<PAGE>
As filed with the Securities and Exchange
Commission on October 30, 2000
File No. 33-37848
811-6028
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 21 X
and/or
REGISTRATION UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15 X
ALLIANCE NEW EUROPE FUND, INC.
(Exact name of Registrant as Specified in Charter)
Alliance Capital Management L.P.
1345 Avenue of the Americas, New York, New York, 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code:
(800) 221-5672
EDMUND P. BERGAN, JR.,
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York, 10105
(Name and address of agent for service)
Copies of communications to:
Thomas G. MacDonald
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
It is proposed that this filing will become effective (check
appropriate box)
<PAGE>
_____immediately upon filing pursuant to paragraph (b)
__X__on November 1, 2000 pursuant to paragraph (b)
_____60 days after filing pursuant to paragraph (a)(1)
_____on (date) pursuant to paragraph (a)(1)
_____75 days after filing pursuant to paragraph (a)(2)
_____on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
____ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<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.
Prospectus and Application
November 1, 2000
Domestic Stock Funds
> Alliance Premier Growth Fund
> Alliance Health Care Fund
> Alliance Growth Fund
> Alliance Technology Fund
> Alliance Quasar Fund
> The Alliance Fund
> Alliance Disciplined Value Fund
Total Return Funds
> Alliance Growth and Income Fund
> Alliance Balanced Shares
> Alliance Utility Income Fund
> Alliance Real Estate Investment Fund
Global Stock Funds
> 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
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.
[LOGO]Alliance Capital(R)
<PAGE>
Investment Products Offered
---------------------------
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
---------------------------
2
<PAGE>
TABLE OF CONTENTS
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Page
RISK/RETURN SUMMARY..................................................... 3
Domestic Stock Funds.................................................... 4
Total Return Funds...................................................... 11
Global Stock Funds...................................................... 15
Summary of Principal Risks.............................................. 22
Principal Risks by Fund................................................. 23
FEES AND EXPENSES OF THE FUNDS.......................................... 24
GLOSSARY................................................................ 27
DESCRIPTION OF THE FUNDS................................................ 28
Investment Objectives and Principal Policies............................ 28
Description of Additional Investment Practices.......................... 42
Additional Risk Considerations.......................................... 49
MANAGEMENT OF THE FUNDS................................................. 52
PURCHASE AND SALE OF SHARES............................................. 56
How The Funds Value Their Shares........................................ 56
How To Buy Shares....................................................... 56
How to Exchange Shares.................................................. 56
How To Sell Shares...................................................... 56
DIVIDENDS, DISTRIBUTIONS AND TAXES...................................... 57
DISTRIBUTION ARRANGEMENTS............................................... 58
GENERAL INFORMATION..................................................... 59
FINANCIAL HIGHLIGHTS.................................................... 59
APPENDIX A--ADDITIONAL INFORMATION ABOUT
THE UNITED KINGDOM, JAPAN, AND GREATER CHINA COUNTRIES.................. 72
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 begins on page 22.
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. As with all investments, you may lose money by investing
in the Funds.
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 500 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects.
Normally, the Fund invests in about 40-60 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 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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Since
1 Year 5 Years Inception
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Class A 23.51% 34.86% 25.01%
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Class B 24.13% 35.13% 24.98%
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Class C 27.12% 35.13% 24.98%
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Russell 1000 Growth Index 33.16% 32.41% 23.43%
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Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception date of
Class A and Class B shares is 9/28/92. Since inception index returns are from
month-end of applicable class inception date. Performance information for
periods prior to the inception of Class C shares (5/3/93) is the performance of
the Fund's Class A shares adjusted to reflect the higher expense ratio of Class
C shares. The average annual total return for Class C shares since its actual
inception date was 26.61%. Index return for the comparable period was 25.06%.
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. Through 9/30/00, the year to date unannualized return for the Class
A shares was -4.69%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 9.98
94 -5.80
95 46.87
96 24.14
97 32.67
98 49.31
99 28.98
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 Health Care Fund
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OBJECTIVE:
The Fund's investment objective is capital appreciation and, secondarily,
current income.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
Under normal circumstances, the Fund invests at least 65%, and normally
substantially all, of the value of its total assets in securities issued by
companies principally engaged in health care and health care-related industries
("Health Care Industries") (companies principally engaged in the discovery,
development, provision, production or distribution of products and services that
relate to the diagnosis, treatment and prevention of diseases or other medical
disorders). Although the payment of dividends will be a factor considered in the
selection of investments for the Fund, the Fund seeks primarily to take
advantage of capital appreciation opportunities identified by Alliance in
emerging technologies and services in Health Care Industries by investing in
companies which are expected to profit from the development of new products and
services for these industries. Under normal circumstances, the Fund invests
primarily in the equity securities of U.S. companies. The Fund may invest up to
40% of its total assets in foreign securities. The Fund may invest in new,
smaller or less-seasoned companies as well as in larger, established companies
in Health Care Industries.
Among the principal risks of investing in the Fund are market risk and
industry/sector risk. Unlike many other equity funds, the Fund invests in the
securities of companies principally engaged in Health Care Industries. As a
result, certain economic conditions and market changes that affect those
industries may have a more significant effect on the Fund's net asset value than
on the value of a more broadly diversified fund. For example, the Fund's share
price could be affected by changes in competition, legislation or government
regulation, government funding, product liability and other litigation, the
obsolescence or development of products, or other factors specific to the health
care and health sciences industries. The Fund's investments in foreign
securities have foreign risk and currency risk. The Fund's investment in small-
to mid-capitalization companies have capitalization risk. These investments may
be more volatile than investments in large-cap companies.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
5
<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
20% 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 than 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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1 Year 5 Years 10 Years
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Class A 20.24% 25.59% 21.26%
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Class B 20.71% 25.81% 19.11%
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Class C 23.72% 25.81% 20.60%
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S&P 500 Index 21.03% 28.54% 18.19%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class A shares
(9/4/90) and Class C shares (8/2/93) is the performance of the Fund's Class B
shares adjusted, in the case of Class A shares, to reflect the lower expense
ratio of Class A shares. The average annual total returns for Class A and Class
C shares since their actual inception dates were 23.58% and 20.91%,
respectively. Index returns for the comparable periods (which date from
month-end following applicable Class inception date) were 21.34% and 22.48%,
respectively.
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. Through 9/30/00, the year to date unannualized return for the Class
A shares was -6.24%
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -7.96
91 62.39
92 9.81
93 28.21
94 -1.84
95 28.65
96 22.32
97 26.22
98 27.23
99 24.71
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.
6
<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 25% of its total assets in foreign
securities.
Among the principal risks of investing in the Fund are market risk and
industry/sector 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 interest rate risk, credit 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
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 64.47% 37.33% 29.42%
--------------------------------------------------------------------------------
Class B 66.56% 37.56% 29.48%
--------------------------------------------------------------------------------
Class C 69.53% 37.54% 29.31%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.54% 18.19%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B and Class
C shares (5/3/93) is the performance of the Fund's Class A shares adjusted to
reflect the higher expense ratio of Class B and Class C shares. The average
annual total returns for Class B and Class C shares since their actual inception
dates were 36.18% and 36.17%, respectively. Index return for the comparable
period (which date from month-end following applicable Class inception date) was
22.17%.
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. Through 9/30/00, the year to date unannualized return for the Class
A shares was 3.81%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -3.08
91 54.24
92 15.50
93 21.63
94 28.50
95 45.80
96 19.41
97 4.54
98 63.14
99 71.78
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 44.57%, 4th quarter, 1999; and Worst Quarter was down
-33.21%, 3rd quarter, 1990.
7
<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, 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
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 8.16% 18.83% 10.43%
--------------------------------------------------------------------------------
Class B 8.04% 18.95% 10.30%
--------------------------------------------------------------------------------
Class C 11.08% 18.95% 10.14%
--------------------------------------------------------------------------------
Russell 2000 Growth Index 43.08% 18.99% 13.51%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charge as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(9/17/90) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 13.60% and 15.37%, respectively. Index returns
for the comparable periods (which date from month-end following applicable Class
inception date) were 18.05% and 15.74%, respectively.
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. Through 9/30/00, the year to date unannualized return for the Class
A shares was 8.92%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -23.44
91 34.27
92 2.81
93 16.16
94 -7.27
95 47.64
96 32.62
97 17.24
98 -4.56
99 12.96
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.
8
<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 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
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 28.20% 21.87% 15.97%
--------------------------------------------------------------------------------
Class B 28.63% 21.91% 15.93%
--------------------------------------------------------------------------------
Class C 31.69% 21.87% 15.85%
--------------------------------------------------------------------------------
S&P Midcap 400 Index 14.72% 23.05% 17.32%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(3/4/91) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 16.40% and 17.66%, respectively. Index returns
for the comparable periods (which date from month-end following applicable Class
inception date) were 17.93% and 17.82%, respectively.
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. Through 9/30/00, the year to date unannualized return for the Class
A shares was -5.90%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -4.36
91 33.91
92 14.70
93 14.26
94 -2.51
95 34.84
96 17.54
97 36.01
98 -2.72
99 33.90
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 26.41%, 4th quarter, 1999; and Worst Quarter was down
-24.32%, 3rd quarter, 1998.
9
<PAGE>
Alliance Disciplined Value Fund
OBJECTIVE:
The Fund's investment objective is long-term growth of capital through the
application of a disciplined value-oriented investment process.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in the equity securities of U.S. companies that
Alliance believes are undervalued. Alliance believes that, over time, a
company's stock price will come to reflect its intrinsic economic value.
Alliance uses a disciplined investment process to evaluate the companies in
Alliance's extensive research universe and to identify the stocks of companies
that offer the best combination of value and potential for price appreciation.
The Fund may invest in companies of any size and in any industry. At different
times, the Fund's investments may be in companies with significantly different
market capitalizations and with a greater emphasis on particular industries. The
Fund expects under normal circumstances to invest primarily in equity securities
of about 75 U.S. companies. The Fund may also invest up to 15% of its total
assets in foreign securities.
Among the principal risks of investing in the Fund is market risk. Depending on
the Fund's investments at a particular time, the Fund may also have
industry/sector risk. In addition, because the Fund may invest in small- to
mid-capitalization companies, it has capitalization risk. These investments may
be more volatile than investments in large-cap companies. To the extent the Fund
invests in foreign securities, it may have foreign risk and currency risk.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
10
<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 and 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
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
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 6.16% 23.23% 14.56%
--------------------------------------------------------------------------------
Class B 6.20% 23.23% 14.35%
--------------------------------------------------------------------------------
Class C 8.86% 23.22% 14.20%
--------------------------------------------------------------------------------
Russell 1000 Value Index 7.35% 23.07% 15.60%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(2/8/91) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 15.19% and 17.38%, respectively. Index returns
for the comparable periods (which date from month-end following applicable Class
inception date) were 17.50% and 17.90%, respectively.
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. Through 9/30/00, the year to date unannualized return for the Class
A shares was 11.72%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -1.69
91 27.08
92 4.52
93 9.96
94 -4.20
95 37.86
96 24.13
97 28.86
98 21.23
99 10.78
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.
11
<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 the Fund will not purchase a security if, as a result,
less than 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 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
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 0.45% 15.41% 10.31%
--------------------------------------------------------------------------------
Class B 0.26% 15.51% 10.18%
--------------------------------------------------------------------------------
Class C 3.18% 15.55% 10.03%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.54% 18.19%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(2/4/91) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 11.06% and 11.42%, respectively. Index returns
for the comparable periods (which date from month-end following applicable Class
inception date) were 19.73% and 22.17%, respectively.
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. Through 9/30/00, the year to date unannualized return for the Class
A shares was 9.91%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -2.20
91 20.47
92 6.81
93 9.93
94 -5.79
95 26.64
96 9.36
97 27.13
98 15.75
99 4.90
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.
12
<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
maintain 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, it has industry/sector risk. This is
the risk that factors affecting utility companies will have a significant effect
on 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 12.97% 19.56% 14.16%
--------------------------------------------------------------------------------
Class B 13.23% 19.76% 14.14%
--------------------------------------------------------------------------------
Class C 16.20% 19.78% 14.22%
--------------------------------------------------------------------------------
NYSE Utilities Index 14.62% 20.84% 12.90%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception dates
are 10/18/93 for Class A shares and Class B shares and 10/27/93 for Class C
shares. Since inception index return is 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. Through 9/30/00, the year to date unannualized return for the Class
A shares was 14.10%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 n/a
94 -10.94
95 22.93
96 8.28
97 30.65
98 24.38
99 18.01
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.
13
<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 industry/sector risk. The Fund 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. Because the Fund invests in mortgage-backed securities,
it is subject to the risk that mortgage loans will be prepaid when interest
rates decline, forcing the Fund to reinvest in securities with lower interest
rates. For this and other reasons, mortgage-backed securities may have
significantly greater price and yield volatility than traditional debt
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
--------------------------------------------------------------------------------
Class A -10.66% 1.65%
--------------------------------------------------------------------------------
Class B -10.85% 2.01%
--------------------------------------------------------------------------------
Class C -8.21% 2.31%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.02%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception dates
are 10/1/96 for Class A, Class B and Class C shares. Since inception index
return is 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. Through 9/30/00, the year to date unannualized return for the Class
A shares was 24.32%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 22.98
98 -20.22
99 -6.70
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.
14
<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 June 30, 2000, the Fund had approximately 34% 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 20.76% 20.33% 12.72%
--------------------------------------------------------------------------------
Class B 21.24% 20.51% 12.86%
--------------------------------------------------------------------------------
Class C 24.21% 20.52% 12.67%
--------------------------------------------------------------------------------
MSCI Europe Index 16.23% 22.54% 15.48%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception date of
Class A shares is 4/2/90. Since inception index returns are from month-end of
applicable class inception date.
Performance information for periods prior to the inception of Class B shares
(3/5/91) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 14.65% and 18.83%, respectively. Index returns
for the comparable periods were 16.54% and 20.08%, respectively.
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. Through 9/30/00, the year to date unannualized return for the Class
A shares was -9.57%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 3.30
92 -0.53
93 34.57
94 4.64
95 18.63
96 20.58
97 16.83
98 24.99
99 26.12
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 24.84%, 4th quarter, 1999; and Worst Quarter was down
-19.73%, 3rd quarter, 1998.
15
<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 at least 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. Because the Fund invests in companies that are undergoing, or
have undergone, privatization, it has industry/sector risk. These companies
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 5 Years Inception
--------------------------------------------------------------------------------
Class A 49.67% 18.98% 16.81%
--------------------------------------------------------------------------------
Class B 51.14% 19.16% 16.88%
--------------------------------------------------------------------------------
Class C 54.04% 19.16% 16.88%
--------------------------------------------------------------------------------
MSCI World Index (minus the U.S.) 28.27% 13.42% 12.04%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception date of
Class A and Class B shares is 6/2/94. Since inception index returns are from
month-end of applicable class inception date.
Performance information for periods prior to the inception of Class C shares
(2/8/95) is the performance of the Fund's Class A shares adjusted to reflect the
higher expense ratio of Class C shares. The average annual total return for
Class C since its actual inception date was 20.64%. Index return for the
comparable period was 14.85%.
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. Through 9/30/00, the year to date unannualized return for the Class
A shares was -18.04%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 4.91
96 23.14
97 13.18
98 8.92
99 56.33
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 34.15%, 4th quarter, 1999; and Worst Quarter was down
-17.44%, 3rd quarter, 1998.
16
<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
international 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, international 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 35% of its total assets in each of the United Kingdom and Japan and up to 25%
of its total assets in each of Canada, France, Germany, Italy, The Netherlands
and Switzerland. 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 40 companies, with the 30 most highly
regarded of these companies usually constituting approximately 70%, and often
more, of the Fund's net assets. The Fund invests in companies with market values
generally in excess of $10 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.
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 40.89% 20.85%
--------------------------------------------------------------------------------
Class B 42.19% 21.47%
--------------------------------------------------------------------------------
Class C 45.09% 22.81%
--------------------------------------------------------------------------------
MSCI EAFE Index 27.30% 17.93%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception dates
are 3/3/98 for Class A, Class B and Class C shares. Since inception index
returns are from 3/31/98.
BAR CHART
--------------------------------------------------------------------------------
The annual return in the bar chart is for the Fund's Class A shares and does not
reflect sales loads. If sales loads were reflected, the annual return would be
less than that shown. Through 9/30/00, the year to date unannualized return for
the Class A shares was -16.11%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 n/a
98 n/a
99 47.21
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 30.43%, 4th quarter, 1999; and Worst Quarter was up 3.29%,
1st quarter, 1999.
17
<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. Investments in smaller companies tend to be more volatile
than investments in large-cap or mid-cap companies.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 40.43% 18.98% 9.36%
--------------------------------------------------------------------------------
Class B 41.53% 19.15% 9.23%
--------------------------------------------------------------------------------
Class C 44.54% 19.16% 9.08%
--------------------------------------------------------------------------------
MSCI World Index 25.34% 20.25% 11.96%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charge as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(9/17/90) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 12.56% and 15.58%, respectively. Index returns
for the comparable periods (which date from month-end following applicable class
inception date) were 16.39% and 16.96%, respectively.
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. Through 9/30/00, the year to date unannualized return for the Class
A shares was 3.13%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -24.89
91 25.29
92 -4.89
93 20.04
94 -4.55
95 27.18
96 19.37
97 8.08
98 3.56
99 46.65
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 31.92%, 4th quarter, 1999; and Worst Quarter was down
-26.77%, 3rd quarter, 1990.
18
<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 international 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 international
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
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Class A 28.92% 11.09% 6.21%
--------------------------------------------------------------------------------
Class B 29.69% 11.19% 6.00%
--------------------------------------------------------------------------------
Class C 32.69% 11.17% 6.12%
--------------------------------------------------------------------------------
MSCI EAFE Index 27.30% 13.15% 7.33%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(9/17/90) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 8.30% and 10.43%, respectively. Index returns
for the comparable periods (which date from month-end following applicable class
inception date) were 12.30% and 12.12%, respectively.
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. Through 9/30/00, the year to date unannualized return for the Class
A shares was -15.41%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 -20.95
91 7.72
92 -5.86
93 27.51
94 5.68
95 10.10
96 7.20
97 1.41
98 9.64
99 34.62
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 25.84%, 4th quarter, 1999; and Worst Quarter was down
-22.29%, 3rd quarter, 1990.
19
<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 June 30, 2000, the Fund had approximately
83% 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 more of 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 Year Inception
--------------------------------------------------------------------------------
Class A 75.11% 6.40%
--------------------------------------------------------------------------------
Class B 77.23% 6.77%
--------------------------------------------------------------------------------
Class C 80.20% 7.47%
--------------------------------------------------------------------------------
MSCI China Free Index 9.94% -32.64%
--------------------------------------------------------------------------------
MSCI Hong Kong Index 59.52% 4.44%
--------------------------------------------------------------------------------
MSCI Taiwan Index 52.71% -1.11%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charge as well as conversion of
Class B shares to Class A shares after the applicable period. Inception dates
are 9/3/97 for Class A, Class B, and Class C shares. Since inception index
returns are 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. Through 9/30/00, the year to date unannualized return for the Class
A shares was -21.32%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 n/a
98 -8.02
99 82.87
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 49.31%, 4th quarter, 1999; and Worst Quarter was down
-26.95%, 2nd quarter, 1998.
20
<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 June 30, 2000,
the Fund had approximately 48% 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 5 Years Inception
--------------------------------------------------------------------------------
Class A 109.70% 6.58% 6.48%
--------------------------------------------------------------------------------
Class B 113.43% 6.76% 6.64%
--------------------------------------------------------------------------------
Class C 116.21% 6.81% 6.68%
--------------------------------------------------------------------------------
MSCI All Country Asia Pacific Index 59.66% 1.99% 2.11%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Average annual total returns reflect imposition of the
maximum front-end or contingent deferred sales charges as well as conversion of
Class B shares to Class A shares after the applicable period. Inception dates
are 11/28/94 for Class A, Class B, and Class C shares. Since inception index
returns are 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. Through 9/30/00, the year to date unannualized return for the Class
A shares was -23.34%.
[The following was depicted as a bar chart in the printed material]
Calendar Year End
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 10.21
96 4.58
97 -35.10
98 -12.34
99 118.99
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 38.96%, 4th quarter, 1999; and Worst Quarter was down
-18.81%, 4th quarter, 1997.
21
<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 Additional
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 long-term periods. All of the Alliance Stock Funds are subject to market
risk.
INDUSTRY/SECTOR RISK
This is the risk of investments in a particular industry sector. Market or
economic factors affecting that industry or group of related industries could
have a major effect on the value of a Fund's investments. Funds particularly
subject to this risk are Alliance Health Care Fund, Alliance Technology Fund,
Alliance Disciplined Value Fund, Alliance Utility Income Fund, Alliance Real
Estate Investment Fund and Alliance Worldwide Privatization 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, The Alliance Fund and Alliance
Disciplined Value 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 Health Care Fund, Alliance Quasar
Fund, Alliance Disciplined Value 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 Health Care Fund, Alliance Technology Fund,
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 and Alliance All-Asia
Investment Fund. Funds 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, Alliance
Worldwide Privatization Fund, Alliance International Fund, Alliance Greater
China '97 Fund and Alliance All-Asia Investment Fund.
22
<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 Health Care Fund, Alliance Technology Fund, 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 and Alliance All-Asia Investment 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>
------------------------------------------------------------------------------------------------------------------------------------
Industry/ Capital- Interest Country or
Market Sector ization Rate Credit Foreign Geographic Currency Manage-
Fund Risk Risk Risk Risk Risk Risk Risk Risk ment Risk
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Premier Growth Fund o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Health Care Fund o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth Fund o o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Technology Fund o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Quasar Fund o o o
------------------------------------------------------------------------------------------------------------------------------------
The Alliance Fund o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Disciplined Value Fund o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Growth and Income Fund o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Balanced Shares o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Utility Income Fund o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Real Estate Investment Fund o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance New Europe Fund o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance Worldwide Privatization Fund o o o o o o
------------------------------------------------------------------------------------------------------------------------------------
Alliance International Premier Growth Fund 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
------------------------------------------------------------------------------------------------------------------------------------
Alliance All-Asia Investment Fund o o o o o
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------------
Focused
Portfolio Allocation
Fund Risk Risk
--------------------------------------------------------------------
<S> <C> <C>
Alliance Premier Growth Fund o
--------------------------------------------------------------------
Alliance Health Care Fund
--------------------------------------------------------------------
Alliance Growth Fund
--------------------------------------------------------------------
Alliance Technology Fund
--------------------------------------------------------------------
Alliance Quasar Fund
--------------------------------------------------------------------
The Alliance Fund
--------------------------------------------------------------------
Alliance Disciplined Value Fund
--------------------------------------------------------------------
Alliance Growth and Income Fund
--------------------------------------------------------------------
Alliance Balanced Shares o
--------------------------------------------------------------------
Alliance Utility Income Fund
--------------------------------------------------------------------
Alliance Real Estate Investment Fund
--------------------------------------------------------------------
Alliance New Europe Fund
--------------------------------------------------------------------
Alliance Worldwide Privatization Fund
--------------------------------------------------------------------
Alliance International Premier Growth Fund o
--------------------------------------------------------------------
Alliance Global Small Cap Fund
--------------------------------------------------------------------
Alliance International Fund
--------------------------------------------------------------------
Alliance Greater China '97 Fund o
--------------------------------------------------------------------
Alliance All-Asia Investment Fund
--------------------------------------------------------------------
</TABLE>
23
<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 FEES (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 redemption proceeds, whichever is lower)
Exchange Fee None None None
</TABLE>
* Class B shares automatically convert to Class A shares after 8 years. The
CDSC decreases over time. For Class B shares the CDSC decreases 1.00%
annually to 0% after the 4th year.
** For Class C shares the CDSC is 0% after the first year.
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
--------------------------------------------------------- ----------------------------------------------------------------------
Alliance Premier Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .95% .95% .95% After 1 year $ 571 $ 621 $ 221 $ 321 $ 221
Distribution (12b-1) fees .33% 1.00% 1.00% After 3 years $ 879 $ 882 $ 682 $ 682 $ 682
Other expenses .22% .23% .23% After 5 years $ 1,209 $1,169 $1,169 $ 1,169 $ 1,169
---- ---- ---- After 10 years $ 2,139 $2,341(b) $2,341(b) $ 2,513 $ 2,513
Total fund
operating expenses 1.50% 2.18% 2.18%
==== ==== ====
<CAPTION>
Alliance Health Care Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .95% .95% .95% After 1 year $ 616 $ 670 $ 270 $ 370 $ 270
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years(c) $ 1,014 $1,029 $ 829 $ 829 $ 829
Other expenses .67% .69% .68% After 5 years(c) $ 1,437 $1,415 $1,415 $ 1,415 $ 1,415
---- ---- ---- After 10 years(c) $ 2,613 $2,831(b) $2,831(b) $ 3,003 $ 3,003
Total fund
operating expenses 1.92% 2.64% 2.63%
==== ==== ====
<CAPTION>
Alliance Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .68% .68% .68% After 1 year $ 540 $ 593 $ 193 $ 293 $ 193
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 784 $ 797 $ 597 $ 597 $ 597
Other expenses .20% .22% .22% After 5 years $ 1,046 $1,026 $ 1,026 $ 1,026 $ 1,026
---- ---- ---- After 10 years $ 1,796 $2,035(b) $ 2,035(b) $ 2,222 $ 2,222
Total fund
operating expenses 1.18% 1.90% 1.90%
==== ==== ====
<CAPTION>
Alliance Technology Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.10% 1.10% 1.10% After 1 year $ 589 $ 642 $ 242 $ 344 $ 244
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 932 $ 945 $ 745 $ 751 $ 751
Other expenses .28% .29% .31% After 5 years $ 1,299 $1,275 $1,275 $ 1,285 $ 1,285
---- ---- ---- After 10 years $ 2,328 $2,550(b) $2,550(b) $ 2,746 $ 2,746
Total fund
operating expenses 1.68% 2.39% 2.41%
==== ==== ====
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 26.
24
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
--------------------------------------------------------- ----------------------------------------------------------------------
Alliance Quasar Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.01% 1.01% 1.01% After 1 year $ 589 $ 649 $ 249 $ 348 $ 248
Distribution (12b-1) fees .27% 1.00% 1.00% After 3 years $ 935 $ 967 $ 767 $ 764 $ 764
Other expenses .41% .45% .44% After 5 years $ 1,304 $1,311 $ 1,311 $ 1,306 $ 1,306
---- ---- ---- After 10 years $ 2,338 $2,606(b) $ 2,606(b) $ 2,786 $ 2,786
Total fund
operating expenses 1.69% 2.46% 2.45%
==== ==== ====
<CAPTION>
The Alliance Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .68% .68% .68% After 1 year $ 528 $ 592 $ 192 $ 289 $ 189
Distribution (12b-1) fees .21% 1.00% 1.00% After 3 years $ 748 $ 794 $ 594 $ 585 $ 585
Other expenses .17% .21% .18% After 5 years $ 985 $1,021 $ 1,021 $ 1,006 $ 1,006
---- ---- ---- After 10 years $ 1,664 $1,995(b) $ 1,995(b) $ 2,180 $ 2,180
Total fund
operating expenses 1.06% 1.89% 1.86%
==== ==== ====
<CAPTION>
Alliance Disciplined
Value Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .75% .75% .75% After 1 year (c) $ 667 $ 723 $ 323 $ 423 $ 323
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years (c) $ 1,334 $ 1,353 $ 1,153 $ 1,153 $ 1,153
Other expenses 2.29% 2.29% 2.29% After 5 years (c) $ 2,023 $ 2,000 $ 2,000 $ 2,000 $ 2,000
---- ---- ---- After 10 years (c) $ 3,847 $ 4,039 $ 4,039 $ 4,188 $ 4,188
Total fund
operating expenses 3.34% 4.04% 4.04%
==== ==== ====
Waiver and/or expense
reimbursement (a) (.84)% (.84)% (.84)%
==== ==== ====
Net expenses 2.50% 3.20% 3.20%
==== ==== ====
<CAPTION>
Alliance Growth and
Income Fund (d) Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .47% .47% .47% After 1 year $ 516 $ 573 $ 173 $ 272 $ 172
Distribution (12b-1) fees .24% 1.00% 1.00% After 3 years $ 709 $ 736 $ 536 $ 533 $ 533
Other expenses .22% .23% .22% After 5 years $ 918 $ 923 $ 923 $ 918 $ 918
---- ---- ---- After 10 years $ 1,519 $1,804(b) $ 1,804(b) $ 1,998 $ 1,998
Total fund
operating expenses .93% 1.70% 1.69%
==== ==== ====
<CAPTION>
Alliance Balanced Shares Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .56% .56% .56% After 1 year $ 534 $ 589 $ 189 $ 289 $ 189
Distribution (12b-1) fees .26% 1.00% 1.00% After 3 years $ 766 $ 785 $ 585 $ 585 $ 585
Other expenses .30% .30% .30% After 5 years $ 1,016 $1,006 $ 1,006 $ 1,006 $ 1,006
---- ---- ---- After 10 years $ 1,730 $1,986(b) $ 1,986(b) $ 2,180 $ 2,180
Total fund
operating expenses 1.12% 1.86% 1.86%
==== ==== ====
<CAPTION>
Alliance Utility Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .75% .75% .75% After 1 year $ 571 $ 623 $ 223 $ 323 $ 223
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years (c) $ 925 $ 938 $ 738 $ 738 $ 738
Other expenses .68% .69% .69% After 5 years (c) $ 1,303 $1,279 $ 1,279 $ 1,279 $ 1,279
---- ---- ---- After 10 years $ 1,730 $1,986(b) $ 1,986(b) $ 2,180 $ 2,180
Total fund
operating expenses 1.73% 2.44% 2.44%
==== ==== ====
Waiver and/or expense
reimbursement (a) (.23)% (.24)% (.24)%
==== ==== ====
Net expenses 1.50% 2.20% 2.20%
==== ==== ====
<CAPTION>
Alliance Real Estate
Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .90% .90% .90% After 1 year $ 591 $ 644 $ 244 $ 343 $ 243
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 941 $ 951 $ 751 $ 748 $ 748
Other expenses .51% .51% .50% After 5 years $ 1,314 $1,285 $ 1,285 $ 1,280 $ 1,280
---- ---- ---- After 10 years $ 2,359 $2,573(b) $ 2,573(b) $ 2,736 $ 2,736
Total fund
operating expenses 1.71% 2.41% 2.40%
==== ==== ====
<CAPTION>
Alliance New Europe Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .92% .92% .92% After 1 year $ 586 $ 641 $ 241 $ 339 $ 239
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 923 $ 942 $ 742 $ 736 $ 736
Other expenses .43% .46% .44% After 5 years $ 1,284 $1,270 $ 1,270 $ 1,260 $ 1,260
---- ---- ---- After 10 years $ 2,296 $2,535(b) $ 2,535(b) $ 2,696 $ 2,696
Total fund
operating expenses 1.65% 2.38% 2.36%
==== ==== ====
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 26.
25
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
--------------------------------------------------------- ----------------------------------------------------------------------
Alliance Worldwide
Privatization Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 594 $ 650 $ 250 $ 347 $ 247
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 950 $ 970 $ 770 $ 761 $ 761
Other expenses .44% .47% .44% After 5 years $ 1,329 $1,316 $ 1,316 $ 1,301 $ 1,301
---- ---- ---- After 10 years $ 2,389 $2,626(b) $ 2,626(b) $ 2,776 $ 2,776
Total fund
operating expenses 1.74% 2.47% 2.44%
==== ==== ====
<CAPTION>
Alliance International
Premier Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 668 $ 724 $ 324 $ 424 $ 324
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years (c) $ 1,319 $1,333 $ 1,133 $ 1,131 $ 1,131
Other expenses 1.96% 1.93% 1.92% After 5 years (c) $ 1,993 $1,959 $ 1,959 $ 1,955 $ 1,955
---- ---- ---- After 10 years (c) $ 3,783 $3,959(b) $ 3,959(b) $ 4,094 $ 4,094
Total fund
operating expenses 3.26% 3.93% 3.92%
==== ==== ====
Waiver and/or expense
reimbursement (a) (.75)% (.72)% (.71)%
==== ==== ====
Net expenses 2.51% 3.21% 3.21%
==== ==== ====
<CAPTION>
Alliance Global Small Cap Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 621 $ 679 $ 279 $ 378 $ 278
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 1.032 $1,056 $ 856 $ 853 $ 853
Other expenses .72% .76% .75% After 5 years $ 1,467 $1,459 $ 1,459 $ 1,454 $ 1,454
---- ---- ---- After 10 years $ 2,673 $2,913(b) $ 2,913(b) $ 3,080 $ 3,080
Total fund
operating expenses 2.02% 2.76% 2.75%
==== ==== ====
<CAPTION>
Alliance International Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.03% 1.03% 1.03% After 1 year $ 601 $ 663 $ 263 $ 360 $ 260
Distribution (12b-1) fees .26% 1.00% 1.00% After 3 years (c) $ 998 $1,037 $ 837 $ 826 $ 826
Interest Expense .01% 0% 0% After 5 years (c) $ 1,420 $1,437 $ 1,437 $ 1,418 $ 1,418
Other expenses .65% .71% .67% After 10 years (c) $ 2,592 $2,871(b) $ 2,871(b) $ 3,022 $ 3,022
---- ---- ----
Total fund
operating expenses 1.95% 2.74% 2.70%
==== ==== ====
Waiver and/or expense
reimbursement (a) (.14)% (.14)% (.13)%
==== ==== ====
Net expenses 1.81% 2.60% 2.57%
==== ==== ====
<CAPTION>
Alliance Greater
China '97 Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 669 $ 725 $ 325 $ 425 $ 325
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years (c) $ 2,521 $2,584 $ 2,384 $ 2,262 $ 2,262
Other expenses 8.62% 8.72% 8.01% After 5 years (c) $ 4,196 $4,214 $ 4,214 $ 4,009 $ 4,009
------ ------ ------ After 10 years (c) $ 7,712 $7,858(b) $ 7,858(b) $ 7,668 $ 7,668
Total fund
operating expenses 9.92% 10.72% 10.01%
====== ====== ======
Waiver and/or expense
reimbursement (a) (7.40)% (7.50)% (6.79)%
====== ====== ======
Net expenses 2.52% 3.22% 3.22%
====== ====== ======
<CAPTION>
Alliance All-Asia
Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 663 $ 751 $ 351 $ 444 $ 344
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years (c) $ 1,156 $1,268 $ 1,068 $1,048 $1,048
Other expenses After 5 years (c) $ 1,675 $1,807 $ 1,807 $1,774 $1,774
Administration fees .15% .15% .15% After 10 years (c) $ 3,093 $3,526(b) $ 3,526(b) $3,694(b) $3,694(b)
Other operating expenses 1.48% 1.81% 1.74%
---- ---- ----
Total other expenses 1.63% 1.96% 1.89%
---- ---- ----
Total fund
operating expenses 2.93% 3.96% 3.89%
==== ==== ====
Waiver and/or expense
reimbursement (a) (.48)% (.48)% (.48)%
==== ==== ====
Net expenses 2.45% 3.48% 3.41%
==== ==== ====
</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. This
waiver extends through the Fund's current fiscal year and may be extended
by Alliance for additional one-year terms.
