of each calendar
year.
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the
54
<PAGE>
Code to "pass through" to the Fund's shareholders credits for foreign income
taxes paid (or to permit shareholders to claim a deduction for such foreign
taxes), but there can be no assurance that any Fund will be able to do so.
Furthermore, a shareholder's ability to claim a foreign tax credit or deduction
for foreign taxes paid by a Fund may be subject to certain limitations imposed
by the Code, as a result of which a shareholder may not be permitted to claim a
full credit or deduction for the amount of such taxes.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant), any further returns of capital will be taxable as capital gain.
See the Fund's SAI for a further explanation of these tax issues.
If you buy shares just before a Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
Each year shortly after December 31, the Funds will send you tax information
stating the amount and type of all its distributions for the year. Consult your
tax adviser about the federal, state, and local tax consequences in your
particular circumstances.
- --------------------------------------------------------------------------------
CONVERSION FEATURE
- --------------------------------------------------------------------------------
Conversion
As described above, Advisor Class shares may be held solely through certain
fee-based program accounts, employee benefit plans and registered investment
advisory or other financial intermediary relationships, and by investment
advisory clients of, and certain persons associated with, Alliance and its
affiliates or the Funds. If a holder of Advisor Class shares (i) ceases to
participate in the fee-based program or plan, or to be associated with an
eligible investment advisor or financial intermediary or (ii) is otherwise no
longer eligible to purchase Advisor Class shares (each a "Conversion Event"),
then all Advisor Class shares held by the shareholder will convert automatically
and without notice, to Class A shares of the same Fund during the calendar month
following the month in which the Fund is informed of the occurrence of the
Conversion Event. The failure of a shareholder or a fee-based program to satisfy
the minimum investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event. The conversion would occur on the basis of the
relative NAV of the two classes and without the imposition of any sales load,
fee or other charge.
Description of Class A Shares
The Class A shares of each Fund have a distribution fee of .30% under the Fund's
Rule 12b-1 plan that allows the Fund to pay distribution and service fees for
the distribution and sale of its shares. Because this fee is paid out of the
Fund's assets, Class A shares have a higher expense ratio and may pay lower
dividends and may have a lower NAV than Advisor Class shares.
55
<PAGE>
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $200 for 90 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed.
During drastic economic or market developments, you might have difficulty in
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephone requests to
purchase, sell, or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephone requests. The telephone
service may be suspended or terminated at any time without notice.
56
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
share of each Fund. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, the independent accountants for The
Alliance Fund, Alliance Growth Fund, Alliance Premier Growth Fund, Alliance
International Premier Growth Fund, Alliance Balanced Shares, Alliance Utility
Income Fund, Alliance Worldwide Privatization Fund, and Alliance Growth and
Income Fund, and by Ernst & Young LLP, the independent accountants for
Alliance All-Asia Investment Fund, Alliance Technology Fund, Alliance Quasar
Fund, Alliance International Fund, Alliance New Europe Fund, Alliance Global
Small Cap Fund, Alliance Global Environment Fund, Alliance Greater China '97
Fund and Alliance Real Estate Investment Fund, whose reports, along with
each Fund's financial statements, are included in the SAI, which is available
upon request.
57
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations Less Dividends and Distributions
--------------------------------------------- --------------------------------------------
Net Gains
Net Asset or Losses on Dividends Distributions
Value, Securities Total from from Net in Excess of Distributions
Beginning Net Investment (both realized Investment Investment Net Investment from
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations Income Income Capital Gains
- --------------------- ------------ -------------- -------------- ------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Premier
Growth Fund
Year ended 11/30/98 .... $ 22.10 $(.07)(b) $ 7.14 $ 7.07 $0.00 $0.00 $(1.46)
Year ended 11/30/97 .... 17.99 (.06)(b) 5.25 5.19 0.00 0.00 (1.08)
10/2/96+ to 11/30/96 ... 15.94 (.01)(b) 2.06 2.05 0.00 0.00 0.00
Alliance Growth Fund
Year ended 10/31/98 .... $ 44.08 $ .08(b) $ 6.22 $ 6.30 $0.00 $0.00 $(2.91)
Year ended 10/31/97 .... 34.91 (.05)(b) 10.25 10.20 0.00 0.00 (1.03)
10/2/96+ to 10/31/96 ... 34.14 0.00(b) .77 .77 0.00 0.00 0.00
Alliance Technology Fund
Year ended 11/30/98 .... $ 54.63 $(.50)(b) $15.49 $14.99 $0.00 $0.00 $ (.58)
Year ended 11/30/97 .... 51.17 (.45)(b) 4.33 3.88 0.00 0.00 (.42)
10/2/96+ to 11/30/96 ... 47.32 (.05)(b) 3.90 3.85 0.00 0.00 0.00
Alliance Quasar Fund
Year ended 9/30/98 ..... $ 30.42 $(.09)(b) $(6.73) $(6.82) $0.00 $0.00 $(1.23)
10/2/96+ TO 9/30/97 .... 27.82 (.17)(b) 6.88 6.71 0.00 0.00 (4.11)
The Alliance Fund
Year ended 11/30/98 .... $ 8.69 $(.01)(b) $ (.53) $ (.54) $0.00 $0.00 $(2.17)
Year ended 11/30/97 .... 7.71 (.02)(b) 2.10 2.08 (.04) 0.00 (1.06)
10/2/96+ to 11/30/96 ... 6.99 0.00 .72 .72 0.00 0.00 0.00
Alliance Growth and
Income Fund
Year ended 10/31/98 .... $ 3.48 $ .04(b) $ .43 $ .47 $(.05) $0.00 $ (.46)
Year ended 10/31/97 .... 3.00 .05(b) .87 .92 (0.06) 0.00 (.38)
10/2/96+ to 10/31/96 ... 2.97 0.00 .03 .03 0.00 0.00 0.00
Alliance Balanced Shares
Year ended 7/31/98 ..... $ 16.17 $ .37(b) $ 1.87 $ 2.24 $(.36) $0.00 $(2.07)
10/2/96+ to 7/31/97 .... 14.79 .23(b) 3.22 3.45 (.27) 0.00 (1.80)
Alliance Utility
Income Fund
Year ended 11/30/98 .... $ 12.49 $ .37(b)(c) $ 2.66 $ 3.03 $(.35) $0.00 $(.47)
Year ended 11/30/97 .... 10.59 .36(b)(c) 2.04 2.40 (.37) 0.00 (.13)
10/2/96+ to 11/30/96 ... 9.95 .03(b)(c) .61 .64 0.00 0.00 0.00
Alliance Real Estate
Investment Fund
Year ended 8/31/98 ..... $ 12.82 $ .55(b) $(2.34) $(1.79) $(.54) $0.00 $ (.01)
10/1/96+ to 8/31/97 .... 10.00 .35(b) 2.88 3.23 (.41)(f) 0.00 0.00
Alliance New Europe Fund
Year ended 7/31/98 ..... $ 18.57 $ .08(b) $ 5.28 $ 5.36 $0.00 $(.09) $(2.05)
10/2/96+ to 7/31/97 .... 16.25 .11(b) 3.76 3.87 (.09) (.14) (1.32)
Alliance Worldwide
Privatization Fund
Year ended 6/30/98 ..... $ 13.23 $ .19(b) $ .80 $ .99 $(.23) $0.00 $(1.36)
10/2/96+ to 6/30/97 .... 12.14 .18(b) 2.52 2.70 (.19) 0.00 (1.42)
Alliance International
Premier Growth Fund
3/3/98+ to 11/30/98 .... $ 10.00 $ .01(b)(c) $ (.37) $ (.36) $0.00 $0.00 $ 0.00
Alliance Global
Small Cap Fund
Year ended 7/31/98 ..... $ 12.89 $ .07(b) $ .37 $ .30 $0.00 $0.00 $ (.99)
10/2/96+ to 7/31/97 .... 12.56 (.08)(b) 1.97 1.89 0.00 0.00 (1.56)
Alliance International
Fund
Year ended 6/30/98 ..... $ 18.67 $ .02(b)(c) $ 1.13 $ 1.15 $(.07) $0.00 $(1.21)
10/2/96+ to 6/30/97 .... 17.96 .16(b) 1.78 1.94 (.15) 0.00 (1.08)
Alliance Greater
China '97 Fund
9/3/97+ to 7/31/98 ..... $ 10.00 $ .10(b)(c) $(5.18) $(5.08) $(.07) $0.00 $ 0.00
Alliance All-Asia
Investment Fund
Year ended 10/31/98 .... $ 7.56 $(.08)(b)(c) $(1.58) $(1.66) $0.00 $0.00 $ 0.00
Year ended 10/31/97 .... 11.04 (.15)(b)(c) (2.99) (3.14) 0.00 0.00 (.34)
10/2/96+ to 10/31/96 ... 11.65 0.00(c) (.61) (.61) 0.00 0.00 0.00
Alliance Global
Environment Fund
12/29/97+ to 10/31/98 .. $ 9.15 $(.20) $ (.58) $ (.78) $0.00 $0.00 $ 0.00
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
Less
Distributions Ratios/Supplemental Data
------------- -----------------------------------------------------------
Total Net Asset Ratio of Ratio of Net
Dividends Value, Net Assets, Expenses Income (Loss)
and End of Total End of Period to Average to Average Portfolio
Fiscal Year or Period Distributions Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
- --------------------- -------------- ------------- ------------ --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Premier
Growth Fund
Year ended 11/30/98 .... $(1.46) $27.71 34.31% $271,661 1.26%(e) (.28)% 82%
Year ended 11/30/97 .... (1.08) 22.10 30.98 53,459 1.25 (.28) 76
10/2/96+ to 11/30/96 ... 0.00 17.99 12.86 1,922 1.50 (.48) 95
Alliance Growth Fund
Year ended 10/31/98 .... $(2.91) $47.47 14.92% $174,745 .93%(e) .17% 61%
Year ended 10/31/97 .... (1.03) 44.08 29.92 101,205 .98(e) (.12) 48
10/2/96+ to 10/31/96 ... 0.00 34.91 2.26 946 1.26* 0.50 46
Alliance Technology Fund
Year ended 11/30/98 .... $ (.58) $69.04 27.73% $230,295 1.37%(e) (.84)% 67%
Year ended 11/30/97 .... (.42) 54.63 7.65 167,120 1.39(e) (.81) 51
10/2/96+ to 11/30/96 ... 0.00 51.17 8.14 566 1.75* (1.21)* 30
Alliance Quasar Fund
Year ended 9/30/98 ..... $(1.23) $22.37 (23.24)% $175,037 1.38% (.32)% 109%
10/2/96+ TO 9/30/97 .... (4.11) 30.42 28.47 62,455 1.58 (.74) 135
The Alliance Fund
Year ended 11/30/98 .... $(2.17) $ 5.98 (8.19)% $ 11,305 .83% (.16)% 106%
Year ended 11/30/97 .... (1.10) 8.69 32.00 10,275 .83 (.21) 158
10/2/96+ to 11/30/96 ... 0.00 7.71 10.30 1,083 .89* 0.38* 80
Alliance Growth and
Income Fund
Year ended 10/31/98 .... $ (.51) $ 3.44 14.96% $ 22,786 .76%(e) 1.14% 89%
Year ended 10/31/97 .... (.44) 3.48 33.61 3,207 .71(e) 1.42 88
10/2/96+ to 10/31/96 ... 0.00 3.00 1.01 87 0.37* 3.40* 88
Alliance Balanced Shares
Year ended 7/31/98 ..... $(2.43) $15.98 15.32% $ 2,079 1.06%(e) 2.33% 145%
10/2/96+ to 7/31/97 .... (2.07) 16.17 25.96 1,565 1.30*(e) 2.15* 207
Alliance Utility
Income Fund
Year ended 11/30/98 .... $(.82) $14.70 25.34% $ 523 1.20%(d) 2.83% 16%
Year ended 11/30/97 .... (.50) 12.49 23.57 42 1.20(d) 3.29 37
10/2/96+ to 11/30/96 ... 0.00 10.59 6.33 33 1.20(d) 4.02 98
Alliance Real Estate
Investment Fund
Year ended 8/31/98 ..... $ (.55) $10.48 (14.74)% $ 2,899 1.25% 4.08% 23%
10/1/96+ to 8/31/97 .... (.41) 12.82 32.72 2,313 1.45*(d)(e) 3.07* 20
Alliance New Europe Fund
Year ended 7/31/98 ..... $(2.14) $21.79 32.55% $ 3,143 1.56%(e) .39% 99%
10/2/96+ to 7/31/97 .... (1.55) 18.57 25.76 4,130 1.71* .77* 89
Alliance Worldwide
Privatization Fund
Year ended 6/30/98 ..... $(1.59) $12.63 9.48% $ 1,716 1.45% 1.48% 53%
10/2/96+ to 6/30/97 .... (1.61) 13.23 25.24 374 1.96* 2.97* 48
Alliance International
Premier Growth Fund
3/2/98+ to 11/30/98 .... $ 0.00 $ 9.64 (3.60)% $ 1,386 2.20%(d)* .13%* 151%
Alliance Global
Small Cap Fund
Year ended 7/31/98 ..... $ (.99) $12.20 2.82% $ 392 1.87%(e) (.57)% 113%
10/2/96+ to 7/31/97 .... (1.56) 12.89 17.08 333 2.05*(e) (.84)* 129
Alliance International
Fund
Year ended 6/30/98 ..... $(1.28) $18.54 6.98% $47,154 1.47% .13% 121%
10/2/96+ to 6/30/97 .... (1.23) 18.67 11.57 8,697 1.69(d) 1.47* 94
Alliance Greater
China '97 Fund
9/3/97+ to 7/31/98 ..... $ (.07) $ 4.85 (51.06)% $ 60 2.22(d)(e) 1.51% 58%
Alliance All-Asia
Investment Fund
Year ended 10/31/98 .... $ 0.00 $ 5.90 (21.96)% $ 2,012 3.46(d)(e) 1.22% 93%
Year ended 10/31/97 .... (.34) 7.56 (29.42) 1,338 3.21(d) (1.51) 70
10/2/96+ to 10/31/96 ... 0.00 11.04 (5.24) 27 4.97*(d) 1.63 66
Alliance Global
Environment Fund
12/29/97+ to 10/31/98 .. $ 0.00 $ 8.37 (8.52)% $ 5 3.04%*(e) (2.39)%* 205%
</TABLE>
- --------------------------------------------------------------------------------
Please refer to footnotes on page 60.
59
<PAGE>
+ Commencement of distribution.
* Annualized.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and
a redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment returns calculated for periods
of less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and expense reimbursement.
(d) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, without giving effect to the expense offset arrangement
described in (e) below, would have been as follows:
1996 1997 1998
Alliance All-Asia Investment Fund
Advisor Class 5.54%* 3.43% 4.39%
Alliance Utility Income Fund
Advisor Class 3.48%* 3.29% 2.21%
Alliance Real Estate Investment Fund
Advisor Class -- 1.47%* --
Alliance International Premier Growth Fund
Advisor Class -- -- 6.28%
Alliance International Fund
Advisor Class -- 1.62%
Alliance Greater China '97 Fund
Advisor Class -- 18.13%*
(e) Amounts do not reflect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offset arrangements, the
rate of expenses to average net assets assuming the assumption and/or
waived reimbursement of expenses described in note (d) above would have
been as follows:
1997 1998
Alliance International Fund
Advisor Class 1.69%* --
Alliance Global Small Cap Fund
Advisor Class 2.04%* 1.84%
Alliance New Europe Fund
Advisor Class 1.71%* 1.54%
Alliance All-Asia Investment Fund
Advisor Class -- 3.41%
Alliance Balanced Shares
Advisor Class 1.29%* 1.05%
Alliance Real Estate Investment Fund
Advisor Class 1.44%* --
Alliance Growth and Income Fund
Advisor Class .70% .75%
Alliance Growth Fund
Advisor Class .96% 92%
Alliance Technology Fund Fund
Advisor Class 1.38% 1.36%
Alliance Greater China '97 Fund
Advisor Class -- 2.20%*
Alliance Premier Growth Fund
Advisor Class -- 1/25%
Alliance Global Environment Fund
Advisor Class -- 3.03%
(f) Distributions from net investment income include a tax return of capital
of $.03.
60
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
The following is additional information about the United Kingdom, Japan and
Greater China countries.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
Dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling-dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. Dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. Dollar. The pound sterling has since recovered due to
interest rate cuts throughout Europe and an upturn in the economy of the United
Kingdom. The average exchange rate of the U.S. Dollar to the pound sterling was
1.50 in 1993 and 1.66 in 1998. On January 22, 1999 the U.S. Dollar-pound
sterling exchange rate was 1.66.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
5,882.6 at the end of 1998, up approximately 15% from the end of 1997. On
October 5, 1998 the FT-SE 100 index closed at 4648.7, the lowest close in the
12-month period prior to that date, after reaching a high of 6179.0 on July 20,
1998. The FT-SE 100 index closed at 4990.1 on January 22, 1999.
The Economic and Monetary Union ("EMU") became effective on January 1, 1999.
When fully implemented in 2002, the EMU will establish a common currency for
European countries that meet the eligibility criteria and choose to participate.
Although the United Kingdom meets the eligibility criteria, the government has
not taken any action to join the EMU.
From 1979 until 1997 the Conservative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. Dollar, the
U.S. Dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar, but has since
fallen from its post-World War II high (in 1995) against the U.S. Dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1997. On
December 31, 1998 the TOPIX closed at 1086.99, down approximately 7% from the
end of 1997. Certain valuation measures, such as price-to-book value and
price-to-cash flow ratios, indicate that the Japanese stock market is near its
lowest level in the last twenty years relative to other world markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan returned to a single-party government led by Ryutaro Hashimoto, a member
of the Liberal Democratic Party ("LDP"). While the LDP does not control a
majority of the seats in the parliament, subsequent to the 1996 elections
it established a majority in the House of Representatives as individual
members joined the ruling party. The popularity of the LDP declined, however,
due to the dissatisfaction with Mr. Hashimoto's leadership. In the July 1998
House of Councillors election, the LDP's representation fell to 103 seats from
120 seats. As a result of the LDP's defeat, Mr. Hashimoto resigned as prime
minister and leader of the LDP. Mr. Hashimoto was replaced by Keizo Obuchi.
On January 14, 1999, the LDP formed a coalition government with a major
opposition party. As a result, Mr. Obuchi's administration strengthened
its position in the parliament, where it increased its majority in the
House of Representatives and reduced its shortfall in the House of
Councillors. For the past several years, Japan's banking industry has been
weakened by a significant
61
<PAGE>
amount of problem loans. Japan's banks also have significant exposure to the
current financial turmoil in other Asian markets. Following the insolvency of
one of Japan's largest banks in November 1997, the government proposed several
plans designed to strengthen the weakened banking sector. In October 1998, the
Japanese parliament approved several new laws that will make $508 billion in
public funds available to increase the capital of Japanese banks, to guarantee
depositors' accounts and to nationalize the weakest banks. It is unclear whether
these new laws will achieve their intended effect. For further information
regarding Japan, see the Statements of Additional Information of Alliance
International Fund and Alliance All-Asia Investment Fund.
Investment in Greater China Issuers. China, in particular, but Hong Kong and
Taiwan, as well, in significant measure because of their existing and increasing
economic, and now in the case of Hong Kong, direct political ties with China,
may be subject to a greater degree of economic, political and social instability
than is the case in the United States.
China's economy is very much in transition. While the government still controls
production and pricing in major economic sectors, significant steps have been
taken toward capitalism and China's economy has become increasingly market
oriented. China's strong economic growth and ability to attract significant
foreign investment in recent years stem from the economic liberalization
initiated by Deng Xiaoping who assumed power in the late 1970s. The economic
growth, however, has not been smooth and has been marked by extremes in many
respects of inordinate growth, which has not been tightly controlled, followed
by rigid measures of austerity.
The rapidity and erratic nature of the growth have resulted in inefficiencies
and dislocations, including at times high rates of inflation.
China's economic development has occurred notwithstanding the continuation of
the power of China's Communist Party and China's authoritarian government
control, not only of centrally planned economic decisions, but of many aspects
of the social structure. While a significant portion of China's population has
benefited from China's economic growth, the conditions of many leave much room
for improvement. Notwithstanding restrictions on freedom of expression and the
absence of a free press, and notwithstanding the extreme manner in which past
unrest has been dealt with, the 1989 Tianamen Square uprising being a recent
reminder, the potential for renewed popular unrest associated with demands for
improved social, political and economic conditions cannot be dismissed.
Following the death of Deng Xiaoping in February 1997, Jian Zemin became the
leader of China's Communist Party. The transfer of political power has
progressed smoothly and Jiang's popularity and credibility have gradually
increased. Jiang continues to consolidate his power, but as of yet does not
appear to have the same degree of control as did Deng Xiaoping. Jiang has
continued the market-oriented policies of Deng. Currently, China's major
economic challenge centers on reforming or eliminating inefficient state-owned
enterprises without creating an unacceptable level of unemployment. Recent
capitalistic policies have in many respects effectively outdated the Communist
Party and the governmental structure, but both remain entrenched. The Communist
Party still controls access to governmental positions and closely monitors
governmental action. Essentially there exists an inefficient set of parallel
bureaucracies and attendant opportunities for corruption.
In addition to the economic impact of China's internal political uncertainties,
the potential effect of China's actions, not only on China Itself, but on Hong
Kong and Taiwan as well, could also be significant.
China is heavily dependent on foreign trade, particularly with Japan, the U.S.,
South Korea and Germany. Political developments adverse to its trading partners,
as well as political and social repression, could cause the U.S. and others to
alter their trading policy towards China. For example, in the U.S., the
continued extension of most favored nation trading status to China which is
reviewed regularly and was reviewed in 1998 is an issue of significant
controversy. Loss of that status would clearly hurt China's economy by reducing
its exports. With much of China's trading activity being funneled through Hong
Kong and with trade through Taiwan becoming increasingly significant, any
sizable reduction in demand for goods from China would have negative
implications for both countries. China is believed to be the largest investor in
Hong Kong and its markets and an economic downturn in China would be expected to
reverberate through Hong Kong's markets as well.
Although China has committed by treaty to preserve Hong Kong's autonomy and its
economic, political and social freedoms for fifty years from the July 1, 1997
transfer of sovereignty from Great Britain to China. Hong Kong is headed by a
chief executive, appointed by the central government of China, whose power is
checked by both the government of China and a Legislative Council. Although Hong
Kong voters voted overwhelmingly for pro-democracy candidates in the recent
election, it remains possible that China could exert its authority so as to
alter the economic structure, political structure or existing social policy of
Hong Kong. Investor and business confidence in Hong Kong can be significantly
affected by such developments, which in turn can affect markets and business
performance. In this connection, it is noted that a substantial portion of the
companies listed on the Hong Kong Stock Exchange are involved in real
estate-related activities. The securities markets of China and to a lesser
extent Taiwan, are relatively small, with the majority of market capitalization
and trading volume concentrated in a limited number of companies representing a
small number of industries. Consequently, Alliance Greater China '97 Fund may
experience greater price volatility and significantly lower liquidity than a
portfolio invested solely in equity securities of U.S. companies. These markets
may be subject to greater influence by adverse events generally affecting the
market, and by large investors trading significant blocks of securities, than is
usual in the U.S. securities settlements may in some instances be subject to
delays and related administrative uncertainties.
62
<PAGE>
Foreign investment in the securities markets of China and Taiwan is restricted
or controlled to varying degrees. These restrictions or controls, which apply to
the Alliance Greater China '97 Fund may at times limit or preclude investment in
certain securities and may increase the cost and expenses of the Fund. China and
Taiwan require governmental approval prior to investments by foreign persons or
limit investment by foreign persons to only a specified percentage of an
issuer's outstanding securities or a specific class of securities which may have
less advantageous terms (including price) than securities of the company
available for purchase by nationals. In addition, the repatriation of investment
income, capital or the proceeds of sales of securities from China and Taiwan is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose restrictions on foreign
capital remittances.
Alliance Greater China '97 Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental approval for repatriation, as well
as by the application to it of other restrictions on investment. The liquidity
of the Fund's investments in any country in which any of these factors exists
could be affected by any such factor or factors on the Fund's investments. The
limited liquidity in certain Greater China markets is a factor to be taken into
account in the Fund's valuation of portfolio securities in this category and may
affect the Fund's ability to dispose of securities in order to meet redemption
requests at the price and time it wishes to do so. It is also anticipated that
transaction costs, including brokerage commissions for transactions both on and
off the securities exchanges in Greater China countries, will be higher than in
the U.S.
Issuers of securities in Greater China countries are generally not subject to
the same degree of regulation as are U.S. issuers with respect to such matters
as timely disclosure of information, insider trading rules, restrictions on
market manipulation and shareholder proxy requirements. Reporting, accounting
and auditing standards of Greater China countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in securities of Greater China country issuers
than to investors in securities of U.S. issuers.
Investment in Greater China companies which are in the initial stages of their
development involves greater risk than is customarily associated with securities
of more established companies. The securities of such companies may have
relatively limited marketability and may be subject to more abrupt or erratic
market movements than securities of established companies or broad market
indices.
63
<PAGE>
For more information about the Funds, the following documents are available upon
request:
o Annual/Semi-Annual Reports to Shareholders
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected a Fund's performance during its last fiscal year.
o Statement of Additional Information (SAI)
Each Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Funds' SAIs are
incorporated by reference into (and is legally part of) this prospectus.
