EUROPEAN LARGE CAP
[GRAPHIC OMITTED]
Alliance New
Europe Fund
Semi-Annual Report
January 31, 2000 (unaudited)
Alliance Capital [LOGO]
The Investment Professional's Choice
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Investment Products Offered
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o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
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LETTER TO SHAREHOLDERS
LETTER TO SHAREHOLDERS
March 21, 2000
Dear Shareholder:
We are pleased to report to you on the performance, investment strategy and
outlook of the Alliance New Europe Fund (the "Fund") for the semi-annual
reporting period ended January 31, 2000.
Investment Results
The following table provides information on Alliance New Europe Fund's
performance and, for comparison, that of relevant benchmarks for the six- and
12-month periods ended January 31, 2000. The Fund handsomely outperformed the
Morgan Stanley Capital International ("MSCI") Europe Index for both the six- and
12-month periods ended January 31, 2000. The Fund's performance slightly
underperformed its peer group, as represented by the Lipper European Region
Funds Average (the "Lipper Average"), for the six- and 12-month periods under
review.
Our bottom-up stock selection process, as always, has influenced performance.
Our process seeks to identify companies offering the best available combination
of fundamental growth and valuation based on internally generated research
provided by our nine industry-oriented European analysts located in London.
Stock selection was the major determinant of relative returns during the six-
and 12-month periods ended January 31, 2000. Country allocation and currency
management added modestly to the Fund's relative returns. The universal driver
of the Fund's performance was the strong showing by holdings in the technology,
telecommunications, and media industries. Several of the Fund's large positions
showed stellar returns for the six months ended January 31, 2000, with
investments in Mannesmann AG, Nokia Corp., ST Microelectronics NV, British Sky
Broadcasting Group Plc, and UPC United Pan-Europe Communications NV more than
doubling in price over this period. In contrast, the Fund's investments in the
financial services, health care, and consumer staples areas showed broad
weakness.
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INVESTMENT RESULTS*
Periods Ended January 31, 2000
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Total Returns
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6 Months 12 Months
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Alliance New
Europe Fund
Class A 19.06% 17.73%
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Class B 18.67% 16.93%
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Class C 18.66% 16.91%
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MSCI Europe
Index 9.44% 8.65%
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Lipper European
Region Funds
Average 19.92% 18.58%
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* The Fund's investment results represent total returns and are based on
the net asset value as of January 31, 2000. All fees and expenses related
to the operation of the Fund have been deducted, but no adjustment has
been made for sales charges that may apply when shares are purchased or
redeemed. Returns for the Fund include the reinvestment of any
distributions paid during the period. Total returns for Advisor Class
shares will differ due to different expenses associated with that class.
Past performance is no guarantee of future results.
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ALLIANCE NEW EUROPE FUND o 1
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LETTER TO SHAREHOLDERS
The MSCI Europe Index is a market-capitalization weighted index of over
550 stocks traded in 15 European markets. The Lipper European Region Funds
Average represents funds that invest in equity securities whose primary
trading markets or operations are concentrated in the European region or
in a single country within this region. These funds have generally similar
investment objectives to your Fund, although investment policies for the
various funds may differ. The Lipper Average, for the six- and 12-month
periods ended January 31, 2000, reflects performance of 157 and 146 mutual
funds, respectively. An investor cannot invest directly in an index or an
average.
Additional investment results appear on pages 7-11.
Market Review
European equities, led by the technology, telecommunications, and media
industries, rose to all-time highs in the six-month period ended January 31,
2000. All of the gains for the six- and 12-month periods came in the calendar
fourth quarter of 1999 when European equities, as measured by the MSCI Europe
Index, gained 17.3%. The euro finished the six- and 12-month periods down near
its lows against the U.S. dollar and the Japanese yen, despite signs that
economic conditions in Europe were improving vis-a-vis those in the U.S. and
Japan.
Returns by country essentially varied based on sector exposure. Indices in
countries with heavy technology representation rose sharply (e.g. Finland),
while those with little or no technology, telecommunications, and media
representation (e.g. Switzerland) did relatively poorly when measured in local
currency terms. In our view, the ubiquitous belief in future growth prospects
for technology companies and telecommunication-related enterprises led equity
investors to buy these stocks in an almost indiscriminate manner, and funding
these investments were sales of stocks in interest-rate sensitive sectors.
Financial stocks remained under pressure despite strong underlying profit
growth. Defensive stocks saw weak inflows in light of further evidence of a
strengthening global economy, but such signs of strength continued to bolster
the performance of cyclical stocks in commodity and industrial industries.
By style, growth-at-a-reasonable-price and pure value investors were universally
trounced during the six-month period ended January 31, 2000, as
momentum-oriented strategies dominated. Our work on these style factors shows
evidence of an exaggerated appetite amongst investors for price-driven
strategies, with secondary importance attached to sustainable long-term growth.
Interestingly, the emphasis on near-term earnings revisions has diminished in
terms of being a catalyst for relative performance. By their actions, the
majority of investors have clearly accepted the investment case for benign
inflation, benign interest rates, and sustainable and robust demand for
"new-era" products and applications.
Investment Strategy
Having found a broader set of technology companies that interested us during the
period, we widened the Fund's
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2 o ALLIANCE NEW EUROPE FUND
<PAGE>
LETTER TO SHAREHOLDERS
holdings in this group to include web-agency company Pixelpark AG, the
consulting firm Transiciel SA, knowledge software vendor Autonomy Corp. Plc, and
technology/industrial conglomerates Siemens AG and Philips Electronics NV.
In the services sector, we added Royal Caribbean Cruises Ltd., the second
largest cruise ship operator in the world. We also made Securitas AB of Sweden a
large holding in the Fund in the belief that the company's well established and
implemented model of organic and acquisition-led growth in the security services
field is second to none on a global basis. Cyclical exposure in the Fund was
also increased with additions of Akzo Nobel NV and Rhodia SA so as to take
advantage of the leverage to earnings provided by the combination of
restructuring and accelerating economic growth.
Cash for the purchases noted above was procured from reductions and/or sales in
holdings in the health care sector, the elimination of investments in consumer
cyclicals, and taking profits in some names that rose sharply.
Economic Outlook
We believe investment success requires the correct marriage of fundamentals and
price. Most often we think of fundamentals as including both macro- and
micro-economic, or company-specific sets of information. Price is set daily in
the marketplace based on the interaction of buyers and sellers whose views are
presumably based on expectations for fundamentals. As we enter the year, it is
worthwhile to once again review fundamentals and prices to assess where risk and
reward lie in the markets at the present time.
From an economic perspective, conditions in the global economy are completely
different today than what they were a year ago. One year ago, interest rates
were at all-time lows, central banks were easing, inflation looked benign,
commodity prices were subdued, Y2K problems were anticipated, and growth
expectations were being reduced. As it turned out, all of the above surprised on
the upside with the exception of inflation, which remains benign, and Y2K, which
turned out to be a non-event. As we enter 2000, central banks are generally in a
tightening mode, interest rates and growth expectations are rising, commodity
prices remain firm, and small signs of pipe line inflationary pressures are
evident. Economic growth is improving at a faster pace than increases in input
costs, thus allowing a general rise in productivity. Further gains in
productivity are expected in 2000, particularly from recovering economies
overseas.
