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This is filed pursuant to Rule 497(c).
File Nos. 333-30409 and 811-5993.
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Alliance
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Global
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Environment Fund
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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
Prospectus and Application
October 6, 1997
Table of Contents Page
Page
The Fund at a Glance.................................................... 2
Expense Information..................................................... 3
Financial Highlights.................................................... 4
Glossary................................................................ 5
Description of the Fund................................................. 6
Investment Objective.............................................. 6
Investment Policies............................................... 6
Additional Investment Practices................................... 7
Certain Fundamental Investment Policies........................... 9
Risk Considerations............................................... 9
Purchase and Sale of Shares............................................. 11
Management of the Fund.................................................. 14
Dividends, Distributions and Taxes...................................... 15
General Information..................................................... 16
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
Alliance Global Environment Fund, Inc. (the "Fund") seeks long-term capital
appreciation through investment in equity securities of companies expected to
benefit from advances or improvements in products, processes or services
intended to foster the protection of the environment.
The Fund is an open-end, non-diversified, management investment company. This
Prospectus sets forth concisely the information that a prospective investor
should know about the Fund before investing. A "Statement of Additional
Information" for the Fund dated October 6, 1997, which provides further
information regarding certain matters discussed in this Prospectus and other
matters which may be of interest to some investors, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
The Fund offers three classes of shares through this Prospectus. These shares
may be purchased, at the investor's choice, at a price equal to their net asset
value (i) plus an initial sales charge imposed at the time of purchase (the
"Class A shares"), (ii) with a contingent deferred sales charge imposed on most
redemptions made within four years of purchase (the "Class B shares"), or (iii)
without any initial or contingent deferred sales charge, as long as the shares
are held for one year or more (the "Class C shares"). See "Purchase and Sale of
Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO] ALLIANCE/(R)/
Investing without the Mystery./SM/
(R)/SM These are registered marks used under license from the owner, Alliance
Capital Management L.P.
<PAGE>
The Fund At A Glance
The following summary is qualified in its entirety by the more detailed
information contained inside this Prospectus.
The Fund's Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment adviser
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $199
billion in assets under management as of June 30, 1997. Alliance provides
investment management services to employee benefit plans for 29 of the FORTUNE
100 companies.
The Fund . . .
Seeks . . . Long-term capital appreciation.
Invests principally in . . . A non-diversified portfolio of equity securities of
companies expected to benefit from advances or improvements in products,
processes or services intended to foster the protection of the environment
("Eligible Companies").
A Word About Risk . . .
The price of shares of the Fund will fluctuate as the daily prices of the
individual stocks and other equity securities in which it invests fluctuate, so
that your shares, when redeemed, may be worth more or less than their original
cost. Because the Fund will invest in foreign currency denominated securities,
these fluctuations may be magnified by changes in foreign exchange rates. The
Fund invests substantially all of its assets in equity securities of Eligible
Companies. As a consequence, the Fund is subject to certain additional risks not
typically associated with funds that have more diversified portfolios and that
do not concentrate their investments in equity securities of Eligible Companies,
including potential detrimental effects on Eligible Companies of high costs of
technological development, rapid technological change and changing regulation,
in addition to risks associated with investment in smaller companies. See "Risk
Considerations" below. Investment in the Fund involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Fund
invests principally in common stocks and other equity securities, in order to
achieve its investment objectives the Fund may at times use certain types of
investment derivatives, such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. These risks are more fully discussed
in this Prospectus.
Tax Considerations . . .
The Fund currently has a large amount of net undistributed realized short-term
capital gains. As the Fund recently converted from a closed-end to an open-end
investment company, and as the Fund's shares became redeemable as of the date of
this Prospectus, it is anticipated that the Fund will experience substantial
redemptions in the near term. If the Fund is required to sell a substantial
amount of portfolio securities in order to meet redemption requests, it may
realize substantial additional short-term and long-term capital gains. In
addition, a reduction in the number of outstanding shares of the Fund (e.g.,
from net redemptions of shares) will proportionately increase the per share
amount of any distribution of capital gains. It is expected that the Fund will
distribute substantially all of its net realized capital gains prior to the end
of 1997. Distributed net short-term capital gains are taxable to recipient
shareholders as ordinary income. Shareholders considering a purchase of the
Fund's shares prior to any such distribution should consult their tax adviser
concerning the tax ramifications of any such purchase. See "Dividends,
Distributions and Taxes -- Dividends and Distributions."
Getting Started . . .
Shares of the Fund are available through your financial representative and most
banks, insurance companies and brokerage firms nationwide. Shares can be
purchased for a minimum initial investment of $250, and subsequent investments
can be made for as little as $50. For detailed information about purchasing and
selling shares, see `Purchase and Sale of Shares." In addition, the Fund offers
several time and money saving services to investors. Be sure to ask your
financial representative about:
Automatic Dividend Reinvestment
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Automatic Investment Program
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Retirement Plans
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Shareholder Communications
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Dividend Direction Plans
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Auto Exchange
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Systematic Withdrawals
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A Choice of Purchase Plans
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Telephone Transactions
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24 - Hour Information
[LOGO] ALLIANCE/(R)/
Investing without the Mystery./SM/
(R)/SM These are registered marks used under license from the owner, Alliance
Capital Management L.P.
2
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Expense Information
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Shareholder Transaction Expenses are one of several factors to consider when you
invest in the Fund. The following table summarizes your maximum transaction
costs and annual expenses for each class of shares. The Example following the
table shows the cumulative expenses attributable to a hypothetical $1,000
investment in each class for the periods specified.
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price)................ 4.25%(a) None None
Sales charge imposed on dividend reinvestments...... None None None
Deferred sales charge (as a percentage of original
purchase price or redemption proceeds, whichever
is lower).......................................... None(a) 4.0% during the 1% during the
first year, decreasing first year,
1.0% annually to 0% thereafter
0% after the
fourth year(b)
Exchange fee......................................... None None None
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</TABLE>
(a) Reduced for larger purchases. Purchases of $1,000,000 or more are not
subject to an initial sales charge but may be subject to a 1% deferred
sales charge on redemption within one year of purchase. See "Purchase and
Sale of Shares--How to Buy Shares"--page 11.
(b) Class B shares automatically convert to Class A shares after eight years.
See `Purchase and Sale of Shares--How to Buy Shares"--page 11.
<TABLE>
<CAPTION>
Operating Expenses Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Management fees.................................... 1.10% 1.10% 1.10%
12b-1 fees......................................... .30% 1.00% 1.00%
Other expenses(a).................................. 1.13% 1.13% 1.13%
------- ------- -------
Total fund operating expenses...................... 2.53% 3.23% 3.23%
======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
Example Class A Class B Class B Class C Class C
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
After 1 year........................... $ 67 $ 73 $ 33 $ 43 $ 33
After 3 years.......................... $118 $119 $ 99 $ 99 $ 99
After 5 years.......................... $171 $169 $169 $169 $169
After 10 years......................... $317 $337(b) $337(b) $353 $353
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</TABLE>
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period.
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholder account.
(b) Assumes Class B shares converted to Class A shares after eight years.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Long-term shareholders of the Fund may pay aggregate sales
charges totaling more than the economic equivalent of the maximum initial sales
charges permitted by the Conduct Rules of the National Association of Securities
Dealers, Inc. See "Management of the Fund--Distribution Services Agreement." The
Rule 12b-1 fee for each class comprises a service fee not exceeding .25% of the
aggregate average daily net assets of the Fund attributable to the class and an
asset-based sales charge equal to the remaining portion of the Rule 12b-1 fee.
"Other Expenses" are based on estimated amounts for the Fund's current fiscal
year. The Example set forth above assumes reinvestment of all dividends and
distributions and utilizes a 5% annual rate of return as mandated by Securities
and Exchange Commission regulations. The Example should not be considered
representative of past or future expenses; actual expenses may be greater or
less than those shown.
3
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Financial Highlights
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The following table presents per share income and capital changes for a share
outstanding throughout each period indicated. No Class B or Class C shares were
outstanding during these periods. The Fund operated as a closed-end investment
company through October 3, 1997, when it converted to an open-end investment
company and all shares of its common stock then outstanding were reclassified as
Class A shares. Except as indicated below, the information in the table has been
audited by Ernst & Young LLP, the independent auditors of the Fund. A report of
Ernst & Young LLP on the information with respect to the Fund appears in the
Fund's Statement of Additional Information. The following information should be
read in conjunction with the financial statements and related notes which are
included in the Fund's Statement of Additional Information.
Further information about the Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge by
contacting Alliance Fund Services, Inc. at the address or the "For Literature"
telephone number shown on the cover of this Prospectus.
<TABLE>
<CAPTION>
Six June 1,
Months 1990*
ended Year Ended October 31, to
April 30, --------------------------------------------------------------- October 31,
(unaudited) 1996 1995 1994 1993 1992 1991 1990
----------- -------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 16.48 $ 12.37 $ 11.74 $ 10.97 $ 10.78 $ 13.12 $ 12.46 $ 13.83
Income from Investment Operations
Net investment income (loss)............. (.10)(a) (.13)(a) .03 0 .01 .01 .13 .20
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions.......... .62 4.26 .60 .77 .18 (2.17) .87 (1.57)
Net increase (decrease) in net
asset value from operations............ .52 4.13 .63 .77 .19 (2.16) 1.00 (1.37)
Less: Dividends and Distributions
Dividends from net investment income..... 0 (.02) 0 0 0 (.10) (.25) 0
Distributions from net realized gain
on investments and foreign
currency transactions.................. (1.13) 0 0 0 0 (.08) (.09) 0
------- -------- ------- ------- ------- ------- ------- -------
Total dividends and distributions........ (1.13) (.02) 0 0 0 (.18) (.34) 0
------- -------- ------- ------- ------- ------- ------- -------
Net asset value, end of period........... $ 15.87 $ 16.48 $ 12.37 $ 11.74 $ 10.97 $ 10.78 $ 13.12 $ 12.46
======= ======== ======= ======= ======= ======= ======= =======
Total Return
Total investment return based on
net asset value (b).................... 4.43% 33.48% 5.37% 7.02% 1.76% (16.59)% 8.66% (10.68)%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $94,705 $100,271 $85,416 $81,102 $75,805 $74,442 $90,612 $86,041
Ratio of expenses to average net assets.. 1.51%(c) 1.60% 1.57% 1.67% 1.62% 1.63% 1.49% 1.72%(c)
Ratio of net investment income
(loss) to average net assets........... (1.19)%(c) (.85)% .21% (.04)% .15% .10% .95% 3.59%(c)
Portfolio turnover rate.................. 167% 268% 109% 42% 25% 41% 32% 4%
Average commission rate (d).............. $ .0503 $ .0313 -- -- -- -- -- -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment return calculated for a period of
less than one year is not annualized.