You may request a free copy of the current annual/semi-annual report or the SAI,
by contacting your broker or other financial intermediary, or by contacting
Alliance:
By Mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07096-1520
By Phone: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
In Person: at the Commission's Public Reference Room
in Washington, D.C.
By Phone: 1-800-SEC-0330
By Mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
On The Internet: www.sec.gov
You also may find more information about Alliance and the Funds on the internet
at www.Alliancecapital.com
64
<PAGE>
- ---------------------------
Alliance Stock Funds
Subscription Application
- Advisor Class
- ---------------------------
The Alliance Fund
Growth Fund
Premier Growth Fund
Technology Fund
Quasar Fund
International Fund
International Premier Growth Fund
Worldwide Privatization Fund
New Europe Fund
All-Asia Investment Fund
Greater China '97 Fund
Global Small Cap Fund
Global Environment Fund
Balanced Shares
Utility Income Fund
Growth & Income Fund
Real Estate Investment Fund
To Open Your New Alliance Account...
Please complete the application and mail it to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration
(Required)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
o Individuals, Joint Tenants, Transfer on Death and Gift/Transfer to a
Minor:
o Indicate your name(s) exactly as it appears on your social
security card.
o Transfer on Death:
o Ensure that your state participates
o Trust/Other:
o Indicate the name of the entity exactly as it appeared on the
notice you received from the IRS when your Employer
Identification number was assigned.
Section 2 Your Address (Required) Complete in full.
o Non-Resident Alien:
o Indicate your permanent country of residence.
Section 3 Your Initial Investment (Required)
For each fund in which you are investing: (1) Write the three digit fund number
in the column titled 'Indicate three digit fund number located below'.
(2) Write the dollar amount of your initial purchase in the column titled
'Indicate Dollar Amount'.
(3) Check off a distribution option for your dividends.
(4) Check off a distribution option for your capital gains. All distributions
(dividends and capital gains) will be reinvested into your fund account unless
you direct otherwise. If you want distributions sent directly to your bank
account, then you must complete Section 4D and attach a preprinted, voided check
for that account. If you want your distributions sent to a third party you must
complete Section 4E.
Section 4 Your Shareholder Options
(Complete only those options you want)
A. Automatic Investment Plans (AIP) - You can make periodic investments into any
of your Alliance Funds in one of three ways. First, by a periodic withdrawal
($25 minimum) directly from your bank account and invested into an Alliance
Fund. Second, you can direct your distributions (dividends and capital gains)
from one Alliance Fund into another Fund. Or third, you can automatically
exchange monthly ($25 minimum) shares of one Alliance Fund for shares of another
Fund. To elect one of these options, complete the appropriate portion of Section
4A & 4D. If more than one dividend direction or monthly exchange is desired,
please call our Literature Center to obtain a Shareholder Account Services
Options Form for completion.
B. Telephone Transactions via EFT - Complete this option if you would like to be
able to transact via telephone between your fund account and your bank account.
C. Systematic Withdrawal Plans (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be made
via Electronic Funds Transfer (EFT) to your bank account or by check.
D. Bank Information - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a preprinted, voided check of the account you wish to use to this
section of the application.
E. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person and/or
address other than those provided in section 1 or 2, complete this option.
Medallion Signature Guarantee is required if your account is not maintained by a
broker dealer.
Section 5 Shareholder Authorization
(Required) All owners must sign. If it is a custodial, corporate, or trust
account, the custodian, an authorized officer, or the trustee respectively must
sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At: (800)
221-5672.
-----------------------------------
For Literature Call: (800) 227-4618
-----------------------------------
<PAGE>
The Alliance Stock Funds Subscription Application
- - Advisor Class
- --------------------------------------------------------------------------------
1. Your Account Registration (Please Print in Capital Letters and Mark Check
Boxes Where Applicable)
- --------------------------------------------------------------------------------
|_| Individual Account [ |_| Male |_| Female ] - or - |_| Joint Account - or -
|_| Transfer On Death [ |_| Male |_| Female ] - or - Gift/Transfer to a Minor
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Owner or Custodian (First Name) (MI) (Last Name)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
(First Name) Joint Owner*, (MI) (Last Name)
Transfer On Death Beneficiary
or Minor
|_| |_| |_| - |_| |_| - |_| |_| |_| |_|
Social Security Number of Owner or Minor
(required to open account)
If Uniform Gift/Transfer
to Minor Account:
|_| |_| Minor's State of Residence
If Joint Tenants Account: * The Account will be registered "Joint Tenants with
right of Survivorship" unless you indicate otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust - or - |_| Corporation - or - |_| Other
-------------------------------
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name of Trustee if applicable (MI) (Last Name)
(First Name)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name of Trust or Corporation or Other Entity
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name of Trust or Corporation or Other Entity continued
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Trust Dated (MM, DD, YYYY) Tax ID Number (required to open account)
|_| Employer ID Number - OR - |_| Social Security
Number
- --------------------------------------------------------------------------------
2. Your Address
- --------------------------------------------------------------------------------
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Street Number Street Name
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
City State Zip code
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_| |_| |_| - |_| |_| |_| |_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
90063GEN-TASFApp-Advisor-P1 Alliance Capital [LOGO](R)
1
<PAGE>
- --------------------------------------------------------------------------------
3. Your Initial Investment
- --------------------------------------------------------------------------------
I hereby subscribe for shares of the following Alliance Stock Fund(s) Advisor
Class and elect distribution options as indicated.
- ---------------------------------------
Broker/Dealer Use Only: Wire Confirm #
|_| |_| |_| |_| |_| |_| |_| |_|
- ---------------------------------------
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
C Send my distributions in cash to the address I have provided in Section 2.
(Complete Section 4D for direct deposit to your bank account. Complete
Section 4E for payment to a third party).
D Direct my distributions to another Alliance fund. Complete the appropriate
portion of Section 4A to direct your distributions (dividends and capital
gains) to another Alliance Fund.
- ----------- ------------- ---------------------- ---------------------------
Make all Distribution Options
checks* Indicate three *Check One
payable to: digit Fund Indicate Dollar Amount ---------------------------
Alliance number Dividends Capital Gains
Funds located below R C D R C D
- ----------- ------------- ---------------------- ----------- -------------
|_| |_| |_| $ |__________________| |R| |C| |D| |R| |C| |D|
|_| |_| |_| $ |__________________| |R| |C| |D| |R| |C| |D|
|_| |_| |_| $ |__________________| |R| |C| |D| |R| |C| |D|
|_| |_| |_| $ |__________________| |R| |C| |D| |R| |C| |D|
- ----------------------
Total Investment $ |__________________|
- ----------------------
* Cash and money orders are not accepted
- --------------------------------------------------------------------------------
Alliance Stock Fund Names and Numbers
- --------------------------------------------------------------------------------
-------
Advisor
Class
-------
- --------------------------------------------------------------------------------
The Alliance Fund 444
------------------------------------------------------------
Growth Fund 431
------------------------------------------------------------
Domestic Premier Growth Fund 478
------------------------------------------------------------
Technology Fund 482
------------------------------------------------------------
Quasar Fund 426
- --------------------------------------------------------------------------------
International Fund 440
------------------------------------------------------------
International Premier Growth 479
------------------------------------------------------------
Worldwide Privatization Fund 412
------------------------------------------------------------
Global New Europe Fund 462
------------------------------------------------------------
All-Asia Investment Fund 418
------------------------------------------------------------
Greater China '97 Fund 460
------------------------------------------------------------
Global Small Cap Fund 445
------------------------------------------------------------
Global Environment Fund 481
- --------------------------------------------------------------------------------
Balanced Shares 496
------------------------------------------------------------
Utility Income Fund 409
Total ------------------------------------------------------------
Return Growth & Income Fund 494
------------------------------------------------------------
Real Estate Investment Fund 410
- --------------------------------------------------------------------------------
90063GEN-TASFApp-Advisor-P2
2
<PAGE>
- --------------------------------------------------------------------------------
4. Your Shareholder Options
- --------------------------------------------------------------------------------
A. Automatic Investment Plans (AIP)
|_| Withdraw From My Bank Account Via EFT* I authorize Alliance to draw on my
bank account for investment in my fund account(s) as indicated below
(Complete Section 4D also for the bank account you wish to use).
1 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
2 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
3 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
Frequency: M = monthly Q = quarterly A = annually
* Electronic Funds Transfer. Your bank must be a member of the
National Automated Clearing House Association (NACHA)
|_| Direct My Distributions As indicated in Section 3, I would like my
dividends and/or capital gains directed to the same class of shares of
another Alliance Fund.
FROM: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
TO: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
|_| Exchange My Shares Monthly I authorize Alliance to transact monthly
exchanges, within the same class of shares, between my fund accounts as
listed below.
FROM: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
|_| |_| , |_| |_| |_|.00 |_| |_|
Amount ($25 minimum) Day of Exchange**
TO: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
** Shares exchanged will be redeemed at the net asset value on the "Day of
Exchange" (If the "Day of Exchange" is not a fund business day, the
exchange transaction will be processed on the next fund business day). The
exchange privilege is not available if stock certificates have been
issued.
B. Purchases and Redemptions Via EFT
You can call our toll-free number 1-800-221-5672 and instruct Alliance
Fund Services, Inc. in a recorded conversation to purchase, redeem or
exchange shares for your account. Purchase and redemption requests will be
processed via electronic funds transfer (EFT) to and from your bank
account.
Instructions: o Review the information in the Prospectus about
telephone transaction services.
o If you select the telephone purchase or redemption
privilege, you must write "VOID" across the face
of a check from the bank account you wish to use
and attach it to Section 4D of this application.
|_| Purchases and Redemptions via EFT
I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected.
- --------------------------------------------------------------------------------
For shares recently purchased by check or electronic funds transfer
redemption proceeds will not be made available until the Fund is
reasonably assured the check or electronic funds transfer has been
collected, normally 15 calendar days after the purchase date.
- --------------------------------------------------------------------------------
90063GEN-TASFApp-Advisor-P3
3
<PAGE>
- --------------------------------------------------------------------------------
4. Your Shareholder Options (CONTINUED)
- --------------------------------------------------------------------------------
C. Systematic Withdrawal Plans (SWP)
In order to establish a SWP, you must reinvest all dividends and capital
gains.
|_| I authorize Alliance to transact periodic redemptions from my fund
account and send the proceeds to me as indicated below.
1 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
2 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
3 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
Frequency: M = monthly Q = quarterly A = annually
Please send my SWP proceeds to:
|_| My Address of Record (via check)
|_| The Payee and address specified in section 4E (via check) (Medallion
Signature Guarantee required)
|_| My checking account-via EFT (complete section 4D) Your bank must be
a member of the National Automated Clearing House Association
(NACHA) in order for you to receive SWP proceeds directly into your
bank account. Otherwise payment will be made by check
D. Bank Information This bank account information will be used for:
|_| Distributions (Section 3)
|_| Automatic Investments (Section 4A)
|_| Telephone Transactions (Section 4B)
|_| Withdrawals (Section 4C)
- --------------------------------------------------------------------------------
Please Tape a Pre-printed Voided Check Here*
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
* The above services cannot be established without a pre-printed voided
check.
For EFT transactions, the fund requires signatures of bank account owners
exactly as they appear on bank records. If the registration at the bank
differs from that on the Alliance mutual fund, all parties must sign in
Section 5.
|_| |_| |_| |_| |_| |_| |_| |_| |_|
Your Bank's ABA Routing Number
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Your Bank Account Number
|_| Checking Account |_| Savings Account
90063GEN-TASFApp-Advisor-P4
4
<PAGE>
- --------------------------------------------------------------------------------
4. Your Shareholder Options (CONTINUED)
- --------------------------------------------------------------------------------
E. Third Party Payment Details Your signature(s) in Section 5 must be
Medallion Signature Guaranteed if your account is not maintained by a
broker/dealer. This third party payee information will be used for:
|_| Distributions (section 3) |_| Systematic Withdrawals (section 4C)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name (First Name) (MI) (Last Name)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Street Number Street Name
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
City State Zip code
- --------------------------------------------------------------------------------
Dealer/Agent Authorization - For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 5, as well as the legal capacity of the
shareholder.
____________________________________ ______________________________________
Dealer/Agent Firm Authorized Signature
___________________________ |_| ______________________________________
Representative First Name MI Last Name
____________________________________ ______________________________________
Dealer/Agent Firm Number Representative Number
____________________________________ ______________________________________
Branch Number Branch Telephone Number
______________________________________________________________________________
Branch Office Address
____________________________________ |_| |_| ____________________________
City State Zip Code
90063GEN-TASFApp-Advisor-P5
5
<PAGE>
- --------------------------------------------------------------------------------
5. Shareholder Authorization -- This section MUST be completed
- --------------------------------------------------------------------------------
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of an investment dealer or agent requesting a
redemption or exchange on my behalf. (NOTE: Telephone exchanges may only
be processed between accounts that have identical registrations.)
Telephone redemption checks will only be mailed to the name and address of
record; and the address must not have changed within the last 30 days. The
maximum telephone redemption amount is $50,000 for redemptions by check.
|_| I do not elect the telephone exchange service
|_| I do not elect the telephone redemption by check service
By selecting any of the above telephone privileges, I agree that neither
the Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund
Services, Inc. or other Fund Agent will be liable for any loss, injury,
damage or expense as a result of acting upon telephone instructions
purporting to be on my behalf, that the Fund reasonably believes to be
genuine, and that neither the Fund nor any such party will be responsible
for the authenticity of such telephone instructions. I understand that any
or all of these privileges may be discontinued by me or the Fund at any
time. I understand and agree that the Fund reserves the right to refuse
any telephone instructions and that my investment dealer or agent reserves
the right to refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the
best of my knowledge and belief, I qualify as a foreign person as
indicated in Section 2.
I am of legal age and capacity and have received and read the Prospectus
and agree to its terms.
I certify under penalty of perjury that the number shown in Section 1 of
this form is my correct tax identification number or I am waiting for a
number to be issued to me and that I have not been notified that this
account is subject to backup withholding.
The Internal Revenue Service does not require your consent to any
provision of this document other than the certification required to avoid
backup withholding.
- ----------------------------------------------------------- -------------
Signature Date
- ----------------------------------------------------------- -------------
Signature Date
- --------------------------------------------
Medallion Signature Guarantee required if
completing Section 4E and your mutual
fund is not maintained by a broker dealer
90063GEN-TASFApp-Advisor-P6 Alliance Capital [LOGO](R)
6
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 33-37848 and 811-06028.
<PAGE>
(LOGO)
ALLIANCE NEW EUROPE FUND, INC.
______________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
______________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
November 2, 1998 (as amended February 1, 1999)
______________________________________________________________
This Statement of Additional Information is not a prospectus
and should be read in conjunction with the Fund's current
Prospectus for the Alliance New Europe Fund, Inc. (the "Fund")
that offers the Class A, Class B and Class C shares of the Fund
and the current Prospectus for the Fund that offers the Advisor
Class shares of the Fund (the "Advisor Class Prospectus" and,
together with the Prospectus for the Fund that offers the
Class A, Class B, and Class C shares of the Fund, the
"Prospectus"). Copies of such Prospectuses may be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone numbers shown above.
Table Of Contents
Page
Description of the Fund.....................................
Management of the Fund......................................
Expenses of the Fund........................................
Purchase of Shares..........................................
Redemption and Repurchase of Shares.........................
Shareholder Services........................................
Net Asset Value.............................................
Dividends, Distributions and Taxes..........................
Portfolio Transactions......................................
General Information.........................................
Financial Statements and Report of Independent Auditors.....
Appendix A: Special Risk Considerations..................... A-1
Appendix B: Currency Hedging Techniques..................... B-1
Appendix C: Additional Information About The
United Kingdom............................................ C-1
Appendix D: Certain Employee Benefit Plans.................. D-1
_______________________________________________________________
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
_______________________________________________________________
DESCRIPTION OF THE FUND
_______________________________________________________________
Introduction to the Fund
Alliance New Europe Fund, Inc. (the "Fund") is a
diversified, open-end management investment company commonly
known as a "mutual fund." Until February 8, 1991, the Fund
operated as a closed-end investment company, and its shares
(which then comprised a single class) were listed and traded on
the New York Stock Exchange until February 1, 1991. The
investment objective and policies of the Fund are set forth
below. The Fund's investment objective is a "fundamental policy"
within the meaning of the Investment Company Act of 1940, as (the
"1940 Act"), and, therefore, may not be changed by the Directors
without a shareholder vote. Except as provided below, the Fund's
investment policies are not fundamental and, therefore, may be
changed by the Board of Directors without shareholder approval;
however, the Fund will not change its investment policies without
contemporaneous written notice to shareholders. There can be, of
course, no assurance that the Fund will achieve its investment
objective.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term capital
appreciation through investment primarily in the equity
securities of companies based in Europe. As a matter of
fundamental policy, the Fund will, under normal circumstances,
invest at least 65% of its total assets in the equity securities
of European companies. The Fund defines European companies to be
companies (a) that are organized under the laws of a European
country and have a principal office in a European country or
(b) that derive 50% or more of their total revenues from business
in Europe or (c) the equity securities of which are traded
principally on a stock exchange in Europe. Under normal market
conditions the Fund expects to invest substantially all of its
assets in the equity securities of companies based in Europe.
When Alliance Capital Management L.P., the Fund's investment
adviser (the "Adviser") believes that such investments provide
the opportunity for capital appreciation, however, up to 35% of
the Fund's total assets may be invested in U.S. dollar or foreign
currency denominated fixed-income securities issued or guaranteed
by European governmental entities, or by European or
multinational companies or supranational organizations which are
rated AA or better by Standard & Poor's Corporation or Aa or
better by Moody's Investors Service, Inc. or, if not so rated, of
equivalent investment quality as determined by the Fund's
Adviser.
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Unless otherwise indicated, Europe consists of the
Republic of Austria, the Kingdom of Belgium, the Kingdom of
Denmark, Germany, the Republic of Finland, the Republic of
France, the Hellenic Republic ("Greece"), the Republic of
Iceland, the Republic of Ireland, the Italian Republic, the Grand
Duchy of Luxembourg, the Kingdom of the Netherlands, the Kingdom
of Norway, the Republic of Portugal, the Kingdom of Spain, the
Kingdom of Sweden, the Swiss Confederation ("Switzerland"), the
Republic of Turkey and the United Kingdom of Great Britain and
Northern Ireland (together, "Western Europe"), plus the People's
Republic of Bulgaria, the Czech Republic and Slovakia, the
Republic of Hungary, the Republic of Poland, Romania and the
states formed from the break-up of the former Socialist Federal
Republic of Yugoslavia (together, "Eastern Europe"). Additional
countries on the continent of Europe may be considered part of
the Fund's definition of Europe and appropriate spheres of
investment by the Fund as the securities markets of those
countries develop. The Fund's definition of European companies
may include companies that have characteristics and business
relationships common to companies in other regions. As a result,
the value of the securities of such companies may reflect
economic and market forces applicable to other regions, as well
as to Europe. The Fund believes, however, that investment in
such companies will be appropriate in light of the Fund's
investment objective, because the Adviser, will select among such
companies only those which in its view, have sufficiently strong
exposure to economic and market forces in Europe such that their
value will reflect European developments to a greater extent than
developments in other regions. For example, the Adviser may
invest in companies organized and located in the United States or
other countries outside of Europe, including companies having
their entire production facilities outside of Europe, when such
companies meet one or more elements of the Fund's definition of
European companies so long as the Adviser believes at the time of
investment that the value of the company's securities will
reflect principally conditions in Europe.
On January 1, 1999, 11 of the 15 member countries of the
European Union introduced the "euro" as a common currency.
During a three-year transitional period, the euro will coexist
with each participating country's currency. Beginning July 1,
2002, the euro is anticipated to become the sole currency of the
participating countries.
The Adviser believes that the quickening pace of
economic integration and political change in Europe, reflected in
such developments as the reduction of barriers to free trade
within the European Community, creates the potential for many
European companies to experience rapid growth. The emergence of
market economies in certain European countries as well as the
broadening and strengthening of such economies in other European
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countries may significantly contribute to the potential for
accelerated economic development. Companies engaged in business
in European countries with relatively mature capital markets may
also benefit from local or international trends encouraging the
development of capital markets and diminishing governmental
intervention in economic affairs. Furthermore, new technologies,
innovative products and favorable regulatory developments may
support earnings growth. The Fund will invest in companies
which, in the opinion of the Adviser, possess such rapid growth
potential. Thus, the Fund will emphasize investments in smaller,
emerging companies, but will also seek investment opportunities
among larger, established companies in such growing economic
sectors as capital goods, telecommunications, pollution control
and consumer services. The Adviser's subsidiaries maintain
offices in London, Luxembourg and Istanbul, and investment
professionals from those offices conduct frequent visits and
interviews with management of European companies. The Adviser's
local expertise in Europe facilitates its investment approach of
buying stocks based on its on-site research of European companies
as contrasted to a strategy of selecting countries with favorable
outlooks and then selecting stocks of companies located in those
countries.
The Fund will emphasize investment in European companies
believed by the Adviser to be the likely beneficiaries of the
efforts of the European Union (the "EU") to remove substantially
all barriers to the free movement of goods, persons, services and
capital within the European Community. The EU is a European
economic cooperative organization consisting of Belgium, Denmark,
France, Germany, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain and the United Kingdom. In this
regard, the Adviser will give consideration to the existence and
extent of economic barriers in various industrial and corporate
sectors and the likelihood and potential timing of the
elimination of such barriers pursuant to the EU's Program. The
Adviser believes that the beneficial effects of the EU's Program
upon economies, sectors and companies may be most pronounced in
the coming decade.
The Fund's investment objective and policies reflect the
Adviser's opinion that attractive investment opportunities will
result from an evolving long-term European trend favoring the
development and emergence of U.S./U.K.-style capital markets. The
Adviser believes that such opportunities are available in a
number of European countries, including Austria, Belgium,
Denmark, Finland, Greece, Ireland, Luxembourg, the Netherlands,
Norway, Portugal, Spain, Sweden and Turkey, which appear to be in
the process of broadening and strengthening their capital
markets, and which may as a result experience relatively high
rates of economic growth during the next decade.
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<PAGE>
Other European countries, although having relatively
mature capital markets, may also be in a position to benefit from
local or international trends encouraging the development of
capital markets and diminishing governmental intervention in
economic affairs. Several European governments have deregulated
significant sectors of their national economies to enable them to
compete more effectively both within and outside Europe. Specific
examples include, to differing degrees and in particular
countries, the lifting of price controls, exchange controls and
restrictions on foreign investment, and the deregulation of
financial services. In addition, a number of European countries
have in recent years employed tax policy, in the form of both
reduced tax burdens on corporations and investors and tax
incentives for business, to stimulate private investment and
economic growth.
Certain European governments including, among others,
the governments of Austria, Germany, Greece, Portugal and Spain,
have, to varying degrees, embarked on "privatization" programs
contemplating the sale of all or part of their interests in
state-owned enterprises. The Adviser believes that
privatization's may offer investors opportunities for significant
capital appreciation and intends to invest assets of the Fund in
them in appropriate circumstances. In certain jurisdictions, the
ability of foreign entities, such as the Fund, to participate in
privatization's may be limited by local law, or the price or
terms on which the Fund may be able to participate may be less
advantageous than for local investors. Moreover, there can be no
assurance that governments will continue to divest currently
government-owned or controlled companies or that privatization
proposals will be successful.
In recent years, there has been a trend toward the
strengthening of economic ties between the former "east bloc"
countries of Eastern Europe and certain other European countries,
notably Germany and, on a smaller scale, Austria. The Adviser
believes that as such trend continues, developing market
economies within former "east bloc" countries will provide some
Western European financial institutions and other companies with
special opportunities in facilitating East-West transactions. The
Fund will seek investment opportunities among such companies.
The Fund will actively seek investment opportunities
within the former "east bloc" countries of Eastern Europe.
However, the Fund will not invest more than 20% of its total
assets in the equity and fixed income securities of issuers based
in the former "east bloc" countries, nor more than 10% of its
total assets in the securities of issuers based in any one such
country. The Adviser believes that, at the present time, there
are very few investments suitable for the Fund's portfolio
available in the former "east bloc" countries. While the Adviser
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<PAGE>
expects that additional such investments will become available in
the future, there can be no assurance that this will be the case.
Most Eastern European countries are currently implementing
reforms directed at political and economic liberalization,
including efforts to move toward more market-oriented economies
and to foster multi-party political systems. For example,
Hungary, Poland and, more recently, the Czech Republic and
Slovakia have adopted reforms to stimulate their economies and
encourage foreign investment. Specifically, laws have been
enacted in Hungary and Poland and the Czech Republic and Slovakia
to allow private individuals to own and operate businesses and to
protect the property rights of investors. Such laws seek to
assure foreign investors of the right to own interests in and,
under certain circumstances, control local companies and to
repatriate capital and profits and, in certain cases, grant
favorable tax treatment to companies with foreign participation.
As a result of these and other measures, the Adviser
expects that foreign direct investment in Eastern Europe may
increase. In addition, the International Bank for Reconstruction
and Development (the "World Bank"), the International Monetary
Fund and various national governments are providing financing to
governments of Eastern European countries. Financing for certain
companies and private sector projects based in Eastern Europe is
being provided by the International Finance Corporation, a
subsidiary of the World Bank. The European Community has entered
into association agreements with Hungary, Poland and the Czech
Republic and Slovakia providing for enhanced trade and
cooperation between the European Community and those countries
and the European Community has provided technical and financial
assistance to Hungary, Poland and the Czech Republic and
Slovakia. Further, the United States has granted Hungary, Poland
and the Czech Republic and Slovakia "most favored nation" status
with respect to trade matters.