While the strength of the global economy is encouraging, there are key
imbalances, which, if become of material concern, could cause investors to
reassess the low risk premium they have placed on equities. First, central banks
have flooded the global economy with liquidity because of Y2K concerns, and now
that Y2K fears have been shown to be generally unfounded, this liquidity is set
to unwind. In the near-term, this presents a challenge to global equities
overall as the speculative energy to fuel further rapid increases is reduced.
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ALLIANCE NEW EUROPE FUND o 3
<PAGE>
LETTER TO SHAREHOLDERS
Second, the U.S. economy is running out of private sector capital and the
workers needed to support its robust pace of economic expansion. To attract
capital, we believe that the return on capital has to rise--either in the form
of higher interest rates, or higher equity prices. Given economic conditions in
the U.S., we believe that the odds favor a further increase in interest rates.
If this is the case, the hurdle rate for returns will go up and, with valuations
at somewhat precarious levels, equities will be materially challenged to earn a
high rate of return for investors. Concomitant with this structural adjustment
must come a shrinking of the current account balance and a rise in the savings
ratio. With regard to the shortage of workers so often an issue in the U.S., no
matter what the economic data says, this shortage is leading to wage increases
in excess of inflation. In our view, there is just too much anecdotal evidence
available in all types of industries to refute such a suggestion. In summary, we
believe that the imbalances in the U.S. economy pose fundamental risks to both
economic growth and equity markets overseas.
In contrast to the U.S., economic conditions in Europe look healthier. The
credit cycle is less mature, savings balances are positive, productivity has
just begun to rise, and participation in local equities is starting to rise from
low levels. Thus, at least from a macro-economic perspective, we see better
risk/reward opportunities in Europe and a continuation of this year's trend of
non-U.S. equities outperforming U.S. equities.
Investment Outlook
Allied to the robust economic backdrop has been a general upward drift to
earnings estimates throughout the year, with technology and basic industry
stocks receiving the heaviest upgrades of any industries. These upgrades have
overcome the valuation pressure applied by rising interest for this group as
evidenced by relative outperformance of these stocks. Today it would be fair to
say that investor expectations for strong and sustained profit growth are high,
particularly in all areas of the "new economy" such as technology,
telecommunications, and media and the Internet. Valuations assigned to these
expectations, especially when viewed against the non-technology,
telecommunications, and media segment of the market, are indeed extreme. What we
can say, at least based on our empirical work in the technology area, is that
valuations do not matter so long as earnings rise above expectations. The
question looking forward, therefore, is whether or not reality can live up to
expectations embodied in today's share prices.
Demand drivers for companies operating in the technology, telecommunications,
and media areas remain strong at both the corporate and consumer level. We see
no reason for these demand trends to wane unless a major technology error
occurs. Thus, we still see room for earnings to surprise on the upside because
of the healthy state of demand, particularly for those companies with leading
edge positions and focused management. As the history of technology investing
has shown, very few companies are able to achieve, let alone exceed, market
expectations on an
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4 o ALLIANCE NEW EUROPE FUND
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LETTER TO SHAREHOLDERS
ongoing basis. Thus, we fear that too much money has chased the "new economy"
theme without regard to company-specific fundamentals. Companies operating in
the Internet arena feature prominently in this regard, and we expect that
sometime in 2000 this group will again undergo a major correction that will
likely be driven by a combination of disappointing profit growth and fears over
the convergence between brick-and-mortar companies and their Internet-only
counterparts. Semiconductor and communication stocks look best placed to exceed
expectations given demand trends, and accordingly the Fund is overweight in
these areas. We also continue to like the outlook for content providers and
cable operators.
While technology has a high hurdle rate to clear in terms of expected growth in
2000 vis-a-vis a 1999 earnings base, the same can be said for many other
industries as well. The only possible exception are basic industries, which are
still recovering from low profit levels achieved in early 1999. But unlike
technology, many well managed and growing (10% to 15%+ sustainable growth)
companies have seen their stocks sold off in the past few months in response to
fears over rising interest rates or modest variations in earnings expectations.
For many of these companies, we believe the long-term trends are intact and that
companies are selling at a discount to what we believe to be their intrinsic
value.
Should the technology sector undergo a material correction, we would expect the
Fund's holdings in those non-technology, telecommunications, and media stocks,
which have sold off more than their fundamentals would suggest, to hold up.
However, until such time as economic conditions change materially, either in
terms of the outlook for interest rates or global growth, we do not expect the
market to rotate significantly from its current leadership unless, of course,
earnings falter for the recent market leaders. Thus, the Fund remains overweight
in technology and consumer services companies. It also remains overweight in
financials, and we see good value in European banks on the back of visible
growth associated with an acceleration in economic activity. Capital goods,
basic industry and energy remain select areas for choice while health care and
consumer staples remain at or below benchmark weight.
A combination of issues surrounding interest rates, earnings expectations, and
bifurcated valuations make the current investment environment as tricky as ever.
In our opinion, while there is much to be constructive about, there are also
great risks lurking about, some of which are not being priced properly in the
market. We expect technology to continue to lead within the market until
expectations exceed underlying trends. Rising interest rates and uncertainty
regarding the magnitude of their increase will pressure equities in the
near-term, but relief may come when economic growth moderates later in the year.
After five consecutive years of double-digit returns, expectations should be
tempered. As such, we are guardedly optimistic that 2000 could be another good,
albeit unspectacular, year for equities.
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ALLIANCE NEW EUROPE FUND o 5
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LETTER TO SHAREHOLDERS
[PHOTO OMITTED]
John D. Carifa
[PHOTO OMITTED]
Stephen Beinhacker
Portfolio Manager, Stephen Beinhacker, is Senior Portfolio Manager in the
Global/International Group. Mr. Beinhacker has over 14 years of investment
experience.
As always, we appreciate your investment in Alliance New Europe Fund and look
forward to reporting its progress to you in the coming period.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Stephen Beinhacker
Stephen Beinhacker
Vice President
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6 o ALLIANCE NEW EUROPE FUND
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PERFORMANCE UPDATE
PERFORMANCE UPDATE
ALLIANCE NEWEUROPE FUND
GROWTH OF A $10,000 INVESTMENT
4/30/90* TO 1/31/00
|_| Alliance New Europe Fund
|_| MSCIEurope Index
|_| Lipper European Region Funds Average
[MOUNTAIN GRAPH OMITTED]
MSCI Europe Index: $37,372
Alliance New Europe Fund Class A: $30,933
Lipper European Region Funds Average: $30,312
This chart illustrates the total value of an assumed $10,000 investment in
Alliance New Europe Fund Class A shares (from 4/30/90 to 1/31/00) as compared to
the performance of an appropriate broad-based index. The chart reflects the
deduction of the maximum 4.25% sales charge from the initial $10,000 investment
in the Fund and assumes the reinvestment of dividends and capital gains.
Performance for Class B, Class C and Advisor Class shares will vary from the
results shown above due to differences in expenses charged to these classes.
Past performance is not indicative of future results, and is not representative
of future gain or loss in capital value or dividend income.