(b) Assumes Class B shares convert to Class A shares after eight years.
(c) These examples assume that Alliance's agreement to waive management fees
and/or bear Fund expenses is not extended beyond its initial period.
(d) The advisory fee for the Fund is proposed to be increased. See page 32.
26
<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 foreign 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 OR COUNTRIES
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.
European Company is a company (i) organized under the laws of a European country
that issues equity or debt securities that are traded principally on a European
stock exchange, or (ii) a company that derives 50% or more of its total revenues
or profits from businesses in Europe.
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").
Health Care Industries include the health care and health care-related
(including health sciences) industries. These industries are principally engaged
in the discovery, development, provision, production or distribution of products
and services that relate to the diagnosis, treatment and prevention of diseases
or other medical disorders. Companies in these fields include, but are not
limited to, pharmaceutical firms; companies that design, manufacture or sell
medical supplies, equipment and support services; companies that operate
hospitals and other health care facilities; and companies engaged in medical,
diagnostic, biochemical, biotechnological or other health sciences research and
development.
International 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.
Non-U.S. Company is an entity that (i) is organized under the laws of a foreign
country, (ii) has its principal place of business in a foreign country, and
(iii) issues equity or debt securities that are traded principally in a foreign
country. Securities issued by non-U.S. companies are known as foreign
securities.
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 BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
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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.
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
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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
Additional 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. Where an investment policy or restriction has a
percentage limitation, such limitation is applied at the time of
investment. Changes in the market value of securities in a Fund's
portfolio after they are purchased by the Fund will not cause the Fund to
be in violation of such limitation.
INVESTMENT OBJECTIVES AND PRINCIPAL 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 40-60 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.
On September 7, 2000 and September 26, 2000, the Board of Directors of Alliance
Premier Growth Fund, Inc. approved several proposals that will be presented to
stockholders at a special meeting that is planned for December 12, 2000. These
proposals include changes in certain of the Fund's fundamental investment
policies. These investment policy changes would: (1) permit the Fund to invest
up to 20% of its total assets on non-U.S. companies, up from the current 15%,
and remove the current definition of a "U.S. Company", thereby allowing the Fund
to rely on the standard definition of "Non-U.S. Company" used by other Alliance
Mutual Funds (as reflected in the Glossary), (2) enable the Fund to engage in
securities lending to the extent permitted by the 1940 Act, (3) revise the
fundamental policy regarding portfolio diversification to permit the Fund to
fully utilize the investment latitude for diversified funds contained in the
1940 Act, and (4) reclassify the Fund's fundamental policy regarding investments
in illiquid securities as a non-fundamental policy and revise that policy to
conform it to current SEC guidelines. If these proposals are adopted,
prospective investors will be notified by way of a supplement to this
Prospectus.
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
500 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
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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
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 Health Care Fund
Alliance Health Care Fund seeks capital appreciation and, secondarily, current
income. In seeking to achieve its investment objective, under normal
circumstances the Fund invests at least 65%, and normally substantially all, of
its total assets in securities issued by companies principally engaged in Health
Care Industries.
The Fund seeks investments in both new, smaller and less seasoned companies and
well-known, larger and established companies. Whenever possible, investments in
new, smaller or less seasoned companies will be made with a view to benefiting
from the development and growth of new products and markets in Health Care
Industries. Investments in these companies may offer more reward but may also
entail more risk than is generally true of larger, established companies.
While the Fund anticipates that a substantial portion of its portfolio will be
invested in the securities of U.S. companies, the Fund is not limited to
investing in such securities. Many companies in the forefront of world medical
technology are located outside the United States, primarily in Japan and Europe.
Accordingly, the Fund may invest up to 40% of its total assets in foreign
securities, including up to 25% in issuers located in any one foreign country.
However, no more than 5% of the Fund's total net assets may be invested in
securities of issuers located in emerging market countries.
Although the payment of dividends will be a factor considered in the selection
of investments for the Fund, the Fund seeks primarily to take advantage of
capital appreciation opportunities identified by Alliance in emerging
technologies and services in Health Care Industries by investing in companies
that are expected to profit from the development of new products and services
for these industries. Examples of such emerging technologies and services
include:
o New methods for administering drugs to a patient, such as surgical
implants and skin patches that enhance the effectiveness of the drugs and
may reduce patient side effects by delivering the drugs in precise
quantities over a prolonged time period or by evading natural body defense
mechanisms which delay the effect of the drugs;
o Developments in medical imaging such as the application of computer
technology to the output of conventional x-ray systems that allow for
cross-sectional images of soft tissue and organs (CT scanning) and
continuous imaging (digital radiography) as well as more advanced nuclear
medicine, ultrasound and magnetic resonance imaging (MRI);
o Advances in minimally invasive surgical techniques, such as angioplasty
and related technologies for diseased blood vessels and laser beams for
the eye, general and cardiovascular surgery, which provide greater
effectiveness, lower cost and improved patient safety than more
traditional surgical techniques;
o New therapeutic pharmaceutical compounds that control or alleviate
disease, including prescription and non-prescription drugs and treatment
regimes for conditions not controlled, alleviated or treatable by existing
medications or treatments and chemical or biological pharmaceuticals for
use in diagnostic testing;
o Advances in molecular biology such as signal transduction, cell adhesion
and cell to cell communication which have facilitated a rapid increase in
new classes of drugs. These have included monoclonal antibodies,
bio-engineered proteins and small molecules from novel synthesis and
screening techniques;
o Genomics, which allows scientists to better understand the causes of human
diseases, and in some cases has led to the manufacture of proteins for use
as therapeutic drugs;
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o Gene chips and other equipment that provides for the screening, diagnosis
and treatment of diseases;
o The introduction of large scale business efficiencies to the management of
nursing homes, acute and specialty hospitals as well as free-standing
outpatient facilities, surgical centers and rehabilitation centers;
o Adaptations of microprocessors for use by pharmaceutical manufacturers,
hospitals, doctors and others in Health Care Industries to increase
distribution efficiency;
o Health care delivery organizations that combine cost effectiveness with
high quality medical care and help address the rising cost of health care;
and
o The sale of prescription drugs and other pharmaceuticals to consumers via
the Internet.
The Fund's portfolio may also include companies that provide traditional
products and services currently in use in Health Care Industries and that are
likely to benefit from any increases in the general demand for such products and
services. The following are examples of the products and services that may be
offered by companies in Health Care Industries:
o Drugs or Pharmaceuticals, including both ethical and proprietary drugs,
drug administration products and pharmaceutical components used in
diagnostic testing;
o Medical Equipment and Supplies, including equipment and supplies used by
health service companies and individual practitioners, such as electronic
equipment used for diagnosis and treatment, surgical and medical
instruments and other products designed especially for Health Care
Industries;
o Health Care Services, including the services of clinical testing
laboratories, hospitals, nursing homes, clinics, centers for convalescence
and rehabilitation, and products and services for home health care; and
o Medical Research, including scientific research to develop drugs,
processes or technologies with possible commercial application in Health
Care Industries.
The Fund also may:
o purchase or sell forward foreign currency exchange contracts;
o enter into forward commitments for the purchase or sale of securities;
o make secured loans of portfolio securities of up to 20% of its total
assets; and
o enter into repurchase agreements.
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 20% 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 normally will 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 25% of its total assets in foreign securities.
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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.
On September 7, 2000, the Board of Directors of Alliance Quasar Fund, Inc.
approved several proposals that will be presented to stockholders at a special
meeting that is planned for December 12, 2000. These proposals include changes
in certain of the Fund's fundamental investment policies. These investment
policy changes would: (1) enable the Fund to engage in securities lending to the
extent permitted by the 1940 Act, (2) permit the Fund to engage in financial
forward and futures contracts and options thereon, (3) remove the fundamental
policy which restricts the Fund's ability to invest in securities of companies
(including predecessors) with less than three years of continuous operation, (4)
revise the fundamental policy regarding portfolio diversification to permit the
Fund to fully utilize the investment latitude for diversified funds contained in
the 1940 Act, and (5) reclassify the Fund's fundamental policy regarding
investments in illiquid securities as a non-fundamental policy and revise that
policy to conform it to current SEC guidelines. If these proposals are adopted,
prospective investors will be notified by way of a supplement to this
Prospectus.
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 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; and
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.
Alliance Disciplined Value Fund
Alliance Disciplined Value Fund seeks long-term growth of capital through the
application of a disciplined value-oriented
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investment process. The Fund invests primarily in the equity securities of U.S.
companies that Alliance believes are undervalued. Alliance believes that, over
time, a company's stock price will come to reflect its intrinsic economic value.
Alliance uses a disciplined investment process to evaluate the companies in
Alliance's extensive research universe. Through this process, Alliance seeks to
identify the stocks of companies that offer the best combination of value and
potential for price appreciation.
Alliance depends heavily upon the fundamental analysis and research of its large
internal research staff in making investment decisions for the Fund. The
research staff follows a primary research universe of approximately 500 largely
domestic companies that are significant participants in their particular
industries. As one of the largest multi-national investment firms, Alliance has
access to considerable information concerning all of the companies followed, an
in-depth understanding of the products, services, markets and competition of
these companies and a good knowledge of the managements of most of the companies
in its research universe. Alliance's analysts prepare their own earnings
estimates and financial models for each company followed.
The disciplined value investment process is grounded in Alliance's research
capabilities. Through its research, Alliance identifies equity securities whose
current market prices do not reflect what Alliance considers to be their
intrinsic economic value. In determining a company's intrinsic economic value,
Alliance takes into account many factors it believes bear on the ability of the
company to perform in the future, including earnings growth, prospective cash
flows, dividend growth and growth in book value. Alliance then ranks, at least
weekly, each of the companies in its research universe in the relative order of
disparity between their intrinsic economic values and their stock prices, with
companies with the greatest disparities receiving the highest rankings (i.e.,
being considered the most undervalued). Alliance anticipates that, normally,
about 75 companies will be represented in the Fund's portfolio, with
substantially all of those companies ranking in the top three deciles of
Alliance's valuation model. Not every security deemed to be undervalued is
subsequently purchased by the Fund; undervalued securities are further analyzed
before being added to the Fund's portfolio. Alliance will use its research
capability to help best evaluate the potential rewards and risks of investing in
competing undervalued securities. It is the interaction between Alliance's
research capabilities and the disciplined value model's perception of value that
determines which securities will be purchased or sold by the Fund.
Alliance recognizes that the perception of what is a "value" stock is relative
and the factors considered in determining whether a stock is a "value" stock
may, and often will, have differing relative significance in different phases of
an economic cycle. Also, at different times, the Fund may be attracted to
investments in companies with different market capitalizations (i.e., large, mid
or small capitalization) or companies engaged in particular types of business
(e.g., banks and other financial institutions), although the Fund does not
intend to concentrate in any particular industries or businesses. 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.
Although the Fund intends to invest primarily in the equity securities of U.S.
companies, the Fund may also invest up to 15% of its assets in securities of
foreign securities.
The Fund also may:
o invest in convertible securities and rights and warrants;
o for hedging purposes, enter into forward commitments, and purchase and
sell futures contracts and options on securities, as well as options on
securities indices and options on futures contracts; and
o for hedging purposes, enter into currency swaps, forward foreign currency
exchange contracts and options on foreign currencies.
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.
On July 19-20, 2000, the Board of Directors of Alliance Growth and Income Fund
approved several proposals that will be presented to the Fund's stockholders at
a special stockholders meeting that is planned for November 2, 2000. These
proposals include a proposed amendment to the Fund's investment advisory
agreement to increase the advisory fee payable by the Fund to Alliance Capital
Management L.P. (the "Adviser") and revise the current advisory fee breakpoint
schedule. If stockholders approve the proposal, at the Fund's current size, the
effective advisory fee would increase from .47 of 1% to .624 of 1% and the
advisory fee breakpoint schedule would change. The new advisory fee would become
effective promptly following such approval. In addition, the Fund will be
requesting stockholder approval of, among other things, changes in two of the
Fund's fundamental investment policies. These investment policy changes would
(1) enable the Fund to engage in securities lending to the extent permitted by
the 1940 Act and (2) revise the Fund's fundamental investment policy regarding
diversification to permit the Fund to fully utilize the investment latitude for
diversified funds established by the 1940 Act. If
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these proposals are adopted, prospective investors will be notified by way of a
supplement to this prospectus.
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 not purchase a security if as a result less than 25% of its total assets
will be in fixed income senior 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.
On September 7, 2000, the Board of Directors of Alliance Balanced Shares, Inc.
approved several proposals that will be presented to stockholders at a special
meeting that is planned for December 12, 2000. These proposals include changes
in certain of the Fund's fundamental investment policies. These investment
policy changes would:1) enable the Fund to engage in securities lending to the
extent permitted by the 1940 Act, (2) revise the fundamental policy regarding
portfolio diversification to permit the Fund to fully utilize the investment
latitude for diversified funds contained in the 1940 Act, (3) permit the Fund to
engage in financial forward and futures contracts and options thereon, and (4)
reclassify the Fund's fundamental policy regarding investments in illiquid
securities as a non-fundamental policy. If these proposals are adopted,
prospective investors will be notified by way of a supplement to this
Prospectus.
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.
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 maintain 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;
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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 respective governments than utility companies located in the
U.S. As in the U.S., foreign 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 wil 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
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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
135 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 22,000
properties owned by these 135 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
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;
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o enter into standby commitment agreements;
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.
The Fund expects that it will invest primarily in the more established and
liquid markets in Europe. However, the Fund may also invest in the
lesser-developed markets in Europe including those countries in Southern and
Eastern Europe, as well as the former communist countries in the Soviet Union.
The Fund does not expect to invest more than 20% of its total assets in these
developing markets under normal circumstances or more than 10% of its total
assets in issuers based in any one of these developing countries.
In managing the Fund, Alliance utilizes a disciplined approach to invest on a
bottom-up basis in those companies exhibiting the best available combination of
sustainable fundamental growth at a reasonable price. Alliance's approach
emphasizes proprietary qualitative and quantitative inputs provided by its
in-house analysts. Internal analysis focuses primarily on large to upper-medium
capitalization stocks (those with a market value of $3 billion and above).
Country and industry exposures are by-products of the stock selection process.
Alliance does not actively manage currency exposures for this Fund but may hedge
underlying exposures back to U.S. Dollars when conditions are perceived to be
extreme.
Stock selection focuses on companies in growth industries that exhibit
above-average growth based on a competitive or sustainable advantage based on
brand, technology, or market share. A stock is typically sold when its relative
fundamentals are no longer as attractive as other investment opportunities
available to the Fund. This may be a function of the stock having achieved its
fair market value, deterioration in fundamentals relative to Alliance's
expectations, or because the management team looses confidence in company
management.
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's investment policies do not require that the Fund concentrate its
investments in any single country. However, these policies also do not prevent
the Fund from concentrating its investments in a single country and in recent
years the Fund has invested more than 25% of its total assets in the United
Kingdom The Fund may invest without limit in any single European 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;
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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 foreign 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 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 maintain no more than 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.
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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 international 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 40 companies will be represented in the Fund's
portfolio, and the 30 most highly regarded of these companies usually will
constitute approximately 70%, and often more, 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 that the market capitalization of the companies represented in
the Fund's portfolio will generally be in excess of $10 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 the Alliance 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 of the 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 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 35% of its total assets in each of the United Kingdom and Japan and
up to 25% of its total assets in issuers in each of Canada, France, Germany,
Italy, The Netherlands and Switzerland. 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 or
country, the Fund may be subject to any special risks associated with that
region or 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. 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;
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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;
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 capitalizations 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 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 international 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 international 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
international 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
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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 foreign 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 slowed during 1999, as expected. 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.
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 the 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.
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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 may differ significantly 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
more of 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-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.
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The Fund will invest primarily in investment grade debt securities, but may
maintain not more than 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 asset value. The Fund's investments in debt securities have interest rate
and credit risk.
DESCRIPTION OF ADDITIONAL 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.
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
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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 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 Health Care Fund,
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.
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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 Health Care Fund, Alliance International Fund, 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. Except with respect to
Alliance Quasar Fund, 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
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.
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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 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,
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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 that 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
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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 Funds 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, Alliance Growth and Income Fund, and Alliance Disciplined
Value 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, Alliance Growth and Income Fund, and
Alliance Disciplined Value 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, 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
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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 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
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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 Disciplined Value Fund and Alliance Global Small Cap 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.
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,
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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 New Europe 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 and Alliance
Greater China '97 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.
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
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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, and
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 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
51
<PAGE>
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.
--------------------------------------------------------------------------------
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 June 30, 2000
totaling more than $388 billion (of which more than $185 billion represented
assets of investment companies). As of June 30, 2000, Alliance managed
retirement assets for many of the largest public and private employee benefit
plans (including 29 of the nation's FORTUNE 100 companies), for public employee
retirement funds in 33 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 52 registered
investment companies managed by Alliance, comprising 122 separate investment
portfolios, currently have more than 6.1 million shareholder accounts.
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:
<TABLE>
<CAPTION>
Fee as a percentage of Fiscal
Fund average daily net assets* Year Ending
---- ------------------------- -----------
<S> <C> <C>
Alliance Premier Growth Fund .95% 11/30/99
Alliance Health Care Fund .95 6/30/00
Alliance Growth Fund .68 10/31/99
Alliance Technology Fund 1.10 11/30/99
Alliance Quasar Fund 1.01 9/30/99
The Alliance Fund .68 11/30/99
Alliance Disciplined Value Fund .75** 11/30/00
Alliance Growth and Income Fund .47 10/31/99
Alliance Balanced Shares Fund .56 7/31/00
Alliance Utility Income Fund .51 11/30/99
Alliance Real Estate Investment Fund .90 8/31/00
Alliance New Europe Fund .92 7/31/00
Alliance Worldwide Privatization Fund 1.00 6/30/00
Alliance International Premier Growth Fund .71 11/30/99
Alliance Global Small Cap Fund 1.00 7/31/00
Alliance International Fund .87 6/30/00
Alliance Greater China '97 Fund -0- 7/31/00
Alliance All-Asia Investment Fund .65 10/31/99
</TABLE>
--------------------------------------------------------------------------------
* 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.
** Prior to any waiver by Alliance. See "Fee Table" at the beginning of the
Prospectus.
52
<PAGE>
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 Managers
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 *
Growth Fund inception--Vice Chairman
of Alliance Capital
Management Corporation
(ACMC)**
Alliance Health Care Norman Fidel; since inception *
Fund --Senior Vice President
of ACMC
Alliance Growth Tyler Smith; since inception *
Fund --Senior Vice President
of ACMC
Alliance Technology Peter Anastos; since 1992 *
Fund --Senior Vice President
of ACMC
Gerald T. Malone; since 1992 *
--Senior Vice President
of ACMC
Alliance Quasar Bruce Aranow; since 1999 Associated with
Fund --Vice President of ACMC Alliance since 1999;
prior thereto, Vice
President at Invesco
since 1998, prior
thereto, Vice President
at LGT Asset Management
since 1996.
The Alliance Fund Alden M. Stewart; since 1997 *
--(see above)
Alliance Disciplined Paul Rissman; since inception *
Value Fund --Senior Vice President
of ACMC
Frank Caruso; since inception *
--Senior Vice President
of ACMC
Alliance Growth and Paul Rissman; since 1994 *
Income Fund --(see above)
Alliance Balanced Paul Rissman; since 1997 *
Shares --(see above)
Alliance Utility Paul Rissman; since 1996 *
Income Fund --(see above)
Alliance Real Estate Daniel G. Pine; since 1996 *
Investment Fund --Senior Vice President
of ACMC
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 *
Europe Fund --Senior Vice President
of ACMC
Alliance Worldwide Mark H. Breedon; since *
Privatization Fund inception--Vice President
of ACMC and Director and
Senior Vice President of
Alliance Capital Limited***
Alliance International Alfred Harrison; since 1998 *
Premier Growth --(see above)
Fund
Thomas Kamp; since 1998 *
--Senior Vice President
of ACMC
Alliance Global Bruce Aranow; since 1999 (see above)
Small Cap Fund --(see above)
Mark H. Breedon; since 1998 *
--(see above)
Alliance Nicholas D.P. Carn; *
International Fund since 1998
--Senior Vice President
of ACMC
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.
Alliance All-Asia Hiroshi Motoki; since 1998 *
Investment Fund --Senior Vice President
of ACMC and director of
Japanese/Asian Equity
research
--------------------------------------------------------------------------------
* Unless indicated otherwise, persons associated with Alliance have been
employed in a substantially similar capacity to their current position.
** 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
53
<PAGE>
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.
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for the period during which Mr. Harrison has managed the
Historical Portfolios as an employee of Alliance. As of September 30, 2000,
the assets in the Historical Portfolios totaled approximately $14.3 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 under
Commission Rule 12b-1 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 Large Cap Growth Fund Index is prepared by Lipper, Inc. and
represents a composite index of the investment performance for the 30 largest
large capitalization growth mutual funds. The composite investment performance
of the Lipper Large Cap 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
54
<PAGE>
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>
Lipper
Russell Large Cap
Premier Historical S&P500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
<S> <C> <C> <C> <C> <C>
1/1/00-9/30/00*** ........................ (8.74)% (4.55)% (1.39)% (1.37)% (1.44)%
Year ended December:
1999*** .................................. 23.51 29.67 21.03 33.16 34.82
1998*** .................................. 42.97 52.16 28.60 38.71 36.47
1997*** .................................. 27.05 34.64 33.36 30.49 27.59
1996*** .................................. 18.84 22.06 22.96 23.12 20.56
1995*** .................................. 40.66 39.83 37.58 37.19 34.92
1994 ..................................... (9.78) (4.82) 1.32 2.66 (0.82)
1993 ..................................... 5.35 10.54 10.08 2.90 10.66
1992 ..................................... -- 12.18 7.62 5.00 6.89
1991 ..................................... -- 38.91 30.47 41.16 37.34
1990 ..................................... -- (1.57) (3.10) (0.26) (1.82)
1989 ..................................... -- 38.80 31.69 35.92 32.30
1988 ..................................... -- 10.88 16.61 11.27 10.84
1987 ..................................... -- 8.49 5.25 5.31 3.33
1986 ..................................... -- 27.40 18.67 15.36 16.75
1985 ..................................... -- 37.41 31.73 32.85 32.85
1984 ..................................... -- (3.31) 6.27 (.95) (4.25)
1983 ..................................... -- 20.80 22.56 15.98 22.63
1982 ..................................... -- 28.02 21.55 20.46 28.91
1981 ..................................... -- (1.09) (4.92) (11.31) (0.06)
1980 ..................................... -- 50.73 32.50 39.57 47.73
1979 ..................................... -- 30.76 18.61 23.91 29.90
Cumulative total
return for the period
January 1, 1979 to
September 30, 2000 ....................... -- 5850% 3032% 3148% 3961%
</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.
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 2000 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>
Lipper
Russell Large Cap
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
<S> <C> <C> <C> <C> <C>
One year ...................................... 9.93% 15.27% 13.27% 23.43% 23.73%
Three years ................................... 19.61 22.74 16.44 22.74 21.95
Five years .................................... 23.84 25.65 21.68 25.07 23.41
Ten years ..................................... 21.70* 23.25 19.42 21.44 20.75
Since January 1, 1979 ......................... -- 20.67 17.16 17.36 18.57
</TABLE>
--------------------------------------------------------------------------------
* Since inception on 9/28/92
Performance of a Similarly Managed Fund. Alliance is the investment adviser of
an investment company organized and operated under the laws of the Grand Duchy
of Luxembourg, ACM International Health Care Fund (the "ACM Fund"), that has
substantially the same investment objective and policies as those of Alliance
Health Care Fund. The ACM Fund has been managed in accordance with substantially
the same investment strategies and techniques as are employed with respect to
the Alliance Health Care Fund.
Norman Fidel, the portfolio manager of Alliance Health Care Fund, is also the
person who has been primarily responsible for the day-to-day management of the
ACM Fund since 1988. Mr. Fidel manages approximately $2 billion of Health Care
Industries assets, including approximately $646 million of assets in the
ACM Fund as of September 30, 2000.
The ACM Fund is not subject to certain limitations, diversification requirements
and other restrictions imposed under the 1940 Act and the Code to which Alliance
Health Care Fund, as a registered investment company, is subject and which, if
applicable to the ACM Fund, may have adversely affected the performance results
of the ACM Fund.
Set forth below are performance data provided by Alliance relating to the Class
AX shares of the ACM Fund since 1988, when Mr. Fidel began managing that fund.
Performance data are shown annually and cumulatively through September 30, 2000.
The performance data are net of all fees imposed by the ACM Fund. The
performance data have not been adjusted to reflect the fees that are payable by
Alliance Health Care Fund, which, at comparable asset levels, may be lower than
the fees imposed on the ACM Fund and may result in a lower expense ratio for
Alliance Health Care Fund. Expenses associated with the distribution of Class A,
Class B and Class C shares of Alliance Health Care Fund in accordance with the
plan adopted by Alliance Health Care Fund's Board of Directors under Commission
Rule 12b-1 also are not reflected in the data below relating to the ACM Fund.
See "Fees and Expenses of the Funds." The performance data have also not been
adjusted for corporate or individual taxes, if any, payable by the ACM Fund
shareholders.
The following performance data are provided solely to illustrate Mr. Fidel's
performance in managing the ACM Fund. Investors should not rely on the following
performance data of the ACM Fund as an indication of future performance of the
Alliance
55
<PAGE>
Health Care Fund. The investment performance for the periods presented may not
be indicative of future rates of return.
ACM International Health Care Fund
Total Returns
-------------
1988.................................................... 21.82%
1989.................................................... 46.75%
1990.................................................... 25.96%
1991.................................................... 83.07%
1992.................................................... -10.46%
1993.................................................... -1.38%
1994.................................................... 13.84%
1995.................................................... 46.49%
1996.................................................... 2.18%
1997.................................................... 23.07%
1998.................................................... 24.29%
1999.................................................... -3.03%
2000*................................................... 27.00%
Average Annual Total Return
(for periods ended 9/30/00)
---------------------------
One year................................................ 39.66%
Five years.............................................. 17.07%
Ten years............................................... 20.01%
Cumulative Total Return of the ACM Fund from 12/31/87 to 9/30/00: 1068%
--------------------------------------------------------------------------------
* Through September 30, 2000 (unannualized)
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 received in proper form 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 Fund's 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.
56
<PAGE>
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, 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.
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.
Distributions of long-term capital gains generally will 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 credit or
deduction for all or a portion of 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
57
<PAGE>
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.
--------------------------------------------------------------------------------
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 on 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
58
<PAGE>
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.
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.
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
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). Except as otherwise indicated,
this information has been audited by PricewaterhouseCoopers LLP, the independent
accountants for The Alliance Fund, Alliance Growth Fund, Alliance Premier Growth
Fund, Alliance Health Care 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 auditors 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 Greater China '97 Fund,
and Alliance Real Estate Investment Fund, whose reports, along with each Fund's
financial statements, are included in each Fund's annual report, which is
available upon request.