There can be no assurance that the reforms initiated by
the former "east bloc" countries of Eastern Europe will continue
or, if continued, will achieve their goals. As influence of the
former Union of Soviet Socialist Republics over those countries
has subsided, several of them have experienced political and
economic instability due to conflicts among regional and ethnic
factions. To the extent such instability continues, it may
reduce the range of suitable investment opportunities for the
Fund in these countries.
In addition to the trends and developments described
above, the Adviser has also identified certain other factors that
it believes may generate attractive investment opportunities in
Europe. These factors include increased direct investment in
Europe by U.S. and Japanese companies, the development of new
stock markets in certain European countries, increased merger and
6
<PAGE>
acquisition activity, an increase in capital spending on
transportation and communications and a trend toward the transfer
of production facilities from countries having higher production
costs to European countries having lower production costs.
Furthermore, the Adviser believes that many European countries
are emerging from recession and that, historically, equities have
performed well during post-recessionary periods due to low
interest rates, rising consumer consumption, rising currency
exchange rates and local investment in infrastructure.
The Adviser will adjust the Fund's exposure to each
European economy based on its perception of the most favorable
markets and issuers. The Fund intends to spread investment risk
among the capital markets of a number of European countries and,
under normal circumstances, will invest in the equity securities
of companies based in at least three such countries. The
percentage of the Fund's assets invested in securities of a
particular country or denominated in a particular currency will
vary in accordance with the Adviser's assessment of the
appreciation potential of such securities and the strength of
that currency. Subject to the foregoing, and apart from the 10%
limitation on investment in any one Eastern European country,
there is no limit on the amount of the Fund's assets that may be
invested in securities of issuers located in a single European
country. While the Fund has no present intention of concentrating
its investments in a single European country, at times a
substantial amount (i.e., 25% or more) of the Fund's assets may
be invested in issuers located in a single country. In such
event, the Fund's portfolio would be subject to a correspondingly
greater risk of loss due to adverse political or regulatory
developments, or an economic downturn, within that country. The
Fund may invest in a small number of leading or actively traded
companies in a country's capital markets in the expectation that
the investment performance of such securities will substantially
represent the investment performance of the country's capital
markets as a whole.
Investors should understand and consider carefully the
substantial risks involved in investing in the equity securities
of companies based in Europe, some of which are referred to in
Appendix A hereto, and which are in addition to the usual risks
inherent in domestic investments. See Appendix A, "Special Risk
Considerations" and Appendix C, "United Kingdom."
The Fund may invest up to 10% of its total assets in
securities for which there is no ready market. The Fund may
therefore not be able to readily sell such securities. There is
no law in many of the countries in which the Fund may invest
similar to the U.S. Securities Act of 1933, as amended (the
"Securities Act"), requiring an issuer to register the sale of
securities with a governmental agency or imposing legal
7
<PAGE>
restrictions on resales of securities, either as to length of
time the securities may be held or manner of resale. However,
there may be contractual restrictions on resale of securities.
The Fund has the ability to invest up to 20% of its
total assets in warrants to purchase equity securities issued by
European companies to the extent consistent with the Fund's
investment objective; however, the Fund does not presently intend
to invest more than 10% of its total assets in such warrants. The
warrants in which the Fund may invest are a type of security,
usually issued together with another equity or debt security of
an issuer, that entitles the holder to buy a fixed amount of
common or preferred stock of such issuer at a specified price for
a fixed period of time (which may be in perpetuity). Warrants
are commonly issued attached to other securities of the issuer as
a method of making such securities more attractive and are
usually detachable and, thus, may be bought or sold separately
from the issued security. Warrants are a speculative instrument.
The value of a warrant may decline because of a decrease in the
value of the underlying stock, the passage of time or a change in
perception as to the potential of the underlying stock, or any
combination thereof. If the market price of the underlying stock
is below the exercise price set forth in the warrant on the
expiration date, the warrant will expire worthless. Warrants
issued by European companies generally are freely transferable
and are generally traded on one or more of the major European
stock exchanges. The Fund anticipates that the warrants in which
it will invest will have exercise periods of approximately two to
ten years. The Fund may also invest in rights which are similar
to warrants except that they have a substantially shorter
duration.
In addition to purchasing corporate securities of
European issuers in European markets, the Fund may invest in
American Depositary Receipts (ADRs), European Depositary Receipts
(EDRs) or other securities convertible into securities of
companies based in European countries. Transactions in these
securities may not necessarily be settled in the same currency as
transactions in the securities into which they may be converted.
Generally, ADRs, in registered form, are designed for use in the
U.S. securities markets and EDRs, in bearer form, are designed
for use in European securities markets.
The Fund will also be authorized to invest in debt
securities of supranational entities denominated in the currency
of any European country, including the euro. A supranational
entity is an entity designated or supported by the national
government of one or more countries to promote economic
reconstruction or development. Examples of supranational entities
include, among others, the World Bank and the European Investment
Bank. The governmental members, or "stockholders," usually make
8
<PAGE>
initial capital contributions to the supranational entity and in
many cases are committed to make additional contributions if the
supranational entity is unable to repay its borrowings. Each
supranational entity's lending activities are limited to a
percentage of its total capital (including "callable capital"
contributed by members at the entity's call), reserves and net
income. The Fund is further authorized to invest in "semi-
governmental securities," which are debt securities issued by
entities owned by either a national, state or equivalent
government or are obligations of one of such government
jurisdictions which are not backed by its full faith and credit
and general taxing powers. An example of a semi-governmental
issuer is the City of Stockholm.
For temporary defensive purposes, the Fund may vary from
its investment policy during periods in which conditions in
European securities markets or other economic or political
conditions in Europe warrant. The Fund may reduce its position
in equity securities and increase its position in debt
securities, which may include U.S. Government securities, rated
AA or better by Standard & Poor's Corporation or Aa or better by
Moody's Investors Service, Inc. or if not so rated, of equivalent
investment quality as determined by the Adviser, short-term
indebtedness or cash equivalents denominated in either foreign
currencies or U.S. dollars. The Fund may also at any time
temporarily invest funds awaiting reinvestment or held as
reserves for dividends and other distributions to shareholders in
U.S. dollar-denominated money market instruments including:
(i) U.S. Government securities, (ii) certificates of deposit,
bankers' acceptances and interest-bearing savings deposits of
banks having total assets of more than $1 billion and which are
members of the Federal Deposit Insurance Corporation and
(iii) commercial paper of prime quality rated A-1 or better by
Standard & Poor's Ratings Services ("S&P") or Prime 1 or better
by Moody's Investors Service, Inc. ("Moody's") or, if not rated,
issued by companies which have an outstanding debt issue rated AA
or better by S&P or Aa or better by Moody's.
Derivative Investment Products
The Fund may use various derivative investment products
to reduce certain risks to the Fund of exposure to local market
and currency movements. These products include forward foreign
currency exchange contracts, futures contracts, including stock
index futures, and options thereon, put and call options and
combinations thereof. The Adviser will use such products as
market conditions warrant. The Fund's ability to use these
products may be limited by market conditions, regulatory limits
and tax considerations and there can be no assurance that any of
these products would succeed in reducing the risk to the Fund of
exposure to local market and currency movements. New financial
9
<PAGE>
products and risk management techniques continue to be developed
and the Fund may use these new investments and techniques to the
extent consistent with its investment objective and policies.
Currency Hedging Techniques. The Fund may engage in
various portfolio strategies to hedge its portfolio against
currency risks. These strategies include use of currency options
and futures, options on such futures and forward foreign currency
transactions. The Fund may enter into such transactions only in
connection with its hedging strategies. While the Fund's use of
hedging strategies is intended to reduce the volatility of the
net asset value of Fund shares, the Fund's net asset will
fluctuate. There can be no assurance that the Fund's hedging
transactions will be effective. Furthermore, the Fund will only
engage in hedging activities from time to time and may not
necessarily be engaging in hedging activities when movements in
the currency exchange rates occur.
Although certain risks are involved in options and
futures transactions, the Adviser believes that, because the Fund
will only engage in these transactions for hedging purposes, the
options and futures portfolio strategies of the Fund will not
subject the Fund to the risks frequently associated with the
speculative use of futures transactions. Tax requirements may
limit the Fund's ability to engage in hedging transactions. See
Appendix B hereto for a further discussion of the use, risks and
costs of the hedging instruments the Fund may utilize.
Forward Foreign Currency Exchange Contracts. The Fund
may purchase or sell forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund
from adverse changes in the relationship between the U.S. Dollar
and other currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a
future date which is individually negotiated and privately traded
by currency traders and their customers. The Fund's dealings in
forward contracts will be limited to hedging involving either
specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward contracts with respect
to specific receivables or payables of the Fund accruing in
connection with the purchase and sale of its portfolio securities
or the payment of dividends and distributions by the Fund.
Position hedging is the sale of forward contracts with respect to
portfolio security positions denominated or quoted in such
foreign currency. The Fund will not speculate in forward
contracts and, therefore, the Adviser believes that the Fund will
not be subject to the risks frequently associated with the
speculative use of such transactions. The Fund may not position
hedge with respect to the currency of a particular country to an
extent greater than the aggregate market value (at the time of
making such sale) of the securities held in its portfolio
10
<PAGE>
denominated or quoted in that particular foreign currency. To
the extent required by applicable law, if the Fund enters into a
position hedging transaction, its custodian bank will place
liquid assets in a separate account of the Fund in an amount
equal to the value of the Fund's total assets committed to the
consummation of such forward contract. If the value of the
assets placed in the separate account declines, additional liquid
assets will be placed in the account so that the value of the
account will equal the amount of the Fund's commitment with
respect to such contracts. In addition, the Fund may use such
other methods of "cover" as are permitted by applicable law.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value
of the hedge currency should rise. Moreover, it may not be
possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to
sell the currency at a price above the devaluation level it
anticipates. The Fund will not enter into a forward contract
with a term of more than one year or if, as a result thereof,
more than 50% of the Fund's total assets would be committed to
such contracts.
Options On Foreign Currencies. The Fund may write, sell
and purchase put and call options on foreign currencies traded on
securities exchanges or boards of trade (foreign and domestic) or
over-the-counter. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a
partial hedge, up to the amount of the premium received, and the
Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although,
in the event of rate movements adverse to the Fund's position, it
may forfeit the entire amount of the premium plus related
transaction costs. There is no specific percentage limitation on
the Fund's investments in options on foreign currencies.
Options. The Fund may write, sell and purchase put and
call options listed on one or more U.S. or foreign securities
exchanges, including options on market indices. A call option
gives the purchaser of the option, for paying the writer a
premium, the right to call upon the writer to deliver a specified
number of shares of a specified stock on or before a fixed date,
at a predetermined price. A put option gives the buyer of the
option, for paying the writer a premium, the right to deliver a
specified number of shares of a stock to the writer of the option
on or before a fixed date, at a predetermined price.
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Writing, purchasing and selling put and call options are
highly specialized activities and entail greater than ordinary
investment risks. When puts written by the Fund are exercised,
the Fund will be obligated to purchase stocks above their then
current market price. The Fund will not write a put option
unless at all times during the option period the Fund has
(a) sold short the optioned securities, or securities convertible
into or carrying rights to acquire the optioned securities, or
(b) purchased an offsetting put on the same securities. When
calls written by the Fund are exercised, the Fund will be
obligated to sell stocks below their then current market price.
The Fund will not write a call option unless the Fund at all
times during the option period owns either (a) the optioned
securities, or securities convertible into or carrying rights to
acquire the optioned securities, or (b) an offsetting call option
on the same securities.
The Fund may purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated (i.e., over-the-counter) transactions. The Fund will
effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and
loan institutions) deemed creditworthy by the Adviser, and the
Adviser has adopted procedures for monitoring the
creditworthiness of such entities.
Options on Market Indices. An option on a securities
index is similar to an option on a security except that, rather
than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of
cash if the closing level of the chosen index is greater than (in
the case of a call) or less than (in the case of a put) the
exercise price of the option.
Financial Futures Contracts, Including Stock Index
Futures, and Options on Futures Contracts. The Fund may enter
into financial futures contracts, including contracts for the
purchase or sale for future delivery of foreign currencies and
futures contracts based on stock indices and may purchase and
write put and call options to buy or sell futures contracts
("options on futures contracts"). A sale of a futures contract
entails the acquisition of a contractual obligation to deliver
the foreign currency or other commodity called for by the
contract at a specified price on a specified date. A purchase of
a futures contract entails the incurring of a contractual
obligation to acquire the commodity called for by the contract at
a specified price on a specified date. The purchaser of a
futures contract on an index agrees to take or make delivery of
an amount of cash equal to the difference between a specified
dollar multiple of the value of the index on the expiration date
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of the contract and the price at which the contract was
originally struck. No physical delivery of the securities
underlying the index is made. In connection with its purchase of
stock index futures contracts the Fund will deposit in a
segregated account with the Fund's custodian an amount of liquid
assets equal to the market value of the futures contracts less
any amounts maintained in a margin account with the Fund's
broker. Options on futures contracts to be written or purchased
by the Fund will be traded on U.S. or foreign exchanges or over-
the-counter. See the Fund's Statement of Additional Information
for further discussion of the use, risks and costs of futures
contracts and options on futures contracts.
With respect to futures contracts and options on futures
contracts that are purchased for purposes other than for "bona
fide hedging purposes" (as defined in Commodity Futures Trading
Commission regulations promulgated under the Commodity Exchange
Act), the aggregate initial margin and premiums required to be
paid by the Fund to establish such positions will not exceed on
all the outstanding futures contracts of the Fund and premiums
paid on outstanding options on futures contracts would exceed 5%
of the liquidation value of the total assets of the Fund, after
taking into account unrealized profits and unrealized losses on
any such contracts the Fund has entered into.
General. The successful use of the foregoing derivative
investment products draws upon the Adviser's special skills and
substantial experience with respect to such products and depends
on the Adviser's ability to forecast currency exchange rate
movements correctly. Should exchange rates move in an unexpected
manner, the Fund may not necessarily achieve the anticipated
benefits of futures contracts, options or forward contracts or
may realize losses and thus be in a worse position than if such
products had not been used. Unlike many exchange-traded futures
contracts and options on futures contracts, there are no daily
price fluctuation limits with respect to options on currencies
and forward contracts, and adverse market movements could
therefore continue to an unlimited extent over a period of time.
In addition, the correlation between movements in the prices of
such instruments and movements in the prices of the securities
and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.
The Fund's ability to dispose of its positions in
futures contracts, options and forward contracts will depend on
the availability of liquid markets in such instruments. Markets
in options and futures with respect to a number of securities and
currencies are relatively new and still developing. It is
impossible to predict the amount of trading interest that may
exist in various types of futures contracts, options and forward
contracts. If a secondary market did not exist with respect to
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<PAGE>
an over-the-counter option purchased or written by the Fund, it
might not be possible to effect a closing transaction in the
option (i.e., dispose of the option), with the result that (i) an
option purchased by the Fund would have to be exercised in order
for the Fund to realize any profit and (ii) the Fund may not be
able to sell currencies or portfolio securities covering an
option written by the Fund until the option expires or it
delivers the underlying futures contract or currency upon
exercise. Therefore, no assurance can be given that the Fund
will be able to utilize these instruments effectively for the
purposes set forth above. Furthermore, the Fund's ability to
engage in options and futures transactions may be limited by tax
considerations. See "Dividends, Distributions and Taxes--U.S.
Federal Income Taxes."
Other Investment Practices
Lending Of Portfolio Securities. In order to increase
income, the Fund may from time to time lend portfolio securities
to brokers, dealers and financial institutions and receive
collateral in the form of liquid assets. Under the Fund's
procedures, collateral for such loans must be maintained at all
times in an amount equal to at least 100% of the current market
value of the loaned securities (including interest accrued on the
loaned securities). The interest accruing on the loaned
securities will be paid to the Fund and the Fund will have the
right, on demand, to call back the loaned, or equivalent,
securities. The Fund may pay fees to arrange the loans. The
Fund will neither lend portfolio securities in excess of 30% of
the value of its total assets nor lend its portfolio securities
to any officer, director, employee or affiliate of the Fund or
the Adviser.
Forward Commitments. The Fund may enter into forward
commitments for the purchase or sale of securities. Such
transactions may include purchases on a "when-issued" basis or
purchases or sales on a "delayed delivery" basis. In some cases,
a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring (i.e., a "when, as
and if issued" trade).
When forward commitment transactions are negotiated, the
price, which is generally expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for the
securities take place at a later date. Normally, the settlement
date occurs within two months after the transaction, but delayed
settlements beyond two months may be negotiated. Securities
purchased or sold under a forward commitment are subject to
market fluctuation, and no interest or dividends accrue to the
purchaser prior to the settlement date. At the time the Fund
14
<PAGE>
enters into a forward commitment, it will record the transaction
and thereafter reflect the value of the security purchased or, if
a sale, the proceeds to be received, in determining its net asset
value. Any unrealized appreciation or depreciation reflected in
such valuation of a "when, as and if issued" security would be
canceled in the event that the required conditions did not occur
and the trade was canceled. No forward commitments will be made
by the Fund if, as a result, the Fund's aggregate commitments
under such transactions would be more than 30% of the then
current value of the Fund's total assets.
The Fund's right to receive or deliver a security under
a forward commitment may be sold prior to the settlement date,
but the Fund will enter into forward commitments only with the
intention of actually receiving or delivering the securities, as
the case may be. To facilitate such transactions, the Fund's
Custodian will maintain, in the segregated account of the Fund,
liquid assets having value equal to, or greater than, any
commitments to purchase securities on a forward commitment basis
and, with respect to forward commitments to sell portfolio
securities of the Fund, the portfolio securities themselves. If
the Fund, however, chooses to dispose of the right to receive or
deliver a security subject to a forward commitment prior to the
settlement date of the transaction, it might incur a gain or
loss. In the event the other party to a forward commitment
transaction were to default, the Fund might lose the opportunity
to invest money at favorable rates or to dispose of securities at
favorable prices.
The use of forward commitments for the purchase or sale
of fixed income securities enables the Fund to protect against
anticipated changes in interest rates and prices. For instance,
in periods of rising interest rates and falling bond prices, the
Fund might sell securities in its portfolio on a forward
commitment basis to limit its exposure to falling prices. In
periods of falling interest rates and rising bond prices, the
Fund might sell a security in its portfolio and purchase the same
or a similar security on a when-issued or forward commitment
basis, thereby obtaining the benefit of currently higher cash
yields. However, if the Adviser were to forecast incorrectly the
direction of interest rate movements, the Fund might be required
to complete such when-issued or forward transactions at prices
inferior to then current market values.
Standby Commitment Agreements. The Fund may from time
to time enter into standby commitment agreements. Such
agreements commit the Fund, for a stated period of time, to
purchase a stated amount of a fixed income security which may be
issued and sold to the Fund at the option of the issuer. The
price and coupon of the security are fixed at the time of the
commitment. At the time of entering into the agreement the Fund
15
<PAGE>
is paid a commitment fee, regardless of whether or not the
security is ultimately issued, which is typically approximately
0.5% of the aggregate purchase price of the security which the
Fund has committed to purchase. The fee is payable whether or
not the security is ultimately issued. The Fund will enter into
such agreements only for the purpose of investing in the security
underlying the commitment at a yield and price which are
considered advantageous to the Fund and which are unavailable on
a firm commitment basis. The Fund will not enter into a standby
commitment with a remaining term in excess of 45 days and will
limit its investment in such commitments so that the aggregate
purchase price of the securities subject to such commitments,
together with the value of portfolio securities that are not
readily marketable, will not exceed 25% of its assets taken at
the time of acquisition of such commitment of security. The Fund
will at all times maintain a segregated account with its
custodian of liquid assets in an aggregate amount equal to the
purchase price of the securities underlying the commitment.
There can be no assurance that the securities subject to
a standby commitment will be issued and the value of the
security, if issued, on the delivery date may be more or less
than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, the
Fund will bear the risk of capital loss in the event the value of
the security declines and may not benefit from an appreciation in
the value of the security during the commitment period if the
issuer decides not to issue and sell the security to the Fund.
The purchase of a security subject to a standby
commitment agreement and the related commitment fee will be
recorded on the date on which the security can reasonably be
expected to be issued and the value of the security will
thereafter be reflected in the calculation of the Fund's net
asset value. The cost basis of the security will be adjusted by
the amount of the commitment fee. In the event the security is
not issued, the commitment fee will be recorded as income on the
expiration date of the standby commitment.
Future Developments. The Fund may, following written
notice thereof to its shareholders, take advantage of
opportunities in the area of futures contracts and options on
futures contracts which are not presently contemplated for use by
the Fund or which are not currently available but which may be
developed, to the extent such opportunities are both consistent
with the Fund's investment objective and legally permissible for
the Fund. Such opportunities, if they arise, may involve risks
which exceed those involved in the options and futures activities
described above.
16
<PAGE>
Portfolio Turnover. Generally, the Fund's policy with
respect to portfolio turnover is to purchase securities with a
view to holding them for periods of time sufficient to assure
that the Fund will realize less than 30% of its gross income from
the sale or other disposition of securities held for less than
three months and generally will hold its securities for six
months or longer. However, it is also the Fund's policy to sell
any security whenever, in the judgment of the Adviser, its
appreciation possibilities have been substantially realized or
the business or market prospects for such security have
deteriorated, irrespective of the length of time that such
security has been held. The Adviser anticipates that the Fund's
annual rate of portfolio turnover will not exceed 200%. A 200%
annual turnover rate would occur if all the securities of the
Fund's portfolio were replaced twice within a period of one year.
The turnover rate has a direct effect on the transaction costs to
be borne by the Fund.
Fundamental Investment Policies
In addition to the investment objective and policies
described above, the Fund has adopted certain fundamental
investment policies which may not be changed without shareholder
approval. Briefly, these policies provide that the Fund may not:
(i) purchase more than 10% of the outstanding voting securities
of any one issuer; (ii) invest more than 15% of the value of its
total assets in the securities of any one issuer or 25% or more
of the value of its total assets in the same industry, provided,
however, that the foregoing restriction shall not be deemed to
prohibit the Fund from purchasing the securities of any issuer
pursuant to the exercise of rights distributed to the Fund by the
issuer, except that no such purchase may be made if as a result
the Fund will fail to meet the diversification requirements of
the Code, and any such acquisition in excess of the foregoing 15%
or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to U.S. government
securities, but will apply to foreign government securities
unless the Securities and Exchange Commission (the "Commission")
permits their exclusion); (iii) borrow money except from banks
for temporary or emergency purposes, including the meeting of
redemption requests which might require the untimely disposition
of securities; borrowing in the aggregate may not exceed 15%, and
borrowing for purposes other than meeting redemptions may not
exceed 5%, of the Fund's total assets (including the amount
borrowed) less liabilities (not including the amount borrowed) at
the time the borrowing is made; outstanding borrowings in excess
of 5% of the value of the Fund's total assets will be repaid
before any subsequent investments are made; (iv) purchase a
security (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange) if, as a result, the Fund
would own any securities of an open-end investment company or
17
<PAGE>
more than 3% of the total outstanding voting stock of any closed-
end investment company, or more than 5% of the value of the
Fund's total assets would be invested in securities of any
closed-end investment company, or more than 10% of such value in
closed-end investment companies in general; (v) make loans except
through (a) the purchase of debt obligations in accordance with
its investment objective and policies and (b) the lending of
portfolio securities; (vi) pledge, hypothecate, mortgage or
otherwise encumber its assets, except (a) to secure permitted
borrowings and (b) in connection with initial and variation
margin deposits relating to futures contracts; (vii) invest in
companies for the purpose of exercising control; (viii) make
short sales of securities or maintain a short position, unless at
all times when a short position is open it owns an equal amount
of such securities or securities convertible into or exchangeable
for, without payment of any further consideration, securities of
the same issue as, and equal in amount to, the securities sold
short ("short sales against the box"), and unless not more than
10% of the Fund's net assets (taken at market value) is held as
collateral for such sales at any one time (it is the Fund's
present intention to make such sales only for the purpose of
deferring realization of gain or loss for federal income tax
purposes); (ix) buy or write (i.e., sell) put or call options,
except (a) the Fund may buy foreign currency options or write
covered foreign currency options and options on foreign currency
futures and (b) the Fund may purchase warrants; or (x) purchase
or sell real estate, except that it may (a) purchase and sell
securities of companies which deal in real estate or interests
therein, (b) purchase or sell commodities or commodity contracts
(except foreign currencies, foreign currency options and futures
and forward contracts or contracts for the future acquisition or
delivery of foreign currencies and related options on futures
contracts and other similar contracts), (c) invest in interests
in oil, gas, or other mineral exploration or development
programs, except that it may purchase and sell securities of
companies that deal in oil, gas or other mineral exploration or
development programs, (d) purchase securities on margin, except
for such short-term credits as may be necessary for the clearance
of transactions or (e) act as an underwriter of securities,
except that the Fund may acquire securities in private placements
under circumstances in which, if such securities were sold, the
Fund might be deemed to be an underwriter within the meaning of
the Securities Act.