The unmanaged Morgan Stanley Capital International ("MSCI") EuropeIndex measures
the overall performance of stock markets in 15 European countries.
The Lipper European Region Funds Average reflects the performance of 14 funds
(based on the number of funds in the average from 4/30/90 to 1/31/00). These
funds have generally similar investment objectives to Alliance New Europe Fund,
although the investment policies of some funds included in the average may vary.
When comparing Alliance New Europe Fund to the index and average shown above,
you should note that no charges or expenses are reflected in the performance of
the index. Lipper results include fees and expenses. An investor cannot invest
directly in an index and its results are not indicative of any specific
investments, including Alliance New Europe Fund.
* Closest month-end after Fund's Class A share inception date of 4/2/90. *
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ALLIANCE NEW EUROPE FUND o 7
<PAGE>
PERFORMANCE UPDATE
PERFORMANCE UPDATE
ALLIANCE NEW EUROPE FUND - CLASS A SHARES
HISTORY OF RETURNS
YEARLY PERIODS ENDED JANUARY 31*
|_| Alliance New Europe Fund
|_| MSCI Europe Index
[GRAPH OMITTED]
Past performance is no guarantee of future results. The Fund's investment
results represent total returns for Class A shares and are based on the net
asset value. All fees and expenses related to the operation of the Fund have
been deducted, but no adjustment has been made for sales charges that may apply
when shares are purchased or redeemed. Returns for the Fund include the
reinvestment of any distributions paid during the period. Total returns for
Class B, Class C and Advisor Class shares will differ due to different expenses
associated with those classes. The MSCI Europe Index is a market-capitalization
weighted index of over 550 stocks traded in 15 European markets. An investor
cannot invest directly in an index, and its returns are not indicative of any
specific investment, including Alliance New Europe Fund.
* Fund returns for the period ended 1/31/91 are from the Fund's inception
date of 4/2/90 through 1/31/91. Benchmark returns for the period ended 1/31/91
are from 3/31/90 through 1/31/91
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8 o ALLIANCE NEW EUROPE FUND
<PAGE>
PORTFOLIO SUMMARY
PORTFOLIO SUMMARY
INCEPTION DATE
(Class A Shares)
4/2/90
PORTFOLIO STATISTICS
Assets ($mil):$384.4
Median Market Capitalization ($mil): $19,570.0
[The following data was represented as a pie chart in the printed material.]
SECTOR BREAKDOWN
|_|21.21% Consumer Services
|_|19.34% Finance
|_|16.06% Capital Goods
|_|15.12% Technology
|_| 5.53% Energy
|_| 5.44% Consumer Manufacturing
|_| 4.64% Consumer Staples
|_| 2.64% Basic Industry
|_| 2.51% Health Care
|_| 2.45% Utilities
|_| 2.24% Aerospace & Defense
|_| 1.58% Multi-Industry Companies
|_| 1.24% Short Term Investments
[The following data was represented as a pie chart in the printed material.]
COUNTRY BREAKDOWN
|_|29.04% United Kingdom
|_|19.33% France
|_|15.17% Netherlands
|_|13.22% Germany
|_| 6.26% Finland
|_| 5.02% Spain
|_| 3.01% Switzerland
|_| 2.99% Ireland
|_| 2.97% Sweden
|_| 1.30% Italy
|_| 0.48% Norway
|_| 1.21% Short Term Investments
All data as of January 31, 2000. Sector and country breakdowns may vary over
time. These breakdowns are expressed as a percentage of total investments.
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ALLIANCE NEW EUROPE FUND o 9
<PAGE>
INVESTMENT OBJECTIVE & POLICIES
and INVESTMENT RESULTS
INVESTMENT OBJECTIVE & POLICIES
Alliance New Europe Fund seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe.
INVESTMENT RESULTS
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS
AS OF JANUARY 31, 2000
Class A Shares
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Without Sales Charge With Sales Charge
One Year 17.73% 12.74%
Five Years 20.39% 19.34%
Since Inception* 12.53% 12.03%
Class B Shares
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Without Sales Charge With Sales Charge
One Year 16.93% 12.93%
Five Years 19.56% 19.56%
Since Inception*(a) 13.85% 13.85%
Class C Shares
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Without Sales Charge With Sales Charge
One Year 16.91% 15.91%
Five Years 19.56% 19.56%
Since Inception* 17.67% 17.67%
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10 o ALLIANCE NEW EUROPE FUND
<PAGE>
INVESTMENT RESULTS
SEC AVERAGE ANNUAL TOTAL RETURNS
AS OF THE MOST RECENT QUARTER-END
(DECEMBER 31, 1999)
Class A Class B Class C
- --------------------------------------------------
1 Year 20.76% 21.24% 24.21%
5 Years 20.33% 20.51% 20.52%
Since Inception* 12.72% 14.65% (a) 18.84%
The Fund's investment results represent average annual total returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) the effect of
the 4.25% maximum front-end sales charge for Class A shares or applicable
contingent deferred sales charge for Class B shares (4% year 1, 3% year 2, 2%
year 3, 1% year 4); and for Class C shares (1% year 1). Returns for Class A
shares do not reflect the imposition of the 1 year 1% contingent deferred sales
charge for accounts over $1,000,000. Total return for Advisor Class shares will
differ due to different expenses associated with that class.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Inception: 4/2/90 Class A; 3/5/91 Class B; 5/3/93 Class C.