59
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-------------------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
Alliance Premier Growth Fund
Class A
12/1/99 to 5/31/00+++ . $ 35.82 $ (.10)(b) $ 2.71 $ 2.61
Year ended 11/30/99 ... 27.50 (.28)(b) 9.21 8.93
Year ended 11/30/98 ... 22.00 (.15)(b) 7.11 6.96
Year ended 11/30/97 ... 17.98 (.10)(b) 5.20 5.10
Year ended 11/30/96 ... 16.09 (.04)(b) 3.20 3.16
Year ended 11/30/95 ... 11.41 (.03) 5.38 5.35
Class B
12/1/99 to 5/31/00+++ . $ 34.05 $ (.21)(b) $ 2.56 $ 2.35
Year ended 11/30/99 ... 26.33 (.48)(b) 8.81 8.33
Year ended 11/30/98 ... 21.26 (.30)(b) 6.83 6.53
Year ended 11/30/97 ... 17.52 (.23)(b) 5.05 4.82
Year ended 11/30/96 ... 15.81 (.14)(b) 3.12 2.98
Year ended 11/30/95 ... 11.29 (.11) 5.30 5.19
Class C
12/1/99 to 5/31/00+++ . $ 34.09 $ (.21)(b) $ 2.57 $ 2.36
Year ended 11/30/99 ... 26.36 (.49)(b) 8.83 8.34
Year ended 11/30/98 ... 21.29 (.31)(b) 6.84 6.53
Year ended 11/30/97 ... 17.54 (.24)(b) 5.07 4.83
Year ended 11/30/96 ... 15.82 (.14)(b) 3.13 2.99
Year ended 11/30/95 ... 11.30 (.08) 5.27 5.19
Alliance Health Care Fund
Class A
8/27/99+ to 6/30/00 ... $ 10.00 $ (.06)(b)(c) $ 2.46 $ 2.40
Class B
8/27/99+ to 6/30/00 ... $ 10.00 $ (.13)(b)(c) $ 2.46 $ 2.33
Class C
8/27/99+ to 6/30/00 ... $ 10.00 $ (.12)(b)(c) $ 2.45 $ 2.33
Alliance Growth Fund
Class A
11/1/99 to 4/30/00+++ . $ 56.32 $ (.08)(b) $ 6.76 $ 6.68
Year ended 10/31/99 ... 47.17 (.15)(b) 13.01 12.86
Year ended 10/31/98 ... 43.95 (.05)(b) 6.18 6.13
Year ended 10/31/97 ... 34.91 (.10)(b) 10.17 10.07
Year ended 10/31/96 ... 29.48 .05 6.20 6.25
Year ended 10/31/95 ... 25.08 .12 4.80 4.92
Class B
11/1/99 to 4/30/00+++ . $ 44.40 $ (.21)(b) $ 5.26 $ 5.05
Year ended 10/31/99 ... 38.15 (.42)(b) 10.38 9.96
Year ended 10/31/98 ... 36.31 (.31)(b) 5.06 4.75
Year ended 10/31/97 ... 29.21 (.31)(b) 8.44 8.13
Year ended 10/31/96 ... 24.78 (.12) 5.18 5.06
Year ended 10/31/95 ... 21.21 (.02) 4.01 3.99
Class C
11/1/99 to 4/30/00+++ . $ 44.42 $ (.21)(b) $ 5.27 $ 5.06
Year ended 10/31/99 ... 38.17 (.42)(b) 10.38 9.96
Year ended 10/31/98 ... 36.33 (.31)(b) 5.06 4.75
Year ended 10/31/97 ... 29.22 (.31)(b) 8.45 8.14
Year ended 10/31/96 ... 24.79 (.12) 5.18 5.06
Year ended 10/31/95 ... 21.22 (.03) 4.02 3.99
Alliance Technology Fund
Class A
12/1/99 to 5/31/00+++ . $ 111.46 $ (.63)(b) $ 25.01 $ 24.38
Year ended 11/30/99 ... 68.60 (.99)(b) 49.02 48.03
Year ended 11/30/98 ... 54.44 (.68)(b) 15.42 14.74
Year ended 11/30/97 ... 51.15 (.51)(b) 4.22 3.71
Year ended 11/30/96 ... 46.64 (.39)(b) 7.28 6.89
Year ended 11/30/95 ... 31.98 (.30)(b) 18.13 17.83
Class B
12/1/99 to 5/31/00+++ . $ 105.73 $ (1.05)(b) $ 23.69 $ 22.64
Year ended 11/30/99 ... 65.75 (1.54)(b) 46.69 45.15
Year ended 11/30/98 ... 52.58 (1.08)(b) 14.83 13.75
Year ended 11/30/97 ... 49.76 (.88)(b) 4.12 3.24
Year ended 11/30/96 ... 45.76 (.70)(b) 7.08 6.38
Year ended 11/30/95 ... 31.61 (.60)(b) 17.92 17.32
Class C
12/1/99 to 5/31/00+++ . $ 105.69 $ (1.06)(b) $ 23.69 $ 22.63
Year ended 11/30/99 ... 65.74 (1.57)(b) 46.69 45.12
Year ended 11/30/98 ... 52.57 (1.08)(b) 14.83 13.75
Year ended 11/30/97 ... 49.76 (.88)(b) 4.11 3.23
Year ended 11/30/96 ... 45.77 (.70)(b) 7.07 6.37
Year ended 11/30/95 ... 31.61 (.58)(b) 17.91 17.33
<CAPTION>
Less Dividends and Distributions
---------------------------------------------------------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ----------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Premier Growth Fund
Class A
12/1/99 to 5/31/00+++ . $ 0.00 $ 0.00 $ (2.36) $ (2.36) $ 36.07
Year ended 11/30/99 ... 0.00 0.00 (.61) (.61) 35.82
Year ended 11/30/98 ... 0.00 0.00 (1.46) (1.46) 27.50
Year ended 11/30/97 ... 0.00 0.00 (1.08) (1.08) 22.00
Year ended 11/30/96 ... 0.00 0.00 (1.27) (1.27) 17.98
Year ended 11/30/95 ... 0.00 0.00 (.67) (.67) 16.09
Class B
12/1/99 to 5/31/00+++ . $ 0.00 $ 0.00 $ (2.36) $ (2.36) $ 34.04
Year ended 11/30/99 ... 0.00 0.00 (.61) (.61) 34.05
Year ended 11/30/98 ... 0.00 0.00 (1.46) (1.46) 26.33
Year ended 11/30/97 ... 0.00 0.00 (1.08) (1.08) 21.26
Year ended 11/30/96 ... 0.00 0.00 (1.27) (1.27) 17.52
Year ended 11/30/95 ... 0.00 0.00 (.67) (.67) 15.81
Class C
12/1/99 to 5/31/00+++ . $ 0.00 $ 0.00 $ (2.36) $ (2.36) $ 34.09
Year ended 11/30/99 ... 0.00 0.00 (.61) (.61) 34.09
Year ended 11/30/98 ... 0.00 0.00 (1.46) (1.46) 26.36
Year ended 11/30/97 ... 0.00 0.00 (1.08) (1.08) 21.29
Year ended 11/30/96 ... 0.00 0.00 (1.27) (1.27) 17.54
Year ended 11/30/95 ... 0.00 0.00 (.67) (.67) 15.82
Alliance Health Care Fund
Class A
8/27/99+ to 6/30/00 ... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 12.40
Class B
8/27/99+ to 6/30/00 ... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 12.33
Class C
8/27/99+ to 6/30/00 ... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 12.33
Alliance Growth Fund
Class A
11/1/99 to 4/30/00+++ . $ 0.00 $ 0.00 $ (7.44) $ (7.44) $ 55.56
Year ended 10/31/99 ... 0.00 0.00 (3.71) (3.71) 56.32
Year ended 10/31/98 ... 0.00 0.00 (2.91) (2.91) 47.17
Year ended 10/31/97 ... 0.00 0.00 (1.03) (1.03) 43.95
Year ended 10/31/96 ... (.19) 0.00 (.63) (.82) 34.91
Year ended 10/31/95 ... (.11) 0.00 (.41) (.52) 29.48
Class B
11/1/99 to 4/30/00+++ . $ 0.00 $ 0.00 $ (7.44) $ (7.44) $ 42.01
Year ended 10/31/99 ... 0.00 0.00 (3.71) (3.71) 44.40
Year ended 10/31/98 ... 0.00 0.00 (2.91) (2.91) 38.15
Year ended 10/31/97 ... 0.00 0.00 (1.03) (1.03) 36.31
Year ended 10/31/96 ... 0.00 0.00 (.63) (.63) 29.21
Year ended 10/31/95 ... (.01) 0.00 (.41) (.42) 24.78
Class C
11/1/99 to 4/30/00+++ . $ 0.00 $ 0.00 $ (7.44) $ (7.44) $ 42.04
Year ended 10/31/99 ... 0.00 0.00 (3.71) (3.71) 44.42
Year ended 10/31/98 ... 0.00 0.00 (2.91) (2.91) 38.17
Year ended 10/31/97 ... 0.00 0.00 (1.03) (1.03) 36.33
Year ended 10/31/96 ... 0.00 0.00 (.63) (.63) 29.22
Year ended 10/31/95 ... (.01) 0.00 (.41) (.42) 24.79
Alliance Technology Fund
Class A
12/1/99 to 5/31/00+++ . $ 0.00 $ 0.00 $ (4.04) $ (4.04) $ 131.80
Year ended 11/30/99 ... 0.00 0.00 (5.17) (5.17) 111.46
Year ended 11/30/98 ... 0.00 0.00 (.58) (.58) 68.60
Year ended 11/30/97 ... 0.00 0.00 (.42) (.42) 54.44
Year ended 11/30/96 ... 0.00 0.00 (2.38) (2.38) 51.15
Year ended 11/30/95 ... 0.00 0.00 (3.17) (3.17) 46.64
Class B
12/1/99 to 5/31/00+++ . $ 0.00 $ 0.00 $ (4.04) $ (4.04) $ 124.33
Year ended 11/30/99 ... 0.00 0.00 (5.17) (5.17) 105.73
Year ended 11/30/98 ... 0.00 0.00 (.58) (.58) 65.75
Year ended 11/30/97 ... 0.00 0.00 (.42) (.42) 52.58
Year ended 11/30/96 ... 0.00 0.00 (2.38) (2.38) 49.76
Year ended 11/30/95 ... 0.00 0.00 (3.17) (3.17) 45.76
Class C
12/1/99 to 5/31/00+++ . $ 0.00 $ 0.00 $ (4.04) $ (4.04) $ 124.28
Year ended 11/30/99 ... 0.00 0.00 (5.17) (5.17) 105.69
Year ended 11/30/98 ... 0.00 0.00 (.58) (.58) 65.74
Year ended 11/30/97 ... 0.00 0.00 (.42) (.42) 52.57
Year ended 11/30/96 ... 0.00 0.00 (2.38) (2.38) 49.76
Year ended 11/30/95 ... 0.00 0.00 (3.17) (3.17) 45.77
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss)
Total End of Period to Average to Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------ -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Premier Growth Fund
Class A
12/1/99 to 5/31/00+++ . 7.67% $5,432,865 1.39%* (.53)%* 68%
Year ended 11/30/99 ... 33.13% 4,285,490 1.50 (.85) 75
Year ended 11/30/98 ... 33.94 1,418,262 1.59(f) (.59) 82
Year ended 11/30/97 ... 30.46 373,099 1.57 (.52) 76
Year ended 11/30/96 ... 21.52 172,870 1.65 (.27) 95
Year ended 11/30/95 ... 49.95 72,366 1.75 (.28) 114
Class B
12/1/99 to 5/31/00+++ . 7.29% $9,915,193 2.08%* (1.22)%* 68%
Year ended 11/30/99 ... 32.30 8,161,471 2.18 (1.53) 75
Year ended 11/30/98 ... 33.04 2,799,288 2.28(f) (1.27) 82
Year ended 11/30/97 ... 29.62 858,449 2.25 (1.20) 76
Year ended 11/30/96 ... 20.70 404,137 2.32 (.94) 95
Year ended 11/30/95 ... 49.01 238,088 2.43 (.95) 114
Class C
12/1/99 to 5/31/00+++ . 7.30% $3,720,469 2.08%* (1.22)%* 68%
Year ended 11/30/99 ... 32.31 2,965,440 2.18 (1.53) 75
Year ended 11/30/98 ... 32.99 862,193 2.28(f) (1.30) 82
Year ended 11/30/97 ... 29.64 177,923 2.24 (1.22) 76
Year ended 11/30/96 ... 20.76 60,194 2.32 (.94) 95
Year ended 11/30/95 ... 48.96 20,679 2.42 (.97) 114
Alliance Health Care Fund
Class A
8/27/99+ to 6/30/00 ... 24.00% $ 55,412 1.92%*(d) (.67)%* 26%
Class B
8/27/99+ to 6/30/00 ... 23.30% $ 144,659 2.64%*(d) (1.40)%* 26%
Class C
8/27/99+ to 6/30/00 ... 23.30% $ 44,582 2.63%*(d) (1.38)%* 26%
Alliance Growth Fund
Class A
11/1/99 to 4/30/00+++ . 12.31% $1,677,919 1.13%* (.28)%* 38%
Year ended 10/31/99 ... 28.69 1,441,962 1.18 (.28) 62
Year ended 10/31/98 ... 14.56 1,008,093 1.22(f) (.11) 61
Year ended 10/31/97 ... 29.54 783,110 1.26(f) (.25) 48
Year ended 10/31/96 ... 21.65 499,459 1.30 .15 46
Year ended 10/31/95 ... 20.18 285,161 1.35 .56 61
Class B
11/1/99 to 4/30/00+++ . 11.89% $5,640,866 1.84%* (1.00)%* 38%
Year ended 10/31/99 ... 27.79 5,265,153 1.90 (1.00) 62
Year ended 10/31/98 ... 13.78 4,230,756 1.94(f) (.83) 61
Year ended 10/31/97 ... 28.64 3,578,806 1.96(f) (.94) 48
Year ended 10/31/96 ... 20.82 2,498,097 1.99 (.54) 46
Year ended 10/31/95 ... 19.33 1,052,020 2.05 (.15) 61
Class C
11/1/99 to 4/30/00+++ . 11.91% $1,044,948 1.84%* (.99)%* 38%
Year ended 10/31/99 ... 27.78 923,483 1.90 (1.00) 62
Year ended 10/31/98 ... 13.76 718,688 1.93(f) (.83) 61
Year ended 10/31/97 ... 28.66 599,449 1.97(f) (.95) 48
Year ended 10/31/96 ... 20.81 403,478 2.00 (.55) 46
Year ended 10/31/95 ... 19.32 226,662 2.05 (.15) 61
Alliance Technology Fund
Class A
12/1/99 to 5/31/00+++ . 22.40% $3,472,183 1.53%* (.90)%* 23%
Year ended 11/30/99 ... 74.67 2,167,060 1.68(f) (1.11) 54
Year ended 11/30/98 ... 27.36 824,636 1.66(f) (1.13) 67
Year ended 11/30/97 ... 7.32 624,716 1.67(f) (.97) 51
Year ended 11/30/96 ... 16.05 594,861 1.74 (.87) 30
Year ended 11/30/95 ... 61.93 398,262 1.75 (.77) 55
Class B
12/1/99 to 5/31/00+++ . 21.95% $6,063,004 2.23%* (1.61)%* 23%
Year ended 11/30/99 ... 73.44 3,922,584 2.39(f) (1.83) 54
Year ended 11/30/98 ... 26.44 1,490,578 2.39(f) (1.86) 67
Year ended 11/30/97 ... 6.57 1,053,436 2.38(f) (1.70) 51
Year ended 11/30/96 ... 15.20 660,921 2.44 (1.61) 30
Year ended 11/30/95 ... 60.95 277,111 2.48 (1.47) 55
Class C
12/1/99 to 5/31/00+++ . 21.95% $1,585,521 2.23%* (1.61)%* 23%
Year ended 11/30/99 ... 73.40 907,707 2.41(f) (1.85) 54
Year ended 11/30/98 ... 26.44 271,320 2.40(f) (1.87) 67
Year ended 11/30/97 ... 6.55 184,194 2.38(f) (1.70) 51
Year ended 11/30/96 ... 15.17 108,488 2.44 (1.60) 30
Year ended 11/30/95 ... 60.98 43,161 2.48 (1.47) 55
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 70 and 71.
60 & 61
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-------------------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
Alliance Quasar Fund
Class A
10/1/99 to 3/31/00+++ .... $ 23.84 $ (.12)(b) $ 4.54 $ 4.42
Year ended 9/30/99 ....... 22.27 (.22)(b) 2.80 2.58
Year ended 9/30/98 ....... 30.37 (.17)(b) (6.70) (6.87)
Year ended 9/30/97 ....... 27.92 (.24)(b) 6.80 6.56
Year ended 9/30/96 ....... 24.16 (.25) 8.82 8.57
Year ended 9/30/95 ....... 22.65 (.22)(b) 5.59 5.37
Class B
10/1/99 to 3/31/00+++ .... $ 21.32 $ (.19)(b) $ 4.05 $ 3.86
Year ended 9/30/99 ....... 20.17 (.37)(b) 2.53 2.16
Year ended 9/30/98 ....... 27.83 (.36)(b) (6.07) (6.43)
Year ended 9/30/97 ....... 26.13 (.42)(b) 6.23 5.81
Year ended 9/30/96 ....... 23.03 (.20) 8.11 7.91
Year ended 9/30/95 ....... 21.92 (.37)(b) 5.34 4.97
Class C
10/1/99 to 3/31/00+++ .... $ 21.34 $ (.20)(b) $ 4.06 $ 3.86
Year ended 9/30/99 ....... 20.18 (.36)(b) 2.53 2.17
Year ended 9/30/98 ....... 27.85 (.35)(b) (6.09) (6.44)
Year ended 9/30/97 ....... 26.14 (.42)(b) 6.24 5.82
Year ended 9/30/96 ....... 23.05 (.20) 8.10 7.90
Year ended 9/30/95 ....... 21.92 (.37)(b) 5.36 4.99
The Alliance Fund
Class A
12/1/99 to 5/31/00+++ .... $ 7.55 $ (.01)(b) $ (.32) $ (.33)
Year ended 11/30/99 ...... 5.97 (.03)(b) 2.00 1.97
Year ended 11/30/98 ...... 8.70 (.02)(b) (.54) (.56)
Year ended 11/30/97 ...... 7.71 (.02)(b) 2.09 2.07
Year ended 11/30/96 ...... 7.72 .02 1.06 1.08
Year ended 11/30/95 ...... 6.63 .02(b) 2.08 2.10
Class B
12/1/99 to 5/31/00+++ .... $ 6.87 $ (.04)(b) $ (.29) $ (.33)
Year ended 11/30/99 ...... 5.51 (.07)(b) 1.82 1.75
Year ended 11/30/98 ...... 8.25 (.07)(b) (.50) (.57)
Year ended 11/30/97 ...... 7.40 (.08)(b) 1.99 1.91
Year ended 11/30/96 ...... 7.49 (.01) .99 .98
Year ended 11/30/95 ...... 6.50 (.03)(b) 2.02 1.99
Class C
12/1/99 to 5/31/00+++ .... $ 6.86 $ (.04)(b) $ (.29) $ (.33)
Year ended 11/30/99 ...... 5.50 (.08)(b) 1.83 1.75
Year ended 11/30/98 ...... 8.26 (.07)(b) (.52) (.59)
Year ended 11/30/97 ...... 7.41 (.08)(b) 1.99 1.91
Year ended 11/30/96 ...... 7.50 (.02) 1.00 .98
Year ended 11/30/95 ...... 6.50 (.03)(b) 2.03 2.00
Alliance Growth and Income Fund
Class A
11/1/99 to 4/30/00+++ .... $ 3.70 $ .02(b) $ .21 $ .23
Year ended 10/31/99 ...... 3.44 .03(b) .62 .65
Year ended 10/31/98 ...... 3.48 .03(b) .43 .46
Year ended 10/31/97 ...... 3.00 .04(b) .87 .91
Year ended 10/31/96 ...... 2.71 .05 .50 .55
Year ended 10/31/95 ...... 2.35 .02 .52 .54
Class B
11/1/99 to 4/30/00+++ .... $ 3.66 $ .00(b) $ .21 $ .21
Year ended 10/31/99 ...... 3.41 .00(b) .62 .62
Year ended 10/31/98 ...... 3.45 .01(b) .43 .44
Year ended 10/31/97 ...... 2.99 .02(b) .85 .87
Year ended 10/31/96 ...... 2.69 .03 .51 .54
Year ended 10/31/95 ...... 2.34 .01 .49 .50
Class C
11/1/99 to 4/30/00+++ .... $ 3.66 $ .00(b) $ .21 $ .21
Year ended 10/31/99 ...... 3.41 .00(b) .62 .62
Year ended 10/31/98 ...... 3.45 .01(b) .43 .44
Year ended 10/31/97 ...... 2.99 .02(b) .85 .87
Year ended 10/31/96 ...... 2.70 .03 .50 .53
Year ended 10/31/95 ...... 2.34 .01 .50 .51
<CAPTION>
Less Dividends and Distributions
---------------------------------------------------------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ----------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Quasar Fund
Class A
10/1/99 to 3/31/00+++ .... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 28.26
Year ended 9/30/99 ....... 0.00 0.00 (1.01) (1.01) 23.84
Year ended 9/30/98 ....... 0.00 0.00 (1.23) (1.23) 22.27
Year ended 9/30/97 ....... 0.00 0.00 (4.11) (4.11) 30.37
Year ended 9/30/96 ....... 0.00 0.00 (4.81) (4.81) 27.92
Year ended 9/30/95 ....... 0.00 0.00 (3.86) (3.86) 24.16
Class B
10/1/99 to 3/31/00+++ .... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 25.18
Year ended 9/30/99 ....... 0.00 0.00 (1.01) (1.01) 21.32
Year ended 9/30/98 ....... 0.00 0.00 (1.23) (1.23) 20.17
Year ended 9/30/97 ....... 0.00 0.00 (4.11) (4.11) 27.83
Year ended 9/30/96 ....... 0.00 0.00 (4.81) (4.81) 26.13
Year ended 9/30/95 ....... 0.00 0.00 (3.86) (3.86) 23.03
Class C
10/1/99 to 3/31/00+++ .... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 25.20
Year ended 9/30/99 ....... 0.00 0.00 (1.01) (1.01) 21.34
Year ended 9/30/98 ....... 0.00 0.00 (1.23) (1.23) 20.18
Year ended 9/30/97 ....... 0.00 0.00 (4.11) (4.11) 27.85
Year ended 9/30/96 ....... 0.00 0.00 (4.81) (4.81) 26.14
Year ended 9/30/95 ....... 0.00 0.00 (3.86) (3.86) 23.05
The Alliance Fund
Class A
12/1/99 to 5/31/00+++ .... $ 0.00 $ 0.00 $ (.64) $ (.64) $ 6.58
Year ended 11/30/99 ...... 0.00 $ 0.00 (.39) (.39) 7.55
Year ended 11/30/98 ...... 0.00 0.00 (2.17) (2.17) 5.97
Year ended 11/30/97 ...... (.02) 0.00 (1.06) (1.08) 8.70
Year ended 11/30/96 ...... (.02) 0.00 (1.07) (1.09) 7.71
Year ended 11/30/95 ...... (.01) 0.00 (1.00) (1.01) 7.72
Class B
12/1/99 to 5/31/00+++ .... $ 0.00 $ 0.00 $ (.64) $ (.64) $ 5.90
Year ended 11/30/99 ...... 0.00 0.00 (.39) (.39) 6.87
Year ended 11/30/98 ...... 0.00 0.00 (2.17) (2.17) 5.51
Year ended 11/30/97 ...... 0.00 0.00 (1.06) (1.06) 8.25
Year ended 11/30/96 ...... 0.00 0.00 (1.07) (1.07) 7.40
Year ended 11/30/95 ...... 0.00 0.00 (1.00) (1.00) 7.49
Class C
12/1/99 to 5/31/00+++ .... $ 0.00 $ 0.00 $ (.64) $ (.64) $ 5.89
Year ended 11/30/99 ...... 0.00 0.00 (.39) (.39) 6.86
Year ended 11/30/98 ...... 0.00 0.00 (2.17) (2.17) 5.50
Year ended 11/30/97 ...... 0.00 0.00 (1.06) (1.06) 8.26
Year ended 11/30/96 ...... 0.00 0.00 (1.07) (1.07) 7.41
Year ended 11/30/95 ...... 0.00 0.00 (1.00) (1.00) 7.50
Alliance Growth and Income Fund
Class A
11/1/99 to 4/30/00+++ .... $ (.02) $ 0.00 $ (.17) $ (.19) $ 3.74
Year ended 10/31/99 ...... (.03) (.01) (.35) (.39) 3.70
Year ended 10/31/98 ...... (.04) 0.00 (.46) (.50) 3.44
Year ended 10/31/97 ...... (.05) 0.00 (.38) (.43) 3.48
Year ended 10/31/96 ...... (.05) 0.00 (.21) (.26) 3.00
Year ended 10/31/95 ...... (.06) 0.00 (.12) (.18) 2.71
Class B
11/1/99 to 4/30/00+++ .... $ (.01) $ 0.00 $ (.17) $ (.18) $ 3.69
Year ended 10/31/99 ...... 0.00 (.02) (.35) (.37) 3.66
Year ended 10/31/98 ...... (.02) 0.00 (.46) (.48) 3.41
Year ended 10/31/97 ...... (.03) 0.00 (.38) (.41) 3.45
Year ended 10/31/96 ...... (.03) 0.00 (.21) (.24) 2.99
Year ended 10/31/95 ...... (.03) 0.00 (.12) (.15) 2.69
Class C
11/1/99 to 4/30/00+++ .... $ (.01) $ 0.00 $ (.17) $ (.18) $ 3.69
Year ended 10/31/99 ...... 0.00 (.02) (.35) (.37) 3.66
Year ended 10/31/98 ...... (.02) 0.00 (.46) (.48) 3.41
Year ended 10/31/97 ...... (.03) 0.00 (.38) (.41) 3.45
Year ended 10/31/96 ...... (.03) 0.00 (.21) (.24) 2.99
Year ended 10/31/95 ...... (.03) 0.00 (.12) (.15) 2.70
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss)
Total End of Period to Average to Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------ -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Quasar Fund
Class A
10/1/99 to 3/31/00+++ .... 18.54% $ 467,721 1.67%*(f) (.90)%* 86%
Year ended 9/30/99 ....... 11.89 517,289 1.69(f) (.90) 91
Year ended 9/30/98 ....... (23.45) 495,070 1.61(f) (.59) 109
Year ended 9/30/97 ....... 27.81 402,081 1.67 (.91) 135
Year ended 9/30/96 ....... 42.42 229,798 1.79 (1.11) 168
Year ended 9/30/95 ....... 30.73 146,663 1.83 (1.06) 160
Class B
10/1/99 to 3/31/00+++ .... 18.10% $ 568,729 2.41%*(f) (1.64)%* 86%
Year ended 9/30/99 ....... 11.01 587,919 2.46(f) (1.68) 91
Year ended 9/30/98 ....... (24.03) 625,147 2.39(f) (1.36) 109
Year ended 9/30/97 ....... 26.70 503,037 2.51 (1.73) 135
Year ended 9/30/96 ....... 41.48 112,490 2.62 (1.96) 168
Year ended 9/30/95 ....... 29.78 16,604 2.65 (1.88) 160
Class C
10/1/99 to 3/31/00+++ .... 18.09% $ 151,965 2.41%*(f) (1.63)%* 86%
Year ended 9/30/99 ....... 11.05 168,120 2.45(f) (1.66) 91
Year ended 9/30/98 ....... (24.05) 182,110 2.38(f) (1.35) 109
Year ended 9/30/97 ....... 26.74 145,494 2.50 (1.72) 135
Year ended 9/30/96 ....... 41.46 28,541 2.61 (1.94) 168
Year ended 9/30/95 ....... 29.87 1,611 2.64 (1.76) 160
The Alliance Fund
Class A
12/1/99 to 5/31/00+++ .... (4.89)% $1,078,444 1.03%* (.33)%* 46%
Year ended 11/30/99 ...... 35.37 1,128,166 1.06 (.41) 97
Year ended 11/30/98 ...... (8.48) 953,181 1.03 (.36) 106
Year ended 11/30/97 ...... 31.82 1,201,435 1.03 (.29) 158
Year ended 11/30/96 ...... 16.49 999,067 1.04 .30 80
Year ended 11/30/95 ...... 37.87 945,309 1.08 .31 81
Class B
12/1/99 to 5/31/00+++ .... (5.42)% $ 96,805 1.86%* (1.16)%* 46%
Year ended 11/30/99 ...... 34.24 101,858 1.89 (1.23) 97
Year ended 11/30/98 ...... (9.27) 85,456 1.84 (1.17) 106
Year ended 11/30/97 ...... 30.74 70,461 1.85 (1.12) 158
Year ended 11/30/96 ...... 15.47 44,450 1.87 (.53) 80
Year ended 11/30/95 ...... 36.61 31,738 1.90 (.53) 81
Class C
12/1/99 to 5/31/00+++ .... (5.43)% $ 25,641 1.85%* (1.16)%* 46%
Year ended 11/30/99 ...... 34.31 28,025 1.86 (1.22) 97
Year ended 11/30/98 ...... (9.58) 21,231 1.84 (1.18) 106
Year ended 11/30/97 ...... 30.72 18,871 1.83 (1.10) 158
Year ended 11/30/96 ...... 15.48 13,899 1.86 (.51) 80
Year ended 11/30/95 ...... 36.79 10,078 1.89 (.51) 81
Alliance Growth and Income Fund
Class A
11/1/99 to 4/30/00+++ .... 6.76% $1,685,202 .91%* .94%* 28%
Year ended 10/31/99 ...... 20.48 1,503,874 .93 .87 48
Year ended 10/31/98 ...... 14.70 988,965 .93(f) .96 89
Year ended 10/31/97 ...... 33.28 787,566 .92(f) 1.39 88
Year ended 10/31/96 ...... 21.51 553,151 .97 1.73 88
Year ended 10/31/95 ...... 24.21 458,158 1.05 1.88 142
Class B
11/1/99 to 4/30/00+++ .... 6.20% $2,079,387 1.68%* .17%* 28%
Year ended 10/31/99 ...... 19.56 1,842,045 1.70 .09 48
Year ended 10/31/98 ...... 14.07 787,730 1.72(f) .17 89
Year ended 10/31/97 ...... 31.83 456,399 1.72(f) .56 88
Year ended 10/31/96 ...... 21.20 235,263 1.78 .91 88
Year ended 10/31/95 ...... 22.84 136,758 1.86 1.05 142
Class C
11/1/99 to 4/30/00+++ .... 6.18% $ 617,713 1.67%* .19%* 28%
Year ended 10/31/99 ...... 19.56 518,185 1.69 .11 48
Year ended 10/31/98 ...... 14.07 179,487 1.72(f) .18 89
Year ended 10/31/97 ...... 31.83 106,526 1.71(f) .58 88
Year ended 10/31/96 ...... 20.72 61,356 1.76 .93 88
Year ended 10/31/95 ...... 23.30 35,835 1.84 1.04 142
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 70 and 71.
62 & 63
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-------------------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
Alliance Balanced Shares
Class A
Year ended 7/31/00 ......... $ 15.63 $ .40(b) $ .49 $ .89
Year ended 7/31/99 ......... 15.97 .36(b) 1.29 1.65
Year ended 7/31/98 ......... 16.17 .33(b) 1.86 2.19
Year ended 7/31/97 ......... 14.01 .31(b) 3.97 4.28
Year ended 7/31/96 ......... 15.08 .37 .45 .82
Class B
Year ended 7/31/00 ......... $ 15.11 $ .27(b) $ .48 $ .75
Year ended 7/31/99 ......... 15.54 .23(b) 1.25 1.48
Year ended 7/31/98 ......... 15.83 .21(b) 1.81 2.02
Year ended 7/31/97 ......... 13.79 .19(b) 3.89 4.08
Year ended 7/31/96 ......... 14.88 .28 .42 .70
Class C
Year ended 7/31/00 ......... $ 15.15 $ .28(b) $ .48 $ .76
Year ended 7/31/99 ......... 15.57 .24(b) 1.25 1.49
Year ended 7/31/98 ......... 15.86 .21(b) 1.81 2.02
Year ended 7/31/97 ......... 13.81 .20(b) 3.89 4.09
Year ended 7/31/96 ......... 14.89 .26 .45 .71
Alliance Utility Income Fund
Class A
12/1/99 to 5/31/00+++ ...... $ 16.91 $ 1.33(b)(c) $ (.37) $ .96
Year ended 11/30/99 ........ 14.68 .36(b)(c) 2.53 2.89
Year ended 11/30/98 ........ 12.48 .30(b)(c) 2.69 2.99
Year ended 11/30/97 ........ 10.59 .32(b)(c) 2.04 2.36
Year ended 11/30/96 ........ 10.22 .18(b)(c) .65 .83
Year ended 11/30/95 ........ 8.97 .27(b)(c) 1.43 1.70
Class B
12/1/99 to 5/31/00+++ ...... $ 16.80 $ 1.28(b)(c) $ (.39) $ .89
Year ended 11/30/99 ........ 14.62 .25(b)(c) 2.52 2.77
Year ended 11/30/98 ........ 12.46 .21(b)(c) 2.67 2.88
Year ended 11/30/97 ........ 10.57 .25(b)(c) 2.04 2.29
Year ended 11/30/96 ........ 10.20 .10(b)(c) .67 .77
Year ended 11/30/95 ........ 8.96 .18(b)(c) 1.45 1.63
Class C
12/1/99 to 5/31/00+++ ...... $ 16.82 $ 1.26(b)(c) $ (.37) $ .89
Year ended 11/30/99 ........ 14.65 .25(b)(c) 2.51 2.76
Year ended 11/30/98 ........ 12.47 .21(b)(c) 2.69 2.90
Year ended 11/30/97 ........ 10.59 .25(b)(c) 2.03 2.28
Year ended 11/30/96 ........ 10.22 .11(b)(c) .66 .77
Year ended 11/30/95 ........ 8.97 .18(b)(c) 1.46 1.64
Alliance Real Estate
Investment Fund
Class A
Year ended 8/31/00 ......... $ 10.19 $ .37(b) $ .89 $ 1.26
Year ended 8/31/99 ......... 10.47 .46(b) (.06) .40
Year ended 8/31/98 ......... 12.80 .52(b) (2.33) (1.81)
10/1/96+ to 8/31/97 ........ 10.00 .30(b) 2.88 3.18
Class B
Year ended 8/31/00 ......... $ 10.17 $ .30(b) $ .89 $ 1.19
Year ended 8/31/99 ......... 10.44 .38(b) (.05) .33
Year ended 8/31/98 ......... 12.79 .42(b) (2.33) (1.91)
10/1/96+ to 8/31/97 ........ 10.00 .23(b) 2.89 3.12
Class C
Year ended 8/31/00 ......... $ 10.17 $ .29(b) $ .91 $ 1.20
Year ended 8/31/99 ......... 10.44 .38(b) (.05) .33
Year ended 8/31/98 ......... 12.79 .42(b) (2.33) (1.91)
10/1/96+ to 8/31/97 ........ 10.00 .23(b) 2.89 3.12
<CAPTION>
Less Dividends and Distributions
---------------------------------------------------------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ----------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Balanced Shares
Class A
Year ended 7/31/00 ......... $ (.35) $ 0.00 $ (.64) $ (.99) $ 15.53
Year ended 7/31/99 ......... (.34) 0.00 (1.65) (1.99) 15.63
Year ended 7/31/98 ......... (.32) 0.00 (2.07) (2.39) 15.97
Year ended 7/31/97 ......... (.32) 0.00 (1.80) (2.12) 16.17
Year ended 7/31/96 ......... (.41) 0.00 (1.48) (1.89) 14.01
Class B
Year ended 7/31/00 ......... $ (.26) $ 0.00 $ (.64) $ (.90) $ 14.96
Year ended 7/31/99 ......... (.26) 0.00 (1.65) (1.91) 15.11
Year ended 7/31/98 ...... (.24) 0.00 (2.07) (2.31) 15.54
Year ended 7/31/97 ......... (.24) 0.00 (1.80) (2.04) 15.83
Year ended 7/31/96 ......... (.31) 0.00 (1.48) (1.79) 13.79
Class C
Year ended 7/31/00 ......... $ (.26) $ 0.00 $ (.64) $ (.90) $ 15.01
Year ended 7/31/99 ......... (.26) 0.00 (1.65) (1.91) 15.15
Year ended 7/31/98 ......... (.24) 0.00 (2.07) (2.31) 15.57
Year ended 7/31/97 ......... (.24) 0.00 (1.80) (2.04) 15.86
Year ended 7/31/96 ......... (.31) 0.00 (1.48) (1.79) 13.81
Alliance Utility Income Fund
Class A
12/1/99 to 5/31/00+++ ...... $ (.16) $ 0.00 $ (.94) $ (1.10) $ 16.77
Year ended 11/30/99 ........ (.32) 0.00 (.34) (.66) 16.91
Year ended 11/30/98 ........ (.32) 0.00 (.47) (.79) 14.68
Year ended 11/30/97 ........ (.34) 0.00 (.13) (.47) 12.48
Year ended 11/30/96 ........ (.46) 0.00 0.00 (.46) 10.59
Year ended 11/30/95 ........ (.45) 0.00 0.00 (.45) 10.22
Class B
12/1/99 to 5/31/00+++ ...... $ (.12) $ 0.00 $ (.94) $ (1.06) $ 16.63
Year ended 11/30/99 ........ (.25) 0.00 (.34) (.59) 16.80
Year ended 11/30/98 ........ (.25) 0.00 (.47) (.72) 14.62
Year ended 11/30/97 ........ (.27) 0.00 (.13) (.40) 12.46
Year ended 11/30/96 ........ (.40) 0.00 0.00 (.40) 10.57
Year ended 11/30/95 ........ (.39) 0.00 0.00 (.39) 10.20
Class C
12/1/99 to 5/31/00+++ ...... $ (.12) $ 0.00 $ (.94) $ (1.06) $ 16.65
Year ended 11/30/99 ........ (.25) 0.00 (.34) (.59) 16.82
Year ended 11/30/98 ........ (.25) 0.00 (.47) (.72) 14.65
Year ended 11/30/97 ........ (.27) 0.00 (.13) (.40) 12.47
Year ended 11/30/96 ........ (.40) 0.00 0.00 (.40) 10.59
Year ended 11/30/95 ........ (.39) 0.00 0.00 (.39) 10.22
Alliance Real Estate
Investment Fund
Class A
Year ended 8/31/00 ......... $ (.60)(g) $ (0) $ (.00) $ (.60) $ 10.85
Year ended 8/31/99 ......... (.48)(g) (.10) (.10) (.68) 10.19
Year ended 8/31/98 ......... (.51) 0.00 (.01) (.52) 10.47
10/1/96+ to 8/31/97 ........ (.38)(g) 0.00 0.00 (.38) 12.80
Class B
Year ended 8/31/00 ......... $ (.52)(g) $ (0.00) $ (.00) $ (.52) $ 10.84
Year ended 8/31/99 ......... (.40)(g) (.10) (.10) (.60) 10.17
Year ended 8/31/98 ......... (.43) 0.00 (.01) (.44) 10.44
10/1/96+ to 8/31/97 ........ (.33)(g) 0.00 0.00 (.33) 12.79
Class C
Year ended 8/31/00 ......... $ (.52)(g) $ (0.00) $ (.00) $ (.52) $ 10.85
Year ended 8/31/99 ......... (.40)(g) (.10) (.10) (.60) 10.17
Year ended 8/31/98 ......... (.43) 0.00 (.01) (.44) 10.44
10/1/96+ to 8/31/97 ........ (.33)(g) 0.00 0.00 (.33) 12.79
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss)
Total End of Period to Average to Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------ -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Balanced Shares
Class A
Year ended 7/31/00 ......... 6.22% $212,326 1.12% 2.62% 76%
Year ended 7/31/99 ......... 11.44 189,953 1.22(f) 2.31 105
Year ended 7/31/98 ......... 14.99 123,623 1.30(f) 2.07 145
Year ended 7/31/97 ......... 33.46 115,500 1.47(f) 2.11 207
Year ended 7/31/96 ......... 5.23 102,567 1.38 2.41 227
Class B
Year ended 7/31/00 ......... 5.46% $155,060 1.86% 1.88% 76%
Year ended 7/31/99 ......... 10.56 136,384 1.97(f) 1.56 105
Year ended 7/31/98 ......... 14.13 47,728 2.06(f) 1.34 145
Year ended 7/31/97 ......... 32.34 24,192 2.25(f) 1.32 207
Year ended 7/31/96 ......... 4.45 18,393 2.16 1.61 227
Class C
Year ended 7/31/00 ......... 5.52% $ 65,214 1.86% 1.88% 76%
Year ended 7/31/99 ......... 10.60 63,517 1.96(f) 1.57 105
Year ended 7/31/98 ......... 14.09 10,855 2.05(f) 1.36 145
Year ended 7/31/97 ......... 32.37 5,510 2.23(f) 1.37 207
Year ended 7/31/96 ......... 4.52 6,096 2.15 1.63 227
Alliance Utility Income Fund
Class A
12/1/99 to 5/31/00+++ ...... 5.98% $ 37,191 1.49%*(d) 15.87%* 19%
Year ended 11/30/99 ........ 20.27 29,841 1.50(d) 2.26 19
Year ended 11/30/98 ........ 24.99 9,793 1.50(d) 2.23 16
Year ended 11/30/97 ........ 23.10 4,117 1.50(d) 2.89 37
Year ended 11/30/96 ........ 8.47 3,294 1.50(d) 1.67 98
Year ended 11/30/95 ........ 19.58 2,748 1.50(d) 2.48 162
Class B
12/1/99 to 5/31/00+++ ...... 5.61% $102,261 2.20%*(d) 15.34%* 19%
Year ended 11/30/99 ........ 19.45 80,806 2.20%(d) 1.55% 19%
Year ended 11/30/98 ........ 24.02 35,550 2.20(d) 1.56 16
Year ended 11/30/97 ........ 22.35 14,782 2.20(d) 2.27 37
Year ended 11/30/96 ........ 7.82 13,561 2.20(d) .95 98
Year ended 11/30/95 ........ 18.66 10,988 2.20(d) 1.60 162
Class C
12/1/99 to 5/31/00+++ ...... 5.60% $ 24,572 2.20%*(d) 15.10%* 19%
Year ended 11/30/99 ........ 19.34 20,605 2.20(d) 1.56 19
Year ended 11/30/98 ........ 24.16 7,298 2.20(d) 1.54 16
Year ended 11/30/97 ........ 22.21 3,413 2.20(d) 2.27 37
Year ended 11/30/96 ........ 7.81 3,376 2.20(d) .94 98
Year ended 11/30/95 ........ 18.76 3,500 2.20(d) 1.88 162
Alliance Real Estate
Investment Fund
Class A
Year ended 8/31/00 ......... 13.46% $ 22,221 1.71% 3.81% 26%
Year ended 8/31/99 ......... 3.86 35,299 1.58 4.57 29
Year ended 8/31/98 ......... (14.90) 51,214 1.55 3.87 23
10/1/96+ to 8/31/97 ........ 32.24 37,638 1.77*(d)(f) 2.73* 20
Class B
Year ended 8/31/00 ......... 12.68% $113,542 2.41% 3.13% 26%
Year ended 8/31/99 ......... 3.20 168,741 2.31 3.82 29
Year ended 8/31/98 ......... (15.56) 268,856 2.26 3.16 23
10/1/96+ to 8/31/97 ........ 31.49 186,802 2.44*(d)(f) 2.08* 20
Class C
Year ended 8/31/00 ......... 12.78% $ 34,217 2.40% 3.02% 26%
Year ended 8/31/99 ......... 3.20 44,739 2.30 3.77 29
Year ended 8/31/98 ......... (15.56) 69,575 2.26 3.15 23
10/1/96+ to 8/31/97 ........ 31.49 42,719 2.43*(d)(f) 2.06* 20
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 70 and 71.