State Undertakings
In connection with the qualification or registration of
the Fund's shares for sale under the securities laws of certain
states, the Fund has agreed, in addition to the investment
restrictions described in the Prospectus, that it will not
(i) purchase the securities of any company that has a record of
18
<PAGE>
less than three years of continuous operation (including that of
predecessors) if such purchase at the time thereof would cause
more than 5% of its total assets, taken at current value, to be
invested in the securities of such companies; (ii) invest in oil,
gas or other mineral leases; (iii) purchase or sell real property
(including limited partnership interests, but excluding readily
marketable interests in real estate investment trusts or readily
marketable securities of companies which invest in real estate);
(iv) invest in warrants (other than warrants acquired by the Fund
as a part of a unit or attached to securities at the time of
purchase) if as a result of such warrants valued at the lower of
such cost or market would exceed 10% of the value of the Fund's
assets at the time of purchase; (v) invest in the securities of
any open-end investment company; (vi) it will prohibit the
purchase or retention by the Fund of the securities of any issuer
if the officers, directors or trustees of the Fund, its advisers
or managers scoping beneficially more than one-half of one
percent of the securities of each issuer together own
beneficially more than five percent of such securities; (vii) it
will prohibit the investment of any assets of the Fund in the
securities of other investment companies except by purchase in
the open-market where no commission or profit to a sponsor or
dealer results from such purchase other than the customary
broker's commissions, or except when such purchase is part of a
plan of merger, consolidation, reorganization or acquisition;
(viii) it will limit its investments in illiquid securities
together with restricted securities (excluding Rule 144A
securities) to no more than 15% of the Fund's average net assets;
and (ix) meetings of stockholders for any purpose may be called
by 10% of its outstanding shareholders.
____________________________________________________________
MANAGEMENT OF THE FUND
____________________________________________________________
Adviser
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision of the Fund's Board of Directors (see "Management of
the Fund" in the Prospectus).
The Adviser is a leading international investment
manager supervising client accounts with assets as of
December 31, 1998, totaling more than $286 billion (of which more
than $118 billion represented the assets of investment
19
<PAGE>
companies). The Adviser's clients are primarily major corporate
employee benefit funds, public employee retirement systems,
investment companies, foundations and endowment funds. The 54
registered investment companies managed by the Adviser,
comprising 118 separate investment portfolios, currently have
more than 3.5 million shareholder accounts. As of December 31,
1998, the Adviser and its subsidiaries employed approximately
2,000 employees who operate out of domestic offices and the
offices of subsidiaries in Bahrain, Bangalore, Cairo, Chennai,
Hong Kong, Istanbul, Johannesburg, London, Luxembourg, Madrid,
Moscow, Mumbai, New Delhi, Paris, Pune, Sao Paolo, Seoul,
Singapore, Sydney, Tokyo, Toronto, Vienna and Warsaw. As of
December 31, 1998, the Adviser was retained as an investment
manager for employee benefit plan assets of 35 of the FORTUNE 100
companies.
Alliance Capital Management Corporation ("ACMC"), the
sole general partner of, and the owner of a 1% general
partnership interest in the Adviser, is an indirect wholly-owned
subsidiary of the Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States and a wholly-owned subsidiary of the
Equitable Companies Incorporated ("ECI"). ECI is a holding
company controlled by AXA-UAP ("AXA") a French insurance holding
company which at March 1, 1998, beneficially owned approximately
59% of the outstanding voting shares of ECI. As of June 30,
1998, ACMC, Inc. and Equitable Capital Management Corporation,
each a wholly-owned direct or indirect subsidiary of Equitable,
together with Equitable, owned in the aggregate approximately 57%
of the issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser.
AXA is a holding company for an international group of
insurance and related financial services companies. AXA's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.
Based on information provided by AXA, as of March 31,
1998, more than 30% of the voting power of AXA was controlled
directly and indirectly by FINAXA, a French holding company. As
of March 31, 1998 approximately 74% of the voting power of FINAXA
was controlled directly and indirectly by four French mutual
insurance companies (the "Mutuelles AXA"), one of which, AXA
Assurances I.A.R.D. Mutuelle, itself controlled directly and
20
<PAGE>
indirectly more than 42% of the voting power of FINAXA. Acting
as a group, the Mutuelles AXA control AXA and FINAXA.
The Advisory Agreement became effective on July 22,
1992, having been approved by the unanimous vote, cast in person,
of the Fund's Directors (including the Directors who are not
parties to the Advisory Agreement or "interested persons" as
defined in the Act of any such party) at a meeting called for the
purpose and held on September 12, 1991. At a meeting held on
June 8, 1992, a majority of the outstanding voting securities of
the Fund approved the Advisory Agreement.
The Advisory Agreement remains in effect for successive
twelve-month periods (computed from each January 1) if approved
annually (a) by the Directors of the Fund or by vote of a
majority of the outstanding voting securities of the Fund and
(b) by vote of the majority of the Directors who are not
"interested persons" of the Fund within the meaning of the 1940
Act, cast in person at a meeting called for the purpose of voting
on such approval. Most recently, continuance of the Advisory
Agreement was approved for the period ending December 31, 1998 by
the Directors, including a majority of the Directors who are not
"interested persons," as defined in the Act, at their Regular
Meeting held on December 10, 1998.
Under the Advisory Agreement, the Adviser furnishes
investment advice and recommendations to the Fund and provides
office space in New York, order placement facilities and persons
satisfactory to the Fund's Board of Directors to act as officers
of the Fund. Such officers, as well as certain Directors of the
Fund, may be employees of the Adviser or directors, officers or
employees of its affiliates.
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser a monthly
management fee at an 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. For the
fiscal years ended July 31, 1996, July 31, 1997 and July 31,
1998, the Adviser received from the Fund advisory fees of
$1,318,528, $1,497,867 and $2,091,076 respectively.
The Advisory Agreement is terminable at any time,
without penalty, on 60 days' written notice to the Adviser by
vote of a majority of the Fund's outstanding voting securities,
or by vote of a majority of the Fund's Board of Directors, or by
the Adviser with respect to the Fund, on 60 days' written notice
to the Fund, and will automatically terminate in the event of its
assignment. The Advisory Agreement may not be amended except upon
approval by the Directors and stockholders of the Fund as
21
<PAGE>
described in the preceding sentence. The Advisory Agreement
provides that in the absence of willful misfeasance, bad faith or
gross negligence on the part of the Adviser, or of reckless
disregard of its obligations and duties thereunder, the Adviser
shall not be liable for any action or failure to act in
accordance with its duties thereunder.
The Adviser is, under the Advisory Agreement,
responsible for any expenses incurred by the Fund in promoting
the sale of Fund shares (other than the portion of the
promotional expenses borne by the Fund in accordance with an
effective plan pursuant to Rule 12b-1 under the 1940 Act, and the
costs of printing and mailing Fund prospectuses and other reports
to shareholders and all expenses and fees related to proxy
solicitations and registrations and filings with the Commission
and with state regulatory authorities).
The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or by other subsidiaries of Equitable. In such event,
the services will be provided to the Fund at cost and the
payments therefore must be specifically approved by the Fund's
Directors. The Fund paid to the Adviser a total of $121,000 in
respect of such services during the fiscal year of the Fund ended
in 1998.
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The
Adviser may, from time to time, make recommendations which result
in the purchase or sale of a particular security by its other
clients simultaneously with the Fund. If transactions on behalf
of more than one client during the same period increase the
demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price or quantity.
It is the policy of the Adviser to allocate advisory
recommendations and the placing of orders in a manner which is
deemed equitable by the Adviser to the accounts involved,
including the Fund. When two or more of the clients of the
Adviser (including the Fund) are purchasing or selling the same
security on a given day from the same broker-dealer, such
transactions may be averaged as to price.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to the following: AFD Exchange
Reserves, Alliance All-Asia Investment Fund, Inc., Alliance
Balanced Shares, Inc., Alliance Bond Fund, Inc., Alliance Capital
Reserves, Alliance Global Dollar Government Fund, Inc., Alliance
22
<PAGE>
Global Environment Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Global Strategic Trust, Inc., Alliance Government
Reserves, Alliance Greater China '97 Fund, Inc., Alliance Growth
and Income Fund, Inc., Alliance High Yield Fund, Inc., Alliance
Institutional Funds, Inc., Alliance Institutional Reserves,
Alliance International Fund, Alliance International Premier
Growth Fund, Inc., Alliance Limited Maturity Government Fund,
Inc., Alliance Money Market Fund, Alliance Mortgage Securities
Income Fund, Inc., Alliance Multi-Market Strategy Trust, Inc.,
Alliance Municipal Income Fund, Inc., Alliance Municipal Income
Fund II, Alliance Municipal Trust, Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance Regent/Sector Opportunity Fund, Inc.,
Alliance Select Investors Series, Inc., Alliance Technology Fund,
Inc., Alliance Utility Income Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance Worldwide Privatization
Fund, Inc., The Alliance Fund, Inc., The Alliance Portfolios, and
The Hudson River Trust, all registered open-end investment
companies; and to ACM Government Income Fund, Inc., ACM
Government Securities Fund, Inc., ACM Government Spectrum Fund,
Inc., ACM Government Opportunity Fund, Inc., ACM Managed Dollar
Income Fund, Inc., ACM Managed Income Fund, Inc., ACM Municipal
Securities Income Fund, Inc., Alliance All-Market Advantage Fund,
Inc., Alliance World Dollar Government Fund, Inc., Alliance World
Dollar Government Fund II, Inc., The Austria Fund, Inc., The
Korean Investment Fund, Inc., The Southern Africa Fund, Inc. and
The Spain Fund, Inc., all registered closed-end investment
companies.
The Adviser may from time to time retain particular
European banks or other financial institutions for research and
consulting services with respect to general economic and monetary
conditions in Europe and, in particular, with respect to a number
of the smaller, developing securities markets in which the Fund
will seek investment opportunities. For such services, the
Adviser will from its own funds pay each consultant a fee to be
arranged by the Adviser and each consultant. The consultants
will have no responsibility for the Fund's investments.
Under the terms of the Advisory Agreement, the Fund will
discontinue the use of the term "Alliance" in the Fund's name or
the use of any marks or symbols owned by the Adviser if the
Adviser ceases to act as the Fund's investment adviser or if the
Adviser so requests.
Directors and Officers
The Directors and principal officers of the Fund, their
ages and their principal occupations during the past five years
are set forth below. Each such Director and officer is also a
23
<PAGE>
trustee, director or officer of other investment companies
sponsored by the Adviser. Unless otherwise specified the address
of each of the following persons is 1345 Avenue of the Americas,
New York, New York 10105.
Directors
John D. Carifa,* 53, Chairman of the Board, is the
President, Chief Operating Officer and a Director of ACMC, with
which he has been associated since prior to 1994.
David H. Dievler, 69, is an independent consultant. He
was formerly a Senior Vice President of ACMC until December 1994.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.
John H. Dobkin, 56, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1994.
Previously, he was Director of the National Academy of Design.
His address is 150 White Plains Road, Tarrytown, New York 10591.
W.H. Henderson, 71, joined the Royal Dutch/Shell Group
in 1948 and served in Singapore, Japan, South Africa, Hong Kong
and London. The greater part of his service was in Japan and
between 1969 and 1972 he was Managing Director and Chief
Executive Officer of the Shell Company of Hong Kong Limited.
Mr. Henderson retired from the Royal Dutch/Shell Group in 1974 in
order to establish his own oil and gas consultancy business.
Mr. Henderson is currently a Director of a number of investment
companies. His address is Quarrey House, Charlton Horethorne,
Sherborne, Dorset, DT9 4NY, England.
Stig Host, 72, is Chairman and Chief Executive Officer
of International Energy Corp. (oil and gas exploration), with
which he has been associated with since prior to 1994. He is
also Chairman and Director of Kriti Exploration Corporation (oil
and gas exploration and production); Managing Director of Kriti
Oil and Minerals, N.V.; Chairman of Kriti Properties and
Development Corporation (real estate); Chairman of International
Marine Sales, Inc. (marine fuels); a Director of Florida Fuels,
Inc. (marine fuels); and President of Alexander Host Foundation.
He is a Trustee of the Winthrop Focus Funds. His address is 103
Oneida Drive, Greenwich, Connecticut 06530.
Alan Stoga, 47, has been President of Zemi Investments,
L.P., since 1995, President of Zemi Communications, L.L.C. and
its predecessor company since 1996, and a Managing Director of
Kissinger Associates, Inc. until 1995. He has continued as a
____________________
* An "interested person" of the Fund as defined in the 1940
Act.
24
<PAGE>
member of the Board of Directors of Kissinger Associates. His
address is Kissinger Associates, Inc., 350 Park Avenue, New York,
New York 10022.
Officers
John D. Carifa, Chairman and President, see biography
above.
Kathleen A. Corbet, 38, Senior Vice President, is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1994.
Thomas J. Bardong, 53, Vice President, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1994.
Stephen M. Beinhacker, 47, Vice President, is a Vice
President of ACMC, with which he has been associated since prior
to 1994.
Edmund P. Bergan, Jr., 48, Secretary, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS"), with which
he has been associated since prior to 1994.
Russell Brody, 31, Vice President, is a Vice President
and Head Trader of the London desk of ACL, with which he has been
associated since July 1997. Prior thereto, he was Head of
European Equity Dealing with Lombard Odier et Cie, London office,
since prior to 1994.
Domenick Pugliese, 37, Assistant Secretary, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since May 1995. Previously, he was a Vice
President and Counsel of Concord Financial Holding Corporation
since prior to 1994.
Andrew L. Gangolf, 44, Assistant Secretary, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since December 1994. Prior thereto he was a Vice
President and Assistant Secretary of Delaware Management Company,
Inc. since prior to 1994.
Emilie D. Wrapp, 42, Assistant Secretary, is a Vice
President and Assistant General Counsel of AFD, with which she
has been associated since prior to 1994.
Mark D. Gersten, 48, Treasurer and Chief Financial
Officer, is a Senior Vice President of AFS, with which he has
been associated since prior to 1994.
25
<PAGE>
Vincent S. Noto, 33, Controller, is a Vice President of
AFS, with which he has been associated since prior to 1994.
While the Fund is a Maryland corporation, certain of its
Directors and officers are residents of the United Kingdom and
substantially all of the assets of such persons may be located
outside of the United States. As a result, it may be difficult
for U.S. investors to effect service of process on such Directors
or officers within the United States or to realize judgments of
courts of the United States predicated upon civil liabilities of
such Directors or officers under the federal securities laws of
the United States. The Fund has been advised that there is
substantial doubt as to the enforceability in the United Kingdom
of such civil remedies and criminal penalties as are afforded by
the federal securities laws of the United States. Also, it is
unclear if extradition treaties now in effect between the United
States and the United Kingdom would subject such Directors and
officers to effective enforcement of the criminal penalties of
the federal securities laws.
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year, ended July 31, 1998, the
aggregate compensation paid to each of the Directors during
calendar year 1998 by all of the funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies (and separate investment portfolios within
those companies) in the Alliance Fund Complex with respect to
which each of the Directors serves as a director or trustee, are
set forth below. Neither the Fund nor any other fund in the
Alliance Fund Complex provides compensation in the form of
pension or retirement benefits to any of its directors or
trustees. Some of the Directors is a director or trustee of one
or more other registered investment companies in the Alliance
Fund Complex.
26
<PAGE>
Total Number of Total Number
Investment of Investment
Companies in Portfolios
the Alliance Within the
Total Fund Complex, Funds,
Compensation Including the Including
From the Fund, as to the Fund, as
Alliance Fund which the to which the
Aggregate Complex, Director is a Director is
Compensation Including Director or a Director or
Name of Director From the Fund the Fund Trustee Trustee
________________ _____________ _____________ ______________ _____________
John D. Carifa $0 $0 50 114
David H. Dievler $5,738 $216,288 43 80
John H. Dobkin $5,613 $185,363 41 91
W.H. Henderson $5,538 $ 26,950 4 4
Stig Host $5,538 $ 26,950 4 4
Alan Stoga $4,663 $ 26,450 4 4
As of January 8, 1999, the Directors and officers of the
Fund as a group owned less than 1% of the shares of the Fund.
____________________________________________________________
EXPENSES OF THE FUND
____________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund's shares and to permit the Fund to pay distribution
services fees to defray expenses associated with distribution of
its Class A shares, Class B shares and Class C shares in
accordance with a plan of distribution which is included in the
Agreement and has been duly adopted and approved in accordance
with Rule 12b-1 under the 1940 Act (the "Rule 12b-1 Plan").
In approving the Agreement, the Directors of the Fund
determined that there was a reasonable likelihood that the
Agreement would benefit the Fund and its shareholders. The
distribution services fee of a particular class will not be used
to subsidize the provision of distribution services with respect
to any other class.
During the Fund's fiscal year ended July 31, 1998, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class A shares, in amounts aggregating
27
<PAGE>
$284,858 which constituted approximately 0.30% of the average
daily net assets attributable to Class A shares during the
period, and the Adviser made payments from its own resources as
described above aggregating $608,764. Of the $893,622 paid by
the Fund and the Adviser with respect to the Class A shares under
the Agreement, $67,449 was spent on advertising, $17,439 on the
printing and mailing of prospectuses for persons other than
current shareholders, $397,227 for compensation to broker-dealers
and other financial intermediaries (including, $132,363 to the
Fund's Principal Underwriters), $159,719 for compensation to
sales personnel, $251,788 was spent on printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses.
During the Fund's fiscal year ended July 31, 1998, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class B shares, in amounts aggregating
$838,443, which constituted approximately 1.00% of the average
daily net assets attributable to Class B shares during the
period, and the Adviser made payments from its own resources as
described above aggregating $1,841,806. Of the $2,680,249 paid
by the Fund and the Adviser with respect to the Class B shares
under the Agreement, $30,614 was spent on advertising, $8,703 on
the printing and mailing of prospectuses for persons other than
current shareholders, $2,415,830 for compensation to broker-
dealers and other financial intermediaries (including, $69,684 to
the Fund's Principal Underwriters), $33,919 for compensation to
sales personnel, $99,838 was spent on printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses.
During the Fund's fiscal year ended July 31, 1998, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class C shares, in amounts aggregating
$224,234, which constituted approximately 1.00% of the average
daily net assets attributable to Class C shares during the
period, and the Adviser made payments from its own resources as
described above aggregating $200,569. Of the $424,803 paid by
the Fund and the Adviser with respect to the Class C shares under
the Agreement, $10,359 was spent on advertising, $2,654 on the
printing and mailing of prospectuses for persons other than
current shareholders, $342,975 for compensation to broker-dealers
and other financial intermediaries (including, $23,402 to the
Fund's Principal Underwriters), $10,886 for compensation to sales
personnel, $33,297 was spent on printing of sales literature,
travel, entertainment, due diligence and other promotional
expenses, and $24,632 was spent on interest on Class C shares
financing.
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
28
<PAGE>
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and at the same time to permit the
Principal Underwriter to compensate broker-dealers in connection
with the sale of such shares. In this regard, the purpose and
function of the combined contingent deferred sales charge and
distribution services fee on the Class B shares and Class C
shares are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares and
that in each case the sales charge and distribution services fee
provide for the financing of the distribution of the relevant
class of the Fund's shares.
In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class, and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
The Agreement will continue in effect for successive
twelve-month periods (computed from each January 1), provided,
however, that such continuance is specifically approved at least
annually by the Directors of the Fund or by vote of the holders
of a majority of the outstanding voting securities (as defined in
the 1940 Act) of that class, and, in either case, by a majority
of the Directors of the Fund who are not parties to the Agreement
or "interested persons," as defined in the 1940 Act, of any such
party (other than as directors of the Fund) and who have no
direct or indirect financial interest in the operation of the
Rule 12b-1 Plan or any agreement related thereto. Most recently
the Directors approved the continuance of the Agreement until
December 31, 1999 was approved by a vote, cast in person, of the
Directors, including a majority of the Directors who are not
"interested persons", as defined in the 1940 Act, at their
meeting held on December 10, 1998.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.
Unreimbursed distribution expenses incurred as of the
end of the Fund's most recently completed fiscal period, and
29
<PAGE>
carried over for reimbursement in future years in respect of the
Class B and Class C shares for the Fund were, respectively,
$4,377,262 (3.19% of the net assets of Class B) and $741,808
(1.87% of the net assets of Class C).
The Rule 12b-1 Plan is in compliance with rules of the
National Association of Securities Dealers, Inc. which
effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to
.75% and .25%, respectively, of the average annual net assets
attributable to that class. The rules also limit the aggregate of
all front-end, deferred and asset-based sales charges imposed
with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per
annum.
The Glass-Steagall Act and other applicable laws may
limit the ability of a bank or other depository institution to
become an underwriter or distributor of securities. However, in
the opinion of the Fund's management, based on the advice of
counsel, these laws do not prohibit such depository institutions
from providing services for investment companies such as the
administrative, accounting and other services referred to in the
Agreement. In the event that a change in these laws prevented a
bank from providing such services, it is expected that other
services arrangements would be made and that shareholders would
not be adversely affected.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each of the Class A shares, Class B shares,
Class C shares and Advisor Class shares of the Fund, plus
reimbursement for out-of-pocket expenses. The transfer agency
fee with respect to the Class B and Class C shares is higher than
the transfer agency fee with respect to the Class A shares and
Advisor Class shares, reflecting the additional costs associated
with Class B and Class C contingent deferred sales charges. For
the fiscal year ended July 31, 1998, the Fund paid Alliance Fund
Services, Inc. $395,487 for transfer agency services.
____________________________________________________________
PURCHASE OF SHARES
____________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How To Buy Shares."
30
<PAGE>
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), without any
initial sales charge and, as long as the shares are held for one
year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset-
based sales charge, in each case as described below. Shares of
the Fund that are offered subject to a sales charge are offered
through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered
into selected agent agreements with the Principal Underwriter
("selected agents"), and (iii) the Principal Underwriter.
Advisor Class shares of the Fund may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, (iii) by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is not eligible on the basis solely
of such status to purchase and hold Advisor Class shares) or,
(iv) by directors and present or retired full-time employees of
CB Richard Ellis, Inc. Generally, a fee-based program must
charge an asset-based or other similar fee and must invest at
least $250,000 in Advisor Class shares of the Fund in order to be
approved by AFD for investment in Advisor Class shares.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares made through such financial
representative. Such financial representative may also impose
requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed
31
<PAGE>
by the Fund, including requirements as to the minimum initial and
subsequent investment amounts. Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares.
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under "--
Class A Shares." On each Fund business day on which a purchase
or redemption order is received by the Fund and trading in the
types of securities in which the Fund invests might materially
affect the value of Fund shares, the per share net asset value is
computed in accordance with the Fund's Articles of Incorporation
and By-Laws as of the next close of regular trading on the New
York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern
time) by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any day on which the Exchange is open for
trading.
The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected
to be substantially the same. Under certain circumstances,
however, the per share net asset values of the Class B and
Class C shares may be lower than the per share net asset value of
the Class A and Advisor Class shares, as a result of the
differential daily expense accruals of the distribution and
transfer agency fees applicable with respect to those classes of
shares. Even under those circumstances, the per share net asset
values of the four classes eventually will tend to converge
immediately after the payment of dividends, which will differ by
approximately the amount of the expense accrual differential
among the classes.
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchase of shares placed through
selected dealers, agents or financial representatives, as
32
<PAGE>
applicable, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer,
agent or financial representative receives the order prior to the
close of regular trading on the Exchange and transmits it to the
Principal Underwriter prior to 5:00 p.m. Eastern time. The
selected dealer, agent or financial representative, as
applicable, is responsible for transmitting such orders by
5:00 p.m. Eastern time (certain selected dealers, agents or
financial representatives may enter into operating agreements
permitting them to transmit purchase information to the Principal
Underwriter after 5:00 p.m. Eastern time and receive that day's
net asset value.) If the selected dealer, agent or financial
representative fails to do so, the investor's right to that day's
closing price must be settled between the investor and the
selected dealer, agent or financial representative, as
applicable. If the selected dealer, agent or financial
representative, as applicable, receives the order after the close
of regular trading on the Exchange, the price will be based on
the net asset value determined as of the close of regular trading
on the Exchange on the next day it is open for trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase orders may not exceed $500,000. Payment for
shares purchased by telephone can be made only by electronic
funds transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription.
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, share certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.
33
<PAGE>
In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents, in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part, to provide
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, cash or other incentives
will be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other Alliance Mutual
Funds, as defined below, during a specific period of time. On
some occasions, such cash or other incentives may take the form
of payment for attendance at seminars, meals, sporting events or
theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel taken by persons
associated with a dealer or agent to urban or resort locations
within or outside the United States. Such dealer or agent may
elect to receive cash incentives of equivalent amount in lieu of
such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B shares and Class C shares
each bear the expense of a higher distribution services fee than
that borne by Class A shares, and Advisor Class shares do not
bear such a fee, (iii) Class B and Class C shares bear higher
transfer agency costs than those borne by Class A and Advisor
Class shares, (iv) each of Class A, Class B and Class C shares
has exclusive voting rights with respect to provisions of the
Rule 12b-1 Plan pursuant to which its distribution services fee
is paid and other matters for which separate class voting is
appropriate under applicable law, provided that, if the Fund
submits to a vote of the Class A shareholders, an amendment to
the Rule 12b-1 Plan that would materially increase the amount to
be paid thereunder with respect to the Class A shares, then such
amendment will also be submitted to the Class B shareholders and
Advisor Class shareholders and the Class A shareholders, the
Class B shareholders and the Advisor Class shareholders will vote
separately by class, and (v) Class B shares and Advisor Class
shares are subject to a conversion feature. Each class has
different exchange privileges and certain different shareholder
service options available.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
34
<PAGE>
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Alternative Retail Purchase Arrangements -- Class A, Class B and
Class C Shares**
The alternative purchase arrangements available with
respect to Class A, Class B and Class C shares permit an investor
to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their
investment in the Fund, the accumulated distribution services fee
and contingent deferred sales charges on Class B shares prior to
conversion, or the accumulated distribution services fee and
contingent deferred sales charges on Class C shares, would be
less than the initial sales charge and accumulated distribution
services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher
return of Class A shares. Class A shares will normally be more
beneficial than Class B shares to the investor who qualifies for
reduced initial sales charges on Class A shares, as described
below. In this regard, the Principal Underwriter will reject any
order (except orders from certain retirement plans and certain
employee benefit plans) for more than $250,000 for Class B
shares. (See Appendix D for information concerning the
eligibility of certain employee benefit plans to purchase Class B
shares at net asset value without being subject to a contingent
deferred sales charge and the ineligibility of certain such plans
to purchase Class A shares.) Class C shares will normally not be
suitable for the investor who qualifies to purchase Class A
shares at net asset value. For this reason, the Principal
Underwriter will reject any order for more than $1,000,000 for
Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
____________________
** Advisor Class shares are sold only to investors described
above in this section under "--General."