(c) Annualized.
(d) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for trades on which
commissions are charged. This amount includes commissions paid to foreign
brokers which may materially affect the rate shown. Amounts paid in foreign
currencies have been converted into U.S. dollars using the prevailing
exchange rate on the date of the transaction.
4
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Glossary
- --------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus. Many of these terms
are explained in greater detail under "Description of the Fund."
Eligible Companies are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
Environmental Companies are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
Beneficiary Companies are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and healthier
environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous wastes.
Equity Securities are common stocks (but not preferred stocks), rights or
warrants to subscribe for or purchase common stocks, and preferred stocks or
debt securities that are convertible into common stocks without the payment of
any further consideration.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
1940 Act is the Investment Company Act of 1940, as amended.
Commission is the U.S. Securities and Exchange Commission.
Code is the Internal Revenue Code of 1986, as amended.
5
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Description Of The Fund
- --------------------------------------------------------------------------------
The Fund is a non-diversified management investment company. Until October 3,
1997, the Fund operated as a closed-end investment company, and its common stock
(which then comprised a single class) was listed on the New York Stock Exchange.
The Fund's investment objective is "fundamental" and cannot be changed without a
shareholder vote. Except as noted, the Fund's investment policies are not
fundamental and thus can be changed without a shareholder vote. The Fund will
not change these policies without notifying its shareholders. There is no
guarantee that the Fund will achieve its investment objective.
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital appreciation through
investment in equity securities (i.e., common stocks (but not preferred stocks),
rights or warrants to subscribe for or purchase common stocks, and preferred
stocks or debt securities that are convertible into common stocks without the
payment of any further consideration) of Eligible Companies.
INVESTMENT POLICIES
The Fund will invest in two categories of Eligible Companies--"Environmental
Companies" and "Beneficiary Companies." Environmental Companies are those that
have a principal business involving the sale of systems or services intended to
foster environmental protection, such as waste treatment and disposal,
remediation, air pollution control and recycling. Under normal circumstances,
the Fund will invest at least 65% of its total assets in equity securities of
Environmental Companies. Beneficiary Companies are those whose principal
businesses lie outside the environmental sector but nevertheless anticipate
environmental regulations or consumer preferences through the development of new
products, processes or services that are intended to contribute to a cleaner and
healthier environment. Examples of such companies could be companies that
anticipate the demand for plastic substitutes, aerosol substitutes, alternative
fuels and processes that generate less hazardous wastes. In this regard, the
Fund may invest in an issuer with a broadly-diversified business, only a part of
which provides such products, processes or services, when Alliance believes that
these products, processes or services will yield a competitive advantage that
significantly enhances the issuer's growth prospects. As a matter of fundamental
policy, the Fund will, under normal circumstances, invest substantially all of
its total assets in equity securities of Eligible Companies.
A major premise of the Fund's investment approach is that environmental concerns
will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous waste treatment and disposal,
pulp and paper recycling, waste-to-energy alternatives, biodegradable cartons,
packages, plastics and other products, remedial projects and emergency cleanup
efforts, manufacture of environmental supplies and equipment, the achievement of
purer air, groundwater and foods and the detection, evaluation and treatment of
both existing and potential environmental problems including, among others, air
pollution and acid rain.
The environmental services industry is generally positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded substantial
opportunities for growth. Beneficiary Companies may also derive an advantage to
the extent that they have anticipated environmental regulation and are therefore
at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena which are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies which protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund intends to spread investment risk among the capital
markets of a number of countries and will invest in equity securities of
companies based in at least three, and normally considerably more, such
countries. The percentage of the Fund's assets invested in securities of
companies in a particular country or denominated in a particular currency will
vary in accordance with Alliance's assessment of the appreciation potential of
such securities and the strength of that currency. As of June 30, 1997,
approximately 75% of the Fund's net assets were invested in equity securities of
U.S. companies.
The Fund may also: (i) invest up to 20% of its total assets in warrants to
purchase equity securities to the extent consistent with its investment
objective; (ii) invest in depositary receipts; (iii) purchase and write put and
call options on foreign currencies for hedging purposes; (iv) enter into forward
foreign currency transactions for hedging purposes; (v) invest in currency
futures and options on such futures for hedging purposes; and (vi) make secured
loans of its portfolio securities not in excess of 30% of its total assets. For
6
<PAGE>
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices." The Fund may borrow to the
maximum extent permitted under the 1940 Act in order to repurchase its shares or
to meet redemption requests. In addition, the Fund may borrow for temporary
purposes (including the purposes mentioned in the preceding sentence) in an
amount not exceeding 5% of the value of the assets of the Fund. See "Certain
Fundamental Investment Policies."
ADDITIONAL INVESTMENT PRACTICES
The Fund may engage in the following investment practices to the extent
described above.
Rights and Warrants. 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 securities, however,
although the value of a right or 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. Moreover,
a right or warrant ceases to have value if it is not exercised prior to the
expiration date.
Convertible Securities. Prior to conversion, convertible preferred stocks and
convertible debt securities have the same general characteristics as
non-convertible preferred stocks and non-convertible debt securities, which
generally provide a stable stream of income with generally higher yields than
those of common stocks of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying common stock, although the higher yield tends to make the price of
the convertible security less volatile than that of the underlying common stock.
As with non-convertible preferred stocks and debt securities, the market values
of convertible securities tend to decline as interest rates increase and
increase as interest rates decline. While convertible securities generally offer
lower dividend or interest yields than non-convertible securities of similar
quality, they offer investors the potential to benefit from increases in the
market prices of the underlying common stocks.
Depositary Receipts. 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 a 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 a 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, the
investments of the Fund in depositary receipts are deemed to be investments in
the underlying securities.
Illiquid Securities. The Fund will not maintain more than 15% of its net assets
in illiquid securities. Illiquid securities include 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), and many individually
negotiated currency swaps.
Because of the absence of a trading market for illiquid securities, the Fund may
not be able to realize their full value upon sale. Alliance will monitor the
illiquidity of such securities with respect to the Fund under the supervision of
the Directors of the Fund. To the extent permitted by applicable law, Rule 144A
securities will not be treated as "illiquid" for purposes of the foregoing
restriction so long as such securities meet liquidity guidelines established by
the Fund's Directors.
The Fund may not be able to readily sell securities for which there is no ready
market. To the extent that these securities are foreign securities, there is no
law in many of the countries in which the 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 resale of securities.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
foreign currency 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 currency called for by the contract at a
specified price on a specified date.
Options on futures contracts written or purchased by the Fund will be 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 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.
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
7
<PAGE>
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. See the Statement of Additional Information for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. The Fund may purchase or sell
forward contracts so as to minimize the risk to it 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, and is individually negotiated and privately traded.
The 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"). The Fund may 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 the 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"). The 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, the 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 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.
Currency Swaps. Currency swaps involve the individually negotiated exchange by
the 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. The Fund will not enter into any currency swap
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the other party thereto 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 other party to such a transaction,
the Fund will have contractual remedies pursuant to the agreements related to
the transactions.
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 (subject to review by the Fund's
Directors) 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 earned thereon and the Fund may invest any cash
collateral in portfolio securities, thereby earning additional income, or
receive an agreed upon amount of income from a borrower who has delivered
equivalent collateral. The Fund will have the right to regain record ownership
of loaned securities to exercise beneficial rights such as voting rights,
subscription rights and rights to dividends, interest or distributions. The Fund
may pay reasonable finders', administrative and custodial fees in connection
with a loan. The Fund will not lend portfolio securities to any officer,
director, employee or affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements or currency
exchange rate movements correctly. Should prices or exchange rates move
unexpectedly, the 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 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 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
8
<PAGE>
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 with respect
to an 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 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" in the Statement of
Additional Information of the Fund.
Future Developments. The 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.
Defensive Position. For temporary defensive purposes, the Fund may reduce its
position in equity securities and increase without limit its position in
short-term, liquid, high-grade debt securities, which may include U.S.
Government securities, bank deposits, money market instruments, short-term debt
securities, including notes and bonds, and short-term foreign-currency
denominated high-grade debt securities issued by foreign governmental entities,
companies and supranational organizations. For a complete description of the
types of securities the Fund may invest in while in a temporary defensive
position, please see the Fund's Statement of Additional Information.
Portfolio Turnover. Alliance anticipates that the Fund's annual rate of turnover
generally will not exceed 100%. A 100% annual turnover rate would occur if all
of the securities in the Fund's portfolio are replaced once in a period of one
year. A high rate of portfolio turnover involves correspondingly greater
brokerage and other expenses than a lower rate, 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. See "Dividends, Distributions and
Taxes" in the Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
The Fund has adopted certain fundamental investment policies, listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to the Fund are set forth in the Statement
of Additional Information.
The Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of the value of its
total assets in the securities of any one issuer or 25% or more of the value of
its total assets in the same industry, except that the Fund will invest more
than 25% of its total assets in Environmental Companies, provided that this
restriction does not apply to U.S. Government securities, but will apply to
foreign government obligations unless the Commission permits their exclusion;
(iii) borrow money or issue senior securities, except that the Fund may borrow
(a) from a bank if immediately after such borrowing there is asset coverage of
at least 300% as defined in the 1940 Act and (b) for temporary purposes in an
amount not exceeding 5% of the value of the total assets of the Fund; (iv)
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; (v) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or 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 the aggregate;
(vi) 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 5% of the Fund's net assets (taken at market value) is held as collateral
for such sales at any onetime; or (vii) 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.
RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations described below.
Investing in Environmental Companies. Governmental regulations or other action
can inhibit an Environmental Company's performance, and it may take years to
translate environmental legislation into sales and profits. Environmental
Companies generally face competition in fields often characterized by relatively
short product cycles and competitive pricing policies. Losses may result from
large product development or expansion costs, unprotected marketing or
distribution systems, erratic revenue flows and low profit margins. Additional
risks that Environmental Companies may face include difficulty in financing the
high cost of technological development, uncertainties due to changing regulation
or rapid technological advances, potential liabilities associated with hazardous
components and operations, and difficulty in finding experienced employees.
9
<PAGE>
Many Eligible Companies tend to be companies with total market capitalizations
of less than $500 million. Consequently, the Fund expects that a significant
portion of its assets will be invested in equity securities of smaller, emerging
companies. Investment in smaller companies involves greater risk than is
customarily associated with the 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.
Foreign Investment. 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, the Fund whose investment portfolio includes such
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
registration, custody and settlements may in some instances be subject to delays
and legal and 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 which 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 the 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, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
The 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 to it of other restrictions on investment. Investing in local
markets may require the Fund to adopt special procedures, which may involve
additional costs to the Fund. The liquidity of the Fund's investments in any
country in which any of these factors exists could be affected and Alliance will
monitor the effect of any such factor or factors on the 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 or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, the 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.
Currency Considerations. The Fund is permitted to invest substantially all of
its assets in securities denominated in foreign currencies. A portion of the
Fund's revenues corresponding to its foreign currency denominated investments
will be received in such currencies. Therefore, the dollar equivalent of the
Fund's net assets, income and distributions could be adversely affected by
reductions in the value of certain foreign currencies relative to the U.S.
dollar. The Fund may, however, attempt to protect itself against adverse changes
in the values of foreign currencies by engaging in certain of the investment
practices listed above. While it has this ability, there is no certainty as to
whether and to what extent it will engage in these practices. 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 it has insufficient cash in U.S. dollars to meet distribution
requirements. Similarly, if an 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.
U.S. and Foreign Taxes. Foreign taxes paid by the 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
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<PAGE>
foreign taxes. Investors should review carefully the information discussed under
the heading "Dividends, Distributions and Taxes" and should discuss with their
tax advisers the specific tax consequences of investing in the Fund.
Non-Diversified Status. The Fund is a "non-diversified" investment company,
which means it is not limited in the proportion of its assets that may be
invested in the securities of a single issuer. However, the Fund intends to
conduct its operations so as to qualify to be taxed as a "regulated investment
company" for purposes of the Code, which will relieve the Fund of any liability
for federal income tax to the extent its earnings are distributed to
shareholders. See "Dividends, Distributions and Taxes--U.S. Federal Income
Taxes" in the Statement of Additional Information. To so qualify, among other
requirements, the Fund will limit its investments so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the Fund's total assets
will be invested in the securities of a single issuer, and (ii) with respect to
50% of its total assets, not more than 5% of its total assets will be invested
in the securities of a single issuer and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer. The Fund's investments in
U.S. Government securities are not subject to these limitations. Because the
Fund, a non-diversified investment company, may invest in a smaller number of
individual issuers than a diversified investment company, an investment in the
Fund may, under certain circumstances, present greater risk to an investor than
an investment in a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
----------------------------------------
Purchase And Sale
----------------------------------------
Of Shares
----------------------------------------
HOW TO BUY SHARES
You can purchase shares of the Fund at a price based on the next calculation of
their net asset value after receipt of a proper purchase order either through
broker-dealers, banks or other financial intermediaries, or directly through
Alliance Fund Distributors, Inc. ("AFD"), the Fund's principal underwriter. The
minimum initial investment in the Fund is $250. The minimum for subsequent
investments is $50. Investments of $25 or more are allowed under the Fund's
automatic investment program. Share certificates are issued only upon request.
See the Subscription Application and Statement of Additional Information for
more information.
Existing shareholders may make subsequent purchases by electronic funds transfer
if they have completed the Telephone Transactions section of the Subscription
Application or the Shareholder Options form obtained from Alliance Fund
Services, Inc. ("AFS"), the Fund's registrar, transfer agent and dividend
disbursing agent. Telephone purchase orders can be made by calling (800)
221-5672 and may not exceed $500,000.
The Fund offers three classes of shares through this Prospectus, Class A, Class
B and Class C. The Fund may refuse any order to purchase shares. In this regard,
the Fund reserves the right to restrict purchases of Fund shares (including
through exchanges) when they appear to evidence a pattern of frequent purchases
and sales made in response to short-term considerations.
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at net asset value plus an initial sales charge,
as follows:
Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
- --------------------------------------------------------------------------------
Less than $100,000 4.44% 4.25% 4.00%
- --------------------------------------------------------------------------------
$100,000 to less
than $250,000 3.36 3.25 3.00
- --------------------------------------------------------------------------------
$250,000 to less
than $500,000 2.30 2.25 2.00
- --------------------------------------------------------------------------------
$500,000 to less
than $1,000,000 1.78 1.75 1.50
- --------------------------------------------------------------------------------
On purchases of $1,000,000 or more, you pay no initial sales charge but may pay
a contingent deferred sales charge ("CDSC") equal to 1% of the lesser of net
asset value at the time of redemption or original cost if you redeem within one
year. Alliance may pay the dealer or agent a fee of up to 1% of the dollar
amount purchased. In addition, shareholders who owned shares of the Fund at the
time of its conversion to an open-end investment company and have continuously
owned Class A shares since then, may purchase additional Class A shares of the
Fund at net asset value without any sales charges. Certain purchases of Class A
shares may qualify for reduced or eliminated sales charges in accordance with
the 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
Statement of Additional Information.
Class B Shares--Deferred Sales Charge Alternative
You can purchase Class B shares at net asset value without an initial sales
charge. However, you may pay a CDSC if you redeem shares within four years after
purchase. The amount of the CDSC (expressed as a percentage of the lesser of the
current net asset value or original cost) will vary according to the number of
years from the purchase of Class B shares until the redemption of those shares.
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<PAGE>
The amount of the CDSC on Class B shares is set forth below:
Year Since Purchase CDSC
- --------------------------------------------------------------------------------
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
Class B shares are subject to higher distribution fees than Class A shares 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 shares pay correspondingly lower
dividends and may have a lower net asset value than Class A shares.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase Class C shares without any initial sales charge. The Fund will
thus receive the full amount of your purchase, and, if you hold your shares for
one year or more, you will receive the entire net asset value of your shares
upon redemption. Class C shares incur higher distribution fees than Class A
shares and do not convert to any other class of shares of the Fund. The higher
fees mean a higher expense ratio, so Class C shares pay correspondingly lower
dividends and may have a lower net asset value than Class A shares.
Class C shares redeemed within one year of purchase will be subject to a CDSC
equal to 1% of the lesser of their original cost or net asset value at the time
of redemption.
Application of the CDSC
Shares obtained from dividend or distribution reinvestment are not subject to
the CDSC. The CDSC is deducted from the amount of the redemption and is paid to
AFD. The CDSC will be waived on redemptions of shares following the death or
disability of a shareholder, to meet the requirements of certain qualified
retirement plans or pursuant to a monthly, bimonthly or quarterly systematic
withdrawal plan. See the Statement of Additional Information.
How the Fund Values its Shares
The net asset value of each Class of shares of the Fund is calculated by
dividing the value of the Fund's net assets allocable to that class by the
outstanding shares of that class. Shares are valued each day the New York Stock
Exchange (the "Exchange") is open as of the close of regular trading (currently
4:00 p.m. Eastern time). The securities in the Fund are valued 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 Fund's Directors believe
would accurately reflect fair market value.
General
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 Class
A shares. If you are making a smaller investment, you might consider Class B
shares because 100% of your purchase is invested immediately. If you are unsure
of the length of your investment, you might consider Class C shares because
there is no initial sales charge and, as long as the shares are held for one
year or more, no CDSC. Consult your financial agent. Dealers and agents may
receive different 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.
The Fund offers a fourth class of shares, Advisor Class shares, by means of
separate prospectus. Advisor Class shares may be purchased and held solely by
(i) accounts established under a fee-based program sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by AFD,
(ii) 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 and (iii)
certain other categories of investors described in the prospectus for the
Advisor Class, including investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or the Fund. Advisor Class
shares are offered without any initial sales charge or CDSC and without an
ongoing distribution fee and are expected, therefore, to have different
performance than Class A, Class B or Class C shares. You may obtain more
information about Advisor Class shares by contacting AFS at (800) 221-5672 or by
contacting your financial representative.
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 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 the Fund, including requirements as to the minimum initial and subsequent
investment amounts.
In addition to the discount or commission paid to dealers or agents, AFD from
time to time pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., an affiliate of AFD, in connection
with the sale of shares of the Fund. Such additional amounts may be utilized, in
whole or in part, in some cases together with other revenues of such dealers or
agents, to provide additional compensation to registered representatives who
sell shares of the Fund. On some occasions, such cash or other incentives will
be conditioned upon the sale of a specified minimum dollar amount of the shares
of the Fund and/or other Alliance Mutual Funds during a specific period of time.
Such incentives may take the form of payment for attendance at seminars, meals,
sporting events or theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel by persons associated with a
dealer or agent and their immediate family members to urban or resort locations
within or outside the United States. Such dealer or agent may elect to receive
cash incentives of equivalent amount in lieu of such payments.
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<PAGE>
HOW TO SELL SHARES
You may "redeem", i.e., sell your shares in the Fund to the Fund on any day the
Exchange is open, either directly or through your financial intermediary. The
price you will receive is the net asset value (less, any applicable CDSC) next
calculated after the Fund receives your request in proper form. Proceeds
generally will be sent to you within seven days. However, for shares recently
purchased by check or electronic funds transfer, the Fund will not send proceeds
until it is reasonably satisfied that the check or electronic funds transfer has
been collected (which may take up to 15 days).