64 & 65
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-------------------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
Alliance New Europe Fund
Class A
Year ended 7/31/00 ......... $ 18.57 $ (.10)(b) $ 3.55 $ 3.45
Year ended 7/31/99 ......... 21.85 .07(b) (.79) (.72)
Year ended 7/31/98 ......... 18.61 .05(b) 5.28 5.33
Year ended 7/31/97 ......... 15.84 .07(b) 4.20 4.27
Year ended 7/31/96 ......... 15.11 .18 1.02 1.20
Class B
Year ended 7/31/00 ......... $ 17.39 $ (.23)(b) $ 3.31 $ 3.08
Year ended 7/31/99 ......... 20.76 (.06)(b) (.75) (.81)
Year ended 7/31/98 ......... 17.87 (.08)(b) 5.02 4.94
Year ended 7/31/97 ......... 15.31 (.04)(b) 4.02 3.98
Year ended 7/31/96 ......... 14.71 .08 .99 1.07
Class C
Year ended 7/31/00 ......... $ 17.41 $ (.23)(b) $ 3.31 $ 3.08
Year ended 7/31/99 ......... 20.77 (.05)(b) (.75) (.80)
Year ended 7/31/98 ......... 17.89 (.08)(b) 5.01 4.93
Year ended 7/31/97 ......... 15.33 (.04)(b) 4.02 3.98
Year ended 7/31/96 ......... 14.72 .08 1.00 1.08
Alliance Worldwide
Privatization Fund
Class A
Year ended 6/30/00 ......... $ 11.84 $ (.04)(b) $ 2.83 $ 2.79
Year ended 6/30/99 ......... 12.67 .00(b) .93 .93
Year ended 6/30/98 ......... 13.26 .10(b) .85 .95
Year ended 6/30/97 ......... 12.13 .15(b) 2.55 2.70
Year ended 6/30/96 ......... 10.18 .10(b) 1.85 1.95
Class B
Year ended 6/30/00 ......... $ 11.50 $ (.13)(b) $ 2.75 $ 2.62
Year ended 6/30/99 ......... 12.37 .(08)(b) .89 .81
Year ended 6/30/98 ......... 13.04 .02(b) .82 .84
Year ended 6/30/97 ......... 11.96 .08(b) 2.50 2.58
Year ended 6/30/96 ......... 10.10 (.02)(b) 1.88 1.86
Class C
Year ended 6/30/00 ......... $ 11.50 $ (.12)(b) $ 2.73 $ 2.61
Year ended 6/30/99 ......... 12.37 .(08)(b) .89 .81
Year ended 6/30/98 ......... 13.04 .05(b) .79 .84
Year ended 6/30/97 ......... 11.96 .12(b) 2.46 2.58
Year ended 6/30/96 ......... 10.10 .03(b) 1.83 1.86
Alliance International
Premier Growth
Class A
12/1/99 to 5/31/00+++ ...... $ 13.22 $ (.04)(b)(c) $ .47 $ .43
Year ended 11/30/99 ........ 9.63 (.15)(b)(c) 3.74 3.59
3/3/98+ to 11/30/98 ........ 10.00 (.08)(b)(c) (.29) (.37)
Class B
12/1/99 to 5/31/00+++ ...... $ 13.05 $ (.09)(b)(c) $ .49 $ .40
Year ended 11/30/99 ........ 9.58 (.22)(b)(c) 3.69 3.47
3/3/98+ to 11/30/98 ........ 10.00 (.13)(b)(c) (.29) (.42)
Class C
12/1/99 to 5/31/00+++ ...... $ 13.05 $ (.09)(b)(c) $ .48 $ .39
Year ended 11/30/99 ........ 9.57 (.22)(b)(c) 3.70 3.48
3/3/98+ to 11/30/98 ........ 10.00 (.15)(b)(c) (.28) (.43)
<CAPTION>
Less Dividends and Distributions
---------------------------------------------------------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ----------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance New Europe Fund
Class A
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ (.91) $ (.91) $ 21.11
Year ended 7/31/99 ......... 0.00 0.00 (2.56) (2.56) 18.57
Year ended 7/31/98 ......... 0.00 (.04) (2.05) (2.09) 21.85
Year ended 7/31/97 ......... (.15) (.03) (1.32) (1.50) 18.61
Year ended 7/31/96 ......... 0.00 0.00 (.47) (.47) 15.84
Class B
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ (.91) $ (.91) $ 19.56
Year ended 7/31/99 ......... 0.00 0.00 (2.56) (2.56) 17.39
Year ended 7/31/98 ......... 0.00 0.00 (2.05) (2.05) 20.76
Year ended 7/31/97 ......... 0.00 (.10) (1.32) (1.42) 17.87
Year ended 7/31/96 ......... 0.00 0.00 (.47) (.47) 15.31
Class C
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ (.91) $ (.91) $ 19.58
Year ended 7/31/99 ......... 0.00 0.00 (2.56) (2.56) 17.41
Year ended 7/31/98 ......... 0.00 0.00 (2.05) (2.05) 20.77
Year ended 7/31/97 ......... 0.00 (.10) (1.32) (1.42) 17.89
Year ended 7/31/96 ......... 0.00 0.00 (.47) (.47) 15.33
Alliance Worldwide
Privatization Fund
Class A
Year ended 6/30/00 ......... $ 0.00 $ 0.00 $ (1.06) $ (1.06) $ 13.57
Year ended 6/30/99 ......... (.12) 0.00 (1.64) (1.76) 11.84
Year ended 6/30/98 ......... (.18) 0.00 (1.36) (1.54) 12.67
Year ended 6/30/97 ......... (.15) 0.00 (1.42) (1.57) 13.26
Year ended 6/30/96 ......... 0.00 0.00 0.00 0.00 12.13
Class B
Year ended 6/30/00 ......... $ 0.00 $ 0.00 $ (1.06) $ (1.06) $ 13.06
Year ended 6/30/99 ......... (.04) 0.00 (1.64) (1.68) 11.50
Year ended 6/30/98 ......... (.15) 0.00 (1.36) (1.51) 12.37
Year ended 6/30/97 ......... (.08) 0.00 (1.42) (1.50) 13.04
Year ended 6/30/96 ......... 0.00 0.00 0.00 0.00 11.96
Class C
Year ended 6/30/00 ......... $ 0.00 $ 0.00 $ (1.06) $ (1.06) $ 13.05
Year ended 6/30/99 ......... (.04) 0.00 (1.64) (1.68) 11.50
Year ended 6/30/98 ......... (.15) 0.00 (1.36) (1.51) 12.37
Year ended 6/30/97 ......... (.08) 0.00 (1.42) (1.50) 13.04
Year ended 6/30/96 ......... 0.00 0.00 0.00 0.00 11.96
Alliance International
Premier Growth
Class A
12/1/99 to 5/31/00+++ ...... $ 0.00 $ 0.00 $ (.44) $ (.44) $ 13.21
Year ended 11/30/99 ........ 0.00 0.00 0.00 0.00 13.22
3/3/98+ to 11/30/98 ........ 0.00 0.00 0.00 0.00 9.63
Class B
12/1/99 to 5/31/00+++ ...... $ 0.00 $ 0.00 $ (.44) $ (.44) $ 13.01
Year ended 11/30/99 ........ 0.00 0.00 0.00 0.00 13.05
3/3/98+ to 11/30/98 ........ 0.00 0.00 0.00 0.00 9.58
Class C
12/1/99 to 5/31/00+++ ...... $ 0.00 $ 0.00 $ (.44) $ (.44) $ 13.00
Year ended 11/30/99 ........ 0.00 0.00 0.00 0.00 13.05
3/3/98+ to 11/30/98 ........ 0.00 0.00 0.00 0.00 9.57
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss)
Total End of Period to Average to Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------ -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance New Europe Fund
Class A
Year ended 7/31/00 ......... 18.89% $170,815 1.65%(f) (.46)% 103%
Year ended 7/31/99 ......... (2.87) 125,729 1.80(f) .39 89
Year ended 7/31/98 ......... 32.21 130,777 1.85(f) .25 99
Year ended 7/31/97 ......... 28.78 78,578 2.05(f) .40 89
Year ended 7/31/96 ......... 8.20 74,026 2.14 1.10 69
Class B
Year ended 7/31/00 ......... 18.01% $181,285 2.38%(f) (1.18)% 103%
Year ended 7/31/99 ......... (3.52) 144,570 2.50(f) (.34) 89
Year ended 7/31/98 ......... 31.22 137,425 2.56(f) (.40) 99
Year ended 7/31/97 ......... 27.76 66,032 2.75(f) (.23) 89
Year ended 7/31/96 ......... 7.53 42,662 2.86 .59 69
Class C
Year ended 7/31/00 ......... 17.99% $ 60,984 2.36%(f) (1.18)% 103%
Year ended 7/31/99 ......... (3.46) 45,845 2.50(f) (.28) 89
Year ended 7/31/98 ......... 31.13 39,618 2.56(f) (.41) 99
Year ended 7/31/97 ......... 27.73 16,907 2.74(f) (.23) 89
Year ended 7/31/96 ......... 7.59 10,141 2.87 .58 69
Alliance Worldwide
Privatization Fund
Class A
Year ended 6/30/00 ......... 24.26% $394,665 1.74%(f) (.31)% 67%
Year ended 6/30/99 ......... 9.86 340,194 1.92(f) (.01) 58
Year ended 6/30/98 ......... 9.11 467,960 1.73 .80 53
Year ended 6/30/97 ......... 25.16 561,793 1.72 1.27 48
Year ended 6/30/96 ......... 19.16 672,732 1.87 .95 28
Class B
Year ended 6/30/00 ......... 23.45% $160,847 2.47%(f) (1.02)% 67%
Year ended 6/30/99 ......... 8.91 117,420 2.63(f) (1.43) 58
Year ended 6/30/98 ......... 8.34 156,348 2.45 .20 53
Year ended 6/30/97 ......... 24.34 121,173 2.43 .66 48
Year ended 6/30/96 ......... 18.42 83,050 2.83 (.20) 28
Class C
Year ended 6/30/00 ......... 23.37% $ 39,598 2.44%(f) (.94)% 67%
Year ended 6/30/99 ......... 8.91 20,397 2.63(f) (1.44) 58
Year ended 6/30/98 ......... 8.34 26,635 2.44 .38 53
Year ended 6/30/97 ......... 24.33 12,929 2.42 1.06 48
Year ended 6/30/96 ......... 18.42 2,383 2.57 .63 28
Alliance International
Premier Growth
Class A
12/1/99 to 5/31/00+++ ...... 3.32% $ 58,071 1.88%* (.57)%* 122%
Year ended 11/30/99 ........ 37.28 12,851 2.51(d)(f) (1.34) 107
3/3/98+ to 11/30/98 ........ (3.70) 7,255 2.50*(d) (.90)* 151
Class B
12/1/99 to 5/31/00+++ ...... 3.12% $119,116 2.60%* (1.30)%* 122%
Year ended 11/30/99 ........ 36.22 28,678 3.21(d)(f) (2.07) 107
3/3/98+ to 11/30/98 ........ (4.20) 11,710 3.20*(d) (1.41)* 151
Class C
12/1/99 to 5/31/00+++ ...... 3.05% $ 43,867 2.59%* (1.28)%* 122%
Year ended 11/30/99 ........ 36.36 9,235 3.21(d)(f) (2.06) 107
3/3/98+ to 11/30/98 ........ (4.30) 3,120 3.20*(d) (1.69)* 151
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 70 and 71.
66 & 67
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-------------------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
Alliance Global Small Cap Fund
Class A
Year ended 7/31/00 ......... $ 11.66 $ (.16)(b) $ 3.83 $ 3.67
Year ended 7/31/99 ......... 12.14 (.08)(b) .76 .68
Year ended 7/31/98 ......... 12.87 (.11)(b) .37 .26
Year ended 7/31/97 ......... 11.61 (.15)(b) 2.97 2.82
Year ended 7/31/96 ......... 10.38 (.14)(b) 1.90 1.76
Class B
Year ended 7/31/00 ......... $ 10.57 $ (.24)(b) $ 3.46 $ 3.22
Year ended 7/31/99 ......... 11.20 (.15)(b) .68 .53
Year ended 7/31/98 ......... 12.03 (.18)(b) .34 .16
Year ended 7/31/97 ......... 11.03 (.21)(b) 2.77 2.56
Year ended 7/31/96 ......... 9.95 (.20)(b) 1.81 1.61
Class C
Year ended 7/31/00 ......... $ 10.59 $ (.24)(b) $ 3.47 $ 3.23
Year ended 7/31/99 ......... 11.22 (.16)(b) .69 .53
Year ended 7/31/98 ......... 12.05 (.19)(b) .35 .16
Year ended 7/31/97 ......... 11.05 (.22)(b) 2.78 2.56
Year ended 7/31/96 ......... 9.96 (.20)(b) 1.82 1.62
Alliance International Fund
Class A
Year ended 6/30/00 ......... $ 16.24 $ (.04)(b)(c) $ 4.64 $ 4.60
Year ended 6/30/99 ......... 18.55 (.04)(b)(c) (.75) (.79)
Year ended 6/30/98 ......... 18.69 (.01)(b)(c) 1.13 1.12
Year ended 6/30/97 ......... 18.32 .06(b) 1.51 1.57
Year ended 6/30/96 ......... 16.81 .05(b) 2.51 2.56
Class B
Year ended 6/30/00 ......... $ 15.19 $ (.17)(b)(c) $ 4.33 $ 4.16
Year ended 6/30/99 ......... 17.41 (.16)(b)(c) (.68) (.84)
Year ended 6/30/98 ......... 17.71 (.16)(b)(c) 1.07 .91
Year ended 6/30/97 ......... 17.45 (.09)(b) 1.43 1.34
Year ended 6/30/96 ......... 16.19 (.07)(b) 2.38 2.31
Class C
Year ended 6/30/00 ......... $ 15.19 $ (.16)(b)(c) $ 4.32 $ 4.16
Year ended 6/30/99 ......... 17.42 (.16)(b)(c) (.69) (.85)
Year ended 6/30/98 ......... 17.73 (.15)(b)(c) 1.05 .90
Year ended 6/30/97 ......... 17.46 (.09)(b) 1.44 1.35
Year ended 6/30/96 ......... 16.20 (.07)(b) 2.38 2.31
Alliance Greater China '97 Fund
Class A
Year ended 7/31/00 ......... $ 8.20 $ (.04)(b)(c) $ 2.18 $ 2.14
Year ended 7/31/99 ......... 4.84 .02(b)(c) 3.34 3.36
9/3/97+ to 7/31/98 ......... 10.00 .08(b)(c) (5.18) (5.10)
Class B
Year ended 7/31/00 ......... $ 8.12 $ (.11)(b)(c) $ 2.12 $ 2.01
Year ended 7/31/99 ......... 4.82 (.01)(b)(c) 3.31 3.30
9/3/97+ to 7/31/98 ......... 10.00 .03(b)(c) (5.17) (5.14)
Class C
Year ended 7/31/00 ......... $ 8.11 $ (.13)(b)(c) $ 2.15 $ 2.02
Year ended 7/31/99 ......... 4.82 (.03)(b)(c) 3.32 3.29
9/3/97+ to 7/31/98 ......... 10.00 .03(b)(c) (5.17) (5.14)
Alliance All-Asia Investment Fund
Class A
11/1/99 to 4/30/00+++ ...... $ 10.46 $ (.09)(b) $ 2.85 $ 2.76
Year ended 10/31/99 ........ 5.86 (.10)(b)(c) 4.70 4.60
Year ended 10/31/98 ........ 7.54 (.10)(b)(c) (1.58) (1.68)
Year ended 10/31/97 ........ 11.04 (.21)(b)(c) (2.95) (3.16)
Year ended 10/31/96 ........ 10.45 (.21)(b)(c) .88 .67
11/28/94+ to 10/31/95 ...... 10.00 (.19)(c)(b) .64 .45
Class B
11/1/99 to 4/30/00+++ ...... $ 10.09 $ (.13)(b) $ 2.75 $ 2.62
Year ended 10/31/99 ........ 5.71 (.18)(b)(c) 4.56 4.38
Year ended 10/31/98 ........ 7.39 (.14)(b)(c) (1.54) (1.68)
Year ended 10/31/97 ........ 10.90 (.28)(b)(c) (2.89) (3.17)
Year ended 10/31/96 ........ 10.41 (.28)(b)(c) .85 .57
11/28/94+ to 10/31/95 ...... 10.00 (.25)(b)(c) .66 .41
Class C
11/1/99 to 4/30/00+++ ...... $ 10.12 $ (.13)(b) $ 2.75 $ 2.62
Year ended 10/31/99 ........ 5.72 (.18)(b)(c) 4.58 4.40
Year ended 10/31/98 ........ 7.40 (.14)(b)(c) (1.54) (1.68)
Year ended 10/31/97 ........ 10.91 (.27)(b)(c) (2.90) (3.17)
Year ended 10/31/96 ........ 10.41 (.28)(b)(c) .86 .58
Year ended 10/31/95 ........ 10.00 (.35)(b)(c) .76 .41
<CAPTION>
Less Dividends and Distributions
---------------------------------------------------------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ----------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Global Small Cap Fund
Class A
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ (.20) $ (.20) $ 15.13
Year ended 7/31/99 ......... 0.00 0.00 (1.16) (1.16) 11.66
Year ended 7/31/98 ......... 0.00 0.00 (.99) (.99) 12.14
Year ended 7/31/97 ......... 0.00 0.00 (1.56) (1.56) 12.87
Year ended 7/31/96 ......... 0.00 0.00 (.53) (.53) 11.61
Class B
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ (.20) $ (.20) $ 13.59
Year ended 7/31/99 ......... 0.00 0.00 (1.16) (1.16) 10.57
Year ended 7/31/98 ......... 0.00 0.00 (.99) (.99) 11.20
Year ended 7/31/97 ......... 0.00 0.00 (1.56) (1.56) 12.03
Year ended 7/31/96 ......... 0.00 0.00 (.53) (.53) 11.03
Class C
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ (.20) $ (.20) $ 13.62
Year ended 7/31/99 ......... 0.00 0.00 (1.16) (1.16) 10.59
Year ended 7/31/98 ......... 0.00 0.00 (.99) (.99) 11.22
Year ended 7/31/97 ......... 0.00 0.00 (1.56) (1.56) 12.05
Year ended 7/31/96 ......... 0.00 0.00 (.53) (.53) 11.05
Alliance International Fund
Class A
Year ended 6/30/00 ......... $ 0.00 $ 0.00 $ (1.19) $ (1.19) $ 19.65
Year ended 6/30/99 ......... 0.00 (.48) (1.04) (1.52) 16.24
Year ended 6/30/98 ......... 0.00 (.05) (1.21) (1.26) 18.55
Year ended 6/30/97 ......... (.12) 0.00 (1.08) (1.20) 18.69
Year ended 6/30/96 ......... 0.00 0.00 (1.05) (1.05) 18.32
Class B
Year ended 6/30/00 ......... $ 0.00 $ 0.00 $ (1.19) $ (1.19) $ 18.16
Year ended 6/30/99 ......... 0.00 (.34) (1.04) (1.38) 15.19
Year ended 6/30/98 ......... 0.00 0.00 (1.21) (1.21) 17.41
Year ended 6/30/97 ......... 0.00 0.00 (1.08) (1.08) 17.71
Year ended 6/30/96 ......... 0.00 0.00 (1.05) (1.05) 17.45
Class C
Year ended 6/30/00 ......... $ 0.00 $ 0.00 $ (1.19) $ (1.19) $ 18.16
Year ended 6/30/99 ......... 0.00 (.34) (1.04) (1.38) 15.19
Year ended 6/30/98 ......... 0.00 0.00 (1.21) (1.21) 17.42
Year ended 6/30/97 ......... 0.00 0.00 (1.08) (1.08) 17.73
Year ended 6/30/96 ......... 0.00 0.00 (1.05) (1.05) 17.46
Alliance Greater China '97 Fund
Class A
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 10.34
Year ended 7/31/99 ......... 0.00 0.00 0.00 0.00 8.20
9/3/97+ to 7/31/98 ......... (.06) 0.00 0.00 (.06) 4.84
Class B
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 10.13
Year ended 7/31/99 ......... 0.00 0.00 0.00 0.00 8.12
9/3/97+ to 7/31/98 ......... (.03) (.01) 0.00 (.04) 4.82
Class C
Year ended 7/31/00 ......... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 10.13
Year ended 7/31/99 ......... 0.00 0.00 0.00 0.00 8.11
9/3/97+ to 7/31/98 ......... (.03) (.01) 0.00 (.04) 4.82
Alliance All-Asia Investment Fund
Class A
11/1/99 to 4/30/00+++ ...... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 13.22
Year ended 10/31/99 ........ 0.00 0.00 0.00 0.00 10.46
Year ended 10/31/98 ........ 0.00 0.00 0.00 0.00 5.86
Year ended 10/31/97 ........ 0.00 0.00 (.34) (.34) 7.54
Year ended 10/31/96 ........ 0.00 0.00 (.08) (.08) 11.04
11/28/94+ to 10/31/95 ...... 0.00 0.00 0.00 0.00 10.45
Class B
11/1/99 to 4/30/00+++ ... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 12.71
Year ended 10/31/99 ........ 0.00 0.00 0.00 0.00 10.09
Year ended 10/31/98 ........ 0.00 0.00 0.00 0.00 5.71
Year ended 10/31/97 ........ 0.00 0.00 (.34) (.34) 7.39
Year ended 10/31/96 ........ 0.00 0.00 (.08) (.08) 10.90
11/28/94+ to 10/31/95 ...... 0.00 0.00 0.00 0.00 10.41
Class C
11/1/99 to 4/30/00+++ ...... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 12.74
Year ended 10/31/99 ........ 0.00 0.00 0.00 0.00 10.12
Year ended 10/31/98 ........ 0.00 0.00 0.00 0.00 5.72
Year ended 10/31/97 ........ 0.00 0.00 (.34) (.34) 7.40
Year ended 10/31/96 ........ 0.00 0.00 (.08) (.08) 10.91
Year ended 10/31/95 ........ 0.00 0.00 0.00 0.00 10.41
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss)
Total End of Period to Average to Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ------------ -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Global Small Cap Fund
Class A
Year ended 7/31/00 ......... 31.81% $120,687 2.02%(f) (1.07)% 133%
Year ended 7/31/99 ......... 7.51 77,164 2.37(f) (.79) 120
Year ended 7/31/98 ......... 2.49 82,843 2.16(f) (.88) 113
Year ended 7/31/97 ......... 26.47 85,217 2.41(f) (1.25) 129
Year ended 7/31/96 ......... 17.46 68,623 2.51 (1.22) 139
Class B
Year ended 7/31/00 ......... 30.82% $ 65,097 2.76%(f) (1.82)% 133%
Year ended 7/31/99 ......... 6.74 30,205 3.14(f) (1.59) 120
Year ended 7/31/98 ......... 1.80 38,827 2.88(f) (1.58) 113
Year ended 7/31/97 ......... 25.42 31,946 3.11(f) (1.92) 129
Year ended 7/31/96 ......... 16.69 14,247 3.21 (1.88) 139
Class C
Year ended 7/31/00 ......... 30.86% $ 19,580 2.75%(f) (1.80)% 133%
Year ended 7/31/99 ......... 6.72 7,058 3.15(f) (1.61) 120
Year ended 7/31/98 ......... 1.79 9,471 2.88(f) (1.59) 113
Year ended 7/31/97 ......... 25.37 8,718 3.10(f) (1.93) 129
Year ended 7/31/96 ......... 16.77 4,119 3.19 (1.85) 139
Alliance International Fund
Class A
Year ended 6/30/00 ......... 29.18% $ 88,507 1.81%(d)(f)(h) (.21)% 154%
Year ended 6/30/99 ......... (3.95) 78,303 1.80(d)(f) (.25)(c) 178
Year ended 6/30/98 ......... 6.79 131,565 1.65(d) (.05)(c) 121
Year ended 6/30/97 ......... 9.30 190,173 1.74(f) .31 94
Year ended 6/30/96 ......... 15.83 196,261 1.72 .31 78
Class B
Year ended 6/30/00 ......... 28.27% $ 68,639 2.60%(d)(f)(h) (.96)% 154%
Year ended 6/30/99 ......... (4.56) 55,724 2.61(d)(f) (1.02)(c) 178
Year ended 6/30/98 ......... 5.92 71,370 2.49(d) (.90)(c) 121
Year ended 6/30/97 ......... 8.37 77,725 2.58(f) (.51) 94
Year ended 6/30/96 ......... 14.87 72,470 2.55 (.46) 78
Class C
Year ended 6/30/00 ......... 28.27% $ 21,180 2.57%(d)(f)(h) (.94)% 154%
Year ended 6/30/99 ......... (4.62) 16,876 2.61(d)(f) (1.02)(c) 178
Year ended 6/30/98 ......... 5.85 20,428 2.48(d) (.90)(c) 121
Year ended 6/30/97 ......... 8.42 23,268 2.56(f) (.51) 94
Year ended 6/30/96 ......... 14.85 26,965 2.53 (.47) 78
Alliance Greater China '97 Fund
Class A
Year ended 7/31/00 ......... 26.10% $ 2,471 2.52%(d)(f) (.42)% 158%
Year ended 7/31/99 ......... 69.42 1,011 2.52(d)(f) .36 94
9/3/97+ to 7/31/98 ......... (51.20) 445 2.52(d)(f)* 1.20* 58
Class B
Year ended 7/31/00 ......... 24.75% $ 4,047 3.22%(d)(f) (1.13)% 158%
Year ended 7/31/99 ......... 68.46 1,902 3.22(d)(f) (.22) 94
9/3/97+ to 7/31/98 ......... (51.53) 1,551 3.22(d)(f)* .53* 58
Class C
Year ended 7/31/00 ......... 24.91% $ 1,372 3.22%(d)(f) (1.31)% 158%
Year ended 7/31/99 ......... 68.26 162 3.22(d)(f) (.49) 94
9/3/97+ to 7/31/98 ......... (51.53) 102 3.22(d)(f)* .50* 58
Alliance All-Asia Investment Fund
Class A
11/1/99 to 4/30/00+++ ...... 26.39% $ 39,125 2.04%(f)(h)* (1.27)%* 164%
Year ended 10/31/99 ........ 78.50 40,040 2.45(d)(f) (1.20) 119
Year ended 10/31/98 ........ (22.28) 3,778 3.74(d)(f) (1.50) 93
Year ended 10/31/97 ........ (29.61) 5,916 3.45(d) (1.97) 70
Year ended 10/31/96 ........ 6.43 12,284 3.37(d) (1.75) 66
11/28/94+ to 10/31/95 ...... 4.50 2,870 4.42*(d) (1.87)* 90
Class B
11/1/99 to 4/30/00+++ ...... 25.97% $ 64,245 2.80%(f)(h)* (2.02)%* 164%
Year ended 10/31/99 ........ 76.71% 38,108 3.48%(d)(f) (2.31) 119
Year ended 10/31/98 ........ (22.73) 8,844 4.49(d)(f) (2.22) 93
Year ended 10/31/97 ........ (30.09) 11,439 4.15(d) (2.67) 70
Year ended 10/31/96 ........ 5.49 23,784 4.07(d) (2.44) 66
11/28/94+ to 10/31/95 ...... 4.10 5,170 5.20*(d) (2.64)* 90
Class C
11/1/99 to 4/30/00+++ ...... 25.89% $ 19,364 2.80%(f)(h)* (2.00)%* 164%
Year ended 10/31/99 ........ 76.92 10,060 3.41(d)(f) (2.21) 119
Year ended 10/31/98 ........ (22.70) 1,717 4.48(d)(f) (2.20) 93
Year ended 10/31/97 ........ (30.06) 1,859 4.15(d) (2.66) 70
Year ended 10/31/96 ........ 5.59 4,228 4.07(d) (2.42) 66
Year ended 10/31/95 ........ 4.10 597 5.84(d) (3.41) 90
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 70 and 71.