35
<PAGE>
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge on Class A shares would have to hold his or
her investment approximately seven years for the Class C
distribution services fee to exceed the initial sales charge plus
the accumulated distribution services fee of Class A shares. In
this example, an investor intending to maintain his or her
investment for a longer period might consider purchasing Class A
shares. This example does not take into account the time value
of money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in net
asset value or the effect of different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
During the Fund's fiscal year ended July 31, 1998,
July 31, 1997 and July 31, 1996, the aggregate amount of
underwriting commission payable with respect to shares of the
Fund were $843,047, $210,208 and $131,250 respectively. Of that
amount, the Principal Underwriter received the amounts of
$28,025, $10,280 and $20,247, respectively, representing that
portion of the sales charges paid on shares of the Fund sold
during the year which was not reallowed to selected dealers (and
was, accordingly, retained by the Principal Underwriter). During
the Fund's fiscal years ended in 1998, 1997, and 1996, the
Principal Underwriter received contingent deferred sales charges
of $345, $3,183, and $-0-, respectively, on Class A shares,
$87,486, $109,336 and $92,235, respectively, on Class B shares,
and $7,877, $9,181 and $-0-, respectively, on Class C shares.
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
36
<PAGE>
Sales Charge
Discount Or
Commission
As % of To Dealers
As % of the Public Or Agents
Amount of Net Amount Offering As % of
Purchase Invested Price Offering Price
_________ __________ __________ ______________
Less than
$100,000 4.44% 4.25% 4.00%
$100,000 but
less than
$250,000 3.36 3.25 3.00
$250,000 but
less than
$500,000 2.30 2.25 2.00
$500,000 but
less than
$1,000,000* 1.78 1.75 1.50
____________________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial offering price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gain distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, as described below under "--Class B
Shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers and agents for selling
37
<PAGE>
Class A shares. With respect to purchases of $1,000,000 or more
made through selected dealers or agents, the Adviser may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
1% of the amount invested to compensate such dealers or agents
for their distribution assistance in connection with such
purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "Class B
Shares--Conversion Feature" and "--Conversion of Advisor Class
Shares to Class A Shares". The Fund receives the entire net
asset value of its Class A shares sold to investors. The
Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above. In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter. A selected
dealer who receives reallowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities
Act.
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but may be subject in most such cases to a
contingent deferred sales charge) or (ii) a reduced initial sales
charge. The circumstances under which investors may pay a reduced
initial sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
38
<PAGE>
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
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-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting AFS at the address or the
"For Literature" telephone number shown on the front cover of
this Statement of Additional Information.
Cumulative Quantity Discount (Right Of Accumulation).
An investor's purchase of additional Class A shares of the Fund
may qualify for a Cumulative Quantity Discount. The applicable
sales charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all shares of the Fund held by the
investor and (b) all shares of any other Alliance Mutual Fund
held by the investor; and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder eligible to combine
his or her purchase with that of the investor into a single
"purchase" (see above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the sales charge for the $100,000 purchase
would be at the 2.25% rate applicable to a single $300,000
purchase of shares of the Fund, rather than the 3.25% rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
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Statement of Intention. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B,
Class C and/or Advisor Class shares) of the Fund or any other
Alliance Mutual Fund. Each purchase of shares under a Statement
of Intention will be made at the public offering price or prices
applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Statement of Intention. At
the investor's option, a Statement of Intention may include
purchases of shares of the Fund or any other Alliance Mutual Fund
made not more than 90 days prior to the date that the investor
signs a Statement of Intention; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to
invest a total of $60,000 during the following 13 months in
shares of the Fund or any other Alliance Mutual Fund, to qualify
for the 3.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in sales charge will
be used to purchase additional shares of the Fund subject to the
rate of the sales charge applicable to the actual amount of the
aggregate purchases.
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<PAGE>
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting AFS at the address or
telephone numbers shown on the cover of this Statement of
Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of the shares of the Fund will be that normally
applicable, under the schedule of the sales charges set forth in
this Statement of Additional Information, to an investment 13
times larger than such initial purchase. The sales charge
applicable to each succeeding monthly purchase will be that
normally applicable, under such schedule, to an investment equal
to the sum of (i) the total purchase previously made during the
13-month period and (ii) the current month's purchase multiplied
by the number of months (including the current month) remaining
in the 13-month period. Sales charges previously paid during
such period will not be retroactively adjusted on the basis of
later purchases.
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that
(i) such reinvestment is made within 120 calendar days after the
redemption or repurchase date and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the repurchase or redemption transaction. Investors
may exercise the reinstatement privilege by written request sent
to the Fund at the address shown on the cover of this Statement
of Additional Information.
Sales at Net Asset Value. The Fund may sell its Class A
shares at net asset value (i.e., without an initial sales charge)
42
<PAGE>
and without a contingent deferred sales charge to certain
categories of investors including:
(i) investment management clients of the Adviser or
its affiliates;
(ii) officers and present or former Directors of the
Fund; present or former directors and trustees of other
investment companies managed by the Adviser; present or retired
full-time employees of the Adviser, the Principal Underwriter,
AFS and their affiliates; officers and directors of ACMC, the
Principal Underwriter, AFS and their affiliates; officers,
directors and present and full-time employees of selected dealers
or agents; or the spouse, sibling, direct ancestor or direct
descendant (collectively, "relatives") of any such person; or any
trust, individual retirement account or retirement plan account
for the benefit of any such person or relative; or the estate of
any such person or relative, if such shares are purchased for
investment purposes (such shares may not be resold except to the
Fund);
(iii) the Adviser, Principal Underwriter, AFS and their
affiliates; certain employee benefit plans for employees of the
Adviser, the Principal Underwriter, AFS and their affiliates;
(iv) registered investment advisers or other financial
intermediaries who charge a management, consulting or other fee
for their services and who purchase shares through a broker or
agent approved by the Principal Underwriter and clients of such
registered investment advisers or financial intermediaries whose
accounts are linked to the master account of such investment
adviser or financial intermediary on the books of such approved
broker or agent;
(v) persons participating in a fee-based program,
sponsored and maintained by a registered broker-dealer or other
financial intermediary and approved by the Principal Underwriter,
pursuant to which such persons pay an asset-based fee to such
broker-dealer or other financial intermediary, or its affiliates
or agents, for service in the nature of investment advisory or
administrative services;
(vi) persons who establish to the Principal
Underwriter's satisfaction that they are investing, within such
time period as may be designated by the Principal Underwriter,
proceeds of redemption of shares of such other registered
investment companies as may be designated from time to time by
the Principal Underwriter; and
(vii) employer-sponsored qualified pensions or profit-
sharing plans (including Section 401(k) plans), custodial
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<PAGE>
accounts maintained pursuant to Section 403(b)(7) retirement
plans and individual retirement accounts (including individual
retirement accounts to which simplified employee pension ("SEP")
contributions are made), if such plans or accounts are
established or administered under programs sponsored by
administrators or other persons that have been approved by the
Principal Underwriter.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
Class B are paid to the Principal Underwriter and are used by the
Principal Underwriter to defray the expenses of the Principal
Underwriter related to providing distribution-related services to
the Fund in connection with the sale of the Class B shares, such
as the payment of compensation to selected dealers and agents for
selling Class B shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class B shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class B shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
To illustrate, assume that on or after November 19, 1993
an investor purchased 100 Class B shares at $10 per share (at a
cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor
has acquired 10 additional Class B shares upon dividend
reinvestment. If at such time the investor makes his or her first
redemption of 50 Class B shares (proceeds of $600), 10 Class B
shares will not be subject to charge because of dividend
reinvestment. With respect to the remaining 40 Class B shares,
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<PAGE>
the charge is applied only to the original cost of $10 per share
and not to the increase in net asset value of $2 per share.
Therefore, $400 of the $600 redemption proceeds will be charged
at a rate of 3.0% (the applicable rate in the second year after
purchase as set forth below).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a %
of Dollar Amount Subject to Charge
Shares purchased Shares purchased
before on or after
Year Since Purchase November 19, 1993 November 19, 1993
First 5.5% 4.0%
Second 4.5% 3.0%
Third 3.5% 2.0%
Fourth 2.5% 1.0%
Fifth 1.5% None
Sixth 0.5% None
Seventh and thereafter None None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Code, of a shareholder, (ii) to the extent that
the redemption represents a minimum required distribution from an
individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2, (iii) that had
been purchased by present or former Directors of the Fund, by the
relative of any such person, by any trust, individual retirement
account or retirement plan account for the benefit of any such
person or relative, or by the estate of any such person or
relative, or (iv) pursuant to a systematic withdrawal plan (see
"Shareholder Services--Systematic Withdrawal Plan" below).
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<PAGE>
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee
enables the Fund to sell Class C shares without either an initial
or contingent deferred sales charge, as long as the shares are
held for one year or more. Class C shares do not convert to any
46
<PAGE>
other class of shares of the Fund and incur higher distribution
services fees and transfer agency costs than Class A shares and
Advisor Class shares, and will thus have a higher expense ratio
and pay correspondingly lower dividends than Class A shares and
Advisor Class shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, as described above
under "--Class B Shares."
In determining the contingent deferred sales charge
applicable to a redemption of Class C shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because the
shares have been held beyond the period during which the charge
applies or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge.
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares and the Advisor Class shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts, employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--General," and by
investment advisory clients of, and by certain other persons
associated with, the Adviser and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in a
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<PAGE>
fee-based program or plan, or to be associated with the
investment adviser or financial intermediary in each case, that
satisfies the requirements to purchase shares set forth under
"Purchase of Shares--General" or (ii) the holder is otherwise no
longer eligible to purchase Advisor Class shares as described in
the Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
shares held by the shareholder will convert automatically and
without notice to the shareholder, other than the notice
contained in the Advisor Class Prospectus and this Statement of
Additional Information, to Class A shares of the Fund during the
calendar month following the month in which the Fund is informed
of the occurrence of the Conversion Event. The failure of a
shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event. The conversion would occur on the
basis of the relative net asset values of the two classes and
without the imposition of any sales load, fee or other charge.
Class A shares currently bear a .30% distribution services fee
and have a higher expense ratio than Advisor Class shares. As a
result, Class A shares may pay correspondingly lower dividends
and have a lower net asset value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law. The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem his Advisor Class shares, which would constitute a taxable
event under federal income tax law.
____________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
____________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
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Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund redeem the
shares tendered to it, as described below, at a redemption price
equal to their net asset value as next computed following the
receipt of shares tendered for redemption in proper form. Except
for any contingent deferred sales charge which may be applicable
to Class A, Class B or Class C shares, there is no redemption
charge. Payment of the redemption price will be made within
seven days after the Fund's receipt of such tender for
redemption. If a shareholder is in doubt about what documents
are required by his or her fee-based program or employee benefit
plan, the shareholder should contact his or her financial
representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the the Exchange is closed (other than customary
weekend and holiday closings) or during which the Commission
determines that trading thereon is restricted, or for any period
during which an emergency (as determined by the Commission)
exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or as a result of which
it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or for such other periods as the
Commission may by order permit for the protection of security
holders of the Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment received by a shareholder upon
redemption or repurchase of his or her shares, assuming the
shares constitute capital assets in his or her hands, will result
in long-term or short-term capital gains (or loss) depending upon
the shareholder's holding period and basis in respect of the
shares redeemed.
To redeem shares of the Fund for which no share
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
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<PAGE>
To redeem shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Fund. The
signature or signatures on the assignment form must be guaranteed
in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
fund transfer of shares for which no stock certificates have been
issued by telephone at (800) 221-5672 by a shareholder who has
completed the appropriate portion of the Subscription Application
or, in the case of an existing shareholder, an "Autosell"
application obtained from AFS. A telephone redemption request by
electronic funds transfer may not exceed $100,000 (except for
certain omnibus accounts), and must be made by 4:00 p.m. Eastern
time on a Fund business day as defined above. Proceeds of
telephone redemptions will be sent by electronic funds transfer
to a shareholder's designated bank account at a bank selected by
the shareholder that is a member of the NACHA.
Telephone Redemption By Check. Each Fund shareholder is
eligible to request redemption by check of Fund shares for which
no stock certificates have been issued by telephone at
(800) 221-5672 before 4:00 p.m. Eastern time on a Fund business
day in an amount not exceeding $50,000. Proceeds of such
redemptions are remitted by check to the shareholder's address of
record. A shareholder otherwise eligible for telephone
redemption by check may cancel the privilege by written
instruction to AFS, or by checking the appropriate box on the
Subscription Application found in the Prospectus.
Telephone Redemptions--General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching AFS by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
AFS at the address shown on the cover of this Statement of
Additional Information. The Fund reserves the right to suspend
or terminate its telephone redemption service at any time without
notice. Telephone redemption by check is not available with
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<PAGE>
respect to shares (i) for which certificates have been issued,
(ii) held in nominee or "street name" accounts, (iii) held by a
shareholder who has changed his or her address of record within
the preceding 30 calendar days or (iv) held in any retirement
plan account. Neither the Fund nor the Adviser, the Principal
Underwriter or AFS will be responsible for the authenticity of
telephone requests for redemptions that the Fund reasonably
believes to be genuine. The Fund will employ reasonable
procedures in order to verify that telephone requests for
redemptions are genuine, including, among others, recording such
telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders. If the Fund
did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions.
Selected dealers or agents may charge a commission for handling
telephone requests for redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. Eastern time (certain
selected dealers, agents or financial representatives may enter
into operating agreements permitting them to transmit purchase
information to the Principal Underwriter after 5:00 p.m. Eastern
time and receive that day's net asset value). If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
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<PAGE>
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
________________________________________________________________
SHAREHOLDER SERVICES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set
forth below are applicable to Class A, Class B, Class C and
Advisor Class shares unless otherwise indicated. If you are an
Advisor Class shareholder through an account established under a
fee-based program your fee-based program may impose requirements
with respect to the purchase, sale or exchange of Advisor Class
shares of the Fund that are different from those described
herein. A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing electronic funds transfer
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives
the proceeds from the investor's bank. In electronic form,
drafts can be made on or about a date each month selected by the
shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus. Current shareholders should
contact AFS at the address or telephone numbers shown on the
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cover of this Statement of Additional Information to establish an
automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Adviser).
In addition, (i) present officers and full-time employees of the
Adviser, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
employees of the Adviser, the Principal Underwriter, AFS and
their affiliates may, on a tax-free basis, exchange Class A
shares of the Fund for Advisor Class shares of the Fund.
Exchanges of shares are made at the net asset value next
determined and without sales or service charges. Exchanges may be
made by telephone or written request. Telephone exchange
requests must be received by AFS by 4:00 p.m. Eastern time on a
Fund business day in order to receive that day's net asset value.
Shares will continue to age without regard to exchanges
for purposes of determining the CDSC, if any, upon redemption
and, in the case of Class B shares, for the purpose of conversion
to Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call AFS at (800) 221-5672 to exchange uncertificated shares.
Except with respect to exchanges of Class A shares of the Fund
for Advisor Class shares of the Fund, exchanges of shares as
described above in this section are taxable transactions for
federal income tax purposes. The exchange service may be
changed, suspended, or terminated on 60 days' written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
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will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for federal income tax purposes.
Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless AFS,
receives written instruction to the contrary from the
shareholder, or the shareholder declines the privilege by
checking the appropriate box on the Subscription Application
found in the Prospectus. Such telephone requests cannot be
accepted with respect to shares then represented by stock
certificates. Shares acquired pursuant to a telephone request
for exchange will be held under the same account registration as
the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone AFS with their account number and other details
of the exchange, at (800) 221-5672 before 4:00 p.m. Eastern time
on a Fund business day as defined above. Telephone requests for
exchanges received before 4:00 p.m. Eastern time on a Fund
business day will be processed as of the close of business on
that day. During periods of drastic economic or market
developments, such as the market break of October 1987, it is
possible that shareholders would have difficulty in reaching AFS
by telephone (although no such difficulty was apparent at any
time in connection with the 1987 market break). If a shareholder
were to experience such difficulty, the shareholder should issue
written instructions to AFS at the address shown on the cover of
this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or AFS will be responsible for the
authenticity of telephone requests for exchanges that the Fund
reasonably believes to be genuine. The Fund will employ
reasonable procedures in order to verify that telephone requests
for exchanges are genuine, including, among others, recording
such telephone instructions and causing written confirmations of
the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
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instructions. Selected dealers, agents or financial
representatives, as applicable, may charge a commission for
handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact AFS at the "For Literature"
telephone number on the cover of this Statement of Additional
Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his
other spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan reaches $1 million
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on or before December 15 in any year, all Class B shares or Class
C shares of the Fund held by the plan can be exchanged at the
plan's request, without any sales charge, for Class A shares of
the Fund.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirements plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to AFS as compensation for its services to the retirement plan
accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact AFS.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on the shareholder's Class A, Class B,
Class C or Advisor Class Fund shares be automatically reinvested,
in any amount, without the payment of any sales or service
charges, in shares of the same class of such other Alliance
Mutual Fund(s). Further information can be obtained by contacting
AFS at the address or the "For Literature" telephone number shown
on the cover of this Statement of Additional Information.
Investors wishing to establish a dividend direction plan in
connection with their initial investment should complete the
appropriate section of the Subscription Application found in the
Prospectus. Current shareholders should contact AFS to establish
a dividend direction plan.
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Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such payments will be subject to any
taxes applicable to redemptions and, except as discussed below,
any applicable contingent deferred sales charge. Shares acquired
with reinvested dividends and distributions will be liquidated
first to provide such withdrawal payments and thereafter other
shares will be liquidated to the extent necessary, and depending
upon the amount withdrawn, the investor's principal may be
depleted. A systematic withdrawal plan may be terminated at any
time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level. Therefore,
redemptions of shares under the plan may reduce or even liquidate
a shareholder's account and may subject the shareholder to the
Fund's involuntary redemption provisions. See "Redemption and
Repurchase of Shares--General." Purchases of additional shares
concurrently with withdrawals are undesirable because of sales
charges when purchases are made. While an occasional lump-sum
investment may be made by a holder of Class A shares who is
maintaining a systematic withdrawal plan, such investment should
normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting AFS at the address or the "For Literature"
telephone number shown on the cover of this Statement of
Additional Information.
CDSC Waiver for Class B Shares and Class C Shares. Under
a systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or
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3% quarterly of the value at the time of redemption of the
Class B or Class C shares in a shareholder's account may be
redeemed free of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. Redemptions of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.
With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
Statements And Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent auditors, Ernst & Young LLP, as
well as a confirmation of each purchase and redemption. By
contacting his or her broker or AFS, a shareholder can arrange
for copies of his or her account statements to be sent to another
person.
________________________________________________________________
NET ASSET VALUE
________________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange (ordinarily 4:00 p.m.
Eastern time) following receipt of a purchase or redemption order
by the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors deems
appropriate or necessary in order to comply with Rule 22c-1 under
the 1940 Act. The Fund's per share net asset value is calculated
by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A fund business day is any weekday on which the Exchange is open
for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
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fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
States over-the-counter market) are valued, except as indicated
below, at the last sale price reflected on the consolidated tape
at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each case
on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued
at the mean of the closing bid and asked prices on such day. If
no bid or asked prices are quoted on such day, then the security
is valued in good faith at fair value by, or in accordance with
procedures established by, the Board of Directors. Readily
marketable securities not listed on the Exchange or on a foreign
securities exchange but listed on other United States national
securities exchanges or traded on The Nasdaq Stock Market, Inc.
are valued in like manner. Portfolio securities traded on the
Exchange and on one or more foreign or other national securities
exchanges, and portfolio securities not traded on the Exchange
but traded on one or more foreign or other national securities
exchange are valued in accordance with these procedures by
reference to the principal exchange on which the securities are
traded.
Readily marketable securities traded in the over-the-
counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a U.S.
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on The
Nasdaq Stock Market, Inc.), are valued at the mean of the current
bid and asked prices as reported by Nasdaq or, in the case of
securities not quoted by Nasdaq, the National Quotation Bureau or
other comparable sources.
Listed put or call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price. If there are no
quotations available for the day of valuations, the last
available closing settlement price will be used.
U.S. Government Securities and other debt instruments
having 60 days or less remaining until maturity are valued at
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amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities, and any developments related to specific
securities.
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern or European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Board of Directors at fair value.
The Board of Directors may suspend the determination of
the Fund's net asset value (and the offering and sale of shares),
subject to the rules of the Commission and other governmental
rules and regulations, at a time when: (1) the Exchange is
closed, other than customary weekend and holiday closings, (2) an
emergency exists as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by it or
to determine fairly the value of its net assets, or (3) for the
protection of shareholders, the Commission by order permits a
suspension of the right of redemption or a postponement of the
date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. Dollars at the mean
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of the current bid and asked prices of such currency against the
U.S. Dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
The assets attributable to the Class A shares, Class B
shares, Class C shares and Advisor Class shares will be invested
together in a single portfolio. The net asset value of each
class will be determined separately by subtracting the
liabilities allocated to that class from the assets belonging to
that class in conformance with the provisions of a plan adopted
by the Fund in accordance with Rule 18f-3 under the 1940 Act.
____________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
____________________________________________________________
Dividends paid by the Fund, if any, with respect to
Class A, Class B, Class C and Advisor Class shares will be
calculated in the same manner at the same time on the same day
and will be in the same amount, except that the higher
distribution services applicable to Class B and C shares, and any
incremental transfer agency costs relating to Class B and Class C
shares, will be borne exclusively by the class to which they
relate.
Foreign Income Taxes. Investment income received by the
Fund from sources within foreign countries may be subject to
foreign income taxes withheld at the source. The United States
has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of such taxes or exemption
from taxes on such income. It is impossible to determine the
effective rate of foreign tax in advance since the amount of the
Fund's assets to be invested within various countries is not
known.
U.S. Federal Income Taxes. The Fund intends for each
year to qualify for tax treatment as a "regulated investment
company" under the Code. To the extent that the Fund distributes
its taxable income and net capital gain to its shareholders,
qualification as a regulated investment company and the
satisfaction of certain distribution requirements contained in
the Code relieves the Fund of federal income and excise taxes.
Investors should consult their own counsel for a complete
understanding of the requirements the Fund must meet to qualify
for such treatment. The following discussion relates solely to
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U.S. federal income taxes on dividends and distributions by the
Fund and assumes that the Fund qualifies as a regulated
investment company. Investors should consult their own counsel
for further details, including their entitlement to foreign tax
credits that might be "passed through" to them under the rules
described below, and the application of state and local tax laws
to his or her particular situation.
Distributions of net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) are
taxable as long-term capital gain, regardless of how long a
shareholder has held shares in the Fund. The investment
objective of the Fund is such that only a small portion, if any,
of the Fund's distributions is expected to qualify for the
dividends-received deduction for corporate shareholders.
Under current federal tax law the amount of an income
dividend or capital gains distribution declared by the Fund
during October, November or December of a year to shareholders of
record as of a specified date in such a month that is paid during
January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
Income received by the Fund from sources within various
foreign countries may be subject to foreign income tax. If more
than 50% of the value of the Fund's total assets at the close of
its taxable year consists of the stock or securities of foreign
corporations, the Fund may elect to "pass through" to the Fund's
shareholders the amount of foreign income taxes paid by the Fund.
Pursuant to such election, shareholders would be required: (i) to
include in gross income, even though not actually received, their
respective pro-rata shares of the Fund's gross income from
foreign sources; (ii) treat their pro rata share of such foreign
taxes as having been paid by them; and (iii) either to deduct
their pro-rata share of foreign taxes in computing their taxable
income, or to use it as a foreign tax credit against federal
income (but not both). No deduction for foreign taxes could be
claimed by a shareholder who does not itemize deductions. In
addition, certain shareholders may be subject to rules which
limit their ability to fully deduct, or claim a credit for, their
pro rata share of the foreign taxes paid by the Fund. A
shareholder's foreign tax credit with respect to a dividend
received from the Fund will be disallowed unless the shareholder
holds shares in the Fund on the ex-dividend date and for at least
15 other days during the 30-day period beginning 15 days prior to
the ex-dividend date.