Selling Shares Through Your Broker
Your broker must receive your request before 4:00 p.m. Eastern time, and your
broker must transmit your request to the Fund by 5:00 p.m. Eastern time, for you
to receive that day's net asset value (less any applicable CDSC). Your broker is
responsible for furnishing all necessary documentation to the Fund and may
charge you for this service.
Selling Shares Directly To The Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. 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. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to (800) 221-5672.
Telephone redemption requests must be made by 4:00 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and may be made
only once in any 30-day period. A shareholder who has completed the Telephone
Transactions section of the Subscription Application, or the Shareholder Options
form obtained from AFS, can elect to have the proceeds of his or her redemption
sent to his or her bank via an electronic funds transfer. Proceeds of telephone
redemptions also may be sent by check to a shareholder's address of record.
Redemption requests by electronic funds transfer may not exceed $100,000 and
redemption requests by check may not exceed $50,000. Telephone redemption is not
available for shares held in nominee or "street name" accounts or retirement
plan accounts or shares held by a shareholder who has changed his or her address
of record within the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, the Fund may suspend redemptions or postpone payment for
up to seven days or longer, as permitted by federal securities law. The Fund
reserves 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
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic 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 fails to do so. Dealers and
agents may charge a commission for handling telephonic 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 application. A shareholder manual
explaining all available services will be provided upon request. To request a
shareholder manual, call (800) 227-4618.
HOW TO EXCHANGE SHARES
You may exchange your shares of the Fund 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 net asset values next
determined, without sales or service charges. Exchanges may be made by telephone
or written request. Telephone exchange requests must be received by AFS by 4:00
p.m. Eastern time on a Fund business day in order to receive that day's net
asset value.
Shares will continue to age without regard to exchanges for purposes of
determining the CDSC, if any, upon redemption and, in the case of Class B
shares, for the purposes 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. An exchange is a taxable transaction for federal tax
purposes. The exchange service may be changed, suspended, or terminated on 60
days' written notice.
13
<PAGE>
- --------------------------------------------------------------------------------
Management Of The Fund
- --------------------------------------------------------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of the Fund,
subject to the general supervision and control of the Directors of the Fund.
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1997 of more than $199 billion (of which
more than $71 billion represented the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds, public
employee retirement systems, investment companies, foundations and endowment
funds. The 54 registered investment companies managed by Alliance comprising
more than 116 separate investment portfolios currently have over two million
shareholders. As of June 30, 1997, Alliance provided investment management
services to employee benefit plans for 29 of the Fortune 100 companies.
Alliance Capital Management Corporation ("ACMC"), the sole general partner of,
and the owner of a 1% general partnership interest in, Alliance, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies in the United
States, which is a wholly-owned subsidiary of The Equitable Companies
Incorporated, a holding company controlled by AXA-UAP, a French insurance
holding company. Certain information concerning the ownership and control of
Equitable by AXA-UAP is set forth in the Statement of Additional Information
under "Management of the Fund."
Under the Advisory Agreement, the Fund pays Alliance a fee at the annual rate of
1.10% of the Fund's average daily net assets up to $100 million, .95% of the
next $100 million of the Fund's average daily net assets, and .80% of the Fund's
average daily net assets over $200 million. The fee is accrued daily and paid
monthly.
The person primarily responsible for the day-to-day management of the Fund's
portfolio since August 1995 has been Jeremy R. Kramer, a Vice President of ACMC,
with which he has been associated since 1993. Previously, he was a securities
analyst with Neuberger & Berman.
DISTRIBUTION SERVICES AGREEMENT
Rule 12b-1 adopted by the Commission under the 1940 Act permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Effective October 4, 1997, the Fund adopted
a "Rule 12b-1 plan" (the "Plan") and entered into a Distribution Services
Agreement (the "Agreement") with AFD. Pursuant to the Plan, the Fund pays to AFD
for distribution expenses a Rule 12b-1 distribution services fee, which may not
exceed an annual rate of .30% of the Fund's aggregate average daily net assets
attributable to the Class A shares, 1.00% of the Fund's aggregate average daily
net assets attributable to the Class B shares and 1.00% of the Fund's aggregate
average daily net assets attributable to the Class C shares. The Plan provides
that a portion of the distribution services fee in an amount not to exceed .25%
of the aggregate average daily net assets of the Fund attributable to each of
the Class A, Class B and Class C shares constitutes a service fee used for
personal service and/or the maintenance of shareholder accounts.
The Plan provides that AFD will use the distribution services fee received from
the Fund in its entirety for payments (i) to compensate broker-dealers or other
persons for providing distribution assistance, (ii) to otherwise promote the
sale of shares of the Fund and (iii) to compensate broker-dealers, depository
institutions and other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's shareholders. In this
regard, some payments under the Plan are used to compensate financial
intermediaries with trail or maintenance commissions in an amount equal to .25%,
annualized, with respect to Class A shares and Class B shares, and 1.00%,
annualized, with respect to Class C shares, of the assets maintained in the Fund
by their customers. Distribution services fees received from the Fund with
respect to Class A shares will not be used to pay any interest expenses,
carrying charges or other financing costs or allocation of overhead of AFD.
Distribution services fees received from the Fund with respect to Class B and
Class C shares may be used for these purposes. The Plan also provides that
Alliance may use its own resources to finance the distribution of the Fund's
shares.
The Fund is not obligated under the Plan to pay any distribution services fee in
excess of the amounts set forth above. 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 under the
Plan is directly tied to the expenses incurred by AFD. Actual distribution
expenses for such Class B and Class C shares for any given year, however, will
probably exceed the distribution services fees payable under the Plan and
payments received from CDSCs. The excess will be carried forward by AFD and
reimbursed from distribution services fees payable under the Plan and payments
subsequently received through CDSCs, so long as the Plan and the Agreement are
in effect.
The 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
14
<PAGE>
service fee to 6.25% of cumulative gross sales of shares of that class, plus
interest at the prime rate plus 1% per annum.
The Glass-Steagall Act and other applicable laws may limit the ability of a bank
or other depository institution to become an underwriter or distributor of
securities. However, in the opinion of the Fund's management, based on the
advice of counsel, these laws do not prohibit such depository institutions from
providing services for investment companies such as the administrative,
accounting and other services referred to in the Agreement. In the event that a
change in these laws prevented a bank from providing such services, it is
expected that other service arrangements would be made and that shareholders
would not be adversely affected.
- --------------------------------------------------------------------------------
Dividends, Distributions
- --------------------------------------------------------------------------------
And Taxes
- --------------------------------------------------------------------------------
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 the Fund without charge by returning to
Alliance, with appropriate instructions, the check representing such 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
the Fund.
Each income dividend and capital gains distribution, if any, declared by the
Fund on its outstanding shares will, at the election of each shareholder, be
paid in cash or in additional shares of the Fund having an aggregate net asset
value as of the payment date of such dividend or distribution equal to the cash
amount of such income dividend or distribution. Election to receive income
dividends and distributions in cash or shares is made at the time shares are
initially purchased and may be changed at any time prior to the record date for
a particular dividend or distribution. Cash dividends can be paid by check or,
if the shareholder so elects, electronically via the ACH network. There is no
sales or other charge in connection with the reinvestment of dividends and
capital gains distributions. Dividends paid by the Fund, if any, with respect to
Class A, Class B and Class C 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 fees applicable to Class B and C shares and any
incremental transfer agency costs relating to Class B shares, will be borne
exclusively by the class to which they relate.
While it is the intention of the 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 such dividend or distribution must
necessarily depend upon 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 the Fund will pay any dividends or realize any capital gains.
The Fund expects to distribute substantially all of its net realized capital
gains prior to December 31, 1997. As of September 30, 1997 the Fund had net
undistributed realized capital gains, substantially all of which were short-term
capital gains, of approximately $18.4 million, or $3.09 per share. Additionally,
a reduction in the number of outstanding shares of the Fund (e.g., from net
redemptions of shares) will proportionately increase the per share amount of any
distribution of capital gains. As the Fund recently converted from a closed-end
to an open-end investment company, and as the Fund's shares became redeemable as
of the date of this Prospectus, it is anticipated that the Fund will experience
substantial redemptions in the near term. The Fund estimates that if it were to
experience, for example, net redemptions reducing the number of its outstanding
shares by one-half and were required to sell portfolio securities at their
September 30, 1997 valuations in order to raise additional cash to meet those
redemption requests (resulting in the realization of additional short-term and
long-term capital gains), net undistributed realized capital gains, expected to
consist principally of net short-term capital gains, could rise to more than
$8.00 per share. The precise amount of the Fund's year-end distributions cannot
be determined at this time. Investors considering a purchase of Fund shares
prior to any such distribution should first consult their tax advisers.
Distributions of short-term capital gains are taxed to recipient shareholders as
ordinary income. If you buy shares just before the Fund deducts a distribution
from its net asset value, you will pay the full price for the shares and then
receive a portion of the price back as a taxable distribution.
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. To the extent that
the Fund is liable for foreign income taxes withheld at the source, the 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,
but there can be no assurance that the Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
The Fund intends to qualify to be taxed 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 relieves the Fund of federal income taxes on that part of its taxable
income, including net capital gains, which it pays out to its shareholders.
Dividends out of net ordinary income and distributions of net short-term capital
gains are taxable to the recipient shareholders as ordinary income. In the case
of corporate shareholders, such dividends may be eligible for the
15
<PAGE>
dividends-received deduction, except that the amount eligible for the deduction
is limited to the amount of qualifying dividends received by the Fund. A
corporation's dividends-received deduction will be disallowed with respect to a
dividend unless the corporation holds shares in the Fund on the ex-dividend date
and for at least 45 other days during the 90-day period beginning 45 days prior
to the ex-dividend date. Furthermore, the dividends-received deduction will be
disallowed to the extent a corporation's investment in shares of the Fund is
financed with indebtedness.
Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains--that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on capital assets held
for more than one year but not more than 18 months ("mid-term gains"), and a
second rate (generally 20%) applies to the balance of such net capital gains
("adjusted net capital gains"). Distributions of mid-term gains and adjusted net
capital gains will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund. Distributions of net capital gains are
not eligible for the dividends-received deduction referred to above.