68 & 69
<PAGE>
+ Commencement of operations.
++ Commencement of distribution.
+++ Unaudited.
* 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 (f) below, would have been as follows:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Alliance All-Asia Investment Fund
Class A 10.57%* 3.61% 3.57% 4.63% 2.93% --
Class B 11.32%* 4.33% 4.27% 5.39% 3.96% --
Class C 11.38%* 4.30% 4.27% 5.42% 3.89% --
Alliance Real Estate Investment Fund
Class A -- -- 1.79%* -- -- --
Class B -- -- 2.45%* -- -- --
Class C -- -- 2.45%* -- -- --
Alliance Global Small Cap Fund
Class A 2.61% -- -- -- -- --
Class B 3.27% -- -- -- -- --
Class C 3.31% -- -- -- -- --
Alliance Utility Income Fund
Class A 4.86% 3.38% 3.55% 2.48% 1.73% 1.49%*
Class B 5.34% 4.08% 4.28% 3.21% 2.44% 2.20%*
Class C 5.99% 4.07% 4.28% 3.22% 2.44% 2.20%*
Alliance International Fund
Class A -- -- -- 1.80% 1.91% 1.95%
Class B -- -- -- 2.64% 2.74% 2.74%
Class C -- -- -- 2.63% 2.75% 2.70%
Alliance Greater China '97 Fund
Class A -- -- -- 18.27%* 19.68% 9.92
Class B -- -- -- 19.18%* 20.22% 10.72
Class C -- -- -- 19.37%* 20.41% 10.01
Alliance International Premier Growth Fund
Class A -- -- -- 5.19%* 3.26% 1.88%*
Class B -- -- -- 6.14%* 3.93% 2.60%*
Class C -- -- -- 6.00%* 3.92% 2.59%*
Alliance Health Care Fund
Class A -- -- -- -- -- 1.96%*
Class B -- -- -- -- -- 2.67%*
Class C -- -- -- -- -- 2.67%*
</TABLE>
--------------------------------------------------------------------------------
For the expense ratios of the Funds in years prior to fiscal year 1995, assuming
the Funds had borne all expenses, please see the Financial Statements in each
Fund's Statement of Additional Information.
70
<PAGE>
(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 (d) above, would have been
as follows:
<TABLE>
<S> <C> <C> <C> <C>
Alliance Balanced Shares 1997 1998 1999 2000
Class A 1.46% 1.29% 1.21% --
Class B 2.24% 2.05% 1.96% --
Class C 2.22% 2.04% 1.94% --
Alliance Real Estate Investment Fund 1997 1998 1999 2000
Class A 1.77% -- -- --
Class B 2.43% -- -- --
Class C 2.42% -- -- --
Alliance Growth Fund 1997 1998 1999 2000
Class A 1.25% 1.21% -- --
Class B 1.95% 1.93% -- --
Class C 1.95% 1.92% -- --
Alliance International Fund 1997 1998 1999 2000
Class A 1.73% -- 1.78% 1.79%
Class B 2.58% -- 2.59% 2.59%
Class C 2.56% -- 2.59% 2.55%
Alliance Global Small Cap Fund 1997 1998 1999 2000
Class A 2.38% 2.14% 2.33% 2.01%
Class B 3.08% 2.86% 3.11% 2.75%
Class C 3.08% 2.85% 3.12% 2.74%
Alliance Technology Fund 1997 1998 1999 2000
Class A 1.66% 1.65% 1.66% --
Class B 2.36% 2.38% 2.38% --
Class C 2.37% 2.38% 2.40% --
Alliance Worldwide Privatization Fund 1997 1998 1999 2000
Class A -- -- 1.91% 1.73%
Class B -- -- 2.62% 2.46%
Class C -- -- 2.61% 2.43%
Alliance Greater China '97 Fund 1997 1998 1999 2000
Class A -- 2.50%* 2.50% 2.50%
Class B -- 3.20%* 3.20% 3.20%
Class C -- 3.20%* 3.20% 3.20%
Alliance New Europe Fund 1997 1998 1999 2000
Class A 2.04% 1.84% 1.78% 1.64%
Class B 2.74% 2.54% 2.49% 2.36%
Class C 2.73% 2.54% 2.49% 2.35%
Alliance Growth and Income Fund 1997 1998 1999 2000
Class A .91% .92% -- --
Class B 1.71% 1.71% -- --
Class C 1.70% 1.71% -- --
Alliance Quasar Fund 1997 1998 1999 2000
Class A -- 1.60% 1.68% 1.66%*
Class B -- 2.38% 2.45% 2.40%*
Class C -- 2.37% 2.44% 2.40%*
Alliance Premier Growth Fund 1997 1998 1999 2000
Class A -- 1.58% -- --
Class B -- 2.27% -- --
Class C -- 2.27% -- --
Alliance All-Asia 1997 1998 1999 2000
Class A -- 3.70% 2.43% 2.03%*
Class B -- 4.44% 3.46% 2.79%*
Class C -- 4.44% 3.39% 2.79%*
Alliance International Premier Growth 1997 1998 1999 2000
Class A -- -- 2.50% --
Class B -- -- 3.20% --
Class C -- -- 3.20% --
</TABLE>
(g) Distributions from net investment income for the years ended 2000, 1999
and 1997 include a tax return of capital of $.18, $.02 and $.08 for
Class A shares, $.16, $.02 and $.09 for Class B shares and $.16, $.02 and
$.08 for Class C shares, respectively. 2.
(h) Includes interest expenses. If Alliance International Fund had not borne
interest expenses, the ratio of expenses (net of interest expenses) to
average net assets would have been 1.94%, 2.74% and 2.70% for Class A,
Class B and Class C respectively for 2000. If Alliance All-Asia Fund had
not borne interest expenses, the ratio of expenses (net of interest
expenses to average net assets would have been 1.98%, 2.73% and 2.72% for
Class A, Class B and Class C, respectively for 2000.
71
<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 1.62 in 1999. On October 23, 2000 the U.S. Dollar-pound
sterling exchange rate was 1.45.
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
6930.2 at the end of 1999, up approximately 18% from the end of 1998. The FT-SE
100 index closed at 6315.90 on October 23, 2000, down approximately 9% from
the beginning of 2000.
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, gaining 418 of 659 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
SAI 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. Thereafter, the
Japanese yen generally depreciated against the U.S. Dollar until mid-1998, when
it began to appreciate. In September 1999 the Japanese yen reached a 43-month
high against the U.S. Dollar, precipitating a series of interventions by the
Japanese government in the currency market, which have succeeded in slowing the
appreciation of the Japanese yen 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, 1999 the TOPIX closed at 1722.20, up approximately 58% from the
end of 1998. On October 23, 2000 the TOPIX closed at 1422.84, down
approximately 17% from the beginning of 2000.
Since the early 1980s, 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 was expected to more open Japanese markets with respect to trade
in certain goods and services. Since then, the two countries have agreed in
principle to increase Japanese imports of American automobiles and automotive
parts, as well as other goods and services. Nevertheless, the surpluses have
persisted and it is expected that continuing the 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
72
<PAGE>
Councillors. The LDP formed a new three-party coalition government on October 5,
1999 that further strengthened the position of Mr. Obuchi's administration in
the parliament. On April 6, 2000, following an ultimately fatal stroke suffered
by Mr. Obuchi, the parliament elected Yoshiro Mori to replace Mr. Obuchi as
prime minister. Although the LDP held on to its power in the House of
Representatives elections in June 2000, its margin of victory was less than
predicted. For the past several years, Japan's banking industry has been
weakened by a significant amount of problem loans. Japan's banks also have had
significant exposure to the recent 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
made $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 laws will achieve their intended effect. For further
information regarding Japan, see the SAIs 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, Jiang 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.
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 Taiwan, as well as trade with Hong Kong. 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.In
September 2000, however, following an agreement reached in November 1999 between
the U.S. and China, the U.S. Congress authorized the President to grant
permanent normal trade relations (formerly known as most favored nation status)
to China, ending the current annual review process and facilitating China's
entry into the World Trade Organization. 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 May 1998
election and again in the September 2000 election (although by a smaller
margin), 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 affected
significantly 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
73
<PAGE>
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 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 that 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.
74
<PAGE>
(This page left intentionally blank.)
<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 are legally part of) this prospectus.
You may request a free copy of the current annual/semi-annual report or the SAI,
or make inquiries concerning the Funds, 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:
o Call the Commission at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov
o Copies of the information may be obtained, after paying a duplicating fee,
by electronic request at [email protected], or by writing the
Commission's Public Reference Section, Wash. DC 20549-0102
On the Internet: www.sec.gov
You also may find more information about Alliance and the Funds on the Internet
at: www.Alliancecapital.com
Fund SEC File No.
----- -----------
Alliance Premier Growth Fund 811-06730
Alliance Health Care Fund 811-09329
Alliance Growth Fund 811-05088
Alliance Technology Fund 811-03131
Alliance Quasar Fund 811-01716
The Alliance Fund 811-00204
Alliance Disciplined Value Fund 811-09687
Alliance Growth & Income 811-00126
Alliance Balanced Shares 811-00134
Alliance Utility Income Fund 811-07916
Alliance Real Estate Investment Fund 811-07707
Alliance New Europe Fund 811-06028
Alliance Worldwide Privatization Fund 811-08426
Alliance International Premier Growth Fund 811-08527
Alliance Global Small Cap Fund 811-01415
Alliance International Fund 811-03130
Alliance Greater China '97 Fund 811-08201
Alliance All-Asia Investment Fund 811-08776
76
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
November 1, 2000
Domestic Stock Funds
> Alliance Premier Growth Fund
> Alliance Health Care Fund
> Alliance Growth Fund
> Alliance Technology Fund
> Alliance Quasar Fund
> The Alliance Fund
Total Return Funds
> Alliance Growth and Income Fund
> Alliance Balanced Shares
> Alliance Utility Income Fund
> Alliance Real Estate
Investment Fund
Global Stock Funds
> 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
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>
Investment Products Offered
---------------------------
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
---------------------------
2
<PAGE>
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Page
RISK/RETURN SUMMARY...................................................... 3
Domestic Stock Funds..................................................... 4
Total Return Funds....................................................... 10
Global Stock Funds....................................................... 14
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 Principal Policies............................. 27
Description of Additional Investment Practices........................... 40
Additional Risk Considerations........................................... 47
MANAGEMENT OF THE FUNDS.................................................. 50
PURCHASE AND SALE OF SHARES.............................................. 54
How The Funds Value Their Shares......................................... 54
How To Buy Shares........................................................ 54
How to Exchange Shares................................................... 54
How To Sell Shares....................................................... 55
DIVIDENDS, DISTRIBUTIONS AND TAXES....................................... 55
CONVERSION FEATURE....................................................... 56
GENERAL INFORMATION................................................... 56
FINANCIAL HIGHLIGHTS..................................................... 57
APPENDIX A--ADDITIONAL INFORMATION
ABOUT THE UNITED KINGDOM, JAPAN, AND
GREATER CHINA COUNTRIES.................................................. 62
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 begins 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. As with all investments you may lose money by investing
in the Funds.
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 500 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects.
Normally, the Fund invests in about 40-60 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 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 29.42% 38.66%
--------------------------------------------------------------------------------
Russell 1000 Growth Index 33.16% 34.19%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -4.44%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 33.11
98 49.85
99 29.42
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 Health Care Fund
--------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is capital appreciation and, secondarily,
current income.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
Under normal circumstances, the Fund invests at least 65%, and normally
substantially all, of the value of its total assets in securities issued by
companies principally engaged in health care and health care-related industries
("Health Care Industries") (companies principally engaged in the discovery,
development, provision, production or distribution of products and services that
relate to the diagnosis, treatment and prevention of diseases or other medical
disorders). Although the payment of dividends will be a factor considered in the
selection of investments for the Fund, the Fund seeks primarily to take
advantage of capital appreciation opportunities identified by Alliance in
emerging technologies and services in Health Care Industries by investing in
companies which are expected to profit from the development of new products and
services for these industries. Under normal circumstances, the Fund invests
primarily in the equity securities of U.S. companies. The Fund may invest up to
40% of its total assets in foreign securities. The Fund may invest in new,
smaller or less-seasoned companies as well as in larger, established companies
in the Health Care Industries.
Among the principal risks of investing in the Fund are market risk and
industry/sector risk. Unlike many other equity funds, the Fund invests in the
securities of companies principally engaged in Health Care Industries. As a
result, certain economic conditions and market changes that affect those
industries may have a more significant effect on the Fund's net asset value than
on the value of a more broadly diversified fund. For example, the Fund's share
price could be affected by changes in competition, legislation or government
regulation, government funding, product liability and other litigation, the
obsolescence or development of products, or other factors specific to the health
care and health sciences industries. The Fund's investments in foreign
securities have foreign risk and currency risk. The Fund's investment in small-
to mid-capitalization companies have capitalization risk. These investments may
be more volatile than investments in large-cap companies.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
5
<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
20% 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 than 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 25.96% 28.29%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.02%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -6.03%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 27.46
98 28.55
99 25.96
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.
6
<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 25% of its total assets in foreign
securities.
Among the principal risks of investing in the Fund are market risk and
industry/sector 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 interest rate risk, credit 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 72.32% 41.79%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.02%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 4.04%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 4.84
98 63.68
99 72.32
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 44.69%, 4th quarter, 1999; and Worst Quarter was down
-16.43%, 4th quarter, 1997.
7
<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, foreign risks 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 13.25% 8.70%
--------------------------------------------------------------------------------
Russell 2000 Growth Index 43.08% 18.56%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 9.13%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 17.48
98 -4.30
99 13.25
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 18.58%, 4th quarter, 1999; and Worst Quarter was down
-28.39%, 3rd quarter, 1998.
8
<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 33.95% 22.91%
--------------------------------------------------------------------------------
S&P 400 Mid-Cap Index 14.72% 22.67%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -5.74%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 36.27
98 -2.41
99 33.95
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 26.29%, 4th quarter, 1999; and Worst Quarter was down
-24.17%, 3rd quarter, 1998.
9
<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 and 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
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 11.33% 22.34%
--------------------------------------------------------------------------------
Russell 1000 Value Index 7.35% 19.88%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 11.87%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 29.57
98 21.48
99 11.33
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.
10
<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 the Fund will not purchase a security if, as a result,
less than 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 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 5.22% 16.31%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.02%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 10.03%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 27.43
98 16.03
99 5.22
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.
11
<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
maintain 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, it has industry/sector risk. This is
the risk that factors affecting utility companies will have a significant effect
on 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 18.41% 25.36%
--------------------------------------------------------------------------------
NYSE Utilities Index 14.62% 24.99%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 14.34%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 31.16
98 24.83
99 18.41
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.
12
<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 industry/sector risk. The Fund 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. Because the Fund invests in mortgage-backed securities,
it is subject to the risk that mortgage loans will be prepaid when interest
rates decline, forcing the Fund to reinvest in securities with lower interest
rates. For this and other reasons, mortgage-backed securities may have
significantly greater price and yield volatility than traditional debt
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 -6.39% 3.30%
--------------------------------------------------------------------------------
S&P 500 Index 21.03% 28.02%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 24.72%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 23.27
98 -20.05
99 -6.39
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.
13
<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 June 30, 2000, the Fund had approximately 34% 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 26.53% 24.50%
--------------------------------------------------------------------------------
MSCI Europe Index 16.23% 24.33%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -9.46%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 17.08
98 25.39
99 26.53
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 24.91%, 4th quarter, 1999; and Worst Quarter was down
-19.61%, 3rd quarter, 1998.
14
<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 at least 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. Because the Fund invests in companies that are undergoing, or
have undergone, privatization, it has industry/sector risk. These companies
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 56.62% 24.97%
--------------------------------------------------------------------------------
MSCI World Index
(minus the U.S.) 28.27% 16.20%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -17.80%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 13.45
98 9.33
99 56.62
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 34.27%, 4th quarter, 1999; and Worst Quarter was down
-17.42%, 3rd quarter, 1998.
15
<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
international 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, international 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 35% of its total assets in each of the United Kingdom and Japan and up to 25%
of its total assets in each of Canada, France, Germany, Italy, The Netherlands
and Switzerland. 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 40 companies, with the 30 most highly
regarded of these companies usually constituting approximately 70%, and often
more, of the Fund's net assets. The Fund invests in companies with market values
generally in excess of $10 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.
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 47.51% 24.00%
--------------------------------------------------------------------------------
MSCI EAFE Index 27.30% 17.93%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 3/3/98. Since
inception index return is from 3/31/98.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual return for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -15.76%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 n/a
98 n/a
99 47.51
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 30.50%, 4th quarter, 1999; and Worst Quarter was up 3.38%,
1st quarter, 1999.
16
<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. Investments in smaller companies tend to be more volatile
than investments in large-cap or mid-cap 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 46.91% 17.65%
--------------------------------------------------------------------------------
MSCI World Index 25.34% 22.24%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was 3.24%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 8.44
98 3.81
99 46.91
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 32.13%, 4th quarter, 1999; and Worst Quarter was down
-22.96%, 3rd quarter, 1998.
17
<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 international 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 international
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 35.12% 14.10%
--------------------------------------------------------------------------------
MSCI EAFE Index 27.30% 16.11%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -15.22%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 1.59
98 9.96
99 35.12
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 26.08%, 4th quarter, 1999; and Worst Quarter was down
-17.80%, 3rd quarter, 1998.
18
<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 June 30, 2000 the Fund had approximately
83% 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 rate 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 more of 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 83.38% 8.69%
--------------------------------------------------------------------------------
MSCI China Free Index 9.94% -32.64%
--------------------------------------------------------------------------------
MSCI Hong Kong Index 59.52% 4.44%
--------------------------------------------------------------------------------
MSCI Taiwan Index 52.71% -1.11%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 9/3/97. Since
inception index returns are from 9/30/97.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -21.28%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 n/a
98 -7.87
99 83.38
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 49.44%, 4th quarter, 1999; and Worst Quarter was down
-26.92%, 2nd quarter, 1998.
19
<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 June 30, 2000,
the Fund had approximately 48% 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 119.50% 6.71%
--------------------------------------------------------------------------------
MSCI All Country Asia
Pacific Index 59.66% 4.98%
--------------------------------------------------------------------------------
Index returns and average annual total returns are for the periods ended
December 31, 1999. Advisor Class shares inception date is 10/1/96. Since
inception index return is from 10/31/96.
BAR CHART
--------------------------------------------------------------------------------
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/00, the year to date unannualized return for the Advisor
Class shares was -23.21%.
[The following table was depicted as a bar chart in the printed material.]
Calendar
Year
End
--------
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 -34.83
98 -12.15
99 119.50
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 39.04%, 4th quarter, 1999; and Worst Quarter was down
-18.65%, 4th quarter, 1997.
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 Additional
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 long-term periods. All of the Alliance Stock Funds are subject to market
risk.
INDUSTRY/SECTOR RISK
This is the risk of investments in a particular industry or group of related
industries. Market or economic factors affecting that industry could have a
major effect on the value of a Fund's investments. Funds particularly subject to
this risk are Alliance Health Care Fund, Alliance Technology Fund, Alliance
Utility Income Fund, Alliance Real Estate Investment Fund and Alliance Worldwide
Privatization 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 Health Care Fund, 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 Health Care Fund, Alliance Technology Fund,
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 and Alliance All-Asia
Investment Fund. Funds 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, 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 Health Care Fund, Alliance Technology Fund, 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 and Alliance All-Asia Investment 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>
---------------------------------------------------------------------------------------------------------------------
Industry/ Capital- Interest Country or
Market Sector ization Rate Credit Foreign Geographic Currency
Fund Risk Risk Risk Risk Risk Risk Risk Risk
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Premier Growth Fund o
---------------------------------------------------------------------------------------------------------------------
Alliance Health Care Fund o o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Growth Fund o o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Technology Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Quasar Fund o o
---------------------------------------------------------------------------------------------------------------------
The Alliance Fund o o
---------------------------------------------------------------------------------------------------------------------
Alliance Growth and
Income Fund o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Balanced Shares o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Utility Income Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Real Estate
Investment Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance New Europe Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Worldwide
Privatization Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance International
Premier Growth Fund o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Global Small Cap
Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance International Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance Greater China '97
Fund o o o o
---------------------------------------------------------------------------------------------------------------------
Alliance All-Asia Investment
Fund o o o o
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------
Focused
Manage- Portfolio Allocation
Fund ment Risk Risk Risk
------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Premier Growth Fund o o
------------------------------------------------------------------
Alliance Health Care Fund o
------------------------------------------------------------------
Alliance Growth Fund o
------------------------------------------------------------------
Alliance Technology Fund o
------------------------------------------------------------------
Alliance Quasar Fund o
------------------------------------------------------------------
The Alliance Fund o
------------------------------------------------------------------
Alliance Growth and
Income Fund o
------------------------------------------------------------------
Alliance Balanced Shares o o
------------------------------------------------------------------
Alliance Utility Income Fund o
------------------------------------------------------------------
Alliance Real Estate
Investment Fund o
------------------------------------------------------------------
Alliance New Europe Fund o
------------------------------------------------------------------
Alliance Worldwide
Privatization Fund o
------------------------------------------------------------------
Alliance International
Premier Growth Fund o o
------------------------------------------------------------------
Alliance Global Small Cap
Fund o
------------------------------------------------------------------
Alliance International Fund o
------------------------------------------------------------------
Alliance Greater China '97
Fund o o
------------------------------------------------------------------
Alliance All-Asia Investment
Fund 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 FEES (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.
<TABLE>
<CAPTION>
Operating Expenses Examples
-------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C>
Alliance Premier Growth Fund
Management fees .95% After 1 year $ 118
Distribution (12b-1) fees None After 3 years $ 368
Other expenses .21% After 5 years $ 638
----- After 10 years $ 1,409
Total fund operating expenses 1.16%
=====
Alliance Health Care Fund
Management fees .95% After 1 year $ 168
Distribution (12b-1) fees None After 3 years (b) $ 520
Other expenses .66% After 5 years (b) $ 897
----- After 10 years (b) $ 1,955
Total fund operating expenses 1.61%
=====
Alliance Growth Fund
Management fees .68% After 1 year $ 90
Distribution (12b-1) fees None After 3 years $ 281
Other expenses .20% After 5 years $ 488
----- After 10 years $ 1,084
Total fund operating expenses .88%
=====
Alliance Technology Fund
Management fees 1.10% After 1 year $ 137
Distribution (12b-1) fees None After 3 years $ 428
Other expenses .25% After 5 years $ 739
----- After 10 years $ 1,624
Total fund operating expenses 1.35%
=====
Alliance Quasar Fund
Management fees 1.01% After 1 year $ 145
Distribution (12b-1) fees None After 3 years $ 449
Other expenses .41% After 5 years $ 776
----- After 10 years $ 1,702
Total fund operating expenses 1.42%
=====
The Alliance Fund
Management fees .68% After 1 year $ 87
Distribution (12b-1) fees None After 3 years $ 271
Other expenses .17% After 5 years $ 471
----- After 10 years $ 1,049
Total fund operating expenses .85%
=====
</TABLE>
--------------------------------------------------------------------------------
Please refer to footnotes on page 25.
23
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
-------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C>
Alliance Growth and
Income Fund(C)
Management fees .47% After 1 year $ 69
Distribution (12b-1) fees None After 3 years $ 218
Other expenses .21% After 5 years $ 379
----- After 10 years $ 847
Total fund operating expenses .68%
=====
Alliance Balanced Shares Fund
Management fees .56% After 1 year $ 88
Distribution (12b-1) fees None After 3 years $ 274
Other expenses .30% After 5 years $ 477
----- After 10 years $ 1,061
Total fund operating expenses .86%
=====
Alliance Utility Income Fund
Management fees .75% After 1 year $ 122
Distribution (12b-1) fees None After 3 years (b) $ 426
Other expenses .66% After 5 years (b) $ 751
----- After 10 years (b) $ 1,673
Total fund operating expenses 1.41%
=====
Waiver and/or expense reimbursement (a) (.21)%
=====
Net expenses 1.20%
=====
Alliance Real Estate
Investment Fund
Management fees .90% After 1 year $ 143
Distribution (12b-1) fees None After 3 years $ 443
Other expenses .50% After 5 years $ 766
----- After 10 years $ 1,680
Total fund operating expenses 1.40%
=====
Alliance New Europe Fund
Management fees .92% After 1 year $ 136
Distribution (12b-1) fees None After 3 years $ 425
Other expenses .42% After 5 years $ 734
----- After 10 years $ 1,613
Total fund operating expenses 1.34%
=====
Alliance Worldwide
Privatization Fund
Management fees 1.00% After 1 year $ 146
Distribution (12b-1) fees None After 3 years $ 452
Other expenses .43% After 5 years $ 782
----- After 10 years $ 1,713
Total fund operating expenses 1.43%
=====
Alliance International
Premier Growth Fund
Management fees 1.00% After 1 year $ 224
Distribution (12b-1) fees None After 3 years (b) $ 845
Other expenses 1.96% After 5 years (b) $ 1,492
----- After 10 years (b) $ 3,227
Total fund operating expenses 2.96%
=====
Waiver and/or expense reimbursement (a) (.75)%
=====
Net expenses 2.21%
=====
Alliance Global
Small Cap Fund
Management Fees 1.00% After 1 year $ 172
Distribution (12b-1) Fees None After 3 years $ 533
Other Expenses .69% After 5 years $ 918
----- After 10 years $ 1,998
Total fund operating expenses 1.69%
=====
</TABLE>
--------------------------------------------------------------------------------
Please refer to footnotes on page 25.
24
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
-------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C>
Alliance International Fund
Management fees 1.03% After 1 year $ 158
Distribution (12b-1) fees None After 3 years (b) $ 519
Interest Expense .01% After 5 years (b) $ 905
Other expenses .65% After 10 years (b) $ 1,986
-----
Total fund operating expenses 1.69%
=====
Waiver and/or expense reimbursement (a) (.14)%
=====
Net expenses 1.55%
=====
Alliance Greater
China '97 Fund
Management fees 1.00% After 1 year $ 225
Distribution (12b-1) fees None After 3 years (b) $ 2,110
Other expenses 8.61% After 5 years (b) $ 3,826
----- After 10 years (b) $ 7,464
Total fund operating expenses 9.61%
=====
Waiver and/or expense reimbursement (a) (7.39)%
=====
Net expenses 2.22%
=====
Alliance All-Asia
Investment Fund
Management fees 1.00% After 1 year $ 248
Distribution (12b-1) fees None After 3 years (b) $ 764
Administration fees .15% After 5 years (b) $ 1,306
Other operating expenses 1.78% After 10 years (b) $ 2,786
-----
Total fund operating expenses 2.93%
=====
Waiver and/or expense reimbursement (a) (.48)%
=====
Net Expenses 2.45%
=====
</TABLE>
--------------------------------------------------------------------------------
(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. This
waiver extends through the end of the Fund's current fiscal year and may
be extended by Alliance for additional one year terms.
(b) These examples assume that Alliance's agreement to waive management fees
and/or reimburse Fund expenses is not extended beyond its initial period.
(c) The advisory fee for the Fund is proposed to be increased. See page 31.
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 foreign 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 OR COUNTRIES
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.
European Company is a company (i) organized under the laws of a European country
that issues equity or debt securities that are traded principally on a European
stock exchange, or (ii) a company that derives 50% or more of its total revenues
or profits from businesses in Europe.
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").
Health Care Industries include the health care and health care-related
(including health sciences) industries. These industries are principally engaged
in the discovery, development, provision, production or distribution of products
and services that relate to the diagnosis, treatment and prevention of diseases
or other medical disorders. Companies in these fields include, but are not
limited to, pharmaceutical firms; companies that design, manufacture or sell
medical supplies, equipment and support services; companies that operate
hospitals and other health care facilities; and companies engaged in medical,
diagnostic, biochemical, biotechnological or other health sciences research and
development.
International 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.
Non-U.S. Company is an entity that (i) is organized under the laws of a foreign
country, (ii) has its principal place of business in a foreign country, and
(iii) issues equity or debt securities that are traded principally in a foreign
country. Securities issued by non-U.S. companies are known as foreign
securities.
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 BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
26
<PAGE>
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.
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
Additional 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. Where an investment policy or restriction has a
percentage limitation, such limitation is applied at the time of
investment. Changes in the market value of securities in a Fund's
portfolio after they are purchased by the Fund will not cause the Fund to
be in violation of such limitation.
INVESTMENT OBJECTIVES AND PRINCIPAL 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 40-60 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.
On September 7, 2000 and September 26, 2000, the Board of Directors of Alliance
Premier Growth Fund, Inc. approved several proposals that will be presented to
stockholders at a special meeting that is planned for December 12, 2000. These
proposals include changes in certain of the Fund's fundamental investment
policies. These investment policy changes would: 1) permit the Fund to invest up
to 20% of its total assets on non-U.S. companies, up from the current 15%, and
remove the current definition of a "U.S. Company", thereby allowing the Fund to
rely on the standard definition of "Non-U.S. Company" used by other Alliance
Mutual Funds (as reflected in the Glossary), (2) enable the Fund to engage in
securities lending to the extent permitted by the 1940 Act, (3) revise the
fundamental policy regarding portfolio diversification to permit the Fund to
fully utilize the investment latitude for diversified funds contained in the
1940 Act, and (4) reclassify the Fund's fundamental policy regarding investments
in illiquid securities as a non-fundamental policy and revise that policy to
conform it to current SEC guidelines. If these proposals are adopted,
prospective investors will be notified by way of a supplement to this
Prospectus.
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
500 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
27
<PAGE>
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
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 Health Care Fund
Alliance Health Care Fund seeks capital appreciation and, secondarily, current
income. In seeking to achieve its investment objective, under normal
circumstances the Fund invests at least 65%, and normally substantially all, of
its total assets in securities issued by companies principally engaged in Health
Care Industries.
The Fund seeks investments in both new, smaller and less seasoned companies and
well-known, larger and established companies. Whenever possible, investments in
new, smaller or less seasoned companies will be made with a view to benefiting
from the development and growth of new products and markets in Health Care
Industries. Investments in these companies may offer more reward but may also
entail more risk than is generally true of larger, established companies. While
the Fund anticipates that a substantial portion of its portfolio will be
invested in the securities of U.S. companies, the Fund is not limited to
investing in such securities. Many companies in the forefront of world medical
technology are located outside the United States, primarily in Japan and Europe.
Accordingly, the Fund may invest up to 40% of its total assets in foreign
securities, including up to 25% in issuers located in any one foreign country.
However, no more than 5% of the Fund's total net assets may be invested in
securities of issuers located in emerging market countries.
Although the payment of dividends will be a factor considered in the selection
of investments for the Fund, the Fund seeks primarily to take advantage of
capital appreciation opportunities identified by Alliance in emerging
technologies and services in Health Care Industries by investing in companies
that are expected to profit from the development of new products and services
for these industries. Examples of such emerging technologies and services
include:
o New methods for administering drugs to a patient, such as surgical
implants and skin patches that enhance the effectiveness of the drugs and
may reduce patient side effects by delivering the drugs in precise
quantities over a prolonged time period or by evading natural body defense
mechanisms which delay the effect of the drugs;
o Developments in medical imaging such as the application of computer
technology to the output of conventional x-ray systems that allow for
cross-sectional images of soft tissue and organs (CT scanning) and
continuous imaging (digital radiography) as well as more advanced nuclear
medicine, ultrasound and magnetic resonance imaging (MRI);
o Advances in minimally invasive surgical techniques, such as angioplasty
and related technologies for diseased blood vessels and laser beams for
the eye, general and cardiovascular surgery, which provide greater
effectiveness, lower cost and improved patient safety than more
traditional surgical techniques;
o New therapeutic pharmaceutical compounds that control or alleviate
disease, including prescription and non-prescription drugs and treatment
regimes for conditions not controlled, alleviated or treatable by existing
medications or treatments and chemical or biological pharmaceuticals for
use in diagnostic testing;
o Advances in molecular biology such as signal transduction, cell adhesion
and cell to cell communication which have facilitated a rapid increase in
new classes of drugs. These have included monoclonal antibodies,
bio-engineered proteins and small molecules from novel synthesis and
screening techniques;
o Genomics, which allows scientists to better understand the causes of human
diseases, and in some cases has led to the manufacture of proteins for use
as therapeutic drugs;
28
<PAGE>
o Gene chips and other equipment that provide for the screening, diagnosis
and treatment of diseases;
o The introduction of large scale business efficiencies to the management of
nursing homes, acute and specialty hospitals, as well as free-standing
outpatient facilities, surgical centers and rehabilitation centers;
o Adaptations of microprocessors for use by pharmaceutical manufacturers,
hospitals, doctors and others in Health Care Industries to increase
distribution efficiency;
o Health care delivery organizations that combine cost effectiveness with
high quality medical care and help address the rising cost of health care;
and
o The sale of prescription drugs and pharmaceuticals to consumers via the
Internet.
The Fund's portfolio may also include companies that provide traditional
products and services currently in use in Health Care Industries and that are
likely to benefit from any increases in the general demand for such products and
services. The following are examples of the products and services that may be
offered by companies in Health Care Industries:
o Drugs or Pharmaceuticals, including both ethical and proprietary drugs,
drug administration products and pharmaceutical components used in
diagnostic testing;
o Medical Equipment and Supplies, including equipment and supplies used by
health service companies and individual practitioners, such as electronic
equipment used for diagnosis and treatment, surgical and medical
instruments and other products designed especially for Health Care
Industries;
o Health Care Services, including the services of clinical testing
laboratories, hospitals, nursing homes, clinics, centers for convalescence
and rehabilitation, and products and services for home health care; and
o Medical Research, including scientific research to develop drugs,
processes or technologies with possible commercial application in Health
Care Industries.