The Fund intends to meet for each fiscal year, the
requirements of the Code to "pass through" to its shareholder
foreign income taxes paid, but there can be no assurance that the
Fund will be able to do so. Each shareholder will be notified
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within 60 days after the close of each taxable year of the Fund
whether the foreign taxes paid by the Fund will "pass through"
for that year, and, if so, the amount of each shareholder's pro-
rata share (by country) of (i) the foreign taxes paid, and
(ii) the Fund's gross income from foreign sources. Shareholders
who are not liable for federal income taxes, such as retirement
plans qualified under Section 401 of the Code, will not be
affected by any such "pass through" of foreign tax credits.
A dividend or capital gains distribution with respect to
shares of the Fund held by a tax-deferred or qualified plan, such
as an individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, generally will not be
taxable to the plan. Distributions from such plans will be
taxable to individual participants under applicable tax rules
without regard to the character of the income earned by the
qualified plan.
Backup Withholding. The Fund may be required to
withhold United States federal income tax at the rate of 31% of
all taxable distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer identification
numbers or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to
backup withholding. Corporate shareholders and certain other
shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
amounts so withheld may be credited against a shareholder's
United States federal income tax liability or refunded.
United States Federal Income Taxation Of the Fund
The following discussion relates to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.
Currency Fluctuations--"Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, or from the disposition of a forward contract
denominated in a foreign currency which are attributable to
fluctuations in the value of the foreign currency between the
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date of acquisition of the asset and the date of disposition also
are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as
ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Because section 988 losses
reduce the amount of ordinary dividends the Fund will be allowed
to distribute for a taxable year, such section 988 losses may
result in all or a portion of prior dividend distributions for
such year being recharacterized as a non-taxable return of
capital to shareholders, rather than as an ordinary dividend,
reducing each shareholder's basis in his Fund shares. To the
extent that such distributions exceed such shareholder's basis,
each will be treated as a gain from the sale of shares.
Options, Futures Contracts, and Forward Foreign Currency
Contracts. Certain listed options, regulated futures contracts,
and forward foreign currency contracts are considered "section
1256 contracts" for federal income tax purposes. Section 1256
contracts held by the Fund at the end of each taxable year will
be "marked to market" and treated for federal income tax purposes
as though sold for fair market value on the last business day of
such taxable year. Gain or loss realized by the Fund on section
1256 contracts other than forward foreign currency contracts will
be considered 60% long-term and 40% short-term capital gain or
loss. Gain or loss realized by the Fund on forward foreign
currency contracts will be treated as section 988 gain or loss
and will therefore be characterized as ordinary income or loss
and will increase or decrease the amount of the Fund's net
investment income available to be distributed to shareholders as
ordinary income, as described above. The Fund can elect to
exempt its section 1256 contracts which are part of a "mixed
straddle" (as described below) from the application of section
1256.
The Treasury Department has the authority to issue
regulations that would permit or require the Fund either to
integrate a foreign currency hedging transaction with the
investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a
manner that is consistent with the hedged investment. The
regulations under this authority generally should not apply to
the type of hedging transactions in which the Fund intends to
engage.
Gain or loss realized by the Fund on the lapse or sale
of put and call options on foreign currencies which are traded
over-the-counter or on certain foreign exchanges will be treated
as section 988 gain or loss and will therefore be characterized
as ordinary income or loss and will increase or decrease the
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amount of the Fund's net investment income available to be
distributed to shareholders as ordinary income, as described
above. The amount of such gain or loss shall be determined by
subtracting the amount paid, if any, for or with respect to the
option (including any amount paid by the Fund upon termination of
an option written by the Fund) from the amount received, if any,
for or with respect to the option (including any amount received
by the Fund upon termination of an option held by the Fund. In
general, if the Fund exercises such an option on a foreign
currency, or if such an option that the Fund has written is
exercised, gain or loss on the option will be recognized in the
same manner as if the Fund had sold the option (or paid another
person to assume the Fund's obligation to make delivery under the
option) on the date on which the option is exercised, for the
fair market value of the option. The foregoing rules will also
apply to other put and call options which have as their
underlying property foreign currency and which are traded over-
the-counter or on certain foreign exchanges to the extent gain or
loss with respect to such options is attributable to fluctuations
in foreign currency exchange rates.
Tax Straddles. Any option, futures contract, or forward
foreign currency contract, or other position entered into or held
by the Fund in conjunction with any other position held by the
Fund may constitute a "straddle" for federal income tax purposes.
A straddle of which at least one, but not all, the positions are
section 1256 contracts may constitute a "mixed straddle". In
general, straddles are subject to certain rules that may affect
the character and timing of the Fund's gains and losses with
respect to straddle positions by requiring, among other things,
that (i) loss realized on disposition of one position of a
straddle not be recognized to the extent that the Fund has
unrealized gains with respect to the other position in such
straddle; (ii) the Fund's holding period in straddle positions be
suspended while the straddle exists (possibly resulting in gain
being treated as short-term capital gain rather than long-term
capital gain); (iii) losses recognized with respect to certain
straddle positions which are part of a mixed straddle and which
are non-section 1256 positions be treated as 60% long-term and
40% short-term capital loss; (iv) losses recognized with respect
to certain straddle positions which would otherwise constitute
short-term capital losses be treated as long-term capital losses;
and (v) the deduction of interest and carrying charges
attributable to certain straddle positions may be deferred. The
Treasury Department is authorized to issue regulations providing
for the proper treatment of a mixed straddle where at least one
position consists of an ordinary asset and at least one position
consists of a capital asset. No such regulations have yet been
issued. Various elections are available to the Fund which may
mitigate the effects of the straddle rules, particularly with
respect to mixed straddles. In general, the straddle rules
65
<PAGE>
described above do not apply to any straddles held by the Fund
all of the offsetting positions of which consist of section 1256
contracts.
Taxation of Foreign Stockholders. The foregoing
discussion relates only to U.S. federal income tax law as it
affects shareholders who are U.S. residents or U.S. corporations.
The effects of federal income tax law on shareholders who are
non- resident aliens or foreign corporations may be substantially
different. Foreign investors should consult their counsel for
further information as to the U.S. tax consequences of receipt of
income from the Fund.
________________________________________________________________
PORTFOLIO TRANSACTIONS
________________________________________________________________
Subject to the general supervision of the Fund's Board
of Directors, the Adviser is responsible for the investment
decisions and the placing of the orders for portfolio
transactions for the Fund. The Fund intends to allocate
portfolio transactions for execution by banks and brokers that
offer best execution, taking into account such factors as size of
order, difficulty of execution and skill required to execute, in
the case of agency transactions, the commission, and in the case
of principal transactions, the net price. Brokerage commission
rates in certain countries in which the Fund may invest may be
discounted for certain large domestic and foreign investors such
as the Fund. Any number of banks and brokers may be used for
execution of the Fund's portfolio transactions.
Subject to best execution, orders may be placed with
banks and brokers that supply research, market and statistical
information to the Fund and the Adviser. The research may be
used by the Adviser in advising other clients, and the Fund's
negotiated commissions to brokers and banks supplying research
may not represent the lowest obtainable commission rates.
Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc. and subject to seeking
the most favorable price and execution available and other such
policies as the Directors may determine, the Adviser may consider
sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
Most transactions for the Fund's portfolio in equity
securities will occur on foreign stock exchanges. Transactions
on stock exchanges involve the payment of brokerage commissions.
On many foreign stock exchanges these commissions are fixed.
Securities traded in foreign over-the-counter markets (including
66
<PAGE>
most fixed-income securities) are purchased from and sold to
dealers acting as principal. Over-the-counter transactions
generally do not involve the payment of a stated commission, but
the price usually includes an undisclosed commission or markup.
The prices of underwritten offerings, however, generally, include
a stated underwriter's discount.
The Adviser expects to effect the bulk of its
transactions in securities of companies based in Europe through
brokers, dealers or underwriters located in such countries. U.S.
Government or corporate debt or other U.S. securities
constituting permissible investments will be purchased and sold
through U.S. brokers, dealers or underwriters. The Fund is
permitted to place brokerage orders with Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), a U.S. registered
broker-dealer and an affiliate of the Adviser. With respect to
orders placed with DLJ for execution on a securities exchange,
commissions received must conform to Section 17(e)(2)(A) of the
1940 Act and Rule 17e-1 thereunder, which permit an affiliated
person of a registered investment company (such as the Fund), or
any affiliated person of such person to receive a brokerage
commission from such registered company provided that such
commission is reasonable and fair compared to the commission
received by other brokers in connection with comparable
transactions involving similar securities during a comparable
period of time.
During the fiscal years ended in 1998, 1997 and 1996,
the Fund incurred brokerage commissions amounting in the
aggregate to $1,113,414, $1,511,793 and $316,516, respectively.
During the fiscal years ended in 1998, 1997 and 1996, brokerage
commissions amounting in the aggregate to $0, $0 and $0,
respectively, were paid to DLJ and brokerage commissions
amounting in the aggregate to $947, $0, and $0, respectively,
were paid to brokers utilizing the Pershing Division of DLJ.
During the fiscal year ended July 31, 1998, the brokerage
commissions paid to DLJ constituted 0% of the Fund's aggregate
brokerage commissions and the brokerage commissions paid to
brokers utilizing the Pershing Division of DLJ constituted .09%
of the Fund's aggregate brokerage commissions. During the fiscal
year ended in July 31, 1998, of the Fund's aggregate dollar
amount of brokerage transactions involving the payment of
commissions, 0% were effected through DLJ and .09% were effected
through brokers utilizing the Pershing Division of DLJ. During
the fiscal year ended July 31, 1998, transactions in portfolio
securities of the Fund aggregating $468,165,685 with associated
brokerage commissions of approximately $1,112,276 were allocated
to persons or firms supplying research services to the Fund or
the Adviser.
67
<PAGE>
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Capitalization
The Fund was organized as a Maryland corporation in
January 1990. The authorized Capital Stock of the Fund consists
of 3,000,000,000 shares of Class A Common Stock, 3,000,000,000
shares of Class B Common Stock, 3,000,000,000 shares of Class C
Common Stock and 3,000,000,000 shares of Advisor Class Common
Stock, each having a par value of $.01 per share. All shares of
the Fund, when issued, are fully paid and non-assessable.
The Directors are authorized to reclassify and issue any
unissued shares to any number of additional classes or series
without shareholder approval. Accordingly, the Directors in the
future, for reasons such as the desire to establish one or more
additional portfolios with different investment objectives,
policies or restrictions, may create additional classes or series
of shares. Any issuance of shares of another class would be
governed by the 1940 Act and the law of the State of Maryland. If
shares of another class were issued in connection with the
creation of a second portfolio, each share of either portfolio
would normally be entitled to one vote for all purposes.
Generally, shares of both portfolios would vote as a single
series for the election of Directors and on any other matter that
affected both portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of
the Advisory Agreement and changes in investment policy, shares
of each portfolio would vote as separate classes.
It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required
by federal or state law. Shareholders have available certain
procedures for the removal of Directors.
A shareholder will be entitled to share pro rata with
other holders of the same class of shares all dividends and
distributions arising from the Fund's assets and, upon redeeming
shares, will receive the then current net asset value of the Fund
represented by the redeemed shares less any applicable CDSC. The
Fund is empowered to establish, without shareholder approval,
additional portfolios, which may have different investment
objectives and policies than those of the Fund, and additional
classes of shares within the Fund. If an additional portfolio or
class were established in the Fund, each share of the portfolio
or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together
as a single class on matters, such as the election of Directors,
68
<PAGE>
that affect each portfolio and class in substantially the same
manner. Class A, B, C and Advisor Class shares have identical
voting, dividend, liquidation and other rights, except that each
class bears its own transfer agency expenses, each of Class A,
Class B and Class C shares of the Fund bears its own distribution
expenses and Class B shares and Advisor Class shares convert to
Class A shares under certain circumstances. Each class of shares
of the Fund votes separately with respect to the Fund's Rule 12b-
1 distribution plan and other matters for which separate class
voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the
Directors and, in liquidation of the Fund, are entitled to
receive the net assets of the Fund.
The Fund's shares have non-cumulative voting rights,
which means that the holders of more than 50% of the shares
voting for election of Directors can elect 100% of the Directors
if they choose to do so, and in such event the holders of the
remaining less than 50% of the shares voting for such election of
Directors will not be able to elect any persons or persons as
Directors.
Procedures for calling a shareholder's meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act, are available to shareholders of
the Fund. Meetings of shareholders may be called by 10% of the
Fund's outstanding shareholders. The rights of the holders of
shares of a series may not be modified except by the vote of a
majority of the outstanding shares of such series.
As of the close of business on January 8, 1999, there
were 6,828,630 Class A, 8,088,603 Class B, 2,414,784 Class C and
238,790 Advisor Class shares of common stock of the Fund
outstanding. To the knowledge of the Fund, the following persons
owned of record or beneficially, 5% or more of the outstanding
shares of the Fund as of January 8, 1999:
Name and Address Shares % of Class
Class A
MLPF&S
For the Sole Benefit of
Its Customers
Attn Fund Administration (977H4)
4800 Deer Lake Dr.
East 2nd Floor
Jacksonville,
FL 32246-6484 485,632 7.12%
69
<PAGE>
Class B
MLPF&S
For the Sole Benefit of
Its Customers
Attn Fund Administration (977H1)
4800 Deer Lake Dr.
East 2nd Floor
Jacksonville,
FL 32246-6484 1,666,213 20.60%
Class C
MLPF&S
For the Sole Benefit of
Its Customers
Attn Fund Administration (97B78)
4800 Deer Lake Dr.
East 2nd Floor
Jacksonville,
FL 32246-6484 738,447 30.58%
Advisor Class
MLPF&S
For the Sole Benefit of
Its Customers
Attn Fund Administration (97LSO)
4800 Deer Lake Dr.
East 2nd Floor
Jacksonville,
FL 32246-6484 20,159 8.44%
Trust for Profit Sharing
Plan for Employees of Alliance
Capital Mgmt. L.P. Plans
Attn Jill Smith 32nd Fl
1345 Avenue of the Americas
New York, NY 10105-0302 141,851 59.40%
Charles Schwab & Co.
For the Exclusive Benefit
of Customers
Mutual Fund Operations
101 Montgomery Street
San Francisco, CA 94104-4122 24,790 10.38%
70
<PAGE>
Principal Underwriter
Alliance Fund Distributors, Inc., an indirect wholly-
owned subsidiary of the Adviser located at 1345 Avenue of the
Americas, New York, New York 10105, is the principal underwriter
of shares of the Fund. Under the Agreement, the Fund has agreed
to indemnify the Principal Underwriter, in the absence of its
willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations thereunder, against certain civil
liabilities, including liabilities under the Securities Act.
Counsel
Legal matters in connection with the issuance of the
shares of Common Stock offered hereby are passed upon by Seward &
Kissel, New York, New York. Seward & Kissel has relied upon the
opinion of Venable, Baetjer and Howard, LLP, Baltimore, Maryland,
for matters relating to Maryland law.
Independent Auditors
Ernst & Young LLP, New York, New York, has been
appointed as independent auditors for the Fund.
Custodian
The Bank of New York, 48 Wall Street, New York, New
York, 10286, will act as the Fund's custodian for the assets of
the Fund, but plays no part in deciding the purchase or sale of
portfolio securities. Subject to the supervision of the Fund's
Directors, The Bank of New York may enter into sub-custodial
agreements for the holding of the Fund's foreign securities.
Performance Information
From time to time, the Fund advertises its "total
return," which is computed separately for Class A, Class B, Class
C and Advisor Class shares. Such advertisements disclose the
Fund's average annual compounded total return for the periods
prescribed by the Commission. The Fund's total return for each
such period is computed by finding, through the use of a formula
prescribed by the Commission, the average annual compounded rate
of return over the period that would equate an assumed initial
amount invested to the value of the investment at the end of the
period. For purposes of computing total return, income dividends
and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases and redemptions of the Fund's
shares are assumed to have been paid.
71
<PAGE>
From April 2, 1990 through February 11, 1991, the Fund
operated as a closed-end investment company. On February 11,
1991, the Fund commenced operations as an open-end investment
company and all outstanding shares of the Fund were reclassified
as Class A shares. The Fund's average annual compounded total
return for the one- five- and ten-year periods ended July 31,
1998 (or since inception through that date, as noted) were as
follows:
12 months Ended 5 Years Ended 10 Years Ended
7/31/98 7/31/98 7/31/98
Class A 32.21% 21.82% 12.96*
Class B 31.22% 20.95% 14.66%*
Class C 31.13% 20.96% 20.11%*
Advisor Class 32.55% 32.18%* N/A
*Inception Dates: Class A - February 11, 1991
Class B - March 5, 1991
Class C - May 3, 1993
Advisor Class - October 1, 1996
The Fund's total return is computed separately for
Class A, Class B, Class C and Advisor Class shares. The Fund's
total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and
quality of the securities in the Fund's portfolio and the Fund's
expenses. An investor's principal invested in the Fund is not
fixed and will fluctuate in response to prevailing market
conditions.
Advertisements quoting performance rankings or ratings
of the Fund as measured by financial publications or by
independent organizations such as Lipper Analytical Services,
Inc. ("Lipper") and Morningstar Inc. and advertisements
presenting the historical record of payments of income dividends
by the Fund may also from time to time be sent to investors or
may be placed in newspapers and magazines such as The New York
Times, The Wall Street Journal, Barrons, Investor's Daily, Money
Magazine, Changing Times, Business Week and Forbes or other media
on behalf of the Fund. The Fund has been ranked by Lipper in the
category known as "European Region Funds."
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or to Alliance Fund Services, Inc. at the
address or telephone numbers shown on the front cover of this
Statement of Additional Information.
72
<PAGE>
This Statement of Additional Information does not
contain all the information set forth in the Registration
Statement filed by the Fund with the Commission. Copies of the
Registration Statement may be obtained at a reasonable charge
from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
73
<PAGE>
_______________________________________________________________
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS
_______________________________________________________________
74
<PAGE>
ALLIANCE NEW EUROPE FUND
ANNUAL REPORT
JULY 31, 1998
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
JULY 31, 1998 ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-90.7%
AUSTRIA-0.9%
Bank Austria AG 37,415 $ 2,958,298
DENMARK-1.0%
Ratin A/S Cl. B 17,080 3,259,488
FINLAND-7.3%
Enso OY Cl. R 328,000 3,160,145
Nokia Oyj Cl. A 184,000 16,162,438
Orion-yhtymae Oy Ser. B 105,740 3,245,958
------------
22,568,541
FRANCE-12.7%
Banque Nationale de Paris 49,500 4,588,635
Compagnie de Saint-Gobain 25,062 4,386,008
Compagnie Francaise d'Etudes et de
Construction Technip, SA 23,065 2,822,471
ISIS 13,298 1,497,989
L'Air Liquide 15,995 2,574,001
Pinault-Printemps-Redoute, SA 15,275 2,330,106
Sanofi, SA 11,000 1,322,102
Schneider, SA 68,000 4,444,422
Societe Generale 16,400 3,947,766
ST Microelectronics (a) 10 654
Suez Lyonnaise des Eaux 26,000 4,794,234
Total, SA Cl. B 21,562 2,461,440
Usinor Sacilor 113,000 1,577,890
Valeo, SA 28,739 2,745,994
------------
39,493,712
GERMANY-8.3%
Adidas-Salomon AG 25,400 3,769,309
BASF AG 68,750 3,238,477
Merck KGaA 81,520 3,798,768
Schmalbach Lubeca AG 16,520 3,556,582
Thyssen AG 17,060 4,166,706
Veba AG 51,200 3,021,922
Volkswagen AG 45,000 4,244,519
------------
25,796,283
IRELAND-1.0%
CRH Plc. 242,200 3,204,635
ITALY-4.6%
Credito Italiano SpA 617,000 3,525,062
Eni SpA 562,000 3,653,984
Telecom Italia Mobile SpA 809,000 5,393,487
Telecom Italia SpA 204,388 1,762,918
------------
14,335,451
NETHERLANDS-12.5%
Akzo Nobel NV 226,800 11,555,392
Equant NV (a) 42,800 1,797,600
ING NV 133,235 10,076,150
KLM Royal Dutch Airlines NV 40,000 1,706,965
Royal Philips Electronics NV 114,000 9,235,256
Thermo Eurotech NV (a) (b) 160,000 478,588
Wolters Kluwerc NV 25,700 3,856,473
------------
38,706,424
SPAIN-5.5%
Banco Bilbao Vizcaya, SA 97,800 1,844,428
Banco Santander, SA 82,300 2,325,443
Rights, expiring 9/30/98 (a) 82,300 3,268
Endesa, SA 128,000 2,820,540
Repsol, SA 58,000 3,154,844
Tabacalera, SA Ser. A 164,150 3,622,553
Telefonica, SA 58,090 2,833,002
Unidad Editorial, SA Ser. A (b) 549,920 582,234
------------
17,186,312
SWEDEN-3.3%
Astra AB Ser. A 201,500 3,875,780
Autoliv, Inc. (SDR) 106,300 3,621,555
Electrolux AB Ser. B 179,500 2,865,898
------------
10,363,233
9
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
SWITZERLAND-11.9%
Julius Baer Holdings AG 1,125 $ 3,909,237
Nestle, SA 2,540 5,275,267
Novartis AG 1,950 3,288,589
Schindler Holding AG 1,330 1,940,531
REGD 260 383,712
Schweizerische
Rueckversicherungs-
Gesellschaft 1,300 3,523,177
Swatch Group AG 14,400 2,443,953
UBS AG 10,000 4,340,243
Zurich Allied AG 15,100 11,851,479
------------
36,956,188
UNITED KINGDOM-21.7%
Bank of Scotland 277,200 3,033,804
Bass Plc. 190,914 3,087,397
Beazer Group Plc. 369,900 1,066,470
BPB Plc. 62,600 341,539
British Aerospace Plc. 631,892 4,871,967
British Airways Plc. 384,000 3,932,948
Diageo Plc. 327,680 3,886,029
Energis Plc. 144,000 2,211,107
FKI Plc. 710,000 1,913,647
HSBC Holdings Plc. 109,000 2,708,165
Imperial Tobacco Group Plc. 75,600 635,987
Johnson Matthey Plc. 308,000 2,168,440
Kingfisher Plc. 422,876 3,220,708
Ladbroke Group Plc. 1,196,339 5,535,331
Lloyds TSB Group Plc. 177,955 2,412,724
Railtrack Group Plc. 92,300 2,272,136
Rolls-Royce Plc. 253,000 986,696
Royal Bank of Scotland Plc 150,912 2,445,428
Rugby Group Plc. 591,000 921,956
Siebe Plc. 60,000 1,088,892
Tomkins Plc. 1,177,527 6,116,704
Unilever Plc. 244,700 2,400,305
United Assurance Group Plc. 307,000 3,201,981
Vodafone Group Plc. 213,085 2,953,413
Whitbread Plc. Cl. A 272,999 3,951,065
------------
67,364,839
Total Common Stocks & Other Investments
(cost $239,295,379) 282,193,404
PREFERRED STOCKS-2.5%
GERMANY-2.5%
Henkel KGaA Vorzug 42,340 3,879,382
Hornbach Holding AG 10,000 862,844
Wella AG 2,770 2,875,880
Total Preferred Stocks
(cost $5,269,492) 7,618,106
TOTAL INVESTMENTS-93.2%
(cost $244,564,871) 289,811,510
Other assets less liabilities-6.8% 21,151,513
NET ASSETS-100% $ 310,963,023
(a) Non-income producing security.
(b) Restricted and illiquid securities, valued at fair value (see Notes A & F).
Glossary:
SDR - Swedish Depositary Receipt.
See notes to financial statements.
10
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998 ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $244,564,871) $ 289,811,510
Cash, at value (cost $27,611,712) 27,571,397
Receivable for investment securities and foreign
currency sold 9,093,257
Receivable for capital stock sold 5,412,260
Dividends receivable 789,090
Total assets 332,677,514
LIABILITIES
Payable for investment securities purchased 15,374,569
Payable for capital stock redeemed 5,580,249
Advisory fee payable 245,693
Distribution fee payable 177,651
Accrued expenses and other liabilities 336,329
Total liabilities 21,714,491
NET ASSETS $ 310,963,023
COMPOSITION OF NET ASSETS
Capital stock, at par $ 146,562
Additional paid-in capital 229,766,782
Accumulated net realized gain on investments and foreign
currency transactions 35,756,904
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 45,292,775
$ 310,963,023
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($130,776,899/5,986,218 shares of capital stock
issued and outstanding) $21.85
Sales charge--4.25% of public offering price .97
Maximum offering price $22.82
CLASS B SHARES
Net asset value and offering price per share
($137,425,400/6,618,638 shares of
capital stock issued and outstanding) $20.76
CLASS C SHARES
Net asset value and offering price per share
($39,617,688/1,907,094 shares of
capital stock issued and outstanding) $20.77
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($3,143,036/144,270 shares of capital stock issued
and outstanding) $21.79
See notes to financial statements.
11
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998 ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes
withheld of $463,750) $ 4,180,528
Interest 144,127 $ 4,324,655
EXPENSES
Advisory fee 2,091,076
Distribution fee - Class A 284,858
Distribution fee - Class B 838,443
Distribution fee - Class C 224,234
Transfer agency 395,487
Custodian 251,063
Administrative 121,000
Registration 89,209
Audit and legal 79,779
Printing 47,538
Directors' fees 34,000
Miscellaneous 80,405
Total expenses 4,537,092
Less: expense offset arrangement (see Note B) (29,262)
Net expenses 4,507,830
Net investment loss (183,175)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 35,195,934
Net realized gain on foreign currency transactions 8,444,336
Net change in unrealized appreciation of:
Investments 12,375,129
Foreign currency denominated assets and liabilities (1,257,260)
Net gain on investments and foreign currency transactions 54,758,139
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 54,574,964
See notes to financial statements.