Under the 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.
Any dividend or distribution received by a shareholder on shares of the Fund
will have the effect of reducing the net asset value of such shares by the
amount of such dividend or distribution. Furthermore, a dividend or distribution
made shortly after the purchase of such shares by a shareholder, although in
effect a return of capital to that particular shareholder, would be taxable to
him or her as described above. If a shareholder held shares six months or less
and during that period received a distribution of net capital gains, any loss
realized on the sale of such shares during such six-month period would be a
long-term capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of the Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, generally
will not be taxable to the plan. Distributions from such plans will be taxable
to individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
Distributions by the Fund may be subject to state and local taxes. The Fund is
qualified to do business in the Commonwealth of Pennsylvania and, therefore, is
subject to the Pennsylvania foreign franchise and corporate net income tax in
respect of its business activities in Pennsylvania. Accordingly, shares of the
Fund are exempt from Pennsylvania personal property taxes. The Fund anticipates
continuing such business activities but reserves the right to suspend them at
any time, resulting in the termination of the exemption.
The Fund will be required to withhold 31% of any payments made to a shareholder
if the shareholder has not provided a certified taxpayer identification number
to the Fund, or the Secretary of the Treasury notifies the Fund that a
shareholder has not reported all interest and dividend income required to be
shown on the shareholder's Federal income tax return.
Under certain circumstances, if the Fund realizes losses 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. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Shareholders will be advised annually as to the federal tax status of dividends
and capital gain distributions made by the Fund. Shareholders are urged to
consult their tax advisers regarding their own tax situation.
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
The Fund is a Maryland corporation organized on February 20, 1990. It commenced
operations, as a closed-end management investment company, on June 1, 1990.
Effective after the close of business on October 3, 1997, the Fund converted to
an open-end management investment company and all shares of its common stock
then outstanding were reclassified as Class A shares. The Fund commenced a
continuous public offering of its Class A shares, Class B shares, Class C shares
and Advisor Class shares on October 6, 1997.
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.
16
<PAGE>
A shareholder in the Fund will be entitled to share pro rata with other holders
of the same class of shares in 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 or fee. The Fund is empowered to establish, without shareholder approval,
additional portfolios, which may have different investment objectives, and
additional classes of shares. 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 as a single series or class on matters, such as the election of
Directors, that affect each portfolio or class in substantially the same manner.
Class A, Class B, Class 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 bears its
own distribution expenses, Class B shares convert to Class A shares after eight
years and Advisor Class shares convert to Class A shares under certain
circumstances. Each class of shares 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. Certain additional
matters relating to the Fund's organization are discussed in its Statement of
Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as the Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Fund. The transfer agency fee with respect to the
Class B shares will be higher than the transfer agency fee with respect to the
Class A shares or Class C shares.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Fund.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return, which is computed
separately for Class A, Class B and Class C 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's advertisements
may quote performance rankings or ratings of the Fund by financial publications
or independent organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc. or compare the Fund's performance to various indices.
ADDITIONAL INFORMATION
This Prospectus and the Statement of Additional Information, which has been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statement filed by the Fund with the Commission under the
Securities Act. 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.
17
<PAGE>
SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
ALLIANCE GLOBAL ENVIRONMENT FUND
(see instructions at the front of the application)
- --------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Owner's Name (First Name) (MI) (Last Name)
[_][_][_][-][_][_][-][_][_][_][_]
Social Security Number (Required to open account)
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Joint Owner's Name* (First Name ) (MI) (Last Name)
*Joint Tenants with right of survivorship unless Alliance Fund Services is
informed otherwise.
[_] GIFT/TRANSFER TO A MINOR
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Custodian - One Name Only (First Name) (MI) (Last Name)
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Minor (First Name) (MI) (Last Name)
[_][_][_][-][_][_][-][_][_][_][_]
Minor's Social Security Number (Required to open account)
Under the State of (Minor's Residence) Uniform Gifts/Transfer to
Minor's Act
[_] TRUST ACCOUNT
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Trustee
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Trust
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Trust (cont'd)
[_][_][_][_][_][_][_][_][_][_][_][_][_] [_][_][_][_][_][_][_][_][_][_][_]
Trust Dated Tax ID or Social Security Number
(Required to open account)
[_] OTHER
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Corporation, Partnership, Investment Only Retirement Plan or other
Entity
[_][_][_][_][_][_][_][_][_][_][_][_][_] [_][_][_][_][_][_][_][_][_][_][_]
Tax ID Number Trustee Name (Retirement
Plans Only)
- --------------------------------------------------------------------------------
2. YOUR ADDRESS
- --------------------------------------------------------------------------------
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Street
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
City State Zip Code
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
If Non-U.S., Specify Country
[_][_][_][-][_][_][_][-][_][_][_][_] [_][_][_][-][_][_][_][-][_][_][_][_]
Daytime Phone Evening Phone
I am a: [_] U.S. Citizen [_] Non-Resident Alien
[_] Resident Alien [_] Other
- -
For Alliance Use Only
- -
<PAGE>
- --------------------------------------------------------------------------------
3. YOUR INITIAL INVESTMENT
- --------------------------------------------------------------------------------
THE MINIMUM INVESTMENT IS $250. THE MAXIMUM INVESTMENT IN CLASS B IS $250,000;
CLASS C IS $1,000,000
I hereby subscribe for shares of Alliance Global Environment Fund and elect
distribution options as indicated.
Dividend and Capital Gain Distribution Options:
BROKER/DEALER USE ONLY
WIRE CONFIRM#
- ----------------------
R REINVEST DISTRIBUTIONS into my fund account.
----------------------
C SEND MY DISTRIBUTIONS IN CASH to the address I have provided in
-----------------------------
Section 2. (Complete Section 4D for direct deposit to your bank
account. Complete Section 4E for payment to a third party).
D DIRECT MY DISTRIBUTIONS TO ANOTHER ALLIANCE FUND. Complete the
------------------------------------------------
appropriate portion of Section 4A to direct your distributions
(dividends and capital gains) to another Alliance Fund (the $250
minimum investment required applies to Funds into which
distributions are directed.
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------- -------------- -------------- -------------- ------------------------------
MAKE ALL CHECKS PAYABLE TO: INITIAL SALES CONTINGENT ADVISOR CLASS DISTRIBUTIONS OPTIONS *CIRCLE*
ALLIANCE FUND SERVICES CHARGE DEFFERED ------------------------------
SALES CHARGE ------------- ----------------
- --------------------------- -------------- -------------- -------------- DIVIDENDS CAPITAL GAINS
- --------------------------- -------------- -------------- -------------- ------------- ----------------
ALLIANCE FUND NAME
- --------------------------- (181) (281) (381) R C D R C D
ALLIANCE GLOBAL
ENVIRONMENT FUND $ $ $
- --------------------------- -------------- -------------- -------------- ------------- ----------------
- ---------------------------
TOTAL INVESTMENT $ $ $
- --------------------------- -------------- -------------- --------------
</TABLE>
<PAGE>
MY SOCIAL SECURITY (TAX IDENTIFICATION) NUMBER IS:
[_][_][_][_][_][_][_][_][_]
- --------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS
- --------------------------------------------------------------------------------
- ------------------------------------
A. AUTOMATIC INVESTMENT PLANS (AIP)
- ------------------------------------
[_] WITHDRAW FROM MY BANK ACCOUNT
I authorize Alliance to draw on my bank account for investment in my fund
account(s) as indicated below (Complete Section 4D also for the bank account you
wish to use).
<TABLE>
<CAPTION>
Monthly Dollar Amount Day of Withdrawal*
Fund Name ($25 minimum) (1st thru 31st) Circle "all" or applicable months
<S> <C> <C> <C>
All J F M A M J J A S O N D
- ----------------------- --------------------------- --------------------------- ---------------------------------
All J F M A M J J A S O N D
- ----------------------- --------------------------- --------------------------- ---------------------------------
All J F M A M J J A S O N D
- ----------------------- --------------------------- --------------------------- ---------------------------------
All J F M A M J J A S O N D
- ----------------------- --------------------------- --------------------------- ---------------------------------
</TABLE>
Your bank must be a member of the National Automated Clearing House Association
(NACHA).
[_] DIRECT MY DISTRIBUTIONS
As indicated in Section 3, I would like my dividends and/or capital gains
directed to another Alliance fund within the same class of shares.
<TABLE>
<CAPTION>
"From" Fund Account #
"From" Fund Name (if existing) "To" Fund Name "To" Fund Account # (if existing)
<S> <C> <C> <C>
[_] New
[_] Existing
- ----------------------- --------------------------- --------------------------- ---------------------------------
[_] New
[_] Existing
- ----------------------- --------------------------- --------------------------- ---------------------------------
[_] New
[_] Existing
- ----------------------- --------------------------- --------------------------- ---------------------------------
[_] New
[_] Existing
- ----------------------- --------------------------- --------------------------- ---------------------------------
</TABLE>
[_] EXCHANGE SHARES MONTHLY
I authorize Alliance to transact monthly exchanges between my fund accounts as
listed below within the same class of shares.
<TABLE>
<CAPTION>
"From" Fund Account # Dollar Amount Day of Exchange** "To" Fund Account #
"From" Fund Name (if existing) ($25 minimum) (1st thru 31st) "To" Fund Name (if existing)
<S> <C> <C> <C> <C> <C>
[_] New
[_] Existing
- -------------------- --------------------- --------------- ----------------- -------------- -------------------
[_] New
[_] Existing
- -------------------- --------------------- --------------- ----------------- -------------- -------------------
[_] New
[_] Existing
- -------------------- --------------------- --------------- ----------------- -------------- -------------------
[_] New
[_] Existing
- -------------------- --------------------- --------------- ----------------- -------------- -------------------
</TABLE>
**Shares exchanged will be redeemed at the net asset value on the "Day of
Exchange" (If the "Day of Exchange" is not a fund business day, the exchange
transaction will be processed on the next fund business day). The exchange
privilege is not available if stock certificates have been issued.