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ALLIANCE NEW EUROPE FUND o 11
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TEN LARGEST HOLDINGS
TEN LARGEST HOLDINGS
January 31, 2000 (unaudited)
Percent of
Company U.S. $ Value Net Assets
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Mannesmann AG $ 33,925,170 8.8%
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United Pan-Europe Communications NV 21,854,808 5.7
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Nokia AB Oyj Corp. Series A 20,378,585 5.3
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British Sky Broadcasting Group Plc 16,986,643 4.4
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STMicroelectronics, NV 15,074,066 3.9
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Equant, NV 14,423,094 3.8
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Banque Nationale de Paris 10,704,933 2.8
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Total Fina, SA Cl. B 10,236,400 2.7
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Next Plc 10,127,835 2.6
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Securitas AB, Cl. B 9,620,674 2.5
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$163,332,208 42.5%
MAJOR PORTFOLIO CHANGES
Six Months Ended January 31, 2000 (unaudited)
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Shares
---------------------------------------------------
Holdings
Purchases Country Bought 1/31/00
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British Aerospace Plc. United Kingdom 1,188,500 1,572,492
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Tesco Plc. United Kingdom 888,170 888,170
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Next Plc. United Kingdom 887,700 1,288,700
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Banca Intesa SpA, RNC Italy 682,000 682,000
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British Airways Plc. United Kingdom 573,400 1,219,478
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Bank of Scotland United Kingdom 571,839 851,515
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Bank of Ireland Ireland 564,200 564,200
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British Sky Broadcasting
Group Plc. United Kingdom 554,000 728,000
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Vodafone AirTouch Plc. United Kingdom 508,340 940,425
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Altadis, SA Spain 409,150 409,150
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Holdings
Sales Country Sold 1/31/00
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Unicredito Italiano SpA Italy 814,000 -0-
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Merita Plc. Finland 616,000 -0-
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British Energy Plc. United Kingdom 523,250 -0-
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Orange Plc. United Kingdom 502,500 -0-
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Royal & Sun Alliance
Insurance Group Plc. United Kingdom 354,677 -0-
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Misys Plc. United Kingdom 351,728 -0-
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Norwich Union Plc. United Kingdom 337,100 -0-
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Diageo Plc. United Kingdom 331,394 -0-
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Tabacalera, SA Ser. A Spain 313,150 -0-
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United News & Media Plc. United Kingdom 290,150 140,950
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12 o ALLIANCE NEW EUROPE FUND
<PAGE>
SECTOR DIVERSIFICATION
SECTOR DIVERSIFICATION
January 31, 2000 (unaudited)
Percent of
U.S. $ Value Net Assets
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Aerospace & Defense $ 8,464,307 2.2%
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Basic Industries 9,999,097 2.6
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Capital Goods 60,816,954 15.8
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Consumer Manufacturing 20,595,962 5.4
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Consumer Services 80,277,992 20.9
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Consumer Staples 17,682,327 4.6
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Energy 20,936,315 5.4
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Finance 73,243,962 19.0
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Healthcare 9,495,391 2.5
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Multi-Industry 5,970,723 1.6
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Technology 57,260,482 14.9
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Utilities 9,279,848 2.4
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Total Investments 374,023,360 97.3
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Cash and receivables, net of liabilities 10,420,755 2.7
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Net Assets $384,444,115 100.0%
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* Exclude short-term obligations
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ALLIANCE NEW EUROPE FUND o 13
<PAGE>
PORTFOLIO OF INVESTMENTS
PORTFOLIO OF INVESTMENTS
January 31, 2000 (unaudited)
Company Shares U.S. $ Value
- --------------------------------------------------------------------------------
Common Stocks-97.3%
Finland-6.2%
Nokia AB Oyj Corp. Ser. A .................. 112,000 $ 20,378,585
Sonera Group Oyj ........................... 47,800 3,304,876
-------------
23,683,461
-------------
France-19.1%
Assurances Generales de France ............. 33,600 1,653,699
Aventis, SA ................................ 34,000 1,805,188
Banque Nationale de Paris .................. 134,250 10,704,933
Carrefour, SA .............................. 56,000 8,952,728
Castorama Dubois Investisse ................ 38,000 8,916,809
Compagnie de Saint-Gobain .................. 12,000 1,707,637
Rhodia, SA ................................. 203,000 4,363,012
Sanofi-Synthelabo, SA ...................... 160,000 6,045,427
STMicroelectronics, NV ..................... 91,700 15,074,066
Total Fina, SA Cl. B ....................... 82,000 10,236,400
Transiciel, SA ............................. 16,000 2,057,015
Valeo, SA .................................. 24,239 1,665,172
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73,182,086
-------------
Germany-13.0%
Mannesmann AG .............................. 126,069 33,925,170
Pixelpark AG(a) ............................ 7,923 968,067
Siemens AG ................................. 41,900 5,970,723
Software AG(a) ............................. 144,900 9,172,218
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50,036,178
-------------
Ireland-2.9%
Bank of Ireland ............................ 564,200 3,662,766
CRH Plc .................................... 399,909 7,664,957
-------------
11,327,723
-------------
Italy-1.3%
Banca Intesa SpA, RNC ...................... 682,000 1,161,262
Banca Intesa SpA ........................... 341,000 1,104,370
ENI SpA .................................... 557,500 2,648,113
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4,913,745
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Netherlands-14.9%
Akzo Nobel NV .............................. 135,000 5,636,085
Equant NV(a) ............................... 66,000 6,768,719
Equant NV-ADR(a) ........................... 74,000 7,654,375
ING Groep NV ............................... 130,300 6,598,427
Koninklijke Ahold NV ....................... 84,028 2,008,850
Philips Electronics NV ..................... 44,000 6,498,834
Thermo Eurotech NV(b) ...................... 160,000 427,526
United Pan-Europe Communications NV(a) ..... 171,300 21,854,808
-------------
57,447,624
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14 o ALLIANCE NEW EUROPE FUND
<PAGE>
PORTFOLIO OF INVESTMENTS
Company Shares U.S. $ Value
- --------------------------------------------------------------------------------
Norway-0.5%
Royal Caribbean Cruises Ltd. ............... 36,500 $ 1,815,810
-------------
Spain-4.9%
Altadis, SA ................................ 409,150 4,497,248
Repsol YPF, SA ............................. 424,000 8,051,802
Telefonica, SA ............................. 235,066 5,974,972
Unidad Editorial, SA(b) .................... 249,966 490,634
-------------
19,014,656
-------------
Sweden-2.9%
AstraZeneca Group Plc ...................... 44,270 1,644,776
Securitas AB, Cl. B ........................ 458,080 9,620,674
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11,265,450
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Switzerland-3.0%
ABB Ltd. ................................... 66,500 7,396,544
Schweizerische Rueckversicherungs-
Gesellschaft ............................. 760 1,310,824
Zurich Allied AG ........................... 5,725 2,676,179
-------------
11,383,547
-------------
United Kingdom-28.6%
Autonomy Corp. Plc.(a) ..................... 48,000 4,416,000
Bank of Scotland ........................... 851,515 8,537,853
Beazer Group Plc ........................... 530,300 1,050,512
British Aerospace Plc ...................... 1,572,492 8,464,307
British Airways Plc ........................ 1,219,478 6,494,822
British Sky Broadcasting Group Plc ......... 728,000 16,986,643
CGU Plc .................................... 420,888 5,566,434
CMG Plc .................................... 90,000 5,845,503
Compass Group Plc .......................... 194,300 2,424,577
Dixons Group Plc ........................... 216,600 4,294,311
FKI Plc.(a) ................................ 896,000 3,993,648
Imperial Tobacco Group Plc ................. 255,600 1,878,014
Next Plc ................................... 1,288,700 10,127,835
Prudential Plc ............................. 200,000 3,715,142
Royal Bank of Scotland Group Plc ........... 433,412 7,044,569
Slough Estates Plc ......................... 407,000 2,134,599
Standard Chartered Plc ..................... 618,830 7,752,231
Tesco Plc .................................. 888,170 2,354,337
United News & Media Plc .................... 140,950 1,679,889
Vodafone AirTouch Plc ...................... 940,425 5,191,854
-------------
109,953,080
-------------
Total Common Stocks
(cost $307,482,250) ...................... 374,023,360
-------------
- --------------------------------------------------------------------------------
ALLIANCE NEW EUROPE FUND o 15
<PAGE>
PORTFOLIO OF INVESTMENTS
Principal
Amount
(000) U.S. $ Value
- --------------------------------------------------------------------------------
Time Deposit-1.2%
Bank of New York
5.00%, 2/01/2000
(cost $4,600,000) ........................ $ 4,600 $ 4,600,000
-------------
Total Investments-98.5%
(cost $312,082,250) ...................... 378,623,360
Other assets less liabilities-1.5% ......... 5,820,755
-------------
Net Assets-100% ............................ $ 384,444,115
=============
(a) Non-income producing security.