The Fund also may:
o purchase or sell forward foreign currency exchange contracts;
o enter into forward commitments for the purchase or sale of securities;
o make secured loans of portfolio securities of up to 20% of its total
assets; and
o enter into repurchase agreements.
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 20% 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 normally will 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 25% of its total assets in foreign securities.
29
<PAGE>
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.
On September 7, 2000, the Board of Directors of Alliance Quasar Fund, Inc.
approved several proposals that will be presented to stockholders at a special
meeting that is planned for December 12, 2000. These proposals include changes
in certain of the Fund's fundamental investment policies. These investment
policy changes would: (1) enable the Fund to engage in securities lending to the
extent permitted by the 1940 Act, (2) permit the Fund to engage in financial
forward and futures contracts and options thereon, (3) remove the fundamental
policy which restricts the Fund's ability to invest in securities of companies
(including predecessors) with less than three years of continuous operation, (4)
revise the fundamental policy regarding portfolio diversification to permit the
Fund to fully utilize the investment latitude for diversified funds contained in
the 1940 Act, and (5) reclassify the Fund's fundamental policy regarding
investments in illiquid securities as a non-fundamental policy and revise that
policy to conform it to current SEC guidelines. If these proposals are adopted,
prospective investors will be notified by way of a supplement to this
Prospectus.
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 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; and
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.
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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.
On July 19-20, 2000, the Board of Directors of Alliance Growth and Income Fund
approved several proposals that will be presented to the Fund's stockholders at
a special stockholders meeting that is planned for November 2, 2000. These
proposals include a proposed amendment to the Fund's investment advisory
agreement to increase the advisory fee payable by the Fund to Alliance Capital
Management L.P. (the "Adviser") and revise the current advisory fee breakpoint
schedule. If stockholders approve the proposal, at the Fund's current size, the
effective advisory fee would increase from .47 of 1% to .624 of 1% and the
advisory fee breakpoint schedule would change. The new advisory fee would become
effective promptly following such approval. In addition, the Fund will be
requesting stockholder approval of, among other things, changes in two of the
Fund's fundamental investment policies. These investment policy changes would
(1) enable the Fund to engage in securities lending to the extent permitted by
the 1940 Act and (2) revise the Fund's fundamental investment policy
relating to portfolio diversification to permit the Fund to fully utilize the
investment latitude for diversified funds established by the 1940 Act. If these
proposals are adopted, prospective investors will be notified by way of a
supplement to this Prospectus.
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 not purchase a security if as a result less than 25% of its total assets
will be in fixed income senior 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.
On September 7, 2000, the Board of Directors of Alliance Balanced Shares, Inc.
approved several proposals that will be presented to stockholders at a special
meeting that is planned for December 12, 2000. These proposals include changes
in certain of the Fund's fundamental investment policies. These investment
policy changes would: 1) enable the Fund to engage in securities lending to the
extent permitted by the 1940 Act, (2) revise the fundamental policy regarding
portfolio diversification to permit the Fund to fully utilize the investment
latitude for diversified funds contained in the 1940 Act, (3) permit the Fund to
engage in financial forward and futures contracts and options thereon, and (4)
reclassify the Fund's fundamental policy regarding investments in illiquid
securities as a non-fundamental policy. If these proposals are adopted,
prospective investors will be notified by way of a supplement to this
prospectus.
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.
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
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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 maintain 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 respective governments than utility companies located in the
U.S. As in the U.S., foreign 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.
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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
135 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 22,000
properties owned by these 135 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
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
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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;
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.
The Fund expects that it will invest primarily in the more established and
liquid markets in Europe. However, the Fund may also invest in the
lesser-developed markets in Europe including those countries in Southern and
Eastern Europe, as well as the former communist countries in the Soviet Union.
The Fund does not expect to invest more than 20% of its total assets in these
developing markets under normal circumstances or more than 10% of its total
assets in issuers based in any one of these developing countries.
In managing the Fund, Alliance utilizes a disciplined approach to invest on a
bottom-up basis in those companies exhibiting the best available combination of
sustainable fundamental growth at a reasonable price. Alliance's approach
emphasizes proprietary qualitative and quantitative inputs provided by its
in-house analysts. Internal analysis focuses primarily on large to upper-medium
capitalization stocks (those with a market value of $3 billion and above).
Country and industry exposures are by-products of the stock selection process.
Alliance does not actively manage currency exposures for this Fund but may hedge
underlying exposures back to U.S. Dollars when conditions are perceived to be
extreme.
Stock selection focuses on companies in growth industries that exhibit
above-average growth based on a competitive or sustainable advantage based on
brand, technology, or market share. A stock is typically sold when its relative
fundamentals are no longer as attractive as other investment opportunities
available to the Fund. This may be a function of the stock having
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achieved its fair market value, deterioration in fundamentals relative to
Alliance's expectations, or because the management team loses confidence in
company management.
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's investment policies do not require that the Fund concentrate its
investments in any single country. However, these policies also do not prevent
the Fund from concentrating its investments in a single country and in recent
years the Fund has invested more than 25% of its total assets in the United
Kingdom The Fund may invest without limit in any single European 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 foreign 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 maintain no more than 15% of its total assets in issuers
in any
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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 international 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 40 companies will be represented in the Fund's
portfolio, and the 30 most highly regarded of these companies usually will
constitute approximately 70%, and often more, 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 that the market capitalization of the companies represented in
the Fund's portfolio will generally be in excess of $10 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 the Alliance 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 of the 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 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 35% of its total assets in each of the United Kingdom and Japan and
up to
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25% of its total assets in issuers in each of Canada, France, Germany, Italy,
The Netherlands and Switzerland. 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 or country, the Fund may
be subject to any special risks associated with that region or 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. 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;
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 capitalizations. 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
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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 international 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 international 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
international 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 foreign 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 slowed during 1999, as expected. 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
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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 the 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 may differ significantly 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
more of 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
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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
maintain no more than 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 asset value. The Fund's investments in debt securities have interest rate
and credit risk.
DESCRIPTION OF ADDITIONAL 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
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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.
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 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
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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 Health Care Fund,
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 Health Care Fund, Alliance International Fund, 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. Except with respect to
Alliance Quasar Fund, 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
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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
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.
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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 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.
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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 that 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 Funds 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.
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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, 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
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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 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 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
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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.
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 New Europe 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 and Alliance
Greater China '97 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.
48
<PAGE>
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.
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, and
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
49
<PAGE>
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.
--------------------------------------------------------------------------------
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 June 30, 2000 totaling
more than $388 billion (of which more than $185 billion represented assets of
investment companies). As of June 30, 2000, Alliance managed retirement assets
for many of the largest public and private employee benefit plans (including
29 of the nation's FORTUNE 100 companies), for public employee retirement funds
in 33 states, for investment companies, and for foundations, endowments, banks
and insurance companies worldwide. The 52 registered investment companies
managed by Alliance, comprising 122 separate investment portfolios, currently
have more than 6.1 million shareholder accounts.
50
<PAGE>
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 .95% 11/30/99
Alliance Health Care Fund .95% 6/30/00
Alliance Growth Fund .68 10/31/99
Alliance Technology Fund 1.10 11/30/99
Alliance Quasar Fund 1.01 9/30/99
The Alliance Fund .68 11/30/99
Alliance Growth and Income
Fund .47 10/31/99
Alliance Balanced Shares
Fund .56 7/31/00
Alliance Utility Income Fund .51 11/30/99
Alliance Real Estate
Investment Fund .90 8/31/00
Alliance New Europe Fund .92% 7/31/00
Alliance Worldwide
Privatization Fund 1.00 6/30/00
Alliance International
Premier Growth Fund .71 11/30/99
Alliance Global Small Cap
Fund 1.00% 7/31/00
Alliance International Fund .87% 6/30/00
Alliance Greater China
'97 Fund 0% 7/31/00
Alliance All-Asia Investment
Fund .65 10/31/99
--------------------------------------------------------------------------------
* 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 Managers
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 *
Growth Fund inception--Vice Chairman
of Alliance Capital
Management Corporation
(ACMC)**
Alliance Health Norman Fidel; since inception *
Care Fund --Senior Vice President
of ACMC
Alliance Growth Tyler Smith; since inception *
Fund --Senior Vice President
Alliance Technology Peter Anastos; since 1992 *
Fund --Senior Vice President
of ACMC
Gerald T. Malone; since 1992 *
--Senior Vice President
of ACMC
Alliance Quasar Bruce Aranow; since 1999 Associated with
Fund --Vice President of ACMC Alliance since 1999;
prior thereto, Vice
President at Invesco
since 1998; prior
thereto, Vice
President at LGT
Asset Management
since 1996
The Alliance Fund Alden M. Stewart; since 1997 *
--(see above)
Alliance Growth and Paul Rissman; since 1994 *
Income Fund --Senior Vice President
of ACMC
Alliance Balanced Paul Rissman; since 1997 *
Shares Fund --(see above)
Alliance Utility Paul Rissman; since 1996 *
Income Fund --(see above)
Alliance Real Estate Daniel G. Pine; since 1996 *
Investment Fund --Senior Vice President
of ACMC
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 *
Fund --Senior Vice President
of ACMC
Alliance Worldwide Mark H. Breedon; since *
Privatization Fund inception, Vice President
of ACMC and Director
and Senior Vice President
of Alliance Capital Limited***
Alliance International Alfred Harrison; since 1998 *
Premier Growth Fund --(see above)
Thomas Kamp; since 1998 *
--Senior Vice President
of ACMC
51
<PAGE>
Principal Occupation
During the Past
Fund Employee; Year; Title Five (5) Years*
--------------------------------------------------------------------------------
Alliance Global Bruce Aranow; since 1999 (see above)
Small Cap Fund --(see above)
Mark D. Breedon; since 1998 *
--(see above)
Alliance Nicholas D.P. Carn; since 1998 *
International Fund --Senior Vice President
of ACMC
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.
Alliance All-Asia Hiroshi Motoki; since 1998 *
Investment Fund --Senior Vice President
of ACMC and director of
Japanese/Asian Equity
research
--------------------------------------------------------------------------------
* Unless indicated otherwise, persons associated with Alliance have been
employed in a substantially similar capacity to their current position.
** 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.
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for the period during which Mr. Harrison has managed the
Historical Portfolios as an employee of Alliance. As of September 30, 2000,
the assets in the Historical Portfolios totaled approximately $14.3 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 under
Commission Rule 12b-1 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
52
<PAGE>
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 Large Cap Growth Fund Index is prepared by Lipper, Inc. and
represents a composite index of the investment performance for the 30 largest
large capitalization growth mutual funds. The composite investment performance
of the Lipper Large Cap 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>
Lipper
Russell Large Cap
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>
1/1/00-
9/30/00***...... (8.74)% (4.55)% (1.39)% (1.37)% (1.44)%
Year ended
December:
1999***......... 23.51 29.67 21.03 33.16 34.82
1998***......... 42.97 52.16 28.60 38.71 36.47
1997***......... 27.05 34.64 33.36 30.49 27.59
1996***......... 18.84 22.06 22.96 23.12 20.56
1995***......... 40.66 39.83 37.58 37.19 34.92
1994............ (9.78) (4.82) 1.32 2.66 (0.82)
1993............ 5.35 10.54 10.08 2.90 10.66
1992............ -- 12.18 7.62 5.00 6.89
1991............ -- 38.91 30.47 41.16 37.34
1990............ -- (1.57) (3.10) (0.26) (1.82)
1989............ -- 38.80 31.69 35.92 32.30
1988............ -- 10.88 16.61 11.27 10.84
1987............ -- 8.49 5.25 5.31 3.33
1986............ -- 27.40 18.67 15.36 16.75
1985............ -- 37.41 31.73 32.85 32.85
1984............ -- (3.31) 6.27 (.95) (4.25)
1983............ -- 20.80 22.56 15.98 22.63
1982............ -- 28.02 21.55 20.46 28.91
1981............ -- (1.09) (4.92) (11.31) (0.06)
1980............ -- 50.73 32.50 39.57 47.73
1979............ -- 30.76 18.61 23.91 29.90
Cumulative
total return
for the period
January 1, 1979 to
September 30, 2000 -- 5850% 3032% 3148% 3961%
</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.
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 2000 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>
Lipper
Russell Large Cap
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
<S> <C> <C> <C> <C> <C>
One year........ 9.93% 15.27% 13.27% 23.43% 23.73%
Three years..... 19.61 22.74 16.44 22.74 21.95
Five years...... 23.84 25.65 21.68 25.07 23.41
Ten years...... 21.70* 23.25 19.42 21.44 20.75
Since January 1,
1979............ -- 20.67 17.16 17.36 18.57
</TABLE>
--------------------------------------------------------------------------------
* Since inception on 9/28/92
Performance of a Similarly Managed Fund. Alliance is the investment adviser of
an investment company organized and operated under the laws of the Grand Duchy
of Luxembourg, ACM International Health Care Fund (the "ACM Fund"), that has
substantially the same investment objective and policies as those of Alliance
Health Care Fund. The ACM Fund has been managed in accordance with substantially
the same investment strategies and techniques as are employed with respect to
Alliance Health Care Fund.
Norman Fidel, the portfolio manager of Alliance Health Care Fund, is also the
person who has been primarily responsible for the day-to-day management of the
ACM Fund since 1988. Mr. Fidel manages approximately $2 billion of Health
Care Industries assets, including approximately $646 million of assets in the
ACM Fund as of September 30, 2000.
The ACM Fund is not subject to certain limitations, diversification requirements
and other restrictions imposed under the 1940 Act and the Code to which Alliance
Health Care Fund, as a registered investment company, is subject and which, if
applicable to the ACM Fund, may have adversely affected the performance results
of the ACM Fund.
53
<PAGE>
Set forth below are performance data provided by Alliance relating to the Class
AX shares of the ACM Fund since 1988, when Mr. Fidel began managing that fund.
Performance data are shown annually and cumulatively through September 30, 2000.
The performance data are net of all fees imposed by the ACM Fund. The
performance data have not been adjusted to reflect the fees that are payable by
Alliance Health Care Fund, which, at comparable asset levels, may be lower than
the fees imposed on the ACM Fund and may result in a lower expense ratio for
Alliance Health Care Fund. Expenses associated with the distribution of Class A,
Class B and Class C shares of Alliance Health Care Fund in accordance with the
plan adopted by Alliance Health Care Fund's Board of Directors under Commission
Rule 12b-1 also are not reflected in the data below relating to the ACM Fund.
See "Fees and Expenses of the Funds." The performance data have also not been
adjusted for corporate or individual taxes, if any, payable by the ACM Fund
shareholders.
The following performance data are provided solely to illustrate Mr. Fidel's
performance in managing the ACM Fund. Investors should not rely on the following
performance data of the ACM Fund as an indication of future performance of the
Alliance Health Care Fund. The investment performance for the periods presented
may not be indicative of future rates of return.
ACM International Health Care Fund
----------------------------------
Total Returns
-------------
1988................................................... 21.82%
1989................................................... 46.75%
1990................................................... 25.96%
1991................................................... 83.07%
1992................................................... -10.46%
1993................................................... -1.38%
1994................................................... 13.84%
1995................................................... 46.49%
1996................................................... 2.18%
1997................................................... 23.07%
1998................................................... 24.29%
1999................................................... -3.03%
2000*.................................................. 27.00%
Average Annual Total Return
(for periods ended 9/30/00)
---------------------------
One year............................................... 39.66%
Five years............................................. 17.07%
Ten years.............................................. 20.01%
Cumulative Total Return of the ACM Fund from
12/31/87 to 9/30/00: 1068%
--------------------------------------------------------------------------------
* Through September 30, 2000 (unannualized)
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 received in proper form 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 of 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
54
<PAGE>
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 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.
55
<PAGE>
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.
Distributions of long-term capital gains generally will 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 credit or
deduction for all or a portion of 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
to Class A shares of the same Fund. The Fund will provide the shareholder with
at least 30 days advance notice of such conversion. 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.
--------------------------------------------------------------------------------
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). Except as otherwise indicated,
this information has been audited by PricewaterhouseCoopers LLP, the independent
accountants for The Alliance Fund, Alliance Growth Fund, Alliance Premier Growth
Fund, Alliance Health Care 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 auditors 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 Greater China '97 Fund and
Alliance Real Estate Investment Fund, whose reports, along with each Fund's
financial statements, are included in each Fund's Annual Report, which is
available upon request.
57
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
----------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- ------------ -------------- --------------- ----------
<S> <C> <C> <C> <C>
Alliance Premier Growth Fund
12/1/99 to 5/31/00+++................ $ 36.25 $ (.04)(b) $ 2.74 $ 2.70
Year ended 11/30/99.................. 27.71 (.17)(b) 9.32 9.15
Year ended 11/30/98.................. 22.10 (.07)(b) 7.14 7.07
Year ended 11/30/97.................. 17.99 (.06)(b) 5.25 5.19
10/2/96+ to 11/30/96................. 15.94 (.01)(b) 2.06 2.05
Alliance Health Care Fund
8/27/99++ to 6/30/00................. $ 10.00 $ (.03)(b)(c) $ 2.57 $ 2.54
Alliance Growth Fund
11/1/99 to 4/30/00+++................ $ 56.88 $ (.01)(b) $ 6.84 $ 6.83
Year ended 10/31/99.................. 47.47 .02(b) 13.10 13.12
Year ended 10/31/98.................. 44.08 .08(b) 6.22 6.30
Year ended 10/31/97.................. 34.91 (.05)(b) 10.25 10.20
10/2/96+ to 10/31/96................. 34.14 0.00 .77 .77
Alliance Technology Fund
12/1/99 to 5/31/00+++................ $112.59 $ (.42)(b) $ 25.25 $ 24.83
Year ended 11/30/99.................. 69.04 (.68)(b) 49.40 48.72
Year ended 11/30/98.................. 54.63 (.50)(b) 15.49 14.99
Year ended 11/30/97.................. 51.17 (.45)(b) 4.33 3.88
10/2/96+ to 11/30/96................. 47.32 (.05)(b) 3.90 3.85
Alliance Quasar Fund
10/1/99 to 3/31/00+++................ $ 24.01 $ (.08)(b) $ 4.57 $ 4.49
Year ended 9/30/99................... 22.37 (.15)(b) 2.80 2.65
Year ended 9/30/98................... 30.42 (.09)(b) (6.73) (6.82)
10/2/96+ to 9/30/97.................. 27.82 (.17)(b) 6.88 6.71
The Alliance Fund
12/1/99 to 5/31/00+++................ $ 7.58 $ 0.00(b) $ (.33) $ (.33)
Year ended 11/30/99.................. 5.98 (.01)(b) 2.00 1.99
Year ended 11/30/98.................. 8.69 (.01)(b) (.53) (.54)
Year ended 11/30/97.................. 7.71 (.02)(b) 2.10 2.08
10/2/96+ to 11/30/96................. 6.99 0.00 .72 .72
Alliance Growth and
Income Fund
11/1/99 to 4/30/00+++................ $ 3.71 $ .02(b) $ .20 $ .22
Year ended 10/31/99.................. 3.44 .04(b) .63 .67
Year ended 10/31/98.................. 3.48 .04(b) .43 .47
Year ended 10/31/97.................. 3.00 .05(b) .87 .92
10/2/96+ to 10/31/96................. 2.97 0.00 .03 .03
Alliance Balanced Shares
Year ended 7/31/00................... $ 15.64 $ .43(b) $ .50 $ .93
Year ended 7/31/99................... 15.98 .39(b) 1.29 1.68
Year ended 7/31/98................... 16.17 .37(b) 1.87 2.24
10/2/96+ to 7/31/97.................. 14.79 .23(b) 3.22 3.45
Alliance Utility Income Fund
12/1/99 to 5/31/00+++................ $ 16.95 $ 1.18(b)(c) $ (.19) $ .99
Year ended 11/30/99.................. 14.70 .42(b)(c) 2.52 2.94
Year ended 11/30/98.................. 12.49 .37(b)(c) 2.66 3.03
Year ended 11/30/97.................. 10.59 .36(b)(c) 2.04 2.40
10/2/96+ to 11/30/96................. 9.95 .03(b)(c) .61 .64
Alliance Real Estate
Investment Fund
Year ended 8/31/00................... $ 10.20 $ .38(b) $ .92 $ 1.30
Year ended 8/31/99................... 10.48 .48(b) (.05) .43
Year ended 8/31/98................... 12.82 .55(b) (2.34) (1.79)
10/1/96+ to 8/31/97.................. 10.00 .35(b) 2.88 3.23
Alliance New Europe Fund
Year ended 7/31/00................... $ 18.58 $ (.01)(b) $ 3.52 $ 3.51
Year ended 7/31/99................... 21.79 .13(b) (.78) (.65)
Year ended 7/31/98................... 18.57 .08(b) 5.28 5.36
10/2/96+ to 7/31/97.................. 16.25 .11(b) 3.76 3.87
Alliance Worldwide
Privatization Fund
Year ended 6/30/00................... $ 11.77 $ 0.00 $ 2.82 $ 2.82
Year ended 6/30/99................... 12.63 .02(b) .93 .95
Year ended 6/30/98................... 13.23 .19(b) .80 .99
10/2/96+ to 6/30/97.................. 12.14 .18(b) 2.52 2.70
Alliance International
Premier Growth Fund
12/1/99 to 5/31/00+++................ $ 13.27 $ (.01)(b)(c) $ .48 $ .47
Year ended 11/30/99.................. 9.64 (.12)(b)(c) 3.75 3.63
3/3/98++ to 11/30/98................. 10.00 .01(b)(c) (.37) (.36)
<CAPTION>
Less Dividends and Distributions Less Distributions
--------------------------------------------- ------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ----------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Alliance Premier Growth Fund
12/1/99 to 5/31/00+++................ $ 0.00 $0.00 $(2.36) $(2.36) $ 36.59
Year ended 11/30/99.................. 0.00 0.00 (.61) (.61) 36.25
Year ended 11/30/98.................. 0.00 0.00 (1.46) (1.46) 27.71
Year ended 11/30/97.................. 0.00 0.00 (1.08) (1.08) 22.10
10/2/96+ to 11/30/96................. 0.00 0.00 0.00 0.00 17.99
Alliance Health Care Fund
8/27/99++ to 6/30/00................. $ 0.00 $0.00 $ 0.00 $ 0.00 $ 12.54
Alliance Growth Fund
11/1/99 to 4/30/00+++................ $ 0.00 $0.00 $(7.44) $(7.44) $ 56.27
Year ended 10/31/99.................. 0.00 0.00 (3.71) (3.71) 56.88
Year ended 10/31/98.................. 0.00 0.00 (2.91) (2.91) 47.47
Year ended 10/31/97.................. 0.00 0.00 (1.03) (1.03) 44.08
10/2/96+ to 10/31/96................. 0.00 0.00 0.00 0.00 34.91
Alliance Technology Fund
12/1/99 to 5/31/00+++................ $ 0.00 $0.00 $(4.04) $(4.04) $ 133.38
Year ended 11/30/99.................. 0.00 0.00 (5.17) (5.17) 112.59
Year ended 11/30/98.................. 0.00 0.00 (.58) (.58) 69.04
Year ended 11/30/97.................. 0.00 0.00 (.42) (.42) 54.63
10/2/96+ to 11/30/96................. 0.00 0.00 0.00 0.00 51.17
Alliance Quasar Fund
10/1/99 to 3/31/00+++................ $ 0.00 $0.00 $ 0.00 $ 0.00 $ 28.50
Year ended 9/30/99................... 0.00 0.00 (1.01) (1.01) 24.01
Year ended 9/30/98................... 0.00 0.00 (1.23) (1.23) 22.37
10/2/96+ to 9/30/97.................. 0.00 0.00 (4.11) (4.11) 30.42
The Alliance Fund
12/1/99 to 5/31/00+++................ $ 0.00 $0.00 $ (.64) $ (.64) $ 6.61
Year ended 11/30/99.................. 0.00 0.00 (.39) (.39) 7.58
Year ended 11/30/98.................. 0.00 0.00 (2.17) (2.17) 5.98
Year ended 11/30/97.................. (.04) 0.00 (1.06) (1.10) 8.69
10/2/96+ to 11/30/96................. 0.00 0.00 0.00 0.00 7.71
Alliance Growth and
Income Fund
11/1/99 to 4/30/00+++................ $ (.02) $0.00 $ (.17) $ (.19) $ 3.74
Year ended 10/31/99.................. (.04) (.01) (.35) (.40) 3.71
Year ended 10/31/98.................. (.05) 0.00 (.46) (.51) 3.44
Year ended 10/31/97.................. (0.06) 0.00 (.38) (.44) 3.48
10/2/96+ to 10/31/96................. 0.00 0.00 0.00 0.00 3.00
Alliance Balanced Shares
Year ended 7/31/00................... $ (.39) $0.00 $ (.64) $(1.03) $ 15.54
Year ended 7/31/99................... (.37) 0.00 (1.65) (2.02) 15.64
Year ended 7/31/98................... (.36) 0.00 (2.07) (2.43) 15.98
10/2/96+ to 7/31/97.................. (.27) 0.00 (1.80) (2.07) 16.17
Alliance Utility Income Fund
12/1/99 to 5/31/00+++................ $ (.18) $0.00 $ (.94) $(1.12) $ 16.82
Year ended 11/30/99.................. (.35) 0.00 (.34) (.69) 16.95
Year ended 11/30/98.................. (.35) 0.00 (.47) (.82) 14.70
Year ended 11/30/97.................. (.37) 0.00 (.13) (.50) 12.49
10/2/96+ to 11/30/96................. 0.00 0.00 0.00 0.00 10.59
Alliance Real Estate
Investment Fund
Year ended 8/31/00................... $ (.63)(f) $0.00 $ 0.00 $ (.63) $ 10.87
Year ended 8/31/99................... (.50)(f) (.11) (.10) (.71) 10.20
Year ended 8/31/98................... (.54) 0.00 (.01) (.55) 10.48
10/1/96+ to 8/31/97.................. (.41)(f) 0.00 0.00 (.41) 12.82
Alliance New Europe Fund
Year ended 7/31/00................... $ 0.00 $0.00 $ (.91) $ (.91) $ 21.18
Year ended 7/31/99................... 0.00 0.00 (2.56) (2.56) 18.58
Year ended 7/31/98................... 0.00 (.09) (2.05) (2.14) 21.79
10/2/96+ to 7/31/97.................. (.09) (.14) (1.32) (1.55) 18.57
Alliance Worldwide
Privatization Fund
Year ended 6/30/00................... $(0.00) $0.00 $(1.06) $(1.06) $ 13.53
Year ended 6/30/99................... (.17) 0.00 (1.64) (1.81) 11.77
Year ended 6/30/98................... (.23) 0.00 (1.36) (1.59) 12.63
10/2/96+ to 6/30/97.................. (.19) 0.00 (1.42) (1.61) 13.23
Alliance International
Premier Growth Fund
12/1/99 to 5/31/00+++................ $ 0.00 $0.00 $ (.44) $ (.44) $ 13.30
Year ended 11/30/99.................. 0.00 0.00 0.00 0.00 13.27
3/3/98++ to 11/30/98................. 0.00 0.00 0.00 0.00 9.64
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss) to
Total End of Period to Average Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ----------- -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Premier Growth Fund
12/1/99 to 5/31/00+++................ 7.84% $590,345 1.06%* (.20)%* 68%
Year ended 11/30/99.................. 33.68% 466,690 1.16 (.51) 75
Year ended 11/30/98.................. 34.31 271,661 1.26(e) (.28) 82
Year ended 11/30/97.................. 30.98 53,459 1.25 (.28) 76
10/2/96+ to 11/30/96................. 12.86 1,922 1.50* (.48)* 95
Alliance Health Care Fund
8/27/99++ to 6/30/00................. 25.40% $ 6,184 1.61%*(d) (.36)%* 26%
Alliance Growth Fund
11/1/99 to 4/30/00+++................ 12.47% $ 40,622 .82%* (.03)%* 38%
Year ended 10/31/99.................. 29.08 142,720 .88 .03 62
Year ended 10/31/98.................. 14.92 174,745 .93(e) .17 61
Year ended 10/31/97.................. 29.92 101,205 .98(e) (.12) 48
10/2/96+ to 10/31/96................. 2.26 946 1.26* .50 46
Alliance Technology Fund
12/1/99 to 5/31/00+++................ 22.58% $348,407 1.23%* (.61)%* 23%
Year ended 11/30/99.................. 75.22 330,404 1.35%(e) (.78) 54
Year ended 11/30/98.................. 27.73 230,295 1.37(e) (.84) 67
Year ended 11/30/97.................. 7.65 167,120 1.39(e) (.81) 51
10/2/96+ to 11/30/96................. 8.14 566 1.75* (1.21)* 30
Alliance Quasar Fund
10/1/99 to 3/31/00+++................ 18.70% $141,054 1.37%(e)* (.59)%* 86%
Year ended 9/30/99................... 12.16 164,671 1.42(e) (.62) 91
Year ended 9/30/98................... (23.24) 175,037 1.38(e) (.32) 109
10/2/96+ to 9/30/97.................. 28.47 62,455 1.58* (.74)* 135
The Alliance Fund
12/1/99 to 5/31/00+++................ (4.87)% $ 9,891 .82%* (.13)%* 46%
Year ended 11/30/99.................. 35.66 9,970 .85 (.20) 97
Year ended 11/30/98.................. (8.19) 11,305 .83 (.16) 106
Year ended 11/30/97.................. 32.00 10,275 .83 (.21) 158
10/2/96+ to 11/30/96................. 10.30 1,083 .89* .38* 80
Alliance Growth and
Income Fund
11/1/99 to 4/30/00+++................ 6.59% $ 65,293 .66%* 1.19%* 28%
Year ended 10/31/99.................. 21.03 39,739 .68 1.12 48
Year ended 10/31/98.................. 14.96 22,786 .76(e) 1.14 89
Year ended 10/31/97.................. 33.61 3,207 .71(e) 1.42 88
10/2/96+ to 10/31/96................. 1.01 87 .37* 3.40* 88
Alliance Balanced Shares
Year ended 7/31/00................... 6.48% $ 2,943 .86% 2.88% 76%
Year ended 7/31/99................... 11.71 2,627 .97(e) 2.56 105
Year ended 7/31/98................... 15.32 2,079 1.06(e) 2.33 145
10/2/96+ to 7/31/97.................. 25.96 1,565 1.30(e)* 2.15* 207
Alliance Utility Income Fund
12/1/99 to 5/31/00+++................ 6.12% $ 1,035 1.19%(d)* 13.87%* 19%
Year ended 11/30/99.................. 20.62 1,532 1.20(d) 2.55 19
Year ended 11/30/98.................. 25.34 523 1.20(d) 2.83 16
Year ended 11/30/97.................. 23.57 42 1.20(d) 3.28 37
10/2/96+ to 11/30/96................. 6.33 33 1.20(d)* 4.02* 98
Alliance Real Estate
Investment Fund
Year ended 8/31/00................... 13.94% $ 1,943 1.40% 3.83% 26%
Year ended 8/31/99................... 4.18 2,270 1.30 4.75 29
Year ended 8/31/98................... (14.74) 2,899 1.25 4.08 23
10/1/96+ to 8/31/97.................. 32.72 2,313 1.45(d)(e)* 3.07* 20
Alliance New Europe Fund
Year ended 7/31/00................... 19.21% $ 9,196 1.34%(e) (.06)% 103%
Year ended 7/31/99................... (2.54) 4,778 1.51(e) .68 89
Year ended 7/31/98................... 32.55 3,143 1.56(e) .39 99
10/2/96+ to 7/31/97.................. 25.76 4,130 1.71(e)* .77* 89
Alliance Worldwide
Privatization Fund
Year ended 6/30/00................... 24.68% $ 2,506 1.43%(e) .01% 67%
Year ended 6/30/99................... 10.12 1,610 1.62(e) .37 58
Year ended 6/30/98................... 9.48 1,716 1.45 1.48 53
10/2/96+ to 6/30/97.................. 25.24 374 1.96* 2.97* 48
Alliance International
Premier Growth Fund
12/1/99 to 5/31/00+++................ 3.62% $ 21,076 1.53%* (.21)%* 122%
Year ended 11/30/99.................. 37.66 2,386 2.21(d)(e) (1.06) 107
3/3/98++ to 11/30/98................. (3.60) 1,386 2.20(d)* .13* 151
</TABLE>
--------------------------------------------------------------------------------
Please refer to the footnotes on page 60.