- -------------------------------------
B. Systematic Withdrawal Plans (SWP)
- -------------------------------------
In order to establish a SWP, you must reinvest all dividends and capital gains
and own or purchase shares of the Fund having a current net asset value of at
least:
. $10,000 for monthly payments,
. $5,000 for bi-monthly payments,
. $4,000 for quarterly or less frequent payments
Your bank must be a member of the National Automated Clearing House Association
(NACHA) in order for you to receive SWP proceeds directly into your checking
account.
[_] I authorize Alliance to transact periodic redemptions from my fund account
and send the proceeds to me as indicated below.
<TABLE>
<CAPTION>
Fund Name and Class of Shares Dollar Amount ($50 minimum) Circle "all" or applicable months
<S> <C> <C>
All J F M A M J J A S O N D
- ---------------------------------------------------- --------------------------- ---------------------------------
All J F M A M J J A S O N D
- ---------------------------------------------------- --------------------------- ---------------------------------
All J F M A M J J A S O N D
- ---------------------------------------------------- --------------------------- ---------------------------------
All J F M A M J J A S O N D
- ---------------------------------------------------- --------------------------- ---------------------------------
</TABLE>
(1st-31st)
I would like to have these payments occur on or about the [ ] of the
months circled above.
PLEASE SEND MY SWP PROCEEDS TO:
[_] MY CHECKING ACCOUNT (via EFT) (Complete Section 4D)
[_] MY ADDRESS OF RECORD (via CHECK)
[_] THE PAYEE AND ADDRESS SPECIFIED IN SECTION 4E (via CHECK)
<PAGE>
- -------------------------------------
C. PURCHASES AND REDEMPTIONS VIA EFT
- -------------------------------------
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange
shares for your account. Purchase and redemption requests will be processed
via electronic funds transfer (EFT) to and from your bank account.
Instructions: . Review the information in the Prospectus about telephone
transaction services.
. If you select the telephone purchase or redemption privilege,
you must write "VOID" across the face of a check from the
bank account you wish to use and attach it to Section 4D of
this application.
PURCHASES AND REDEMPTIONS VIA EFT
[_] I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected.
In the case of shares purchased by check, redemption proceeds may not be
made available until the fund is reasonably assured that the check has
cleared, normally 15 calendar days after the purchase date.
- --------------------
D. BANK INFORMATION
- --------------------
This bank account information will be used for:
[_] Distributions (Section 3) [_] Automatic Investments (Section 4A)
[_] Systematic Withdrawals [_] Telephone Transactions (Section 4C)
(Section 4B)
Please attach a voided check:
- - -
TAPE PREPRINTED VOIDED CHECK HERE.
We Cannot Establish These Services Without it.
- - -
Your bank must be a member of the National Automated Clearing House Association
(NACHA) in order to have EFT transactions processed to your fund account. For
EFT transactions, the fund requires signatures of bank account owners exactly as
they appear on bank records.
- -------------------------------
E. THIRD PARTY PAYMENT DETAILS
- -------------------------------
This third party payee information will be used for:
[_] Distributions (Section 3) [_] Systematic Withdrawals (Section 4B)
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Address - Line 1
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Address - Line 2
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Address - Line 3
- ----------------------------------
F. REDUCED CHARGES (CLASS A ONLY)
- ----------------------------------
If you, your spouse or minor children own shares in other Alliance funds, you
may be eligible for a reduced sales charge. Please complete the Right of
Accumulation section or the Statement of Intent section.
A. RIGHT OF ACCUMULATION
[_] Please link the tax identification numbers or account numbers listed
below for Right of Accumulation privileges, so that this and future
purchases will receive any discount for which they are eligible.
B. STATEMENT OF INTENT
[_] I want to reduce my sales charge by agreeing to invest the following
amount over a 13-month period:
[_] $100,000 [_] $250,000 [_] $500,000 [_] $1,000,000
If the full amount indicated is not purchased within 13 months, I
understand that an additional sales charge must be paid from my account.
- -------------------------- -------------------------- ------------------------
Tax ID or Account # Tax ID OR Account # Tax ID or Account #
<PAGE>
- --------------------------------------------------------------------------------
5. SHAREHOLDER AUTHORIZATION THIS SECTION MUST BE COMPLETED
- --------------------------------------------------------------------------------
TELEPHONE EXCHANGES AND REDEMPTIONS BY CHECK
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an authorized
employee of an investment dealer or agent requesting a redemption or exchange on
my behalf. (NOTE: Telephone exchanges may only be processed between accounts
that have identical registrations.) Telephone redemption checks will only be
mailed to the name and address of record; and the address must have no change
within the last 30 days. The maximum telephone redemption amount is $50,000.
This service can be enacted once every 30 days.
[_] I do not elect the telephone exchange service.
[_] I do not elect the telephone redemption by check service.
I CERTIFY UNDER PENALTY OF PERJURY THAT THE NUMBER SHOWN IN SECTION 1 OF THIS
FORM IS MY CORRECT TAX IDENTIFICATION NUMBER OR SOCIAL SECURITY NUMBER AND THAT
I HAVE NOT BEEN NOTIFIED THAT THIS ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.
By selecting any of the above telephone privileges, I agree that neither the
Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund Services,
Inc. or other Fund Agent will be liable for any loss, injury, damage or expense
as a result of acting upon telephone instructions purporting to be on my behalf,
that the Fund reasonably believes to be genuine, and that neither the Fund nor
any such party will be responsible for the authenticity of such telephone
instructions. I understand that any or all of these privileges may be
discontinued by me or the Fund at any time. I understand and agree that the Fund
reserves the right to refuse any telephone instructions and that my investment
dealer or agent reserves the right to refuse to issue any telephone instructions
I may request.
For non-residents only: Under penalties of perjury, I certify that to the best
of my knowledge and belief, I qualify as a foreign person as indicated in
Section 2.
I am of legal age and capacity and have received and read the Prospectus and
agree to its terms.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATION REQUIRED TO AVOID BACKUP WITHHOLDING.
- ------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Signature Date Acceptance Date
- --------------------------------------------------------------------------------
DEALER/AGENT AUTHORIZATION FOR SELECTED DEALERS OR AGENTS ONLY.
- --------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 5, as well as the legal capacity of the
shareholder.
- --------------------------------------------------------------------------------
Dealer/Agent Firm Authorized Signature
- --------------------------------------------------------------------------------
Representative First Name MI Last Name
- --------------------------------------------------------------------------------
Representative Number
- --------------------------------------------------------------------------------
Branch Office Address
- --------------------------------------------------------------------------------
City State Zip Code
( )
- --------------------------------------------------------------------------------
Branch Number Branch Phone
<PAGE>
ALLIANCE SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
ALLIANCE GLOBAL ENVIRONMENT FUND
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
- --------------------------------------------------------------------------------
TO OPEN YOUR NEW ALLIANCE ACCOUNT...
Please complete the application For certified or overnight deliveries,
and mail it to: send to:
ALLIANCE FUND SERVICES, INC. ALLIANCE FUND SERVICES, INC.
P.O. BOX 1520 500 PLAZA DRIVE
SECAUCUS, NEW JERSEY 07096-1520 SECAUCUS, NEW JERSEY 07094
- ---------
SECTION 1 YOUR ACCOUNT REGISTRATION (REQUIRED)
- ---------
Complete one of the available choices.
To ensure proper tax reporting to the IRS:
. Individuals, Joint Tenants and Gift/Transfer to a Minor:
o Indicate your name(s) exactly as it appears on your
social security card.
. Trust/Other:
o Indicate the name of the entity exactly as it appeared
on the notice you received from the IRS when your
Employer Identification number was assigned.
- ---------
SECTION 2 YOUR ADDRESS (REQUIRED)
- ---------
Complete in full.
- ---------
SECTION 3 YOUR INITIAL INVESTMENT (REQUIRED)
- ---------
1) Write the dollar amount of your initial purchase in the column corresponding
to the class of shares you have chosen.(If you are elegible for a reduced sales
charge, you must also complete Section 4F). 2) Circle a distribution option for
your dividends 3) Circle a distribution option for your capital gains. All
distributions (dividends and capital gains) will be reinvested into your fund
account unless you direct otherwise. If you want distributions sent directly to
your bank account, then you must complete Section 4D and attach a voided check
for that account. If you want your distributions sent to a third party you must
complete Section 4E.
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SECTION 4 YOUR SHAREHOLDER OPTIONS (COMPLETE ONLY THOSE OPTIONS YOU WANT)
- ---------
A. AUTOMATIC INVESTMENT PLANS (AIP) - You can make periodic investments into any
of your Alliance Funds in one of three ways. First, by a periodic withdrawal
($25 minimum) directly from your bank account and invested into an Alliance
Fund. Second, you can direct your distributions (dividends and capital gains)
from one Alliance Fund into another Fund. Or third, you can automatically
exchange monthly ($25 minimum) shares of one Alliance Fund for shares of
another Fund. To elect one of these options, complete the appropriate portion
of Section 4A.
B. SYSTEMATIC WITHDRAWAL PLANS (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be
made via Electronic Funds Transfer (EFT) to your bank account or by check.
C. TELEPHONE TRANSACTIONS VIA EFT - Complete this option if you would like to be
able to transact via telephone between your fund account and your bank
account.
D. BANK INFORMATION - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a voided check of the account you wish to use to this section of
the application.
E. THIRD PARTY PAYMENT DETAILS - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person
and/or address other than those provided in section 1 or 2, complete this
option.
F. Reduced Charges (Class A only) - Complete if you would like to link fund
accounts that have combined balances that might exceed $100,000 so that
future purchases will received discounts. Comlete if you intend to purchase
over $100,000 within 13 months.
- ---------
SECTION 5 SHAREHOLDER AUTHORIZATION (REQUIRED)
- ---------
All owners must sign. If it is a custodial, corporate, or trust account, the
custodian, an authorized officer, or the trustee respectively must sign.
IF WE CAN ASSIST YOU IN ANY WAY, PLEASE DO NOT HESITATE TO CALL US AT:
(800) 221-5672.