(b) Restricted and illiquid securities, valued at fair value (See Notes A &
F).
Glossary:
ADR - American Depositary Receipt.
See notes to financial statements.
- --------------------------------------------------------------------------------
16 o ALLIANCE NEW EUROPE FUND
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
STATEMENT OF ASSETS & LIABILITIES
January 31, 2000 (unaudited)
Assets
Investments in securities, at value (cost $312,082,250) ...... $ 378,623,360
Cash ......................................................... 19,877
Foreign cash, at value (cost $2,155,231) ..................... 2,147,098
Receivable for investment securities sold .................... 17,968,510
Receivable for capital stock sold ............................ 1,897,800
Dividends and interest receivable ............................ 1,046,178
-------------
Total assets ................................................. 401,702,823
-------------
Liabilities
Payable for investment securities purchased .................. 15,001,888
Payable for capital stock redeemed ........................... 1,362,351
Advisory fee payable ......................................... 306,516
Distribution fee payable ..................................... 235,727
Accrued expenses ............................................. 352,226
-------------
Total liabilities ............................................ 17,258,708
-------------
Net Assets ................................................... $ 384,444,115
=============
Composition of Net Assets
Capital stock, at par ........................................ $ 189,881
Additional paid-in capital ................................... 306,893,505
Accumulated net investment loss .............................. (2,479,750)
Accumulated net realized gain on investments and
foreign currency transactions .............................. 13,653,300
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities ................ 66,187,179
-------------
$ 384,444,115
=============
Calculation of Maximum Offering Price
Class A Shares
Net asset value and redemption price per share
($149,062,527 / 7,051,146 shares of capital stock
issued and outstanding) .................................... $ 21.14
Sales charge--4.25% of public offering price ................. .94
-------------
Maximum offering price ....................................... $ 22.08
=============
Class B Shares
Net asset value and offering price per share
($170,746,607 / 8,681,330 shares of capital stock
issued and outstanding) .................................... $ 19.67
=============
Class C Shares
Net asset value and offering price per share
($57,034,301 / 2,896,966 shares of capital stock
issued and outstanding) .................................... $ 19.69
=============
Advisor Class Shares
Net asset value, redemption and offering price per share
($7,600,680 / 358,656 shares of capital stock
issued and outstanding) .................................... $ 21.19
=============
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCE NEW EUROPE FUND o 17
<PAGE>
STATEMENT OF OPERATIONS
STATEMENT OF OPERATIONS
Six Months Ended January 31, 2000 (unaudited)
Investment Income
Dividends (net of foreign taxes
withheld of $85,834) ........................ $ 1,122,452
Interest ...................................... 123,076 $ 1,245,528
------------
Expenses
Advisory fee .................................. 1,624,244
Distribution fee -- Class A ................... 207,399
Distribution fee -- Class B ................... 776,947
Distribution fee -- Class C ................... 250,049
Transfer agency ............................... 450,394
Custodian ..................................... 173,810
Administrative ................................ 63,000
Printing ...................................... 48,514
Audit and legal ............................... 47,654
Registration .................................. 35,511
Directors' fees ............................... 21,080
Miscellaneous ................................. 34,738
------------
Total expenses ................................ 3,733,340
Less: expenses offset arrangement
(see Note B) ................................ (22,901)
------------
Net expenses .................................. 3,710,439
-----------
Net investment loss ........................... (2,464,911)
-----------
Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions
Net realized gain on investment
transactions ................................ 18,855,824
Net realized loss on foreign currency
transactions ................................ (487,559)
Net change in unrealized
appreciation/depreciation of:
Investments ................................. 44,231,867
Foreign currency denominated assets
and liabilities ............................ (344,776)
-----------
Net gain on investments and foreign
currency transactions ....................... 62,255,356
-----------
Net Increase in Net Assets
from Operations ............................... $59,790,445
===========
See notes to financial statements.
- --------------------------------------------------------------------------------
18 o ALLIANCE NEW EUROPE FUND
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
STATEMENT OF CHANGES
IN NET ASSETS
Six Months
Ended Year Ended
January 31, 2000 July 31,
(unaudited) 1999
------------- -------------
Increase (Decrease) in Net Assets
from Operations
Net investment loss ...................... $ (2,464,911) $ (97,975)
Net realized gain on investments and
foreign currency transactions .......... 18,368,265 13,408,223
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities ..... 43,887,091 (22,992,687)
------------- -------------
Net increase (decrease) in net assets
from operations ........................ 59,790,445 (9,682,439)
Dividends and Distributions to
Shareholders from:
Net realized gain on investments and
foreign currency transactions
Class A ................................ (6,199,548) (14,329,507)
Class B ................................ (7,384,078) (17,661,905)
Class C ................................ (2,364,210) (5,167,355)
Advisor Class .......................... (273,936) (416,417)
Capital Stock Transactions
Net increase ............................. 19,953,935 57,216,107
------------- -------------
Total increase ........................... 63,522,608 9,958,484
Net Assets
Beginning of year ........................ 320,921,507 310,963,023
------------- -------------
End of period ............................ $ 384,444,115 $ 320,921,507
============= =============
See notes to financial statements.
- --------------------------------------------------------------------------------
ALLIANCE NEW EUROPE FUND o 19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
January 31, 2000 (unaudited)
NOTE A
Significant Accounting Policies
Alliance New Europe Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as a diversified, open-end management investment company.
The Fund offers Class A, Class B, Class C and Advisor Class shares. Class A
shares are sold with a front-end sales charge of up to 4.25% for purchases not
exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase may be subject to a contingent
deferred sales charge of 1%. Class B shares are 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) or on the Nasdaq
Stock Market, Inc. 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 (but excluding
securities traded on The Nasdaq Stock Market, Inc.), 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.
- --------------------------------------------------------------------------------
20 o ALLIANCE NEW EUROPE FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the mean
of the quoted bid and asked price of such currencies against the U.S. dollar.
Purchases and sales of portfolio securities are translated into U.S. dollars at
the rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated into U.S. dollars at rates of exchange
prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents 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.
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.
- --------------------------------------------------------------------------------
ALLIANCE NEW EUROPE FUND o 21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 $63,000 to the Adviser representing the cost of certain
legal and accounting services provided to the Fund by the Adviser for the six
months ended January 31, 2000.
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 $318,761 for the six months ended January 31, 2000.
For the six months ended January 31, 2000, the Fund's expenses were reduced by
$22,901 under an expense offset arrangement with Alliance Fund Services, Inc.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor has advised the
Fund that it has received front-end sales charges of $26,517 from the sale of
Class A shares and $875, $169,723 and $9,941 in contingent deferred sales
charges imposed upon redemptions by shareholders of Class A, Class B and Class C
shares, respectively, for the six months ended January 31, 2000.