58 & 59
<PAGE>
<TABLE>
<CAPTION>
Income from Investment Operations
-----------------------------------------------
Net Gains
Net Asset or Losses on
Value, Securities Total from
Beginning Net Investment (both realized Investment
Fiscal Year or Period of Period Income (Loss) and unrealized) Operations
--------------------- --------- -------------- --------------- ----------
<S> <C> <C> <C> <C>
Alliance Global
Small Cap Fund
Year ended 7/31/00............... $11.74 $(.12)(b) $3.86 $3.74
Year ended 7/31/99............... 12.20 (.07)(b) .77 .70
Year ended 7/31/98............... 12.89 (.07)(b) .37 .30
10/2/96+ to 7/31/97.............. 12.56 (.08)(b) 1.97 1.89
Alliance International Fund
Year ended 6/30/00............... $16.24 $ .01(b)(c) $4.66 $4.67
Year ended 6/30/99............... 18.54 .01(b)(c) (.75) (.74)
Year ended 6/30/98............... 18.67 .02(b)(c) 1.13 1.15
10/2/96+ to 6/30/97.............. 17.96 .16(b) 1.78 1.94
Alliance Greater
China '97 Fund
Year ended 7/31/00............... $ 8.24 $(.02)(b)(c) $2.19 $2.17
Year ended 7/31/99............... 4.85 .04(b)(c) 3.35 3.39
9/3/97+ to 7/31/98............... 10.00 .10(b)(c) (5.18) (5.08)
Alliance All-Asia
Investment Fund
11/1/99 to 4/30/00+++............ $10.54 $(.07)(b) $2.87 $2.80
Year ended 10/31/99.............. 5.90 (.10)(b)(c) 4.74 4.64
Year ended 10/31/98.............. 7.56 (.08)(b)(c) (1.58) (1.66)
Year ended 10/31/97.............. 11.04 (.15)(b)(c) (2.99) (3.14)
10/2/96+ to 10/31/96............. 11.65 0.00(b)(c) (.61) (.61)
<CAPTION>
Less Dividends and Distributions Less Distributions
---------------------------------------------- ------------------
Dividends Distributions Total Net Asset
from Net in Excess of Distributions Dividends Value,
Investment Net Investment from and End of
Fiscal Year or Period Income Income Capital Gains Distributions Period
--------------------- ---------- -------------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Alliance Global
Small Cap Fund
Year ended 7/31/00............... $0.00 $0.00 $ (.20) $ (.20) $15.28
Year ended 7/31/99............... 0.00 0.00 (1.16) (1.16) 11.74
Year ended 7/31/98............... 0.00 0.00 (.99) (.99) 12.20
10/2/96+ to 7/31/97.............. 0.00 0.00 (1.56) (1.56) 12.89
Alliance International Fund
Year ended 6/30/00............... $0.00 $0.00 $(1.19) $(1.19) $19.72
Year ended 6/30/99............... (.01) (.51) (1.04) (1.56) 16.24
Year ended 6/30/98............... (.02) (.05) (1.21) (1.28) 18.54
10/2/96+ to 6/30/97.............. (.15) 0.00 (1.08) (1.23) 18.67
Alliance Greater
China '97 Fund
Year ended 7/31/00............... $0.00 $0.00 $ 0.00 $ 0.00 $10.41
Year ended 7/31/99............... 0.00 0.00 0.00 0.00 8.24
9/3/97+ to 7/31/98............... (.07) 0.00 0.00 (.07) 4.85
Alliance All-Asia
Investment Fund
11/1/99 to 4/30/00+++............ $0.00 $0.00 $ 0.00 $ 0.00 $13.34
Year ended 10/31/99.............. 0.00 0.00 0.00 0.00 10.54
Year ended 10/31/98.............. 0.00 0.00 0.00 0.00 5.90
Year ended 10/31/97.............. 0.00 0.00 (.34) (.34) 7.56
10/2/96+ to 10/31/96............. 0.00 0.00 0.00 0.00 11.04
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------
Ratio of Ratio of Net
Net Assets, Expenses Income (Loss) to
Total End of Period to Average Average Portfolio
Fiscal Year or Period Return (a) (000's omitted) Net Assets Net Assets Turnover Rate
--------------------- ---------- --------------- ---------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Alliance Global
Small Cap Fund
Year ended 7/31/00............... 32.19% $ 707 1.69%(e) (.76)% 133%
Year ended 7/31/99............... 7.63 189 2.13(e) (.63) 120
Year ended 7/31/98............... 2.82 392 1.87(e) (.57) 113
10/2/96+ to 7/31/97.............. 17.08 333 2.05(e)* (.84)* 129
Alliance International Fund
Year ended 6/30/00............... 29.64% $25,407 1.55%(d)(e)(g) .04% 154%
Year ended 6/30/99............... (3.62) 33,949 1.57(d)(e) .04(c) 178
Year ended 6/30/98............... 6.98 47,154 1.47(d) .13(c) 121
10/2/96+ to 6/30/97.............. 11.57 8,697 1.69(e)* 1.47* 94
Alliance Greater
China '97 Fund
Year ended 7/31/00............... 26.34% $ 273 2.22%(d)(e) (.15)%(c) 158%
Year ended 7/31/99............... 69.90% 161 2.22(d)(e) .58 94
9/3/97+ to 7/31/98............... (51.06) 60 2.22(d)(e)* 1.51* 58
Alliance All-Asia
Investment Fund
11/1/99 to 4/30/00+++............ 26.57% $ 8,568 1.77%(e)(g)* (.98)%* 164%
Year ended 10/31/99.............. 78.64 4,746 2.45(d)(e) (1.33) 119
Year ended 10/31/98.............. (21.96) 2,012 3.46(d)(e) 1.22 93
Year ended 10/31/97.............. (29.42) 1,338 3.21(d) (1.51) 70
10/2/96+ to 10/31/96............. (5.24) 27 4.97*(d) 1.63 66
</TABLE>
--------------------------------------------------------------------------------
+ Commencement of distribution.
++ Commencement of operations.
+++ Unaudited.
* 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 1999 2000
Alliance All-Asia Investment Fund
Advisor Class 5.54%* 3.43% 4.39% 2.93% --
Alliance Utility Income Fund
Advisor Class 3.48%* 3.29% 2.21% 1.41% 1.19%
Alliance Real Estate Investment
Fund
Advisor Class -- 1.47%* -- -- --
Alliance International Premier
Growth Fund
Advisor Class -- -- 6.28%* 2.96% --
1997 1998 1999 2000
Alliance International Fund
Advisor Class 1.69% 1.62% 1.70% 1.69%
Alliance Greater China '97 Fund
Advisor Class -- 18.13%* 19.01% 9.61%
Alliance Health Care Fund
Advisor Class -- -- -- 1.65%
(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 1999 2000
Alliance International Fund
Advisor Class 1.69%* -- 1.55% 1.53%
Alliance Global Small Cap Fund
Advisor Class 2.04%* 1.84% 2.10% 1.68%
Alliance New Europe Fund
Advisor Class 1.71%* 1.54% 1.50% 1.33%
Alliance All-Asia Investment Fund
Advisor Class -- 3.41% 2.43% 1.76%
Alliance Balanced Shares
Advisor Class 1.29%* 1.05% .96% --
Alliance Worldwide Privatization Fund
Advisor Class -- -- 1.61% 1.42%
Alliance Quasar Fund
Advisor Class -- 1.37% 1.41% 1.36%*
1997 1998 1999 2000
Alliance Real Estate Investment Fund
Advisor Class 1.44%* -- -- --
Alliance International Premier
Growth Fund
Advisor Class -- -- 2.20% --
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% 1.34% --
Alliance Greater China '97 Fund
Advisor Class -- 2.20%* 2.20% 2.20%*
Alliance Premier Growth Fund
Advisor Class -- 1.25% -- --
(f) Distributions from net investment income for the years ended 2000, 1999
and 1997 include a tax return of capital of $.19, $.02 and $.03
respectively.
(g) Includes interest expense. If Alliance International Fund had not borne
interest expenses, the ratio of expenses (net of interest expenses) to
average net assets would have been with respect to the Adviser Class,
1.68% for 2000. If Alliance All-Asia Investment Fund had not borne
interest expenses, the ratio of expenses (net of interest expenses) to
average net assets would have been with respect to the Adviser Class,
1.70% for 2000.
60 & 61
<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 1.62 in 1999. On October 23, 2000 the U.S. dollar-pound
sterling exchange rate was 1.45.
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
6930.2 at the end of 1999, up approximately 18% from the end of 1998. The FT-SE
100 index closed at 6315.90 on October 23, 2000, down approximately 9%
from the beginning of 2000.
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, gaining 418 of 659 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
SAI 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. Thereafter, the
Japanese yen generally depreciated against the U.S. Dollar until mid-1998, when
it began to appreciate. In September 1999 the Japanese yen reached a 43-month
high against the U.S. Dollar, precipitating a series of interventions by the
Japanese government in the currency market, which have succeeded in slowing the
appreciation of the Japanese yen 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, 1999 the TOPIX closed at 1722.20, up approximately 58% from the end
of 1998. On October 23, 2000 the TOPIX closed at 1422.84, down approximately
17% from the beginning of 2000.
Since the early 1980s, 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 was expected to to more open Japanese markets with respect to
trade in certain goods and services. Since then, the two countries have agreed
in principle to increase Japanese imports of American automobiles and automotive
parts, as well as other goods and services. Nevertheless, the surpluses have
persisted and it is expected that the 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
62
<PAGE>
of Representatives and reduced its shortfall in the House of Councillors. The
LDP formed a new three-party coalition government on October 5, 1999 that
further strengthened the position of Mr. Obuchi's administration in the
parliament. On April 6, 2000, following an ultimately fatal stroke suffered by
Mr. Obuchi, the parliament elected Yoshiro Mori to replace Mr. Obuchi as prime
minister. Although the LDP held on to its power in the House of
Representatives elections in June 2000, its margin of victory was less than
predicted. For the past several years, Japan's banking industry has been
weakened by a significant amount of problem loans. Japan's banks also have
had significant exposure to the recent 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 made $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 laws will achieve
their intended effect. For further information regarding Japan, see the SAIs
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, Jiang 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.
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 Taiwan, as well as trade with Hong Kong. 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. In
September 2000, however, following an agreement reached in November 1999 between
the U.S. and China, the U.S. Congress authorized the President to grant
permanent normal trade relations (formerly known as most favored nation status)
to China, ending the current annual review process and facilitating China's
entry into the World Trade Organization. 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 May 1998
election and again in the September 2000 election (although by a smaller
margin), 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
63
<PAGE>
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 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 that 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.
64
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<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 are legally part of) this prospectus.
You may request a free copy of the current annual/semi-annual report or the SAI,
or make inquiries concerning the Funds, 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:
o Call the Commission at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov
o Copies of the information may be obtained, after paying a duplicating fee,
by electronic request at [email protected], or by writing the
Commission's Public Reference Section, Wash, DC 20549-0102
You also may find more information about Alliance and the Funds on the internet
at www.Alliancecapital.com
Fund SEC File No.
--------------------------------------------------------------------------------
Alliance Premier Growth Fund 811-06730
Alliance Health Care Fund 811-09329
Alliance Growth Fund 811-05088
Alliance Technology Fund 811-03131
Alliance Quasar Fund 811-01716
The Alliance Fund 811-00204
Alliance Growth & Income 811-00126
Alliance Balanced Shares 811-00134
Alliance Utility Income Fund 811-07916
Alliance Real Estate Investment Fund 811-07707
Alliance New Europe Fund 811-06028
Alliance Worldwide Privatization Fund 811-08426
Alliance International Premier Growth Fund 811-08527
Alliance Global Small Cap Fund 811-01415
Alliance International Fund 811-03130
Alliance Greater China '97 Fund 811-08201
Alliance All-Asia Investment Fund 811-08776
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ALLIANCE NEW EUROPE FUND, INC.
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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 1, 2000
______________________________________________________________
This Statement of Additional Information is not a prospectus
and should be read in conjunction with the Fund's current
Prospectus, dated November 1, 2000, 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, dated
November 1, 2000, 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
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(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
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_______________________________________________________________
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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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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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
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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
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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
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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 securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities ("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
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these products would succeed in reducing the risk to the Fund of
exposure to local market and currency movements. New financial
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
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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 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
13
<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 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:
(1) purchase more than 10% of the outstanding
voting securities of any one issuer;
(2) 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);
(3) 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
value 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;
(4) 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
17
<PAGE>
an open-end investment company or 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;
(5) 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;
(6) 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;
(7) invest in companies for the purpose of
exercising control;
(8) 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);
(9) 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
(10) 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
18
<PAGE>
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
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
19
<PAGE>
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 adviser managing
client accounts with assets as of June 30, 2000 totaling more
than $388 billion (of which more than $185 billion represented
assets of investment companies). As of June 30, 2000, the
Adviser managed retirement assets for many of the largest public
and private employee benefit plans (including 29 of the nation's
FORTUNE 100 companies), for public employee retirement funds in
33 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 52
registered investment companies managed by the Adviser,
comprising 122 separate investment portfolios, currently have
approximately 6.1 million shareholder accounts.
Alliance Capital Management Corporation ("ACMC") is the
general partner of the Adviser and a wholly owned subsidiary of
The Equitable Life Assurance Society of the United States
("Equitable"). Equitable, one of the largest life insurance
companies in the United States, is the beneficial owner of an
approximately 55.4% partnership interest in the Adviser.
Alliance Capital Management Holding L.P. ("Alliance Holding")
owns an approximately 41.9% partnership interest in the Adviser.*
Equity interests in Alliance Holding are traded on the New York
Stock Exchange in the form of units. Approximately 98% of such
interests are owned by the public and management or employees of
the Adviser and approximately 2% are owned by Equitable.
Equitable is a wholly owned subsidiary of AXA Financial, Inc.
("AXA Financial"), a Delaware corporation whose shares are traded
on the New York Stock Exchange. AXA Financial serves as the
holding company for the Adviser, Equitable and Donaldson, Lufkin
& Jenrette, Inc., an integrated investment and merchant bank. As
of June 30, 1999, AXA, a French insurance holding company, owned
____________________
* Until October 29, 1999, Alliance Holding served as the
investment adviser to the Fund. On that date, Alliance
Holding reorganized by transferring its business to the
Adviser. Prior thereto, the Adviser had no material
business operations. One result of the organization was
that the Advisory Agreement, then between the Fund and
Alliance Holding, was transferred to the Adviser by means
of a technical assignment, and ownership of Alliance Fund
Distributors, Inc. and Alliance Fund Services, Inc., the
Fund's principal underwriter and transfer agent,
respectively, also was transferred to the Adviser.
20
<PAGE>
approximately 58.2% of the issued and outstanding shares of
common stock of AXA Financial.
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 another annual term 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
November 10, 1999.
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, 1998, July 31, 1999 and July 31, 2000
the Adviser received from the Fund advisory fees of $2,091,076,
$2,888,635 and $3,574,170, 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 $129,750 in
respect of such services during the fiscal year of the Fund ended
in 2000.
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 Disciplined Value Fund, Inc., Alliance Global
22
<PAGE>
Dollar Government 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 Health Care 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 Select
Investor 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 EQ Advisors
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 business and affairs of the Fund are managed under
the direction of the Board of Directors. The Directors and
principal officers of the Fund, their ages and their principal
occupations during the past five years are set forth below. Each
23
<PAGE>
such Director and officer is also a trustee, director or officer
of other registered investment companies sponsored by the
Adviser. Unless otherwise specified the address of each such
persons is 1345 Avenue of the Americas, New York, New York 10105.
Directors
John D. Carifa,** 55, Chairman of the Board, is the
President, Chief Operating Officer and a Director of ACMC, with
which he has been associated since prior to 1995.
David H. Dievler, 71, is an independent consultant.
Until December 1994 he was Senior Vice President of ACMC
responsible for mutual fund administration. Prior to joining
ACMC in 1984, he was Chief Financial Officer of Eberstadt Asset
Management since 1968. Prior to that he was a Senior Manager at
Price Waterhouse & Co. Member of American Institute of Certified
Public Accountants since 1953. His address is P.O. Box 167,
Spring Lake, New Jersey 07762.
John H. Dobkin, 58, Consultant. Formerly a Senior
Advisor from June 1999 - June 2000 and President from December
1989 - May 1999 of Historic Hudson Valley (historic
preservation). Previously, he was Director of the National
Academy of Design. During 1988-92, he was a Director and
Chairman of the Audit Committee of ACMC. His address is P.O. Box
12, Annandale, New York 12504.
W.H. Henderson, 73, 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, 74, is Chairman and Chief Executive Officer
of International Energy Corp. (oil and gas exploration), with
which he has been associated with since prior to 1995. 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,
____________________
** An "interested person" of the Fund as defined in the 1940
Act.
24
<PAGE>
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, 49, 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. since prior to 1995. He has continued
as a 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, 40, Senior Vice President, is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1995.
Thomas J. Bardong, 55, Vice President, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1995.
Stephen M. Beinhacker, 36, Vice President, is a Senior
Vice President of ACMC, with which he has been associated since
prior to 1995.
Russell Brody, 33, 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 1995.
Edmund P. Bergan, Jr., 50, 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 1995.
Andrew L. Gangolf, 46, Assistant Secretary, is a Senior
Vice President and Assistant General Counsel of AFD, with which
he has been associated since prior to 1995.
Domenick Pugliese, 39, Assistant Secretary, is a Senior
Vice President and Assistant General Counsel of AFD, with which
he has been associated since May 1995.
Mark D. Gersten, 50, Treasurer and Chief Financial
Officer, is a Senior Vice President of AFS, with which he has
been associated since prior to 1995.
25
<PAGE>
Vincent S. Noto, 35, Controller, is a Vice President of
AFS, with which he has been associated since prior to 1995.
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 the Fund's fiscal year ended July 31, 2000,
the aggregate compensation paid to each of the Directors during
calendar year 1999 by all of the registered investment companies
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
registered investment company in the Alliance Fund Complex
provides compensation in the form of pension or retirement
benefits to any of its directors or trustees. Each 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 49 106
David H. Dievler $7,304 $210,188 44 89
John H. Dobkin $7,306 $206,488 41 86
W.H. Henderson $7,525 $ 27,600 3 3
Stig Host $7,525 $ 27,600 3 3
Alan Stoga $7,525 $ 27,600 3 3
As of October 6, 2000, 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" or "AFD"), 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").
During the Fund's fiscal year ended July 31, 2000, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class A shares, in amounts aggregating
$469,792 which constituted 0.30%, annualized, of the Fund's
aggregate 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 $1,200,456. Of the
$1,670,248 paid by the Fund and the Adviser under the Rule 12b-1
27
<PAGE>
Plan with respect to the Class A shares, $93,442 was spent on
advertising, $18,145 on the printing and mailing of prospectuses
for persons other than current shareholders, $797,125 for
compensation to broker-dealers and other financial intermediaries
(including, $227,214 to the Fund's Principal Underwriters),
$166,154 for compensation to sales personnel, $595,382 was spent
on printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.
During the Fund's fiscal year ended July 31, 2000, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class B shares, in amounts aggregating
$1,704,053, which constituted 1.00%, annualized, of the Fund's
aggregate 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 $805,590. Of the
$2,509,643 paid by the Fund and the Adviser under the Rule 12b-1
Plan with respect to the Class B shares, $36,383 was spent on
advertising, $7,150 on the printing and mailing of prospectuses
for persons other than current shareholders, $2,008,665 for
compensation to broker-dealers and other financial intermediaries
(including, $87,342 to the Fund's Principal Underwriters),
$28,407 for compensation to sales personnel, $69,443 was spent
on printing of sales literature, travel, entertainment, due
diligence and other promotional expenses, and $259,595 was spent
on interest on Class B shares financing.
During the Fund's fiscal year ended July 31, 2000, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class C shares, in amounts aggregating
$559,404, which constituted 1.00%, annualized, of the Fund's
aggregate 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 $153,231. Of the
$712,635 paid by the Fund and the Adviser under the Rule 12b-1
Plan with respect to the Class C, shares $16,777 was spent on
advertising, $2,743 on the printing and mailing of prospectuses
for persons other than current shareholders, $599,860 for
compensation to broker-dealers and other financial intermediaries
(including, $39,113 to the Fund's Principal Underwriters),
$11,957 for compensation to sales personnel, $75,961 was spent on
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses, and $5,337 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
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
28
<PAGE>
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.
With respect to Class A shares of the Fund, distribution
expenses accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent
fiscal years. AFD's compensation with respect to Class B and
Class C shares for any given year, however, will probably exceed
the distribution services fee payable under the Rule 12b-1 Plan
with respect to the class involved and, in the case of Class B
and Class C shares, payments received from contingent deferred
sales charges ("CDSCs"). The excess will be carried forward by
AFD and reimbursed from distribution services fees payable under
the Rule 12b-1 Plan with respect to the class involved and, in
the case of Class B and Class C shares, payments subsequently
received through CDSCs, so long as the Rule 12b-1 Plan is in
effect.
Unreimbursed distribution expenses incurred as of the
end of the Fund's most recently completed fiscal period, and
carried over for reimbursement in future years in respect of the
Class B and Class C shares for the Fund were, respectively,
$6,412,274 (3.54% of the net assets of Class B) and $1,044,280
(1.71% 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.
In approving the Rule 12b-1 Plan, the Directors of the
Fund determined that there was a reasonable likelihood that the
Rule 12b-1 Plan 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.
29
<PAGE>
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.
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 for
another annual term 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 November 11, 1999.
In the event that the Rule 12b-1 Plan 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.
Transfer Agency Agreement
AFS, 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, 2000, the Fund paid Alliance Fund Services, Inc.
$959,386 for transfer agency services.
30
<PAGE>
Code of Ethics
The Fund, the Adviser and the Principal Underwriter have
each adopted codes of ethics pursuant to Rule 17j-1 of the 1940
Act. These codes of ethics permit personnel subject to the codes
to invest in securities, including securities that may be
purchased or held by the Fund.
____________________________________________________________
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."
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,
31
<PAGE>
(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 the Principal Underwriter 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
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 values
of the Class A and Advisor Class shares, as a result of the
32
<PAGE>
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
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
33
<PAGE>
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.
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, 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 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 contingent 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
34
<PAGE>
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
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.
____________________
*** Advisor Class shares are sold only to investors described
above in this section under "--General."
35
<PAGE>
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.
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, 2000,
July 31, 1999 and July 31, 1998, the aggregate amount of
underwriting commission payable with respect to shares of the
Fund were $1,307,844, 924,525, and $843,047, respectively. Of
that amount, the Principal Underwriter received the amounts of
$81,069, $139,781 and $28,025, 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 2000, 1999 and 1998, the
Principal Underwriter received contingent deferred sales charges
36
<PAGE>
of $2,343, $2,784 and $345, respectively, on Class A shares,
$344,619, $342,722 and $87,486, respectively, on Class B shares,
and $21,182, $45,561 and $7,877 , 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.
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
37
<PAGE>
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
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 such investors may pay a
reduced initial sales charge are described below.
38
<PAGE>
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
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
-Quality Bond Portfolio
-U.S. Government Portfolio
Alliance Disciplined Value Fund, Inc.
Alliance Global Dollar Government 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 Health Care 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.
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<PAGE>
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
-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 Select Investor Series, Inc.
-Biotechnology Portfolio
-Premier Portfolio
-Technology Portfolio
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
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
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<PAGE>
(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.
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%
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<PAGE>
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.
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
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<PAGE>
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)
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, the 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;
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<PAGE>
(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 financial intermediary, or its affiliates or
agents, for service in the nature of investment advisory or
administrative services; and
(vi) employer-sponsored qualified pensions or profit-
sharing plans (including Section 401(k) plans), custodial
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
the Class B 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 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.
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<PAGE>
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,
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
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<PAGE>
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).
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
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<PAGE>
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
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.
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<PAGE>
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, (iv) pursuant to a systematic withdrawal plan (see
"Shareholder Services - Systematic Withdrawal Plan" below), or
(v) sold through programs offered by financial intermediaries and
approved by AFD where such programs offer only shares which are
not subject to a contingent deferred sales charge and where the
financial intermediary establishes a single omnibus account for
each Fund.
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
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 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 Fund will provide the shareholder with at
least 30 days' notice of the conversion. 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.
Advisor Class shares do not have any distribution services fee.
As a result, Class A shares have a higher expense ratio and may
pay correspondingly lower dividends and have a lower net asset
value than Advisor Class shares.
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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.
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
49
<PAGE>
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.
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
found in the Prospectus or, in the case of an existing
shareholder, an "Autosell" application obtained from AFS. A
telephone redemption request by electronic funds transfer may not
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<PAGE>
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 is not available with 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
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<PAGE>
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
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.
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________________________________________________________________
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
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
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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
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
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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
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
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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
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
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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.
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,
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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
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
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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
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
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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
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.
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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
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.
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____________________________________________________________
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.
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
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 their 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.
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
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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.
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. 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 (in addition to
taxable dividends actually received), their respective pro-rata
shares of foreign taxes paid by the Fund; (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 taxes (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
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 taxes.
Backup Withholding. The Fund may be required to
withhold United States federal income tax at the rate of 31% of
all distributions payable to shareholders who fail to provide the
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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
date of acquisition of the asset and the date of disposition also
are treated as ordinary income 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
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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
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.
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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
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
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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
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
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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 July 31, 2000, 1999 and
1998, the Fund incurred brokerage commissions amounting in the
aggregate to $1,780,441, $1,243,655 and $1,113,414, respectively.
During the fiscal years ended in July 31, 2000, 1999 and 1998,
brokerage commissions amounting in the aggregate to $0, $0, and
$0, respectively, were paid to DLJ and brokerage commissions
amounting in the aggregate to $0, $-0- and $947, respectively,
were paid to brokers utilizing the Pershing Division of DLJ.
During the fiscal year ended July 31, 2000, 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 0% of
the Fund's aggregate brokerage commissions. During the fiscal
year ended in July 31, 2000, of the Fund's aggregate dollar
amount of brokerage transactions involving the payment of
commissions,0% were effected through DLJ and 0% were effected
through brokers utilizing the Pershing Division of DLJ. During
the fiscal year ended July 31, 2000, transactions in portfolio
securities of the Fund aggregating $806,707,767 with associated
brokerage commissions of approximately $1,770,519 were allocated
to persons or firms supplying research services to the Fund or
the Adviser.
________________________________________________________________
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
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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,
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.
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<PAGE>
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 October 6, 2000, there
were 7,990,564 Class A, 9,222,919 Class B, 3,145,705 Class C and
446,778 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 October 6, 2000:
Name and Address Shares % of Class
Class A
MLPF&S
For the Sole Benefit of
Its Customers
Attn Fund Admin. (977H4)
4800 Deer Lake Dr.
East 2nd Floor
Jacksonville,
FL 32246-6484 652,171 8.11%
Class B
MLPF&S
For the Sole Benefit of
Its Customers
Attn Fund Admin. (977H1)
4800 Deer Lake Dr.
East 2nd Floor
Jacksonville,
FL 32246-6484 1,084,271 11.75%
Class C
MLPF&S
For the Sole Benefit of
Its Customers
Attn Fund Admin. (97B78)
4800 Deer Lake Dr.
East 2nd Floor
Jacksonville,
FL 32246-6484 685,522 21.81%
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Advisor Class
MLPF&S
For the Sole Benefit of
Its Customers
Attn Fund Admin. (97LSO)
4800 Deer Lake Dr.
East 2nd Floor
Jacksonville,
FL 32246-6484 87,061 20.31%
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 194,918 45.48%
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 LLP, New York, New York. Seward & Kissel LLP 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.
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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.
The Fund calculates average annual total return
information in the Performance Table in the Risk/Return Summary
according to the Commission formula as described above. In
accordance with Commission guidelines, total return information
is presented for each class for the same time periods, i.e., the
1, 5 and 10 years (or over the life of the Fund, if the Fund is
less than 10 years old) ending on the last day of the most recent
calendar year. Since different classes may have first been sold
on different dates ("Actual Inception Dates"), in some cases this
can result in return information being presented for a class for
periods prior to its Actual Inception Date. Where return
information is presented for periods prior to the Actual
Inception Date of a Class (a "Younger Class"), such information
is calculated by using the historical performance of the class
with the earliest Actual Inception Date (the "Oldest Class").
For this purpose, the Fund calculates the difference in total
annual fund operating expenses (as a percentage of average net
assets) between the Younger Class and the Oldest Class, divides
the difference by 12, and subtracts the result from the monthly
performance at net asset value (including reinvestment of all
dividends and distributions) of the Oldest Class for each month
prior to the Younger Class's Actual Inception Date for which
performance information is to be shown. The resulting "pro
forma" monthly performance information is used to calculate the
Younger Class's average annual returns for these periods. Any
conversion feature applicable to the Younger Class is assumed to
occur in accordance with the Actual Inception Date for that
class, not its hypothetical inception date.
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.
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<PAGE>
The Fund's average annual total return for the one-
five- and ten-year periods ended July 31, 2000(or since inception
through that date, as noted) were as follows:
12 months Ended 5 Years Ended 10 Years Ended
7/31/00 7/31/00 7/31/00
Class A ()18.89% 16.30% 11.02*
Class B ()18.01% 15.47% 12.38%13.05*
Class C ()17.99% 15.47% 16.26%*
Advisor Class ()19.21% 18.82%* N/A
*Inception Dates: Class A - April 2, 1990
Class B - March 5, 1991
Class C - May 3, 1993
Advisor Class - October 2, 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, 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.
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.
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_______________________________________________________________
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS
_______________________________________________________________
The financial statements and the report of Ernst & Young LLP of
Alliance New Europe Fund, Inc. are incorporated herein by
reference to its annual report filing made with the SEC pursuant
to Section 30(b) of the 1940 Act and Rule 30b-2 thereunder. The
annual report is dated July 31, 2000 and was filed on October 4,
2000. It is available without charge upon request by calling
Alliance Fund Services, Inc. at (800) 227-4618.
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_______________________________________________________________
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
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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
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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 59 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 future role and composition of the House of
Lords is the subject of a December 1999 report of the Royal
Commission on House of Lords Reform, whose recommendations are to
be considered by a joint committee of the House of Commons and
the House of Lords. An initial step in the reform effort was
taken in November 1999, when hereditary peers lost their right to
sit and vote in the House of Lords. No further steps have been
taken in this regard. 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
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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
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 415 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 3.6% in real growth domestic
product ("GDP") terms from 1982 through 1988; 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 4.4% in 1994, 2.8% in 1995, 2.6% in
1996, 3.5% in 1997, 2.6% in 1998 and 2.1% in 1999. In the first
quarter of 2000, the United Kingdom's real GDP growth rate was
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3.0% compared to the first quarter of 1999. The government has
forecast a GDP growth rate of 2.75% to 3.25% for 2000 and 2.25%
to 3.75% for 2001.
Since the early 1990s, the United Kingdom's economy has
had moderate inflation, averaging 2.8% (as measured by the RPIX,
which excludes mortgage interest payments). The inflation rate
during 1999 was 2.3%.
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 19.9% of GDP in 1999
compared with 36.5% in 1960. 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. Overall, unemployment has continued to fall
from a post-recession high of 10.6% in January 1993 to an average
of 6.2% in 1999.
Foreign trade remains an important part of the United
Kingdom's economy. In 1999, exports of goods and services
represented 25.7% 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 46.0% of imports
in 1999 compared to 20.4% in 1975 and for 47.5% of exports in
1999 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 1999, the other members of the European Union
accounted for 58.7% of all exports and 53.8% of its imports, as
compared to 43.3% and 41.3%, respectively, in 1980. In 1999, the
United Kingdom's largest trading partners with respect to exports
and imports were the United States and Germany, respectively.
Historically, the United Kingdom's current account
consisted of relatively small trade deficits, sometimes
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
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surpluses from invisibles. These developments led to a balance
of payments deficit, which continued through 1999, with the
exception of 1997, when the balance of payments moved into
surplus.
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 permitted to
participate in the Economic and Monetary Union ("EMU") beginning
in January 1999. Although the United Kingdom has met the EMU's
eligibility criteria, the government chose not to participate in
the EMU when it was launched in January 1999. Further, the
government announced that it would not take any action before a
referendum is held after the next general election. Nonetheless,
the government submitted a report to the European Commission
detailing the steps the government is taking to prepare the
United Kingdom for joining the EMU at a later date in the event
it decides to do so. The issue of the United Kingdom's
membership in the EMU has become very contentious and faces
growing public opposition.
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.
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.
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Dollar, Japanese Yen, German Deutsche Mark ("DM"), French Franc
and the European Currency Unit ("ECU"). 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 $1.66 and DM2.91, respectively. In 1999,
the average exchange rates of the Pound against the U.S. Dollar
and the Deutsche Mark were $1.62 and DM2.97, respectively.
On January 1, 1999 eleven member countries of the
European Union (Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, The Netherlands, Portugal and Spain)
adopted the Euro as their common currency. In the transition
period of January 1, 1999 to January 1, 2002, the national
currencies of these eleven countries (e.g., the Deutsche Mark and
the French Franc) will be subdivisions of the Euro. After
January 1, 2002, it is anticipated that the national currencies
will no longer be valid, except to exchange old banknotes. The
ECU, which was not a true currency in its own right, but rather a
unit of account whose value was tied to its underlying
constituent currencies, ceased to exist as of January 1, 1999, at
which time all ECU obligations were converted into Euro
obligations at a 1:1 conversion rate.
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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. As of August 31, 2000, foreign equities constituted
approximately 66% and United Kingdom equities constituted
approximately 34% of the market value of all LSE listed and
quoted equity securities. At the end of 1999, the LSE was the
world's third largest stock exchange in terms of market value,
the New York Stock Exchange being the largest and the Tokyo Stock
Exchange being the second largest.
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 August 31, 2000, 460 companies with an aggregate
market value of 17.3 billion Pounds were traded on AIM. As of
December 31, 1999, 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. Another new market, known as
techMARK, was launched by the LSE on November 4, 1999 for
innovative technology companies. As of December 31, 1999, 190
companies with an aggregate market value of 626.1 billion Pounds
were traded on techMARK.
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
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
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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 faced numerous issues, including agreement on common
regulations and promulgation by their respective governments of a
common tax regime for share trading. In September 2000, just
prior to a vote of shareholders and amid growing concerns about
regulatory matters and national and cultural differences,
opposition from retail traders and a hostile bid by a rival
exchange, the planned merger was called off. It is unclear
whether there will be efforts in the future to establish a pan-
European equity market.