12
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1998 1997
----------- ----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (183,175) $ 162,167
Net realized gain on investments and
foreign currency transactions 43,640,270 10,848,198
Net change in unrealized appreciation
of investments and foreign currency
denominated assets and liabilities 11,117,869 24,996,705
Net increase in net assets from operations 54,574,964 36,007,070
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A -0- (576,971)
Advisor Class -0- (27,293)
Distributions in excess of net
investment income
Class A (163,447) (110,528)
Class B -0- (294,871)
Class C -0- (77,561)
Advisor Class (18,527) (44,709)
Net realized gain on investments
Class A (8,368,006) (5,185,709)
Class B (7,564,196) (3,892,291)
Class C (1,982,938) (1,023,804)
Advisor Class (421,605) (413,229)
CAPITAL STOCK TRANSACTIONS
Net increase 109,259,378 14,458,994
Total increase 145,315,623 38,819,098
NET ASSETS
Beginning of year 165,647,400 126,828,302
End of year $310,963,023 $165,647,400
See notes to financial statements.
13
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998 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 non-diversified,
open-end management investment company. The Fund offers Class A, Class B, Class
C and Advisor Class shares. Class A shares are sold with a front-end sales
charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to
purchases of $1,000,000 or more, Class A shares redeemed within one year of
purchase will be subject to a contingent deferred sales charge of 1%. Class B
shares are 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 earned or 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.
14
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. During the current fiscal year, permanent differences,
primarily due to foreign currency transactions, resulted in a increase to
distribution in excess of net investment income and a corresponding decrease in
accumulated net realized gain on investments and foreign currency denominated
assets and liabilities. This reclassification had no affect on net assets.
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 $121,000 to the Adviser representing the cost of
certain legal and accounting services provided to the Fund by the Adviser for
the year ended July 31, 1998.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $206,568 for the year ended July 31, 1998. In addition, for the
year ended July 31, 1998, the Fund's expenses were reduced by $29,262 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 $28,025 from the sale of Class A shares and $345,
$87,486 and $7,877 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class A, Class B and Class C shares,
respectively, for the year ended July 31, 1998.
Brokerage commissions paid on investment transactions for the year ended July
31, 1998, amounted to $1,113,414, of which $947 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
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
reimbursed by the Fund in the amount of $4,377,262 and $741,808 for Class B and
C shares, respectively; such costs may be recovered from the Fund in future
periods so long as the Agreement is in effect. In accordance with the
Agreement, there is no provision for recovery of unreimbursed distribution
costs, incurred by the Distributor, beyond the current fiscal year for Class A
shares. The Agreement also provides that the Adviser may use its own resources
to finance the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $273,132,782 and $195,032,903,
respectively, for the year ended July 31, 1998. There were no purchases or
sales of U.S. government and government agency obligations for the year ended
July 31, 1998.
At July 31, 1998, the cost of investments for federal income tax purposes was
$244,600,994. Accordingly, gross unrealized appreciation of investments was
$49,766,873 and gross unrealized depreciation of investments was $4,556,357,
resulting in net unrealized appreciation of $45,210,516 (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 July 31, 1998, the Fund had no outstanding forward foreign exchange currency
contracts.
16
ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
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
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
1998 1997 1998 1997
------------ ------------ -------------- --------------
CLASS A
Shares sold 13,751,811 1,303,075 $276,136,179 $ 21,713,136
Shares issued in
reinvestment of
dividends and
distributions 378,398 254,664 6,266,271 3,984,275
Shares converted
from Class B 78,824 100,299 1,524,594 1,691,373
Shares redeemed (12,445,170) (2,108,514) (249,970,416) (35,513,171)
Net increase
(decrease) 1,763,863 (450,476) $ 33,956,628 $ (8,124,387)
CLASS B
Shares sold 5,344,638 1,781,457 $104,681,961 $ 28,883,265
Shares issued in
reinvestment of
dividends and
distributions 400,667 172,848 6,334,550 2,609,985
Shares converted
to Class A (82,525) (104,138) (1,524,594) (1,691,373)
Shares redeemed (2,738,266) (941,780) (51,595,123) (15,417,285)
Net increase 2,924,514 908,387 $ 57,896,794 $ 14,384,592
CLASS C
Shares sold 1,386,110 1,141,931 $27,622,464 $18,134,537
Shares issued in
reinvestment of
dividends and
distributions 111,992 35,907 1,771,714 543,388
Shares redeemed (536,318) (893,992) (10,257,012) (14,251,265)
Net increase 961,784 283,846 $ 19,137,166 $ 4,426,660
YEAR ENDED OCT. 2, 1996(A) YEAR ENDED OCT. 2, 1996(A)
JULY 31, TO JULY 31, TO
1998 JULY 31, 1997 1998 JULY 31, 1997
------------ ------------ -------------- --------------
ADVISOR CLASS
Shares sold 592,718 572,938 $ 12,021,320 $ 9,725,312
Shares issued in
reinvestment of
dividends and
distributions 25,969 26,029 428,215 405,264
Shares redeemed (696,715) (376,669) (14,180,745) (6,358,447)
Net increase
(decrease) (78,028) 222,298 $ (1,731,210) $ 3,772,129
(a) Commencement of distribution.
17
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
NOTE F: RESTRICTED AND ILLIQUID SECURITIES
DATE
SECURITY ACQUIRED U.S. $ COST
- -------- -------- -----------
Thermo Eurotech NV 3/19/91 $512,088
Unidad Editorial, SA Ser. 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 July 31, 1998 was $1,060,822, representing 0.3% of net
assets.
NOTE G: CONCENTRATION OF RISK
The Fund has invested approximately 22% 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.
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") 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 the
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the year ended July 31, 1998.
18
FINANCIAL HIGHLIGHTS ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
MARCH 1,
1994
YEAR ENDED JULY 31, TO YEAR ENDED
-------------------------------------------------- JULY 31, FEBRUARY 28,
1998 1997 1996 1995 1994(A) 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $18.61 $15.84 $15.11 $12.66 $12.53 $9.37
INCOME FROM INVESTMENT OPERATIONS
Net investment income .05(b) .07(b) .18 .04 .09 .02(b)
Net realized and unrealized gain on
investments and foreign currency
transactions 5.28 4.20 1.02 2.50 .04 3.14
Net increase in net asset value from
operations 5.33 4.27 1.20 2.54 .13 3.16
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.15) -0- (.09) -0- -0-
Distributions in excess of net investment
income (.04) (.03) -0- -0- -0- -0-
Distributions from net realized gains on
investments and foreign currency
transactions (2.05) (1.32) (.47) -0- -0- -0-
Total dividends and distributions (2.09) (1.50) (.47) (.09) -0- -0-
Net asset value, end of period $21.85 $18.61 $15.84 $15.11 $12.66 $12.53
TOTAL RETURN
Total investment return based on net
asset value (c) 32.21% 28.78% 8.20% 20.22% 1.04% 33.73%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $130,777 $78,578 $74,026 $86,112 $86,739 $90,372
Ratio of expenses to average net assets 1.85%(d) 2.05%(d) 2.14% 2.09% 2.06%(e) 2.30%
Ratio of net investment income to
average net assets .25% .40% 1.10% .37% 1.85%(e) .17%
Portfolio turnover rate 99% 89% 69% 74% 35% 94%
</TABLE>
See footnote summary on page 22.
19
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------------
MARCH 1,
1994
YEAR ENDED JULY 31, TO YEAR ENDED
-------------------------------------------------- JULY 31, FEBRUARY 28,
1998 1997 1996 1995 1994(A) 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.87 $15.31 $14.71 $12.41 $12.32 $9.28
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.08)(b) (.04)(b) .08 (.05) .07 (.05)(b)
Net realized and unrealized gain on
investments and foreign currency
transactions 5.02 4.02 .99 2.44 .02 3.09
Net increase in net asset value from
operations 4.94 3.98 1.07 2.39 .09 3.04
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- -0- -0- (.09) -0- -0-
Distributions in excess of net investment
income -0- (.10) -0- -0- -0- -0-
Distributions from net realized gains on
investments and foreign currency
transactions (2.05) (1.32) (.47) -0- -0- -0-
Total dividends and distributions (2.05) (1.42) (.47) (.09) -0- -0-
Net asset value, end of period $20.76 $17.87 $15.31 $14.71 $12.41 $12.32
TOTAL RETURN
Total investment return based on net
asset value (c) 31.22% 27.76% 7.53% 19.42% .73% 32.76%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $137,425 $66,032 $42,662 $34,527 $31,404 $20,729
Ratio of expenses to average net assets 2.56%(d) 2.75%(d) 2.86% 2.79% 2.76%(e) 3.02%
Ratio of net investment income (loss) to
average net assets (.40)% (.23)% .59% (.33)% 1.15%(e) (.52)%
Portfolio turnover rate 99% 89% 69% 74% 35% 94%
</TABLE>
See footnote summary on page 22.
20
ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------------------
MARCH 1, MAY 3,
1994 1993(F)
YEAR ENDED JULY 31, TO TO
-------------------------------------------------- JULY 31, FEBRUARY 28,
1998 1997 1996 1995 1994(A) 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.89 $15.33 $14.72 $12.42 $12.33 $10.21
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.08)(b) (.04)(b) .08 (.07) .06 (.04)(b)
Net realized and unrealized gain on
investments and foreign currency
transactions 5.01 4.02 1.00 2.46 .03 2.16
Net increase in net asset value from
operations 4.93 3.98 1.08 2.39 .09 2.12
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- -0- -0- (.09) -0- -0-
Distributions in excess of net investment
income -0- (.10) -0- -0- -0- -0-
Distributions from net realized gains on
investments and foreign currency
transactions (2.05) (1.32) (.47) -0- -0- -0-
Total dividends and distributions (2.05) (1.42) (.47) (.09) -0- -0-
Net asset value, end of period $20.77 $17.89 $15.33 $14.72 $12.42 $12.33
TOTAL RETURN
Total investment return based on net
asset value (c) 31.13% 27.73% 7.59% 19.40% .73% 20.77%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $39,618 $16,907 $10,141 $7,802 $11,875 $10,886
Ratio of expenses to average net assets 2.56%(d) 2.74%(d) 2.87% 2.78% 2.76%(e) 3.00%(e)
Ratio of net investment income (loss) to
average net assets (.41)% (.23)% .58% (.33)% 1.15%(e) (.52)%(e)
Portfolio turnover rate 99% 89% 69% 74% 35% 94%
</TABLE>
See footnote summary on page 22.
21
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
--------------------------
OCTOBER 2,
1996(F)
YEAR ENDED TO
JULY 31, JULY 31,
1998 1997
---------- ---------
Net asset value, beginning of period $18.57 $16.25
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .08 .11
Net realized and unrealized gain on
investments and foreign currency
transactions 5.28 3.76
Net increase in net asset value from
operations 5.36 3.87
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.09)
Distribution in excess of net investment
income (.09) (.14)
Distributions from net realized gains on
investments and foreign currency
transactions (2.05) (1.32)
Total dividends and distributions (2.14) (1.55)
Net asset value, end of period $21.79 $18.57
TOTAL RETURN
Total investment return based on net
asset value (c) 32.55% 25.76%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,143 $4,130
Ratio of expenses to average net assets (d) 1.56% 1.71%(e)
Ratio of net investment income to
average net assets .39% .77%(e)
Portfolio turnover rate 99% 89%
(a) The Fund changed its 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) Ratio reflects expenses grossed up for expense offset arrangement with the
Transfer Agent. For the year ended July 31, 1998, and the July 31, 1997 net
expense ratio would have been 1.84%, 2.54%, 2.54% and 1.54%, and 2.04%, 2.74%,
2.73%, 1.71% for Class A, B, C and Advisor Class shares, respectively.
(e) Annualized.
(f) Commencement of distribution.
22
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE NEW EUROPE FUND
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE NEW EUROPE FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance New Europe Fund, Inc. (the "Fund"), including the portfolio of
investments, as of July 31, 1998, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assur-ance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance New Europe Fund, Inc. at July 31, 1998, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
indicated periods, in conformity with generally accepted accounting principles.
New York, New York
September 9, 1998
TAX INFORMATION (UNAUDITED)
_______________________________________________________________________________
In order to meet certain requirements of the Internal Revenue Code we are
advising you that $6,331,890 and $6,231,854 of the capital gain distributions
paid by the Fund during the fiscal year July 31, 1998 are subject to maximum
tax rates of 28% and 20%, respectively.
In addition, the Fund intends to make an election under Internal Revenue Code
Section 853 to pass through foreign taxes paid by the Fund to its shareholders.
The total amount of foreign taxes that may be passed through to the
shareholders for the fiscal year ended July 31, 1998 is $463,750. The gross
foreign source income for information reporting purposes is $463,750.
Shareholders should not use the above information to prepare their tax returns.
The information necessary to complete your income tax returns will be included
with your Form 1099 DIV which will be sent to you separately in January 1999.
23
<PAGE>
_______________________________________________________________
APPENDIX A
Special Risk Considerations
_______________________________________________________________
Investing in securities of European companies involves
certain considerations set forth below not usually associated
with investing in U.S. securities.
Currency Risks. Because the Fund's assets will be
invested in equity securities of European companies and fixed
income securities denominated in foreign currencies and because
the great majority of the Fund's revenues will be received in
currencies other than the U.S. dollar, the U.S. dollar equivalent
of the Fund's net assets and distributions will be adversely
affected by reductions in the value of certain foreign currencies
relative to the U.S. dollar. Such changes will also affect the
Fund's income. If the value of the foreign currencies in which
the Fund receives its income falls relative to the U.S. dollar
between receipt of the income and the making of Fund
distributions, the Fund may be required to liquidate securities
in order to make distributions if the Fund has insufficient cash
in U.S. dollars to meet distribution requirements. Similarly, if
the exchange rate declines between the time the Fund incurs
expenses in U.S. dollars and the time cash expenses are paid, the
amount of the currency required to be converted into U.S. dollars
in order to pay expenses in U.S. dollars could be greater than
the equivalent amount of such expenses in the currency at the
time they were incurred.
Many of the currencies of Eastern European countries
have experienced a steady devaluation relative to western
currencies. Any future devaluation may have a detrimental impact
on any investments made by the Fund in Eastern Europe. The
currencies of most Eastern European countries are not freely
convertible into other currencies and are not internationally
traded. The Fund will not invest its assets in non-convertible
fixed income securities denominated in currencies that are not
freely convertible into other currencies.
Investment In Securities Of Smaller Companies. Under
normal circumstances, the Fund will invest a significant portion
of its assets in the equity securities of companies whose total
market capitalization is less than the average for Europe as a
whole. Investment in smaller companies involves greater risk than
is customarily associated with the securities of more established
companies. The securities of small companies may have relatively
limited marketability and may be subject to more abrupt or
A-1
<PAGE>
erratic market movements than securities of larger companies or
broad market indices.
Market Characteristics. The securities markets of many
European countries are relatively small, with the majority of
market capitalization and trading volume concentrated in a
limited number of companies representing a small number of
industries. Consequently, the Fund's investment portfolio may
experience greater price volatility and significantly lower
liquidity than a portfolio invested in equity securities of U.S.
companies. These markets may be subject to greater influence by
adverse events generally affecting the market, and by large
investors trading significant blocks of securities, than is usual
in the United States. Securities settlements may in some
instances be subject to delays and related administrative
uncertainties.
Investment And Repatriation Restrictions. Foreign
investment in the securities markets of certain European
countries is restricted or controlled to varying degrees. These
restrictions or controls may at times limit or preclude
investment in certain securities and may increase the cost and
expenses of the Fund. As illustrations, certain countries
require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in
a particular company, or limit the investment by foreign persons
to only a specific class of securities of a company which may
have less advantageous terms than securities of the company
available for purchase by nationals. In addition, the
repatriation of both investment income and capital from certain
of the countries is controlled under regulations, including in
some cases the need for certain advance government notification
or authority. The Fund could be adversely affected by delays in,
or a refusal to grant, any required governmental approval for
repatriation.
In accordance with the 1940 Act, the Fund may invest up
to 10% of its total assets in securities of closed-end investment
companies. This restriction on investments in securities of
closed-end investment companies may limit opportunities for the
Fund to invest indirectly in certain small capital markets. If
the Fund acquires shares in closed-end investment companies,
shareholders would bear both their proportionate share of
expenses in the Fund (including management and advisory fees)
and, indirectly, the expenses of such closed-end investment
companies (including management and advisory fees). The Fund
also may seek, at its own cost, to create its own investment
entities under the laws of certain countries.
Role Of Banks In Capital Markets. In a number of
European countries, commercial banks act as securities brokers
A-2
<PAGE>
and dealers, and as underwriters, investment fund managers and
investment advisers. They also may hold equity participations,
as well as controlling interests, in industrial, commercial or
financial enterprises, including companies whose securities are
publicly traded and listed on European stock exchanges. Investors
should consider the potential conflicts of interest that result
from the combination in a single firm of commercial banking and
diversified securities activities.
The Fund is prohibited under the 1940 Act, in the
absence of an exemptive rule or other exemptive relief, from
purchasing the securities of any company that, in its most recent
fiscal year, derived more than 15% of its gross revenues from
securities-related activities.
Corporate Disclosure Standards. Issuers of securities
in European jurisdictions are not subject to the same degree of
regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation,
shareholder proxy requirements and timely disclosure of
information. The reporting, accounting and auditing standards of
European countries differ from U.S. standards in important
respects and less information is available to investors in
securities of European countries than to investors in U.S.
securities.
Transaction Costs. Brokerage commissions and
transaction costs for transaction both on and off the securities
exchanges in many European countries are generally higher than in
the United States.
U.S. and Foreign Taxes. Foreign taxes paid by the Fund
may be creditable or deductible for U.S. income tax purposes. No
assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S.
investors may not be able to credit or deduct such foreign taxes.
Investors should review carefully the information discussed under
the heading "Taxation" and should discuss with their tax advisers
the specific tax consequences of investing in the Fund.
Economic and Political Risks. The economies of
individual European countries may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross
domestic product ("GDP") or gross national product, as the case
may be, rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payments position. In addition,
securities traded in certain emerging European securities markets
may be subject to risks due to the inexperience of financial
intermediaries, the lack of modern technology, the lack of
sufficient capital base to expand business operations and the
possibility of permanent or temporary termination of trading and
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greater spreads between bid and asked prices for securities in
such markets. Business entities in many Eastern European
countries do not have any recent history of operating in a
market-oriented economy, and the ultimate impact of Eastern
European countries' attempts to move toward more market-oriented
economies is currently unclear. In addition, any change in the
leadership or policies of Eastern European countries may halt the
expansion of or reverse the liberalization of foreign investment
policies now occurring and adversely affect existing investment
opportunities.
Other Risks of Foreign Investments. The Fund's
investments could in the future be adversely affected by any
increase in taxes or by political, economic or diplomatic
developments. The Fund intends to seek investment opportunities
within the former "east bloc" countries in Eastern Europe. See
"Investment Objective and Policies" in the Prospectus. All or a
substantial portion of such investments may be considered "not
readily marketable" for purposes of the limitations set forth
below.
Most Eastern European countries have had a centrally
planned, socialist economy since shortly after World War II. The
governments of a number of Eastern European countries currently
are implementing reforms directed at political and economic
liberalization, including efforts to decentralize the economic
decision making process and move towards a market economy. There
can be no assurance that these reforms will continue or, if
continued will achieve their goals.
Investing in the securities of the former "east bloc"
Eastern European issuers involves certain considerations not
usually associated with investing in securities of issuers in
more developed capital markets such as the United States, Japan
or Western Europe, including (i) political and economic
considerations, such as greater risks of expropriation,
confiscatory taxation, nationalization and less social, political
and economic stability; (ii) the small current size of markets
for such securities and the currently low or non-existent volume
of trading, resulting in lack of liquidity and in price
volatility; (iii) certain national policies which may restrict
the Fund's investment opportunities, including, without
limitation, restrictions on investing in issuers or industries
deemed sensitive to relevant national interest; and (iv) the
absence of developed legal structures governing foreign private
investments and private property. Applicable accounting and
financial reporting standards in Eastern Europe may be
substantially different from U.S. accounting standards and, in
certain Eastern European countries, no reporting standards
currently exist. Consequently, substantially less information is
available to investors in Eastern Europe, and the information
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that is available may not be conceptually comparable to, or
prepared on the same basis as that available in more developed
capital markets, which may make it difficult to assess the
financial status of particular companies. However, in order to
become attractive to Western international investors such as the
Fund, some Eastern European companies may submit to reviews of
their financial conditions conducted in accordance with
accounting standards employed in Western European countries. The
Adviser believes that such information, together with the
application of other analytical techniques, can provide an
adequate basis on which to assess the financial viability of such
companies.
The governments of certain Eastern European countries
may require that a governmental or quasi-governmental authority
act as custodian of the Fund's assets invested in such countries.
These authorities may not be qualified to act as foreign
custodians under the 1940 Act and, as a result, the Fund would
not be able to invest in these countries in the absence of
exemptive relief from the Commission. In addition, the risk of
loss through government confiscation may be increased in such
countries.
Securities Not Readily Marketable. Although the Fund
expects to invest primarily in listed securities of established
companies, it may invest up to 10% of its total assets in
securities which are not readily marketable and which may involve
a high degree of business and financial risk that can result in
substantial losses. Because of the absence of a trading market
for these investments, the Fund may not be able to realize their
value upon sale.
Non-Diversified Status. As a non-diversified investment
company, the Fund's investments will involve greater risk than
would be the case for a similar diversified investment company
because the Fund is not limited by the 1940 Act, in the
proportion of its assets that may be invested in the securities
of a single issuer. The Fund's investment restrictions provide
that the Fund may not invest more than 15% of its total assets in
the securities of a single issuer and the Fund intends to comply
with the diversification and other requirements of the Code
applicable to regulated investment companies. The effect of
these investment restrictions will be to require the Fund, when
fully invested, to maintain investments in the securities of at
least 14 different issuers. See "Dividends, Distributions and
Taxes" in the Prospectus.
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________________________________________________________________
APPENDIX B
Futures Contracts and Options on Futures
Contracts and Foreign Currencies
________________________________________________________________
Futures Contracts
The Fund may enter into financial futures contracts,
including contracts for the purchase or sale for future delivery
of foreign currencies and futures contracts based on stock
indices. U.S. futures contracts have been designed by exchanges
which have been designated "contracts markets" by the Commodity
Futures Trading Commission ("CFTC"), and must be executed through
a futures commission merchant, or brokerage firm, which is a
member of the relevant contract market. Futures contracts trade
on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange.
At the same time a futures contract is purchased or
sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial
deposit would be approximately 1 1/2%-5% of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or
increase in the contract's value.
At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different interest
rate from that specified in the contract. In some (but not many)
cases, securities called for by a futures contract may not have
been issued when the contract was written.
Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
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contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.
The ordinary spreads between prices in the cash and
futures markets, due to differences in the nature of those
markets, are subject to distortions. First, all participants in
the futures market are subject to initial deposit and variation
margin requirements. Rather than meeting additional variation
margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the
liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of
speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the
securities market. Therefore, increased participation by
speculators in the futures market may cause temporary price
distortions. Due to the possibility of distortion, a correct
forecast of general interest rate trends by the Adviser may still
not result in a successful transaction.
In addition, futures contracts entail risks. Although
the Fund believes that use of such contracts will benefit the
Fund, if the Adviser's investment judgment is incorrect about the
general direction of a stock market index for example, the Fund's
overall performance would be poorer than if it had not entered
into any such contract. For example, if the Fund has hedged
against the possibility of a bear market in equities in a
particular country in which would adversely affect the price of
equities held in its portfolio and there is a bull market
instead, the Fund will lose part or all of the benefit of the
increased value of the equities that it has hedged because it
will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash,
it may have to sell equities from its portfolio to meet daily
variation margin requirements. Such sales may be, but will not
necessarily be, at increased prices which reflect the rising
market. The Fund may have to sell securities at a time when it
may be disadvantageous to do so.
Options On Futures Contracts
The Fund intends to purchase and write options on
futures contracts. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of
the option compared to either the price of the futures contract
upon which it is based or the price of the underlying securities,
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it may or may not be less risky than ownership of the futures
contract or underlying securities.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon exercise
of the futures contract. If the futures price at expiration of
the option is below the exercise price, the Fund will retain the
full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Fund's
portfolio holdings. The writing of a put option on a futures
contract constitutes a partial hedge against increasing prices of
the security or foreign currency which is deliverable upon
exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the
Fund will retain the full amount of the option premium which
provides a partial hedge against any increase in the price of
securities which the Fund intends to purchase. If a put or call
option the Fund has written is exercised, the Fund will incur a
loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes
in the value of its portfolio securities and changes in the value
of its futures positions, the Fund's losses from existing options
on futures may to some extent be reduced or increased by changes
in the value of portfolio securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, the Fund may
purchase a put option on a futures contract to hedge the Fund's
portfolio against the risk of a general market decline.
The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs. In addition to the correlation
risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.
Options On Foreign Currencies
The Fund may purchase and write options on foreign
currencies in a manner similar to that in which futures contracts
on foreign currencies, or forward contracts, will be utilized.