Brokerage commissions paid on investment transactions for the six months ended
January 31, 2000, amounted to $844,525, none of which was paid to brokers
utilizing the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp. ("DLJ"), an affiliate of the Adviser, nor to DLJ directly.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual rate
of up to .30 of 1% of the average daily net assets attributable to the Class A
shares and 1% of the average daily net assets attributable to the Class B and
Class C shares. 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 advised the Fund that it has
incurred expenses in excess of the distribution costs reimbursed by the Fund in
the amount of $5,789,655 and $922,285 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
- --------------------------------------------------------------------------------
22 o ALLIANCE NEW EUROPE FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 $191,774,887 and $188,427,441,
respectively, for the six months ended January 31, 2000. There were no purchases
or sales of U.S. government and government agency obligations for the six months
ended January 31, 2000.
At January 31, 2000, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $93,337,040 and
gross unrealized depreciation of investments was $26,795,930, resulting in net
unrealized appreciation of $66,541,110 (excluding foreign currency
transactions).
Forward Exchange Currency Contracts
The Fund enters into forward foreign exchange currency contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings and to hedge certain firm purchase and sale commitments
denominated in foreign currencies. A forward foreign exchange currency contract
is a commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The gain or loss arising from the difference between
the original contract and the closing of such contract is included in net
realized gain or loss from foreign currency transactions. Fluctuations in the
value of forward foreign exchange currency contracts are recorded for financial
reporting purposes as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or liquid assets in a separate account of the Fund having a value equal to the
aggregate amount of the Fund's commitments under forward foreign exchange
currency contracts entered into with respect to position hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Fund has in that particular currency
contract.
At January 31, 2000, the Fund had no outstanding forward foreign exchange
currency contracts.
- --------------------------------------------------------------------------------
ALLIANCE NEW EUROPE FUND o 23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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:
<TABLE>
<CAPTION>
-------------------------------- ---------------------------------
Shares Amount
-------------------------------- ---------------------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
January 31, 2000 July 31, January 31, 2000 July 31,
(unaudited) 1999 (unaudited) 1999
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold 4,671,060 10,387,131 $ 93,290,024 $ 193,992,568
- ---------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 10,082 646,882 199,918 11,572,721
- ---------------------------------------------------------------------------------------
Shares converted
from Class B 81,850 122,569 1,639,315 2,294,514
- ---------------------------------------------------------------------------------------
Shares redeemed (4,480,837) (10,373,809) (89,838,214) (195,377,111)
- ---------------------------------------------------------------------------------------
Net increase 282,155 782,773 $ 5,291,043 $ 12,482,692
=======================================================================================
Class B
Shares sold 1,665,211 4,397,501 $ 31,221,467 $ 78,216,424
- ---------------------------------------------------------------------------------------
Shares issued in
reinvestment of
distributions 44,134 764,041 815,592 12,858,820
- ---------------------------------------------------------------------------------------
Shares converted
to Class A (87,695) (130,183) (1,639,315) (2,294,514)
- ---------------------------------------------------------------------------------------
Shares redeemed (1,251,555) (3,338,762) (23,058,430) (58,834,272)
- ---------------------------------------------------------------------------------------
Net increase 370,095 1,692,597 $ 7,339,314 $ 29,946,458
=======================================================================================
Class C
Shares sold 925,276 1,954,513 $ 17,386,260 $ 34,745,461
- ---------------------------------------------------------------------------------------
Shares issued in
reinvestment of
distributions 26,728 197,181 494,203 3,320,533
- ---------------------------------------------------------------------------------------
Shares redeemed (688,219) (1,425,607) (12,632,275) (25,336,023)
- ---------------------------------------------------------------------------------------
Net increase 263,785 726,087 $ 5,248,188 $ 12,729,971
=======================================================================================
</TABLE>
- --------------------------------------------------------------------------------
24 o ALLIANCE NEW EUROPE FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
-------------------------------- ---------------------------------
Shares Amount
-------------------------------- ---------------------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
January 31, 2000 July 31, January 31, 2000 July 31,
(unaudited) 1999 (unaudited) 1999
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Advisor Class
Shares sold 159,636 640,008 $ 3,194,519 $ 12,009,548
- ---------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 1,061 20,566 21,094 367,511
- ---------------------------------------------------------------------------------------
Shares redeemed (59,132) (547,753) (1,140,223) (10,320,073)
- ---------------------------------------------------------------------------------------
Net increase 101,565 112,821 $ 2,075,390 $ 2,056,986
=======================================================================================
</TABLE>
NOTE F
Restricted Securities
Date
Security Acquired U.S. $ Cost
- -------- -------- -----------
Thermo Eurotech NV 3/19/91 $512,088
Unidad Editorial, SA Series A 10/01/92 317,808
The securities shown above are restricted as to sale and have been valued at
fair value in accordance with procedures described in Note A. The value of these
securities at January 31, 2000 was $918,160, representing 0.2% of net assets.
NOTE G
Bank Borrowing
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide for short-term financing if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the six months ended January 31, 2000.
NOTE H
Concentration of Risk
Investing in securities of foreign companies involves special risks which
include the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover securities of many
foreign companies and their markets may be less liquid and their prices more
volatile than those of comparable United States companies.
The Fund has invested approximately 29% 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.
- --------------------------------------------------------------------------------
ALLIANCE NEW EUROPE FUND o 25
<PAGE>
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Class A
------------------------------------------------------------------------------------------------
Six Months
Ended
January 31, Year Ended July 31,
2000 -----------------------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ........... $ 18.57 $ 21.85 $ 18.61 $ 15.84 $ 15.11 $ 12.66
------------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income (loss) .. (.10)(a) .07(a) .05(a) .07(a) .18 .04
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ................ 3.58 (.79) 5.28 4.20 1.02 2.50
------------------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations .................. 3.48 (.72) 5.33 4.27 1.20 2.54
------------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income ........... -0- -0- -0- (.15) -0- (.09)
Distributions in excess of net
investment income ........... -0- -0- (.04) (.03) -0- -0-
Distributions from net realized
gains on investments and
foreign currency
transactions ................ (.91) (2.56) (2.05) (1.32) (.47) -0-
------------------------------------------------------------------------------------------------
Total dividends and
distributions ............... (.91) (2.56) (2.09) (1.50) (.47) (.09)
------------------------------------------------------------------------------------------------
Net asset value,
end of period ............... $ 21.14 $ 18.57 $ 21.85 $ 18.61 $ 15.84 $ 15.11
================================================================================================
Total Return
Total investment return
based on net asset value(b) 19.06% (2.87)% 32.21% 28.78% 8.20% 20.22%
Ratios/Supplemental
Data
Net assets, end of period
(000's omitted) ............. $ 149,063 $ 125,729 $ 130,777 $ 78,578 $ 74,026 $ 86,112
Ratio of expenses to
average net assets .......... 1.73%(c)(d) 1.80%(c) 1.85%(c) 2.05%(c) 2.14% 2.09%
Ratio of net investment
income (loss) to average
net assets .................. (1.01)%(d) 0.39% .25% .40% 1.10% .37%
Portfolio turnover rate ....... 56% 89% 99% 89% 69% 74%
</TABLE>
See footnote summary on page 30.