On November 23, 1999 the LSE, together with the Bank of
England and CREST (the paperless share settlement system through
which trades executed on the LSE's markets can be settled),
announced proposals for the United Kingdom's equity and corporate
debt markets to move from T+5 to T+3 settlement starting in
February 2001.
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 the first eight months
of 2000, the five largest industry sectors by turnover among
domestic securities were telecommunications with 16.7%, banks
with 14.8%, media/photography with 31.3%, oil with 7.4% and
pharmaceuticals with 6.5%. In the first eight months of 2000,
the five largest country sectors by market value among listed and
SEAQ International quoted securities were France with 14.0% of
the aggregate market value of listed and SEAQ International
quoted securities, The Netherlands with 12.8%, Germany with
12.7%, the USA with 11.1% and Japan with 9.6%.
Market Growth of the LSE. LSE market value and the
trading volume have increased dramatically since the end of 1990.
In 1999, 335.5 billion domestic shares and 725.9 billion foreign
shares were traded as compared with 155.4 billion and 34.8
billion, respectively in 1991. At the end of 1999, the market
value of listed domestic companies and foreign companies
increased to 1,410.6 billion Pounds and 2,420.1 billion Pounds
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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
largest companies reached a record high of 6663.8 on May 4, 1999.
On December 31, 1999, the FT-SE 100 closed at 6930.2 and on
October 16, 2000, the FT-SE 100 closed at 6285.7.
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
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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 Financial Services and Markets Act,
legislation implementing the proposed consolidation of the SROs
into the FSA, which is more complex and more controversial, was
introduced in the House of Commons on June 17, 1999 and was
enacted on June 14, 2000. On July 18, 2000, the Economic
Secretary announced that the Act would be fully implemented in
about a year's time. Among other things, new FSA rules and
systems, secondary legislation and industry preparations will be
required.
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 September 2000, all
member states, including the United Kingdom, had implemented the
ISD, with the exception of Luxembourg.
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.
bf=1>
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____________________________________________________________
APPENDIX D:
CERTAIN EMPLOYEE BENEFIT PLANS
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____________________________________________________________
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
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
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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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PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a) (1) Articles of Amendment and Restatement of Articles
of Incorporation of the Registrant dated February
8, 1991 and filed February 11, 1991 - Incorporated
by reference to Exhibit 1 to Post-Effective
Amendment No. 16 of Registrant's Registration
Statement on Form N-1A (File Nos. 33-37848 and 811-
6028) filed with the Securities and Exchange
Commission on October 31, 1997.
(2) Articles Supplementary to the Articles of
Incorporation of Registrant dated April 29, 1993
and filed April 30, 1993 - Incorporated by
reference to Exhibit 1(b) to Post-Effective
Amendment No. 17 of Registrant's Registration
Statement on Form N-1A (File Nos. 33-37848 and 811-
6028) filed with the Securities and Exchange
Commission on October 30, 1998.
(3) Articles Supplementary to the Articles of
Incorporation of Registrant dated September 30,
1996 and filed October 1, 1996 - Incorporated by
reference to Exhibit 1(c) to Post-Effective
Amendment No. 17 of Registrant's Registration
Statement on Form N-1A (File Nos. 33-37848 and 811-
6028) filed with the Securities and Exchange
Commission on October 30, 1998.
(4) Articles Supplementary to the Articles of
Incorporation of Registrant dated May 21, 1998 and
filed July 6, 1998 - Incorporated by reference to
Exhibit 1(d) to Post-Effective Amendment No. 17 of
Registrant's Registration Statement on Form N-1A
(File Nos. 33-37848 and 811-6028) filed with the
Securities and Exchange Commission on October 30,
1998.
(b) By-Laws of the Registrant as amended through
October 15, 1990 - Incorporated by reference to
Exhibit 2 to Post-Effective Amendment No. 16 of
Registrant's Registration Statement on Form N-1A
(File Nos. 33-37848 and 811-6028) filed with the
Securities and Exchange Commission on October 31,
1997.
(c) Not applicable.
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(d) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. - Incorporated by
reference to Exhibit 5 to Post-Effective Amendment
No. 16 of Registrant's Registration Statement on
Form N-1A (File Nos. 33-37848 and 811-6028) filed
with the Securities and Exchange Commission on
October 31, 1997.
(e) (1) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc. -
Incorporated by reference to Exhibit 6(a) to Post-
Effective Amendment No. 17 of Registrant's
Registration Statement on Form N-1A (File Nos. 33-
37848 and 811-6028) filed with the Securities and
Exchange Commission on October 30, 1998.
(2) Amendment to Distribution Services Agreement
between Registrant and Alliance Fund Distributors,
Inc. dated June 20, 1996 - Incorporated by
reference to Exhibit 6 to Post-Effective Amendment
No. 15 of Registrant's Registration Statement on
Form N-1A (File Nos. 33-37848 and 811-6028) filed
with the Securities and Exchange Commission on
October 1, 1996.
(3) Form of Selected Dealer Agreement between Alliance
Fund Distributors, Inc. and selected dealers -
Incorporated by reference to Exhibit 6(b) to Post-
Effective Amendment No. 16 of Registrant's
Registration Statement on Form N-1A (File Nos. 33-
37848 and 811-6028) filed with the Securities and
Exchange Commission on October 31, 1997.
(4) Form of Selected Agent Agreement between Alliance
Fund Distributors, Inc. and selected agents -
Incorporated by reference to Exhibit 6(c) to Post-
Effective Amendment No. 16 of Registrant's
Registration Statement on Form N-1A (File Nos. 33-
37848 and 811-6028) filed with the Securities and
Exchange Commission on October 31, 1997.
(f) Not applicable.
(g) Custodian Contract between the Registrant and the
Bank of New York - Incorporated by reference to
Exhibit 8 to Post-Effective Amendment No. 17 of
Registrant's Registration Statement on Form N-1A
(File Nos. 33-37848 and 811-6028) filed with the
Securities and Exchange Commission on October 30,
1998.
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(h) Transfer Agency Agreement between the Registrant
and Alliance Fund Services, Inc. - Incorporated by
reference to Exhibit 9 to Post-Effective Amendment
No. 16 of Registrant's Registration Statement on
Form N-1A (File Nos. 33-37848 and 811-6028) filed
with the Securities and Exchange Commission on
October 31, 1997.
(i) Opinion of Seward & Kissel LLP - Filed herewith.
(j) Consent of Independent Auditors - Filed herewith.
(k) Not applicable.
(l) Not applicable.
(m) Rule 12b-1 Plan - see Exhibit (e)(1) hereto.
(n) Rule 18f-3 Plan - Incorporated by reference to
Exhibit 18 to Post-Effective Amendment No. 13 of
Registrant's Registration Statement on Form N-1A
(File Nos. 33-37848 and 811-6028) filed with the
Securities and Exchange Commission on April 23,
1996.
(p) (1) Code of Ethics for the Fund, incorporated by
reference to Exhibit (p)(1) to Post-Effective
Amendment No. 74 of the Registration Statement on
Form N-1A of Alliance Bond Fund, Inc. (File Nos.
2-48227 and 811-2383), filed with the Securities
and Exchange Commission on October 6, 2000, which
is substantially identical in all material respects
except as to the party which is the Registrant.
(2) Code of Ethics for the Alliance Capital Management
L.P. and Alliance Fund Distributors, Inc.
incorporated by reference to Exhibit (p)(2) to
Post-Effective Amendment No. 74 of the Registration
Statement on Form N-1A of Alliance Bond Fund, Inc.
(File Nos. 2-48227 and 811-2383), filed with the
Securities and Exchange Commission on October 6,
2000.
Other Exhibits:
Powers of Attorney for John D. Carifa, David H. Dievler,
John H. Dobkin, W. H. Henderson, Stig Host and Alan
Stoga - Incorporated by reference to Other Exhibits to
Post-Effective Amendment No. 20 of the Registrant's
Registration Statement on Form N-1A (File Nos. 33-37848
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and 811-6028) filed with the Securities and Exchange
commission on October 29, 1999.
Item 24. Persons Controlled by or under Common Control with
Registrant
None
Item 25. Indemnification
It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum
extent permitted by Section 2-418 of the General
Corporation Law of the State of Maryland and as set
forth in Article EIGHTH of Registrant's amended and
restated Articles of Incorporation, which was filed as
Exhibit (a), Article VII and Article VIII of the
Registrant's amended By-laws which was filed as Exhibit
(b) and Section 7 of Distribution Services Agreement
which was filed as Exhibit (e)(1), which are
incorporated by reference herein, all as set forth
below. The liability of the Registrant's directors and
officers is dealt with in Article EIGHTH of Registrant's
amended and restated Articles of Incorporation, and
Article VII, Section 7 and Article VIII, Section 1
through Section 6 of the Registrant's amended By-Laws,
as set forth below. The Investment Adviser's liability
for any loss suffered by the Registrant or its
shareholders is set forth in Section 4 of the Advisory
Agreement, as amended, which was filed as Exhibit (d)
and is incorporated by reference herein, as set forth
below.
Section 2-418 of the Maryland General Corporation Law reads
as follows:
"2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND AGENTS.
(A) In this section the following words have the meaning
indicated.
(1) Director means any person who is or was a director
of a corporation and any person who, while a director of
a corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other
enterprise, or employee benefit plan.
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(2) Corporation includes any domestic or foreign
predecessor entity of a corporation in a merger,
consolidation, or other transaction in which the
predecessor's existence ceased upon consummation of the
transaction.
(3) Expenses include attorney's fees.
(4) Official capacity means the following:
(I) When used with respect to a director, the
office of director in the corporation; and
(II) When used with respect to a person other than
a director as contemplated in subsection (J), the
elective or appointive office in the corporation held by
the officer, or the employment or agency relationship
undertaken by the employee or agent in behalf of the
corporation.
(III) "Official capacity" does not include service
for any other foreign or domestic corporation or any
partnership, joint venture, trust, other enterprise, or
employee benefit plan.
(5) Party includes a person who was, is, or is
threatened to be made a named defendant or respondent in
a proceeding.
(6) Proceeding means any threatened, pending or
completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative.
(B)(1) A corporation may indemnity any director made a
party to any proceeding by reason of service in that
capacity unless it is proved that:
(I) The act or omission of the director was
material to the cause of action adjudicated in the
proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and deliberate
dishonesty; or
(II) The director actually received an improper
personal benefit in money, property, or services; or
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(III) In the case of any criminal proceeding, the
director had reasonable cause to believe that the act or
omission was unlawful.
(2) (i) Indemnification may be against judgements,
penalties, fines, settlements, and reasonable expenses
actually incurred by the director in connection with the
proceeding.
(ii) However, if the proceeding was one by or in
the right of the corporation, indemnification may not be
made in respect of any proceeding in which the director
shall have been adjudged to be liable to the
corporation.
(3)(I) The termination of any proceeding by judgement,
order or settlement does not create a presumption that
the director did not meet the requisite standard of
conduct set forth in this subsection.
(II) The termination of any proceeding by
conviction, or a plea of nolo contendere or its
equivalent, or an entry of an order of probation prior
to judgment, creates a rebuttable presumption that the
director did not need that standard of conduct.
(C) A director may not be indemnified under subsection
(B) of this section in respect of any proceeding
charging improper personal benefit to the director,
whether or not involving action in the director's
official capacity, in which the director was adjudged to
be liable on the basis that personal benefit was
improperly received.
(D) Unless limited by the charter:
(1) A director who has been successful, on the merits
or otherwise, in the defense of any proceeding referred
to in subsection (B) of this section shall be
indemnified against reasonable expenses incurred by the
director in connection with the proceeding.
(2) A court of appropriate jurisdiction upon
application of a director and such notice as the court
shall require, may order indemnification in the
following circumstances:
(I) If it determines a director is entitled to
reimbursement under paragraph (1) of this subsection,
the court shall order indemnification, in which case the
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director shall be entitled to recover the expenses of
securing such reimbursement; or
(II) If it determines that the director is fairly
and reasonable entitled to indemnification in view of
all the relevant circumstances, whether or not the
director has met the standards of conduct set forth in
subsection (B) of this section or has been adjudged
liable under the circumstances described in subsection
(C) of this section, the court may order such
indemnification as the court shall deem proper.
However, indemnification with respect to any proceeding
by or in the right of the corporation or in which
liability shall have been adjudged in the circumstances
described in subsection (C) shall be limited to
expenses.
(3) A court of appropriate jurisdiction may be the same
court in which the proceeding involving the director's
liability took place.
(E) (1) Indemnification under subsection (B) of this
section may not be made by the corporation unless
authorized for a specific proceeding after a
determination has been made that indemnification of the
director is permissible in the circumstances because the
director has met the standard of conduct set forth in
subsection (B) of this section.
(2) Such determination shall be made:
(I) By the board of directors by a majority vote
of a quorum consisting of directors not, at the time,
parties to the proceeding, or, if such a quorum cannot
be obtained, then by a majority vote of a committee of
the board consisting solely of two or more directors
not, at the time, parties, to such proceeding and who
were duly designated to act in the matter by a majority
vote of the full board in which the designated directors
who are parties may participate;
(II) By special legal counsel selected by the
board of directors or a committee of the board by vote
as set forth in subparagraph (I) of this paragraph, or,
if the requisite quorum of the full board cannot be
obtained therefor and the committee cannot be
established, by a majority vote of the full board in
which directors who are parties may participate; or
(III) By the stockholders.
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(3) Authorization of indemnification and determination
as to reasonableness of expenses shall be made in the
same manner as the determination that indemnification is
permissible. However, if the determination that
indemnification is permissible is made by special legal
counsel, authorization of indemnification and
determination as to reasonableness of expenses shall be
made in the manner specified in subparagraph (II)
paragraph (2) of this subsection for selection of such
counsel.
(4) Shares held by directors who are parties to the
proceeding may not be voted on the subject matter under
this subsection.
(F) (1) Reasonable expenses incurred by a director who
is a party to a proceeding may be paid, or reimbursed by
the corporation in advance of the final disposition of
the proceeding upon receipt by the corporation of:
(I) a written affirmation by the director of the
director's good faith belief that the standard of
conduct necessary for indemnification by the corporation
as authorized in this section has been met; and
(II) A written undertaking by or on behalf of the
director to repay the amount if it shall ultimately be
determined that the standard of conduct has not been
met.
(2) The undertaking required by subparagraph (II) of
paragraph (1) of this subsection shall be an unlimited
general obligation of the director but need not be
secured and may be accepted without reference to
financial ability to make the repayment.
(3) Payments under this subsection shall be made as
provided by the charter, bylaws, or contract or as
specified in subsection (E) of this section.
(G) The indemnification and advancement of expenses
provided or authorized by this section may not be deemed
exclusive of any other rights, by indemnification or
otherwise, to which a director may be entitled under the
charter, the bylaws, a resolution of stockholders or
directors, an agreement or otherwise, both as to action
in an official capacity and as to action in another
capacity while holding such office.
(H) This section does not limit the corporation's power
to pay or reimburse expenses incurred by a director in
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connection with an appearance as a witness in a
proceeding at a time when the director has not been made
a named defendant or respondent in the proceeding.
(I) For purposes of this section:
(1) The corporation shall be deemed to have requested a
director to serve an employee benefit plan where the
performance of the director's duties to the corporation
also imposes duties on, or otherwise involves services
by, the director to the plan or participants or
beneficiaries of the plan:
(2) Excise taxes assessed on a director with respect to
an employee benefit plan pursuant to applicable law
shall be deemed fines; and
(3) Action taken or omitted by the director with
respect to an employee benefit plan in the performance
of the director's duties for a purpose reasonably
believed by the director to be in the interest of the
participants and beneficiaries of the plan shall be
deemed to be for a purpose which is not opposed to the
best interests of the corporation.
(J) Unless limited by the charter:
(1) An officer of the corporation shall be
indemnified as and to the extent provided in subsection
(D) of this section for a director and shall be
entitled, to the same extent as a director, to seek
indemnification pursuant to the provisions of subsection
(D);
(2) A corporation may indemnify and advance
expenses to an officer, employee, or agent of the
corporation to the same extent that it may indemnify
directors under this section; and
(3) A corporation, in addition, may indemnify and
advance expenses to an officer, employee, or agent who
is not a director to such further extent, consistent
with law, as may be provided by its charter, bylaws,
general or specific action of its board of directors or
contracts.
(K) (1) A corporation may purchase and maintain
insurance on behalf of any person who is or was a
director, officer, employee, or agent of the
corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was serving
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at the request, of the corporation as a director,
officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint
venture, trust, other enterprise, or employee benefit
plan against any liability asserted against and incurred
by such person in any such capacity or arising out of
such person's position, whether or not the corporation
would have the power to indemnify against liability
under the provisions of this section.
(2) A corporation may provide similar protection,
including a trust fund, letter of credit, or surety
bond, not inconsistent with this section.
(3) The insurance or similar protection may be
provided by a subsidiary or an affiliate of the
corporation.
(L) Any indemnification of, or advance of expenses to,
a director in accordance with this section, if arising
out of a proceeding by or in the right of the
corporation, shall be reported in writing to the
stockholders with the notice of the next stockholders'
meeting or prior to the meeting.
Article EIGHTH of the Registrant's amended and restated
Articles of Incorporation reads as follows:
"(1) To the fullest extent that limitations on the
liability of directors and officers are permitted
by the Maryland General Corporation Law, no
director or officer of the Corporation shall have
any liability to the Corporation or its
stockholders for damages. This limitation on
liability applies to events occurring at the time a
person serves as a director or officer of the
Corporation whether or not such person is a
director or officer at the time of any proceeding
in which liability is asserted.
"(2) The Corporation shall indemnify and advance
expenses to its currently acting and its former
directors to the fullest extent that
indemnification of directors is permitted by the
Maryland General Corporation Law. The Corporation
shall indemnify and advance expenses to its
officers to the same extent as its directors and to
such further extent as is consistent with law. The
Board of Directors may by By-Law, resolution or
agreement make further provisions for
indemnification or directors, officers, employees
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and agents to the fullest extent permitted by the
Maryland General Corporation Law.
"(3) No provision of this Article shall be
effective to protect or purport to protect any
director or officer of the Corporation against any
liability to the Corporation or its security
holders to which he would otherwise be subject by
reason of willful misfeasance, band faith, gross
negligence or reckless disregard of the duties
involved in the conduct of his office.
"(4) References to the Maryland General Corporation
Law in this Article EIGHTH are to that law as from
time to time amended. No further amendment to
these Articles of Incorporation of the Corporation
shall affect any right of any person under this
Article EIGHTH based on any event, omission or
proceeding prior to the amendment."
The Advisory Agreement, as amended, between
Registrant and Alliance Capital Management L.P. provides
that Alliance Capital Management L.P. will not be liable
under such agreements for any mistake of judgment or in
any event whatsoever except for lack of good faith and
that nothing therein shall be deemed to protect Alliance
Capital Management L.P. against any liability to
Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its
duties thereunder, or by reason of reckless disregard of
its duties and obligations thereunder.
The Distribution Services Agreement between
Registrant and Alliance Fund Distributors, Inc. provides
that the Registrant will indemnify, defend and hold
Alliance Fund Distributors, Inc., and any person who
controls it within the meaning of Section 15 of the
Investment Company Act of 1940, free and harmless from
and against any and all claims, demands, liabilities and
expenses which Alliance Fund Distribution, Inc. or any
controlling person may incur arising out of or based
upon any alleged untrue statement of a material fact
contained in Registrant's Registrations Statement,
Prospectus or Statement of Additional information or
arising out of, or based upon any alleged omission to
state a material fact required to be stated in any one
of the foregoing necessary to make the statements in any
one of the foregoing not misleading.
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The foregoing summaries are qualified by the entire
text of Registrant's amended and restated Articles of
Incorporation, the Advisory Agreement, as amended,
between Registrant and Alliance Capital Management L.P.
and the Distribution Services Agreement between
Registrant and Alliance Fund Distributors, Inc. which
were filed as Exhibits (a), (d) and (e), respectively,
in response to item 23 and each of which are
incorporated by reference herein.
In accordance with Release No. 1C-11330 (September
2, 1980), the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the directors who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
directors"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
indemnification and, as a condition to the advance, (1)
the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or (3)
a majority of a quorum of disinterested, non-party
directors of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.
Article VII, Section 7 of Registrant's amended By-laws reads
as follows:
"Section 7. Insurance Against Certain Liabilities. The
Corporation shall not bear the cost of insurance that
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protects or purports to protect directors and officer of
the Corporation against any liabilities to the
Corporation or its security holders to which any such
director or officer would otherwise be subject by reason
of willful malfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct
of his office."
ARTICLE VIII, Section 1 through Section 6 of the Registrant's
amended By-laws reads as follows:
"Section 1. Indemnification of Directors and Officer.
The Corporation shall indemnify its directors to the
fullest extent that indemnification or directors is
permitted by the Maryland General Corporation Law. The
Corporation shall indemnify its officers to the same
extent as its directors and to such further extent as is
consistent with law. The Corporation shall indemnify
its directors and officers who while serving as
directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or
employee benefit plan to the fullest extent consistent
with law. The indemnification and other rights provided
by this Article shall continue as to a person who has
ceased to be a director or officer and shall inure to
the benefit of the heirs, executors and administrators
of such a person. This Article shall not protect any
such person against any liability to the Corporation or
any stockholder thereof to which such person would
otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office ("disabling
conduct").
"Section 2. Advances Any current or former director or
officer of the Corporation seeking indemnification
within the scope of this Article shall be entitled to
advances from the Corporation for payment of the
reasonable expenses incurred by him in connection with
the matter as to which he is seeking indemnification in
the manner and to the fullest extent permissible under
the Maryland General Corporation Law. The person
seeking indemnification shall provide to the Corporation
a written affirmation of his good faith belief that the
standard of conduct necessary for indemnification by the
Corporation has been met and a written undertaking to
repay any such advance if it should ultimately be
determined that the standard of conduct has not been
met. In addition, at least one of the following
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additional conditions shall be met: (a) the person
seeking indemnification shall provide a security in form
and amount acceptable to the Corporation for his
undertaking: (b) the Corporation is insured against
losses arising by reason of the advance; or (c) a
majority of a quorum of directors of the Corporation who
are neither "interested persons" as defined in Section
2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the proceeding ("disinterested
non-party directors"), or independent legal counsel, in
a written opinion shall have determined, based on a
review of facts readily available to the Corporation at
the time the advance is proposed to be made, that there
is reason to believe that the person seeking
indemnification will ultimately be found to be entitled
to indemnification.
"Section 3. Procedures. At the request of any person
claiming indemnification under this Article, the Board
of Directors shall determine or cause to be determined,
in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this
Article have been met. Indemnification shall be made
only following: (a) a final decision on the merits by a
court or other body before whom the proceeding was
brought that the person to be indemnified was not liable
by reason of disabling conduct or (b) in the absence of
such a decision, a reasonable determination, based upon
a review of the facts, that the person to be indemnified
was not liable by reason of disabling conduct by (i) the
vote of a majority of a quorum of disinterested
non-party directors or (ii) an independent legal counsel
in a written opinion.
"Section 4. Indemnification of Employees and Agents.
Employees and agents who are not officers or directors
of the Corporation may be indemnified, and reasonable
expenses may be advanced to such employees or agents, as
may be provided by action of the Board of Directors or
by contract, subject to any limitations imposed by the
Investment Company Act of 1940.
"Section 5. Other Rights. The Board of Directors may
make further provision consistent with law for
indemnification and advance of expenses to directors,
officers, employees and agents by resolution, agreement
or otherwise. The indemnification provided by this
Article shall not be deemed exclusive of any other
right, with respect to indemnification or otherwise, to
which those seeking indemnification may be entitled
under any insurance or other agreement or resolution of
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stockholders or disinterested directors or otherwise.
The rights provided to any person by this Article shall
be enforceable against the Corporation by such person
who shall be presumed to have relied upon it in serving
or continuing to serve as a director, officer, employee,
or agent as provided above.
"Section 6. Amendments. References in this Article are
to the Maryland General Corporation Law and to the
Investment Company Act of 1940 as from time to time
amended. No amendment of these By-laws shall effect any
right of any person under this Article based on any
event, omission or proceeding prior to the amendment."
The Registrant will participate in a Joint directors and
officers liability insurance policy issued by the ICI
Mutual Insurance Company. Coverage under this policy
has been extended to directors, trustees and officers of
the investment companies managed by Alliance Capital
Management L.P. Under this policy, outside trustees and
directors would be covered up to the limits specified
for any claim against them for acts committed in their
capacities as trustee or director. A pro rata share of
the premium for this coverage is charged to each
investment company and to the Adviser.
Item 26. Business and Other Connections of Adviser.
The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Fund" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by
reference herein.
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.
ITEM 27. Principal Underwriters.
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale
of shares of the Registrant. Alliance Fund
Distributors, Inc. also acts as Principal
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Underwriter or Distributor for the following
investment companies:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Disciplined Value Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Institutional Funds, Inc.
Alliance Institutional Reserves, Inc.
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 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 Select Investor 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
(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc., the principal
place of business of which is 1345 Avenue of the
Americas, New York, New York 10105.
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POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Director and Chairman
John D. Carifa Director [President],
Director/Trustee
Robert L. Errico Director and President
Geoffrey L. Hyde Director and Senior
Vice President
Dave H. Williams Director
David Conine Executive Vice President
Richard K. Saccullo Executive Vice President
Edmund P. Bergan, Jr. Senior Vice President, Secretary/Clerk
General Counsel and
Secretary
Richard A. Davies Senior Vice President
Managing Director
Robert H. Joseph, Jr. Senior Vice President and
Chief Financial Officer
Anne S. Drennan Senior Vice President &
Treasurer
Benji A. Baer Senior Vice President
John R. Bonczek Senior Vice President
Karen J. Bullot Senior Vice President
John R. Carl Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Byron M. Davis Senior Vice President
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
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Andrew L. Gangolf Senior Vice President Assistant
and Assistant General Secretary/
Counsel Assistant Clerk
Bradley F. Hanson Senior Vice President
George H. Keith Senior Vice President
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Susan L. Matteson-King Senior Vice President
Daniel D. McGinley Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Domenick Pugliese Senior Vice President Assistant
and Assistant General Secretary/
Counsel Assistant Clerk
Kevin A. Rowell Senior Vice President
John P. Schmidt Senior Vice President
Raymond S. Sclafani Senior Vice President
Gregory K. Shannahan Senior Vice President
Scott C. Sipple Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
William C. White Senior Vice President
Richard A. Winge Senior Vice President
Emilie D. Wrapp Senior Vice President
and Assistant General
Counsel
Gerard J. Friscia Vice President &
Controller
Ricardo Arreola Vice President
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Kenneth F. Barkoff Vice President
Adam J. Barnett Vice President
Charles M. Barrett Vice President
Matthew F. Beaudry Vice President
Leo Benitez Vice President
Gregory P. Best Vice President
Dale E. Boyd Vice President
Robert F. Brendli Vice President
Christopher L. Butts Vice President
Thomas C. Callahan Vice President
Kevin T. Cannon Vice President
John M. Capeci Vice President
John P. Chase Vice President
Doris T. Ciliberti Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Russell R. Corby Vice President
John W. Cronin Vice President
Robert J. Cruz Vice President
Richard W. Dabney Vice President
Daniel J. Deckman Vice President
Sherry V. Delaney Vice President
Richard P. Dyson Vice President
John C. Endahl Vice President
John E. English Vice President
Sohaila S. Farsheed Vice President
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Daniel J. Frank Vice President
Shawn C. Gage Vice President
Joseph C. Gallagher Vice President
Michael J. Germain Vice President
Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Hyman Glasman Vice President
John Grambone Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Michael S. Hart Vice President
Scott F. Heyer Vice President
Timothy A. Hill Vice President
Brian R. Hoegee Vice President
George R. Hrabovsky Vice President
Michael J. Hutten Vice President
Scott Hutton Vice President
Oscar J. Isoba Vice President
Richard D. Keppler Vice President
Richard D. Kozlowski Vice President
Daniel W. Krause Vice President
Donna M. Lamback Vice President
P. Dean Lampe Vice President
Henry Michael Lesmeister Vice President
Eric L. Levinson Vice President
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James M. Liptrot Vice President
James P. Luisi Vice President
Michael F. Mahoney Vice President
Kathryn Austin Masters Vice President
Shawn P. McClain Vice President
David L. McGuire Vice President
Jeffrey P. Mellas Vice President
Michael V. Miller Vice President
Thomas F. Monnerat Vice President
Timothy S. Mulloy Vice President
Joanna D. Murray Vice President
Michael F. Nash, Jr. Vice President
Timothy H. Nasworthy Vice President
Nicole Nolan-Koester Vice President
Daniel A. Notto Vice President
Peter J. O'Brien Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Daniel P. O'Donnell Vice President
Richard J. Olszewski Vice President
Catherine N. Peterson Vice President
Jeffrey R. Petersen Vice President
James J. Posch Vice President
Bruce W. Reitz Vice President
Jeffrey B. Rood Vice President
Karen C. Satterberg Vice President
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Robert C. Schultz Vice President
Richard J. Sidell Vice President
Clara Sierra Vice President
Teris A. Sinclair Vice President
Jeffrey C. Smith Vice President
David A. Solon Vice President
Martine H. Stansbery, Jr. Vice President
Eileen Stauber Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Benjamin H. Travers Vice President
David R. Turnbough Vice President
Andrew B. Vaughey Vice President
Wayne W. Wagner Vice President
Mark E. Westmoreland Vice President
Paul C. Wharf Vice President
Stephen P. Wood Vice President
Keith A. Yoho Vice President
Michael W. Alexander Assistant Vice President
Richard J. Appaluccio Assistant Vice President
Paul G. Bishop Assistant Vice President
Mark S. Burns Assistant Vice President
Maria L. Carreras Assistant Vice President
Judith A. Chin Assistant Vice President
Jorge Ciprian Assistant Vice President
William P. Condon Assistant Vice President
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Jean A. Coomber Assistant Vice President
Dorsey Davidge Assistant Vice President
Ralph A. DiMeglio Assistant Vice President
Faith C. Deutsch Assistant Vice President
Timothy J. Donegan Assistant Vice President
Joan Eilbott Assistant Vice President
Adam E. Engelhardt Assistant Vice President
Michael J. Eustic Assistant Vice President
Michele Grossman Assistant Vice President
Arthur F. Hoyt, Jr. Assistant Vice President
David A. Hunt Assistant Vice President
Theresa Iosca Assistant Vice President
Erik A. Jorgensen Assistant Vice President
Eric G. Kalender Assistant Vice President
Elizabeth E. Keefe Assistant Vice President
Edward W. Kelly Assistant Vice President
Victor Kopelakis Assistant Vice President
Jeffrey M. Kusterer Assistant Vice President
Alexandra C. Landau Assistant Vice President
Laurel E. Lindner Assistant Vice President
Evamarie C. Lombardo Assistant Vice President
Amanda C. McNichol Assistant Vice President
Richard F. Meier Assistant Vice President
Charles B. Nanick Assistant Vice President
Alex E. Pady Assistant Vice President
Raymond E. Parker Assistant Vice President
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Wandra M. Perry-Hartsfield Assistant Vice President
Rizwan A. Raja Assistant Vice President
Carol H. Rappa Assistant Vice President
Brendan J. Reynolds Assistant Vice President
James A. Rie Assistant Vice President
Lauryn A. Rivello Assistant Vice President
Christina Santiago Assistant Vice Assistant Vice
President and Counsel President and
and Counsel Counsel
Nancy D. Testa Assistant Vice President
Margaret M. Tompkins Assistant Vice President
Marie R. Vogel Assistant Vice President
Nina C. Wilkinson Assistant Vice President
Wesley S. Williams Assistant Vice President
Matthew Witschel Assistant Vice President
Mark R. Manley Assistant Secretary
(c) Not Applicable.
Item 28. Location of Accounts and Records.
The accounts, books and other documents required to
be maintained by Section 31(a) of the Investment
Company Act of 1940 and the Rules thereunder are
maintained as follows: journals, ledgers,
securities records and other original records are
maintained principally at the offices of Alliance
Fund Services, Inc., 500 Plaza Drive, Secaucus,
N.J. 07094, and at the offices of The Bank of New
York, the Registrant's Custodian, 48 Wall Street,
New York, New York 10286. All other records so
required to be maintained are maintained at the
offices of Alliance Capital Management L.P., 1345
Avenue of the Americas, New York, New York 10105.
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Item 29. Management Services.
Not applicable.
Item 30. Undertakings.
The Registrant undertakes to furnish each person
whom the prospectus is delivered with a copy of the
Registrant's latest report to Shareholders, upon
request and without charge.
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SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in The City of New York
and the State of New York, on the 30th day of October, 2000.
ALLIANCE NEW EUROPE FUND, INC.
By /s/John D. Carifa
________________________
John D. Carifa
Chairman
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title Date
(1) Principal Executive
Officer
/s/ John D. Carifa Chairman October 30, 2000
____________________
John D. Carifa
(2) Principal Financial and
Accounting Officer
/s/Mark D. Gersten Treasurer and October 30, 2000
_____________________ Chief Financial
Mark D. Gersten Officer
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(3) All of the Directors:
John D. Carifa
David H. Dievler
John H. Dobkin
W.H. Henderson
Stig Host
Alan Stoga
By /s/Edmund P. Bergan, Jr. Secretary October 30, 2000
________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
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Index to Exhibits
Page
(i) Opinion of Seward & Kissel LLP
(j) Consent of Independent Auditors
C-28
00250059.BE1