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 333-30409 and 811-5993.
<PAGE>
<PAGE>
Alliance
----------------------------------------
Global
----------------------------------------
Environment Fund
----------------------------------------
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
Prospectus and Application
Advisor Class
October 6, 1997
Table of Contents Page
The Fund at a Glance............................................ 2
Expense Information............................................. 3
Glossary........................................................ 4
Description of the Fund......................................... 5
Investment Objective................................... 5
Investment Policies.................................... 5
Additional Investment Practices........................ 6
Certain Fundamental Investment Policies................ 8
Risk Considerations.................................... 8
Purchase and Sale of Shares..................................... 10
Management of the Fund.......................................... 12
Dividends, Distributions and Taxes.............................. 12
Conversion Feature.............................................. 14
General Information............................................. 16
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
Alliance Global Environment Fund, Inc. (the "Fund") seeks long-term capital
appreciation through investment in equity securities of companies expected to
benefit from advances or improvements in products, processes or services
intended to foster the protection of the environment.
The Fund is an open-end, non-diversified, management investment company. This
Prospectus sets forth concisely the information that a prospective investor
should know about the Fund before investing. A "Statement of Additional
Information" for the Fund dated October 6, 1997, which provides further
information regarding certain matters discussed in this Prospectus and other
matters which may be of interest to some investors, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
This Prospectus offers the Advisor Class shares of the Fund, which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., the Fund's
principal underwriter, (ii) participants in self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that meet certain minimum standards
and (iii) certain other categories of investors described in the Prospectus,
including investment advisory clients, of, and certain persons associated with,
Alliance Capital Management L.P. and its affiliates or the Fund. See "Purchase
and Sale of Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO] Alliance /(R)/
Investing without the Mystery./(SM)/
(R)/(SM) These are registered marks used under license from the owner, Alliance
Capital Management L.P.
<PAGE>
The Fund At A Glance
The following summary is qualified in its entirety by the more detailed
information contained inside this Prospectus.
The Fund's Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment adviser
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $199
billion in assets under management as of June 30, 1997. Alliance provides
investment management services to employee benefit plans for 29 of the FORTUNE
100 companies.
The Fund . . .
Seeks . . . Long-term capital appreciation.
Invests principally in . . . A non-diversified portfolio of equity securities of
companies expected to benefit from advances or improvements in products,
processes or services intended to foster the protection of the environment
("Eligible Companies").
A Word About Risk . . .
The price of shares of the Fund will fluctuate as the daily prices of the
individual stocks and other equity securities in which it invests fluctuate, so
that your shares, when redeemed, may be worth more or less than their original
cost. Because the Fund will invest in foreign currency denominated securities,
these fluctuations may be magnified by changes in foreign exchange rates. The
Fund invests substantially all of its assets in equity securities of Eligible
Companies. As a consequence, the Fund is subject to certain additional risks not
typically associated with funds that have more diversified portfolios and that
do not concentrate their investments in equity securities of Eligible Companies,
including potential detrimental effects on Eligible Companies of high costs of
technological development, rapid technological change and changing regulation,
in addition to risks associated with investment in smaller companies. See "Risk
Considerations" below. Investment in the Fund involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Fund
invests principally in common stocks and other equity securities, in order to
achieve its investment objectives the Fund may at times use certain types of
investment derivatives, such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. These risks are more fully discussed
in this Prospectus.
Tax Considerations . . .
The Fund currently has a large amount of net undistributed realized short-term
capital gains. As the Fund recently converted from a closed-end to an open-end
investment company, and as the Fund's shares became redeemable as of the date of
this Prospectus, it is anticipated that the Fund will experience substantial
redemptions in the near term. If the Fund is required to sell a substantial
amount of portfolio securities in order to meet redemption requests, it may
realize substantial addtional short-term and long-term capital gains. In
addition, a reduction in the number of outstanding shares of the Fund (e.g.,
from net redemptions of shares) will proportionately increase the per share
amount of any distribution of capital gains. It is expected that the Fund will
distribute substantially all of its net realized capital gains prior to the end
of 1997. Distributed net short-term capital gains are taxable to recipient
shareholders as ordinary income. Shareholders considering a purchase of the
Fund's shares prior to any such distribution should consult their tax adviser
concerning the tax ramifications of any such purchase. See "Dividends,
Distributions and Taxes--Dividends and Distributions."
Getting Started . . .
Shares of the Fund are available through your financial representative. The Fund
offers multiple classes of shares, of which only the Advisor Class is offered by
this Prospectus. Advisor Class shares may be purchased at net asset value
without any initial or contingent deferred sales charges and are not subject to
ongoing distribution expenses. Advisor Class shares may be purchased and held
solely (i) through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary and
approved by Alliance Fund Distributors, Inc. ("AFD"), the Fund's principal
underwriter, (ii) 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, (iii) by investment advisory clients of, and certain other persons
associated with, Alliance and its affiliates or the Fund, and (iv) through
registered investment advisers or other financial intermediaries who charge a
management, consulting or other fee for their service 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. A shareholder's Advisor Class shares will
automatically convert to Class A shares of the Fund under certain circumstances.
See "Conversion Feature--Conversion to Class A Shares." Generally, a fee-based
program must charge an asset-based or other similar fee and must invest in the
aggregate at least $250,000 in Advisor Class shares of the Fund in order to be
approved by AFD for investment in Advisor Class shares. For more detailed
information about who may purchase and hold Advisor Class shares see the
Statement of Additional Information. Fee-based and other programs through which
Advisor Class shares may be purchased may impose different requirements with
respect to investment in Advisor Class shares than described above. For detailed
information about purchasing and selling shares, see "Purchase and Sale of
Shares."
[LOGO] Alliance /(R)/
Investing without the Mystery./(SM)/
(R)/SM These are registered marks used under license from the owner, Alliance
Capital Management L.P.
2
<PAGE>
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Expense Information
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in the Fund. The following table summarizes your maximum transaction
costs from investing in the Advisor Class shares of the Fund and annual expenses
for Advisor Class shares of the Fund. The Example following the table below
shows the cumulative expenses attributable to a hypothetical $1,000 investment
in Advisor Class shares for the periods specified.
Maximum sales charge imposed on purchases
(as a percentage of offering price)........................ None
Sales charge imposed on dividend reinvestments...................... None
Deferred sales charge............................................... None
Exchange fee........................................................ None
- --------------------------------------------------------------------------------
Operating Expenses
Management fees..................................................... 1.10%
12b-1 fees.......................................................... None
Other expenses(a)................................................... 1.13
----
Total fund operating expenses....................................... 2.23
====
Example
After 1 year........................................................ $ 22
After 3 years....................................................... $ 69
After 5 years....................................................... $ 118
After 10 years...................................................... $ 254
- --------------------------------------------------------------------------------
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholder's account.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The Example set forth above assumes reinvestment of all dividends
and distributions and utilizes a 5% annual rate as mandated by Commission
regulations. "Other Expenses" are based on estimated amounts for the Fund's
current fiscal year. The Example should not be considered representative of past
or future expenses; actual expenses may be greater or less than those shown.
3
<PAGE>
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Glossary
- --------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus. Many of these terms
are explained in greater detail under "Description of the Fund."
Eligible Companies are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
Environmental Companies are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
Beneficiary Companies are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and healthier
environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous wastes.
Equity Securities are common stocks (but not preferred stocks), rights or
warrants to subscribe for or purchase common stocks, and preferred stocks or
debt securities that are convertible into common stocks without the payment of
any further consideration.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
1940 Act is the Investment Company Act of 1940, as amended.
Commission is the U.S. Securities and Exchange Commission.
Code is the Internal Revenue Code of 1986, as amended.
4
<PAGE>
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Description Of The Fund
- --------------------------------------------------------------------------------
The Fund is a non-diversified management investment company. Until October 3,
1997, the Fund operated as a closed-end investment company, and its common stock
(which then comprised a single class) was listed on the New York Stock Exchange.
The Fund's investment objective is "fundamental" and cannot be changed without a
shareholder vote. Except as noted, the Fund's investment policies are not
fundamental and thus can be changed without a shareholder vote. The Fund will
not change these policies without notifying its shareholders. There is no
guarantee that the Fund will achieve its investment objective.
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital appreciation through
investment in equity securities (i.e., common stocks (but not preferred stocks),
rights or warrants to subscribe for or purchase common stocks, and preferred
stocks or debt securities that are convertible into common stocks without the
payment of any further consideration) of Eligible Companies.
INVESTMENT POLICIES
The Fund will invest in two categories of Eligible Companies--"Environmental
Companies" and "Beneficiary Companies." Environmental Companies are those that
have a principal business involving the sale of systems or services intended to
foster environmental protection, such as waste treatment and disposal,
remediation, air pollution control and recycling. Under normal circumstances,
the Fund will invest at least 65% of its total assets in equity securities of
Environmental Companies. Beneficiary Companies are those whose principal
businesses lie outside the environmental sector but nevertheless anticipate
environmental regulations or consumer preferences through the development of new
products, processes or services that are intended to contribute to a cleaner and
healthier environment. Examples of such companies could be companies that
anticipate the demand for plastic substitutes, aerosol substitutes, alternative
fuels and processes that generate less hazardous wastes. In this regard, the
Fund may invest in an issuer with a broadly-diversified business, only a part of
which provides such products, processes or services, when Alliance believes that
these products, processes or services will yield a competitive advantage that
significantly enhances the issuer's growth prospects. As a matter of fundamental
policy, the Fund will, under normal circumstances, invest substantially all of
its total assets in equity securities of Eligible Companies.
A major premise of the Fund's investment approach is that environmental concerns
will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous waste treatment and disposal,
pulp and paper recycling, waste-to-energy alternatives, biodegradable cartons,
packages, plastics and other products, remedial projects and emergency cleanup
efforts, manufacture of environmental supplies and equipment, the achievement of
purer air, groundwater and foods and the detection, evaluation and treatment of
both existing and potential environmental problems including, among others, air
pollution and acid rain.