- --------------------------------------------------------------------------------
26 o ALLIANCE NEW EUROPE FUND
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Class B
------------------------------------------------------------------------------------------------
Six Months
Ended
January 31, Year Ended July 31,
2000 -----------------------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ............ $ 17.39 $ 20.76 $ 17.87 $ 15.31 $ 14.71 $ 12.41
------------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income (loss) ... (.16)(a) (.06)(a) (.08)(a) (.04)(a) .08 (.05)
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ................. 3.35 (.75) 5.02 4.02 .99 2.44
------------------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations ................... 3.19 (.81) 4.94 3.98 1.07 2.39
------------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income ............ -0- -0- -0- -0- -0- (.09)
Distributions in excess of net
investment income ............ -0- -0- -0- (.10) -0- -0-
Distributions from net realized
gains on investments and
foreign currency
transactions ................. (.91) (2.56) (2.05) (1.32) (.47) -0-
------------------------------------------------------------------------------------------------
Total dividends and
distributions ................ (.91) (2.56) (2.05) (1.42) (.47) (.09)
------------------------------------------------------------------------------------------------
Net asset value,
end of period ................ $ 19.67 $ 17.39 $ 20.76 $ 17.87 $ 15.31 $ 14.71
================================================================================================
Total Return
Total investment return
based on net asset value(b) .. 18.67% (3.52)% 31.22% 27.76% 7.53% 19.42%
Ratios/Supplemental
Data
Net assets, end of period
(000's omitted) .............. $ 170,747 $ 144,570 $ 137,425 $ 66,032 $ 42,662 $ 34,527
Ratio of expenses to
average net assets ........... 2.43%(c)(d) 2.50%(c) 2.56%(c) 2.75%(c) 2.86% 2.79%
Ratio of net investment
income (loss) to average
net assets ................... (1.70)%(d) (.34)% (.40)% (.23)% .59% (.33)%
Portfolio turnover rate ........ 56% 89% 99% 89% 69% 74%
</TABLE>
See footnote summary on page 30.
- --------------------------------------------------------------------------------
ALLIANCE NEW EUROPE FUND o 27
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Class C
------------------------------------------------------------------------------------------------
Six Months
Ended
January 31, Year Ended July 31,
2000 -----------------------------------------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ........... $ 17.41 $ 20.77 $ 17.89 $ 15.33 $ 14.72 $12.42
------------------------------------------------------------------------------------------------
Income From Investment
Operations
Net investment income (loss) .. (.16)(a) (.05)(a) (.08)(a) (.04)(a) .08 (.07)
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ................ 3.35 (.75) 5.01 4.02 1.00 2.46
------------------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations .................. 3.19 (.80) 4.93 3.98 1.08 2.39
------------------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income ........... -0- -0- -0- -0- -0- (.09)
Distributions in excess of net
investment income ........... -0- -0- -0- (.10) -0- -0-
Distributions from net realized
gains on investments and
foreign currency
transactions ................ (.91) (2.56) (2.05) (1.32) (.47) -0-
------------------------------------------------------------------------------------------------
Total dividends and
distributions ............... (.91) (2.56) (2.05) (1.42) (.47) (.09)
------------------------------------------------------------------------------------------------
Net asset value,
end of period ............... $ 19.69 $ 17.41 $ 20.77 $ 17.89 $ 15.33 $14.72
================================================================================================
Total Return
Total investment return
based on net asset value(b).. 18.66% (3.46)% 31.13% 27.73% 7.59% 19.40%
Ratios/Supplemental
Data
Net assets, end of period
(000's omitted) ............. $ 57,034 $ 45,845 $ 39,618 $ 16,907 $ 10,141 $7,802
Ratio of expenses to
average net assets .......... 2.43%(c)(d) 2.50%(c) 2.56%(c) 2.74%(c) 2.87% 2.78%
Ratio of net investment
income (loss) to average
net assets .................. (1.70)%(d) (.28)% (.41)% (.23)% .58% (.33)%
Portfolio turnover rate ....... 56% 89% 99% 89% 69% 74%
</TABLE>
See footnote summary on page 30.
- --------------------------------------------------------------------------------
28 o ALLIANCE NEW EUROPE FUND
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Advisor Class
---------------------------------------------------------------------
Six Months October 2,
Ended 1996(e)
January 31, to
2000 Year Ended July 31, July 31,
(unaudited) 1999 1998 1997
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 18.58 $ 21.79 $ 18.57 $ 16.25
---------------------------------------------------------------------
Income From Investment
Operations
Net investment income (loss)(a) ...................... (.07) .13 .08 .11
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions ............................. 3.59 (.78) 5.28 3.76
---------------------------------------------------------------------
Net increase (decease) in net asset
value from operations ............................. 3.52 (.65) 5.36 3.87
---------------------------------------------------------------------
Less: Dividends and Distributions
Dividends from net investment
income ............................................ -0- -0- -0- (.09)
Distribution in excess of net
investment income ................................. -0- -0- (.09) (.14)
Distributions from net realized gains
on investments and foreign
currency transactions ............................. (.91) (2.56) (2.05) (1.32)
---------------------------------------------------------------------
Total dividends and distributions .................... (.91) (2.56) (2.14) (1.55)
---------------------------------------------------------------------
Net asset value, end of period ....................... $ 21.19 $ 18.58 $ 21.79 $ 18.57
=====================================================================
Total Return
Total investment return based on
net asset value(b) ................................ 19.26% (2.54)% 32.55% 25.76%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ................................... $ 7,601 $ 4,778 $ 3,143 $ 4,130
Ratio of expenses to average
net assets(c) ..................................... 1.42%(d) 1.51% 1.56% 1.71%(d)
Ratio of net investment income (loss)
to average net assets ............................. (.67)%(d) .68% .39% .77%(d)
Portfolio turnover rate .............................. 56% 89% 99% 89%
</TABLE>
See footnote summary on page 30.
- --------------------------------------------------------------------------------
ALLIANCE NEW EUROPE FUND o 29
<PAGE>
FINANCIAL HIGHLIGHTS
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales 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.
(c) Ratios reflect expenses grossed up for expense offset arrangement with the
Transfer Agent. For the periods shown below, the net expense ratios were
as follows:
Six
Months
Ended Period
January 31, Ended
2000 Year Ended July 31, July 31,
(unaudited)(d) 1999 1998 1997
- --------------------------------------------------------------------------------
Class A ............. 1.71% 1.78% 1.84% 2.04%
Class B ............. 2.42% 2.49% 2.54% 2.74%
Class C ............. 2.42% 2.49% 2.54% 2.73%
Advisor Class ....... 1.41% 1.50% 1.54% 1.71%(d)
(d) Annualized
(e) Commencement of distribution.