For example, a decline in the dollar value of a foreign currency
in which portfolio securities are denominated will reduce the
dollar value of such securities, even if their value in the
foreign currency remains constant. In order to protect against
such diminutions in the value of portfolio securities, the Fund
may purchase put options on the foreign currency. If the value
of the currency does decline, the Fund will have the right to
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sell such currency for a fixed amount in dollars and will thereby
offset, in whole or in part, the adverse effect on its portfolio
which otherwise would have resulted.
Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to the Fund deriving from
purchases of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Fund could sustain
losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The Fund may also write options on foreign currencies
for the same purposes. For example, where the Fund anticipates a
decline in the dollar value of foreign currency denominated
securities due to adverse fluctuations in exchange rates it
could, instead of purchasing a put option, write a call option on
the relevant currency. If the expected decline occurs, the
option will most likely not be exercised, and the diminution in
value of portfolio securities will be offset by the amount of the
premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction. If
this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at
a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund
also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements
in exchange rates.
The Fund intends to write covered call options on
foreign currencies. A call option written on a foreign currency
by the Fund is "covered" if the Fund owns the underlying foreign
currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash
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consideration (or for additional cash consideration held in a
segregated account by its Custodian) upon conversion or exchange
of other foreign currency held in its portfolio. A call option
is also covered if the Fund has a call on the same foreign
currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less
than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government Securities or
other appropriate liquid securities in a segregated account with
its Custodian.
The Fund also intends to write call options on foreign
currencies that are not covered for cross-hedging purposes. A
call option on a foreign currency is for cross-hedging purposes
if it is not covered, but is designed to provide a hedge against
a decline in the U.S. dollar value of a security which the Fund
owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the
exchange rate. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
Custodian, cash or U.S. government securities or other
appropriate liquid securities in an amount not less than the
value of the underlying foreign currency in U.S. dollars marked
to market daily.
Additional Risks of Options on Futures Contracts,
Forward Contracts and Options on Foreign Currencies
Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts
are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the SEC. To
the contrary, such instruments are traded through financial
institutions acting as market-makers, although foreign currency
options are also traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. Similarly, options
on currencies may be traded over-the-counter. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a
period of time. Although the purchaser of an option cannot lose
more than the amount of the premium plus related transaction
costs, this entire amount could be lost. Moreover, the option
writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such
positions.
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Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the SEC, as
are other securities traded on such exchanges. As a result, many
of the protections provided to traders on organized exchanges
will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on
a national securities exchange are cleared and guaranteed by the
Options Clearing Corporation ("OCC"), thereby reducing the risk
of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market,
potentially permitting the Fund to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the
event of adverse market movements.
The purchase and sale of exchange-traded foreign
currency options, however, is subject to the risks of the
availability of a liquid secondary market described above, as
well as the risks regarding adverse market movements, margining
of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects
of other political and economic events. In addition, exchange-
traded options on foreign currencies involve certain risks not
presented by the over-the-counter market. For example, exercise
and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency
option exercises, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies
may be traded on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other
complex foreign political and economic factors, (ii) lesser
availability than in the United States of data, on which to make
trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during non business
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
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________________________________________________________________
APPENDIX C: ADDITIONAL INFORMATION ABOUT THE UNITED KINGDOM
_______________________________________________________________
The information in this section is based on material
obtained by the Fund from various United Kingdom government and
other sources believed to be accurate but has not been
independently verified by the Fund or the Adviser. It is not
intended to be a complete description of The United Kingdom, its
economy or the consequences of investing in United Kingdom
securities.
The United Kingdom of Great Britain and Northern Ireland
is located off the continent of Europe in the Atlantic Ocean.
Its population is approximately 58 million.
GOVERNMENT
The United Kingdom is a constitutional monarchy. Queen
Elizabeth II has been the head of state since she acceded to the
throne in 1952. The monarchy was established in 1066. The
monarch's power has eroded over the centuries, but the monarch
retains the power to call and dissolve Parliament, to give assent
to bills passed by Parliament, to appoint the Prime Minister and
to sign treaties or declare war. In practice, most of these acts
are performed by government ministers, and supreme legislative
authority now resides in the Parliament. Parliament, the
bicameral legislature, consists of the House of Commons and the
House of Lords. Acts of Parliament passed in 1911 and 1949 limit
the powers of the House of Lords to prevent bills passed by the
House of Commons from becoming law. The main purpose of the
House of Lords is now to revise and amend laws passed by the
House of Commons. The national government is headed by the Prime
Minister who is appointed by the monarch on the basis of ability
to form a government with the support of the House of Commons.
POLITICS
Since World War II the national government has been
formed by either the Conservative Party or the Labour Party. The
Conservative Party under the leadership of Margaret Thatcher
achieved a parliamentary majority and formed a new government in
May 1979. In June 1983 and again in June 1987, the Conservative
Party under her leadership was reelected. The Party pursued
policies of reducing state intervention in the economy, reducing
taxes, de-regulating business and industry and privatizing state-
owned enterprises. It also displayed an antipathy toward the
European Union. In November 1990, Mrs. Thatcher faced a
challenge for the leadership of the party from Michael Heseltine,
one of her former cabinet ministers. The opposition proposed
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changes in policy, including increased government intervention in
the economy and a less confrontational approach toward the
European Union. The two wings of the Conservative Party looked
for someone who could unite the Party and elected John Major as
its leader and, by virtue of the Conservative Party majority, to
the post of Prime Minister.
Mr. Major led the Conservative Party to its fourth
successive general election victory in April 1992, after which
time, the popularity of both Mr. Major and the Conservative Party
declined. In April 1995, the Conservative Party won only 11% of
the vote in Scotland local elections, which resulted in
Conservative Party control of only 81 council seats out of 1,161.
It won only 25% of the vote in local council elections in England
and Wales in May 1995. In July 1995, Mr. Major won a vote of
confidence with his reelection as leader of the Conservative
Party. Despite Mr. Major's strengthened position within the
Conservative Party, the Party continued to suffer setbacks.
Within two weeks of Mr. Major's victory, the Conservative Party
lost its fifth by-election since the general election of 1992.
By 1996, his overall majority was reduced to one. In the next
general election, on May 1, 1997, Mr. Major and the Conservative
Party were defeated by the Labour Party led by Tony Blair, who
subsequently was appointed Prime Minister. The Labour Party now
holds 418 of the 659 seats in the House of Commons. The next
general election is required by law to occur no later than May
2002.
ECONOMY
The United Kingdom's economy is the fifth largest in the
Organization for Economic Cooperation and Development, behind the
United States, Japan, Germany and France. Its economy maintained
an average annual growth rate of 3.0% in real growth domestic
product ("GDP") terms from 1950 through 1973; from 1973 through
1981 growth slowed to an annual average of 0.7%; from 1982
through 1988 annual growth recovered to 3.6%; and from 1989
through 1993, the United Kingdom's real GDP annual growth rate
was 1.0%. The economy has continued to experience the moderate
growth that began in 1993, after the 1990-1992 recession, with
real GDP having grown by 4.3% in 1994, 2.7% in 1995, 2.2% in
1996, and 3.4% in 1997 and 2.5% in 1998. The government has
forecast a GDP growth rate of 1.0% to 1.5% for 1999.
The United Kingdoms economy experienced a significant
level of inflation in the 1980s and early 1990s. Since then,
inflation has moderated, averaging 2.8% (as measured by the RPIX,
which excludes mortgage interest payments) from 1993 to 1997.
The inflation rate during 1998 and 1999 is expected to meet the
governments target rate of 2.5%.
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The sluggish growth in the United Kingdom's
manufacturing sector since the 1990-1992 recession continued the
trend toward the decreased importance of manufacturing in the
economy. Manufacturing accounted for just 21.8% of GDP in 1995
compared with 36.5% in 1960. The long-term decline in
manufacturing's share of GDP accelerated during the 1980-1981
recession. In those two years, manufacturing output and
employment each fell by approximately 14%. The United Kingdom's
traditional manufacturing industries of steel, shipbuilding and
textiles have not remained competitive in the international
marketplace. Since 1983, the United Kingdom has been a net
importer of manufactured goods for the first time since the
industrial revolution.
As the United Kingdom's manufacturing industry has
declined in importance, the service industry, including financial
services, has increased in importance. The service industries'
share of GDP has increased to almost two-thirds from 45% in 1960.
Employment has been shifting from manufacturing to the
service industry, a trend expected to continue for the
foreseeable future. Despite this development and the fact that
between the fourth quarter of 1988 and the fourth quarter of 1993
more than 900,000 manufacturing jobs were lost, until 1995 the
manufacturing sector remained the biggest single source of jobs.
By 1995, however, the manufacturing sector, while still
accounting for 8% of jobs, was no longer the biggest single
source. Overall, unemployment has continued to fall from a post-
recession high of 10.6% in January 1993 to 4.86% in December
1998.
Foreign trade remains an important part of the United
Kingdom's economy. In 1997, exports of goods represented 31.2%
of GDP. The United Kingdom has historically been an exporter of
manufactured products and an importer of food and raw materials,
but there is a growing trend toward manufactured goods forming a
larger proportion of imports. Machinery and transport equipment
accounted for 41.0% of imports in the first five months of 1998
compared to 20.4% in 1975 and for 51.6% of exports in the first
five months of 1998 compared to 42.3% in 1975. For every year
since 1982, the United Kingdom has been a net importer of goods.
The relative importance of the United Kingdom's trading partners
has also shifted. In 1997, the other members of the European
Union accounted for 55.3% of all exports and 53.2% of its
imports, as compared to 43.3% and 41.3%, respectively, in 1980.
In 1997, the United Kingdoms largest trading partners with
respect to imports and exports were the United States and
Germany, respectively.
Historically, the United Kingdom's current account
consisted of relatively small trade deficits, sometimes
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outweighed by surpluses on invisibles (services, interest,
dividends, profits and transfers). Since 1980, several important
changes have taken place with regard to the United Kingdom's
trading position. Those include the increased importance to the
economy of oil exports from the North Sea, the change from being
a net exporter to a net importer of goods and the diminishing
surpluses from invisibles. These developments led to a balance
of payments deficit, which continued through 1996. The balance
of payments moved into surplus in 1997 for the first time in over
a decade, then returned to a deficit in the first quarter of
1998, but moved again into surplus in the second quarter of 1998.
With regard to the public sector of the economy, the
national government publishes forecasts for the economy and the
public sector net cash requirement (PSNCR), previously known as
the public sector borrowing requirement ("PSBR"). The PSNCR is a
mandated measure of the amount of borrowing required to balance
the national government's budget. Figures for the fiscal year
ended March 31, 1998, show a PSNCR equal to 0.2% of GDP (or a
general government financial deficit of 0.8%). As a result, the
general government budget balance for the 1997/1998 fiscal year
was well below the permitted level for countries scheduled to
participate in the Economic and Monetary Union ("EMU") beginning
in January 1999. Although the United Kingdom meets the EMUs
eligibility criteria, the government has announced that it would
not take any action before a referendum is held after the next
general election. In January 1999, the government submitted a
report to the European Commission detailing the steps to be taken
the government is taking to prepare the United Kingdom for
possibly joining the EMU at a later date.
MONETARY AND BANKING SYSTEM
The central bank of the United Kingdom is the Bank of
England. Its main functions are to advise on the formulation and
execution of monetary policy, to supervise banking operations in
the United Kingdom, to manage the domestic currency, and, as
agent for the Government, the country's foreign exchange
reserves. Additionally, shortly after taking office in 1997,
Prime Minister Blair vested responsibility for setting interest
rates in a new Monetary Policy Committee headed by the Bank of
England, as opposed to the Treasury.
The City of London is one of the world's major financial
centers. It has the greatest concentration of banks and the
largest insurance market in the world. It is estimated that
United Kingdom insurers handle approximately 20% of the general
insurance business placed in the international market. Financial
services currently form approximately 20% of the country's GDP.
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The currency unit of the United Kingdom is the Pound
Sterling. In June 1972, the Pound was allowed to float against
other currencies. The general trend since then has been a
depreciation against most major currencies, including the U.S.
Dollar, Japanese Yen, German Deutsche Mark ("DM"), French Franc
and the European Currency Unit. On October 8, 1990, Pound
Sterling became part of the Exchange Rate Mechanism ("ERM") of
the European Monetary System at a central rate of L1:DM2.95.
Membership in the ERM requires that each currency remain within a
certain fluctuation range against other currencies. If this
range is not maintained, the currency must be revalued.
Initially, the Pound remained competitive within the DM range of
2.80 to 2.98, but the pressures exerted by ERM membership made it
increasingly difficult for the United Kingdom to allow the Pound
to remain in the ERM. While the government continued to defend
the relative value of the Pound by raising interest rates, it
became clear that the Pound was not competitive against the
Deutsche Mark. On September 16, 1992, the Pound's membership in
the ERM was suspended. The value of the Pound continued to fall
rapidly after the exit from the ERM, reaching a low of DM2.335 at
the end of February 1993. It has since recovered against the
Deutsche Mark and other currencies. In addition to the United
Kingdom's former membership in the ERM, the growing importance of
trade with the European Union has made the Deutsche Mark exchange
rate more important to the United Kingdom than the U.S. Dollar
exchange rate. From 1988 through 1993, the Pound declined at an
average annual rate of approximately 15% against the U.S. Dollar
and approximately 20% against the Deutsche Mark. Since 1993, the
exchange rate between the Pound and the U.S. Dollar has remained
fairly constant, while the exchange rate between the Pound and
the Deutsche Mark has risen significantly, by over 35% between
January 1996 and July 1997. In 1996, the average annual exchange
rates of the Pound against the U.S. Dollar and the Deutsche Mark
were $1.59 and DM2.41, respectively. In 1997, the average
exchange rates of the Pound against the U.S. Dollar and the
Deutsche Mark were $1.64 and DM2.84, respectively. In 1998, the
average exchange rates of the Pound against the U.S. Dollar and
the Deutsche Mark were $1.7066 and DM2.91, respectively.
THE LONDON STOCK EXCHANGE
The London Stock Exchange ("LSE") is both the national
stock exchange for the United Kingdom and the world's leading
marketplace for the trading of international equities. The LSE
provides a secondary market for trading in more than 10,000
securities. It offers markets for domestic securities
(securities issued by companies in the United Kingdom or
Ireland), foreign equities, United Kingdom gilts (securities
issued by the national government), bonds or fixed interest
stocks (usually issued by companies or local authorities) and
options. At the end of 1997, foreign equities constituted
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approximately 59% and United Kingdom equities constituted
approximately 41% of the market value of all LSE listed and
quoted equity securities. Currently, the LSE is the world's
second largest in terms of market value, the New York Stock
Exchange being the largest.
The LSE developed as demand for capital increased with
the advent of the industrial revolution. By 1965, regional
exchanges had banded together to form the Federation of Stock
Exchanges. In 1973, the Irish Stock Exchange based in Dublin and
the London Stock Exchange merged, thereby creating a unified
exchange. On December 8, 1995, pursuant to a European Union
directive requiring its members to regulate stock exchanges in
their own countries, the Dublin Stock Exchange separated from the
LSE and became independent.
The LSE comprises different markets. In addition to the
market for officially-listed securities, the LSE includes a
market created in 1995 for smaller and newer companies known as
AIM. As of December 31, 1997, 308 companies with an aggregate
market value of 5.7 billion Pounds were traded on AIM. As of
December 31, 1997, the market value of the securities traded on
AIM was less than 1% of the market value of the securities
officially listed on the LSE.
In 1979, the abolition of foreign exchange controls made
it easier for United Kingdom savings institutions to invest money
overseas in non-United Kingdom securities. As a result, the
LSE's members were exposed for the first time to competition from
overseas brokers. The international competition and government
pressure led the LSE to institute major reforms. Deregulation of
the LSE, culminating on October 27, 1986 in what is commonly
referred to as "Big Bang", involved the introduction of
negotiated commissions on securities transactions, the
elimination of the system that had maintained a distinction
between brokers and marketmakers, ownership of member firms by
outside entities and the transfer of voting rights from
individual members to member firms.
The LSE runs markets for trading securities by providing
a market structure, regulating the operation of the markets,
supervising the conduct of member firms dealing in the markets,
publishing company news and providing trade confirmation and
settlement services. The domestic market is based on the
competing marketmaker system. The bid and offer prices are
distributed digitally via the Exchange's automated price
information system, SEAQ (Stock Exchange Automated Quotations),
which provides widespread dissemination of the securities prices
for the United Kingdom equity market. Throughout the trading
day, marketmakers display their bid (buying) and offer (selling)
prices and the maximum transaction size to which these prices
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relate. These prices are firm to other LSE member firms, except
that the prices for larger transactions are negotiable.
Marketmakers in the international equity market display
their quotes on SEAQ International. The system operates in a
manner similar to the domestic SEAQ, but is divided into 40
separate country sectors, of which 15 are developing markets
sectors.
On October 20, 1997 the LSE launched the new Stock
Exchange Electronic Trading Service, an initiative that will
improve efficiency and lower share trading costs, and is expected
to attract more volume and thus increase liquidity.
On July 7, 1998 the LSE and its German counterpart, the
Deutsche Borse, unexpectedly announced their intention to form a
strategic alliance under which members of one exchange will be
members of the other. While the first phase of the proposed
alliance began in January 1999, the LSE and the Deutsche Borse
still must address numerous issues, including agreement on common
regulations and promulgation by their respective governments of a
common tax regime for share trading.
Sector Analysis of the LSE. The LSE's domestic and
foreign securities include a broad cross-section of companies
involved in many different industries. In 1997, the five largest
industry sectors by turnover among domestic securities were
banking with 15.2% of the aggregate market value of domestic
market securities, pharmaceuticals with 8.7%, oil with 7.5%,
telecommunications with 5.4% and retailing with 5.1%. In 1997,
the five largest country sectors by market value among listed and
SEAQ International quoted securities were France with 15.4% of
the aggregate market value of listed and SEAQ International
quoted securities, Germany with 11.8%, Japan with 11.2%,
Switzerland with 10.0% and The Netherlands with 9.3%.
Market Growth of the LSE. LSE market value and the
trading volume have increased dramatically since the end of 1990.
In 1997, 280.3 billion domestic shares and 297.1 billion foreign
shares were traded as compared with 155.4 billion and 34.8
billion, respectively in 1991. At the end of 1997, the market
value of listed domestic companies and foreign companies
increased to 1,251.4 billion Pounds and 2,429.1 billion Pounds
from 450.5 billion Pounds and 1,124.1 billion Pounds,
respectively, at the end of 1990.
Market Performance of the LSE. The FT-SE 100 is an
index that consists of the 100 largest United Kingdom companies.
The FT-SE 100 was introduced by the LSE in cooperation with The
Financial Times and the Institute and Faculty of Actuaries in
1984. As measured by the FT-SE 100, the performance of the 100
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largest companies reached a record high of 6179.0 on July 20,
1998. At the end of 1998, the FT-SE 100 closed at 5882.6.
REGULATION OF THE UNITED KINGDOM FINANCIAL SERVICES INDUSTRY
The principal securities law in the United Kingdom is
the Financial Services Act. The Financial Services Act, which
became law in November 1986, established a new regulatory system
for the conduct of investment businesses in the United Kingdom.
Most of the statutory powers under the Act were transferred to
the Securities and Investments Board ("SIB"), a designated agency
created for this purpose. The SIB was given wide-ranging
enforcement powers and was made accountable to Parliament through
the Treasury. A system of self regulating organizations
("SROs"), which regulate their members, was made accountable to
the SIB. There are three SROs covering the financial market,
including the Securities and Futures Authority which is
responsible for overseeing activities on the Exchange. The other
SROs are the Investment Management Regulatory Organization and
the Personal Investment Authority. In 1988, it became illegal for
any firm to conduct business without authorization from the SRO
responsible for overseeing its activities. In addition,
Recognized Investment Exchanges ("RIEs"), which include the
London Stock Exchange of London, the London International
Financial Futures and Options Exchange, the London Commodities
Exchange, the International Petroleum Exchange of London, the
London Metal Exchange and the London Securities and Derivatives
Exchange were made accountable to the SIB. Recognition as an
RIE exempts the exchange (but not its members) from obtaining
authorization for actions taken in its capacity as an RIE. To
become an RIE, an exchange must satisfy the SIB that it meets
various prerequisites set out in the Act, including having
effective arrangements for monitoring and enforcing compliance
with its rules. Recognized Professional Bodies ("RPBs")
supervise the conduct of lawyers, actuaries, accountants and some
insurance brokers. Together the SROs, RIEs and RPBs provide the
framework for protection for investors and integrity of the
markets.
On May 20, 1997 the newly installed Labour government
announced a proposed major restructuring of the regulation and
supervision of the financial services industry in the United
Kingdom. The main feature of the restructuring plan is to
transfer regulatory authority over banks from the Bank of England
to an expanded SIB, which has been named the Financial Services
Authority (FSA). In addition, the plan calls for the merger of
the three SROs into the FSA. The transfer of banking supervision
from the Bank of England to the FSA was formally implemented on
June 1, 1998. The consolidation of the SROs into the FSA, which
is more complex and more controversial, will not be implemented
before the end of 1999.
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The European Union's Investment Services Directive
("ISD") will, with the various banking directives, provide the
framework for a single market in financial services in Europe.
Authorized firms will be able to operate on the basis of one
authorization throughout Europe. Member states were given until
January 1, 1996 to implement the ISD. As of October 1998, all
member states, including the United Kingdom, had implemented the
ISD, with the exception of Luxembourg, which is in the process of
doing so.
Basic restrictions on insider dealing in securities are
contained in the Company Securities Act of 1985. The Financial
Services Act provides guidelines for investigations into insider
dealing under the Criminal Justice Act of 1993 and penalties for
any person who fails to cooperate with such an investigation. In
addition, the Financial Services Act introduced new listing and
disclosure requirements for companies.
UNITED KINGDOM FOREIGN EXCHANGE AND INVESTMENT CONTROLS
The United Kingdom has no exchange or investment
controls, and funds and capital may be moved freely in and out of
the country. Exchange controls were abolished in 1979. As a
member of the European Union, the United Kingdom applies the
European Union's common external tariff.
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____________________________________________________________
APPENDIX D:
CERTAIN EMPLOYEE BENEFIT PLANS
____________________________________________________________
Employee benefit plans described below which are
intended to be tax-qualified under section 401(a) of the Internal
Revenue Code of 1986, as amended ("Tax Qualified Plans"), for
which Merrill Lynch, Pierce, Fenner & Smith Incorporated or an
affiliate thereof ("Merrill Lynch") is recordkeeper (or with
respect to which recordkeeping services are provided pursuant to
certain arrangements as described in paragraph (ii) below)
("Merrill Lynch Plans") are subject to specific requirements as
to the Fund shares which they may purchase. Notwithstanding
anything to the contrary contained elsewhere in this Statement of
Additional Information, the following Merrill Lynch Plans are not
eligible to purchase Class A shares and are eligible to purchase
Class B shares of the Fund at net asset value without being
subject to a contingent deferred sales charge:
(i) Plans for which Merrill Lynch is the recordkeeper on a
daily valuation basis, if when the plan is established
as an active plan on Merrill Lynch's recordkeeping
system:
(a) the plan is one which is not already
investing in shares of mutual funds or
interests in other commingled investment
vehicles of which Merrill Lynch Asset
Management, L.P. is investment adviser or
manager ("MLAM Funds"), and either (A) the
aggregate assets of the plan are less than
$3 million or (B) the total of the sum of
(x) the employees eligible to participate in
the plan and (y) those persons, not
including any such employees, for whom a
plan account having a balance therein is
maintained, is less than 500, each of
(A) and (B) to be determined by Merrill
Lynch in the normal course prior to the date
the plan is established as an active plan on
Merrill Lynch's recordkeeping system (an
"Active Plan"); or
(b) the plan is one which is already investing
in shares of or interests in MLAM Funds and
the assets of the plan have an aggregate
value of less than $5 million, as determined
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by Merrill Lynch as of the date the plan
becomes an Active Plan.
For purposes of applying (a) and (b), there
are to be aggregated all assets of any Tax-
Qualified Plan maintained by the sponsor of
the Merrill Lynch Plan (or any of the
sponsor's affiliates) (determined to be such
by Merrill Lynch) which are being invested
in shares of or interests in MLAM Funds,
Alliance Mutual Funds or other mutual funds
made available pursuant to an agreement
between Merrill Lynch and the principal
underwriter thereof (or one of its
affiliates) and which are being held in a
Merrill Lynch account.
(ii) Plans for which the recordkeeper is not Merrill Lynch,
but which are recordkept on a daily valuation basis by
a recordkeeper with which Merrill Lynch has a
subcontracting or other alliance arrangement for the
performance of recordkeeping services, if the plan is
determined by Merrill Lynch to be so eligible and the
assets of the plan are less than $3 million.
Class B shares of the Fund held by any of the above-
described Merrill Lynch Plans are to be replaced at Merrill
Lynch's direction through conversion, exchange or otherwise by
Class A shares of the Fund on the earlier of the date that the
value of the plan's aggregate assets first equals or exceeds $5
million or the date on which any Class B share of the Fund held
by the plan would convert to a Class A share of the Fund as
described under "Purchase of Shares" and "Redemption and
Repurchase of Shares."
Any Tax Qualified Plan, including any Merrill Lynch
Plan, which does not purchase Class B shares of the Fund without
being subject to a contingent deferred sales charge under the
above criteria is eligible to purchase Class B shares subject to
a contingent deferred sales charge as well as other classes of
shares of the Fund as set forth above under "Purchase of Shares"
and "Redemption and Repurchase of Shares."
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