- --------------------------------------------------------------------------------
30 o ALLIANCE NEW EUROPE FUND
<PAGE>
GLOSSARY OF INVESTMENT TERMS
GLOSSARY OF INVESTMENT TERMS
benchmark
A standard by which a fund's performance can be measured. A benchmark is usually
an unmanaged index, such as the Standard & Poor's 500 Stock Index or the Lehman
Brothers Aggregate Bond Index.
capital
Cash or goods that are used to generate income. Also, the net worth of a
business (the amount by which its assets exceed its liabilities).
correction
A drop in the price of a stock, bond, commodity, index, or the overall market,
following a rise.
equity security
Another term for stock.
earnings
Revenues minus cost of sales, operating expenses, and taxes, over a given period
of time. Earnings are often the most important determinant of a company's stock
price.
economic growth rate
The rate, usually measured annually, at which a nation's, industry's,
community's, or company's income increases.
index
A compilation of securities of similar types of companies that is used to
measure the investment performance of securities within that specific market. An
index is often used as a benchmark for a mutual fund. An investor cannot invest
directly in an index.
inflation
The overall general upward price movement of goods and services in an economy.
sector
A group of securities that are similar with respect to maturity, type, rating,
industry and/or coupon. Refers to a distinct part of the market, for example,
the technology sector.
sell-off
An abrupt drop in price resulting from widespread selling.
valuation
The process of determining the value of an asset or company.
- --------------------------------------------------------------------------------
ALLIANCE NEW EUROPE FUND o 31
<PAGE>
ALLIANCE CAPITAL
ALLIANCE CAPITAL
The Investment Professional's Choice
Alliance Capital is a leading global investment management firm with over $368
billion in assets under management. In recognition of our far-reaching
investment capabilities, Alliance Capital has been selected by employee benefit
plans for 31 of the FORTUNE 100 companies and public retirement funds in 31
states as well as by hundreds of foundations, endowments and foreign
institutions. By sharing this institutional money management experience with
millions of mutual fund investors as well, Alliance stands out as a "manager of
choice" for thousands of investment professionals around the world.
At Alliance Capital, we place a premium on investment research. We carefully
select securities based on our proprietary research, conducted by over 277
investment professionals in 21 investment offices worldwide. Our commitment to
this process means that our mutual fund shareholders have their portfolios
managed by the same experienced analysts and portfolio managers who manage the
pension funds of some of America's largest institutional investors.
All information on Alliance Capital is as of 12/31/99.
- --------------------------------------------------------------------------------
32 o ALLIANCE NEW EUROPE FUND
<PAGE>
ALLIANCE CAPITAL AT YOUR SERVICE
ALLIANCE CAPITAL AT YOUR SERVICE
At Alliance Capital, shareholder satisfaction is among our top priorities.
That's why we provide our shareholders with a wide variety of products and
time-saving services to meet their needs.
o Low Minimum Investments
You can begin investing in Alliance Capital funds with as little as $250
(except for Alliance Select Investor Series Premier Portfolio and Alliance
Select Investor Series Technology Portfolio, which generally have a
$10,000 minimum initial investment) and may make subsequent investments of
$50 or more.
o Automatic Reinvestment
You may choose to reinvest fund dividend and capital-gains distributions
automatically at no charge.
o Automatic Investment Program
Build your investment account by having money automatically transferred
from your bank account on a regular basis.
o Dividend Direction Plans
You may cross-invest dividends from one fund into the same class of shares
in any other fund without incurring a sales charge. This can be a good way
to diversify your assets.
o The Alliance Advance
A quarterly newsletter discussing investment strategies, economic news and
other matters that could affect your mutual fund investment.
o Auto Exchange
You may choose to automatically exchange money from one Alliance Capital
fund to another on a regular basis. This can be a good way to dollar cost
average*, helping you to invest with discipline.
o Systematic Withdrawals
Regular checks for specified amounts can be sent to you or to your
brokerage or bank account.
o A Choice of Purchase Plans
Most funds are available in A, B, and C Class shares. Many funds are also
available in Advisor Class shares.
o Telephone Transaction
Purchases, transfers and redemptions can be made by calling (800)
221-5672. Our knowledgeable representatives are available to assist you
Monday through Friday from 8:30 a.m. to 8:00 p.m. Eastern Standard Time.
o Alliance Answer: 24-Hour Information
For your convenience, our computerized audio response system is available
to you 24-hours a day by calling (800) 251-0539. Using any touch tone
phone, you can hear share prices, get account balances, review details of
your last transaction, obtain dividend information, order
statements/checkbooks, review fund objectives, literature and Watchlist
information, order additional copies of statements and request additional
year-end tax forms (available from February 1 to May 31).
o Alliance Capital on the World Wide Web at www.alliancecapital.com. Here,
you can access updated account information, make additional investments,
request more information, exchange between Alliance funds and view fund
performance, press releases and articles.
* Dollar cost averaging does not assure a profit nor protect against loss in
a declining market. Since this strategy involves continuous investments in
securities, regardless of fluctuating prices, investors should consider
their financial ability to invest during periods of low price levels.
- --------------------------------------------------------------------------------
ALLIANCE NEW EUROPE FUND o 33
<PAGE>
BOARD OF DIRECTORS
BOARD OF DIRECTORS
John D. Carifa, Chairman and President
David H. Dievler(1)
John H. Dobkin(1)
W.H. Henderson(1)
Stig Host(1)
Alan J. Stoga(1)
OFFICERS
Kathleen A. Corbet, Senior Vice President
Thomas J. Bardong, Vice President
Stephen M. Beinhacker, Vice President
Russell Brody, Vice President
Mark D. Gersten, Treasurer & Chief Financial Officer
Edmund P. Bergan, Jr., Secretary
Vincent S. Noto, Controller
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Principal Underwriter
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, NY 10105
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
Transfer Agent
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
(1) Member of the Audit Committee.
- --------------------------------------------------------------------------------
34 o ALLIANCE NEW EUROPE FUND
<PAGE>
ALLIANCE CAPITAL FAMILY OF FUNDS
ALLIANCE CAPITAL FAMILY OF FUNDS
Domestic Equity Funds
Balanced Shares
Conservative Investors Fund
Disciplined Value Fund
Growth & Income Fund
Growth Fund
Growth Investors Fund
Health Care Fund
Premier Growth Fund
Quasar Fund
Real Estate Investment Fund
Technology Fund
The Alliance Fund
Utility Income Fund
Global & International Equity Funds
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Premier Portfolio
Technology Portfolio
Fixed Income Funds
Corporate Bond Portfolio
Global Dollar Government Fund
Global Strategic Income Trust
High Yield Fund
Limited Maturity Government Fund
Mortgage Securities Income Fund
Multi-Market Strategy Trust
North American Government Income Trust
Quality Bond Portfolio
U.S. Government Portfolio
Municipal Income Funds
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
Alliance also offers AFD Exchange Reserves, which serves as the money market
fund exchange vehicle for the Alliance mutual funds.
To obtain a prospectus for any Alliance Capital fund, call your investment
professional, or call Alliance at (800) 227-4618.
- --------------------------------------------------------------------------------
ALLIANCE NEW EUROPE FUND o 35
<PAGE>
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- --------------------------------------------------------------------------------
36 o ALLIANCE NEW EUROPE FUND
<PAGE>
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- --------------------------------------------------------------------------------
ALLIANCE NEW EUROPE FUND o 37
<PAGE>
Alliance New Europe Fund ---------------
1345 Avenue of the Americas BULK RATE
New York, NY 10105 U.S. POSTAGE
(800) 221-5672 PAID
New York, NY
Permit No. 7131
---------------
Alliance Capital [LOGO]
The Investment Professional's Choice
(R) These registered service marks used under license from the owner, Alliance
Capital Management L.P.
EURSR0100