The environmental services industry is generally positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded substantial
opportunities for growth. Beneficiary Companies may also derive an advantage to
the extent that they have anticipated environmental regulation and are therefore
at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena which are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies which protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund intends to spread investment risk among the capital
markets of a number of countries and will invest in equity securities of
companies based in at least three, and normally considerably more, such
countries. The percentage of the Fund's assets invested in securities of
companies in a particular country or denominated in a particular currency will
vary in accordance with Alliance's assessment of the appreciation potential of
such securities and the strength of that currency. As of June 30, 1997,
approximately 75% of the Fund's net assets were invested in equity securities of
U.S. companies.
The Fund may also: (i) invest up to 20% of its total assets in warrants to
purchase equity securities to the extent consistent with its investment
objective; (ii) invest in depositary receipts; (iii) purchase and write put and
call options on foreign currencies for hedging purposes; (iv) enter into forward
foreign currency transactions for hedging purposes; (v) invest in currency
futures and options on such futures for hedging
5
<PAGE>
purposes; and (vi) make secured loans of its portfolio securities not in excess
of 30% of its total assets. For additional information on the use, risks and
costs of these policies and practices see "Additional Investment Practices." The
Fund may borrow to the maximum extent permitted under the 1940 Act in order to
repurchase its shares or to meet redemption requests. In addition, the Fund may
borrow for temporary purposes (including the purposes mentioned in the preceding
sentence) in an amount not exceeding 5% of the value of the assets of the Fund.
See "Certain Fundamental Investment Policies."
ADDITIONAL INVESTMENT PRACTICES
The Fund may engage in the following investment practices to the extent
described above.
Rights and Warrants. 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 securities, however,
although the value of a right or 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. Moreover,
a right or warrant ceases to have value if it is not exercised prior to the
expiration date.
Convertible Securities. Prior to conversion, convertible preferred stocks and
convertible debt securities have the same general characteristics as
non-convertible preferred stocks and non-convertible debt securities, which
generally provide a stable stream of income with generally higher yields than
those of common stocks of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying common stock, although the higher yield tends to make the price of
the convertible security less volatile than that of the underlying common stock.
As with non-convertible preferred stocks and debt securities, the market values
of convertible securities tend to decline as interest rates increase and
increase as interest rates decline. While convertible securities generally offer
lower dividend or interest yields than non-convertible securities of similar
quality, they offer investors the potential to benefit from increases in the
market prices of the underlying common stocks.
Depositary Receipts. 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 a 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 a 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, the
investments of the Fund in depositary receipts are deemed to be investments in
the underlying securities.
Illiquid Securities. The Fund will not maintain more than 15% of its net assets
in illiquid securities. Illiquid securities include 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), and many individually
negotiated currency swaps.
Because of the absence of a trading market for illiquid securities, the Fund may
not be able to realize their full value upon sale. Alliance will monitor the
illiquidity of such securities with respect to the Fund under the supervision of
the Directors of the Fund. To the extent permitted by applicable law, Rule 144A
securities will not be treated as "illiquid" for purposes of the foregoing
restriction so long as such securities meet liquidity guidelines established by
the Fund's Directors.
The Fund may not be able to readily sell securities for which there is no ready
market. To the extent that these securities are foreign securities, there is no
law in many of the countries in which the 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 resale of securities.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
foreign currency 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 currency called for by the contract at a
specified price on a specified date.
Options on futures contracts written or purchased by the Fund will be 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 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.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency
6
<PAGE>
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. See the Statement of Additional Information for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. The Fund may purchase or sell
forward contracts so as to minimize the risk to it 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, and is individually negotiated and privately traded.
The 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"). The Fund may 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 the 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"). The 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, the 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 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.
Currency Swaps. Currency swaps involve the individually negotiated exchange by
the 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. The Fund will not enter into any currency swap
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the other party thereto 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 other party to such a transaction,
the Fund will have contractual remedies pursuant to the agreements related to
the transactions.
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 (subject to review by the Fund's
Directors) 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 earned thereon and the Fund may invest any cash
collateral in portfolio securities, thereby earning additional income, or
receive an agreed upon amount of income from a borrower who has delivered
equivalent collateral. The Fund will have the right to regain record ownership
of loaned securities to exercise beneficial rights such as voting rights,
subscription rights and rights to dividends, interest or distributions. The Fund
may pay reasonable finders', administrative and custodial fees in connection
with a loan. The Fund will not lend portfolio securities to any officer,
director, employee or affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements or currency
exchange rate movements correctly. Should prices or exchange rates move
unexpectedly, the 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 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 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
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<PAGE>
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 with respect
to an 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 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" in the Statement of
Additional Information of the Fund.
Future Developments. The 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.
Defensive Position. For temporary defensive purposes, the Fund may reduce its
position in equity securities and increase without limit its position in
short-term, liquid, high-grade debt securities, which may include U.S.
Government securities, bank deposits, money market instruments, short-term debt
securities, including notes and bonds, and short-term foreign-currency
denominated high-grade debt securities issued by foreign governmental entities,
companies and supranational organizations. For a complete description of the
types of securities the Fund may invest in while in a temporary defensive
position, please see the Fund's Statement of Additional Information.
Portfolio Turnover. Alliance anticipates that the Fund's annual rate of turnover
generally will not exceed 100%. A 100% annual turnover rate would occur if all
of the securities in the Fund's portfolio are replaced once in a period of one
year. A high rate of portfolio turnover involves correspondingly greater
brokerage and other expenses than a lower rate, 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. See "Dividends, Distributions and
Taxes" in the Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
The Fund has adopted certain fundamental investment policies, listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to the Fund are set forth in the Statement
of Additional Information.
The Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of the value of its
total assets in the securities of any one issuer or 25% or more of the value of
its total assets in the same industry, except that the Fund will invest more
than 25% of its total assets in Environmental Companies, provided that this
restriction does not apply to U.S. Government securities, but will apply to
foreign government obligations unless the Commission permits their exclusion;
(iii) borrow money or issue senior securities, except that the Fund may borrow
(a) from a bank if immediately after such borrowing there is asset coverage of
at least 300% as defined in the 1940 Act and (b) for temporary purposes in an
amount not exceeding 5% of the value of the total assets of the Fund; (iv)
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; (v) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or 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 the aggregate;
(vi) 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 5% of the Fund's net assets (taken at market value) is held as collateral
for such sales at any onetime; or (vii) 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.
RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations described below.
Investing in Environmental Companies. Governmental regulations or other action
can inhibit an Environmental Company's performance, and it may take years to
translate environmental legislation into sales and profits. Environmental
Companies generally face competition in fields often characterized by relatively
short product cycles and competitive pricing policies. Losses may result from
large product development or expansion costs, unprotected marketing or
distribution systems, erratic revenue flows and low profit margins. Additional
risks that Environmental Companies may face include difficulty in financing the
high cost of technological development, uncertainties due to changing regulation
or rapid technological advances, potential liabilities associated with hazardous
components and operations, and difficulty in finding experienced employees.
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<PAGE>
Many Eligible Companies tend to be companies with total market capitalizations
of less than $500 million. Consequently, the Fund expects that a significant
portion of its assets will be invested in equity securities of smaller, emerging
companies. Investment in smaller companies involves greater risk than is
customarily associated with the 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.
Foreign Investment. 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, the Fund whose investment portfolio includes such
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
registration, custody and settlements may in some instances be subject to delays
and legal and 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 which 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 the 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, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
The 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 to it of other restrictions on investment. Investing in local
markets may require the Fund to adopt special procedures, which may involve
additional costs to the Fund. The liquidity of the Fund's investments in any
country in which any of these factors exists could be affected and Alliance will
monitor the effect of any such factor or factors on the 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 or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, the 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.
Currency Considerations. The Fund is permitted to invest substantially all of
its assets in securities denominated in foreign currencies. A portion of the
Fund's revenues corresponding to its foreign currency denominated investments
will be received in such currencies. Therefore, the dollar equivalent of the
Fund's net assets, income and distributions could be adversely affected by
reductions in the value of certain foreign currencies relative to the U.S.
dollar. The Fund may, however, attempt to protect itself against adverse changes
in the values of foreign currencies by engaging in certain of the investment
practices listed above. While it has this ability, there is no certainty as to
whether and to what extent it will engage in these practices. 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 it has insufficient cash in U.S. dollars to meet distribution
requirements. Similarly, if an 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.
U.S. and Foreign Taxes. Foreign taxes paid by the Fund may be creditable or
deductible by U.S. shareholders for U.S. income tax purposes. No assurance can
be given that applicable tax
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<PAGE>
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 "Dividends,
Distributions and Taxes" and should discuss with their tax advisers the specific
tax consequences of investing in the Fund.
Non-Diversified Status. The Fund is a "non-diversified" investment company,
which means it is not limited in the proportion of its assets that may be
invested in the securities of a single issuer. However, the Fund intends to
conduct its operations so as to qualify to be taxed as a "regulated investment
company" for purposes of the Code, which will relieve the Fund of any liability
for federal income tax to the extent its earnings are distributed to
shareholders. See "Dividends, Distributions and Taxes--U.S. Federal Income
Taxes" in the Statement of Additional Information. To so qualify, among other
requirements, the Fund will limit its investments so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the Fund's total assets
will be invested in the securities of a single issuer, and (ii) with respect to
50% of its total assets, not more than 5% of its total assets will be invested
in the securities of a single issuer and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer. The Fund's investments in
U.S. Government securities are not subject to these limitations. Because the
Fund, a non-diversified investment company, may invest in a smaller number of
individual issuers than a diversified investment company, an investment in the
Fund may, under certain circumstances, present greater risk to an investor than
an investment in a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
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Purchase And Sale
- --------------------------------------------------------------------------------
Of Shares
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
The Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares of the Fund may be purchased
through your financial representative at net asset value without any initial or
contingent deferred sales charges and are not subject to ongoing distribution
expenses. Advisor Class shares may be purchased and held solely (i) through
accounts established under a fee-based program, sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by AFD,
(ii) 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,
(iii) by investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Fund and (iv) through registered
investment advisers or other financial intermediaries who charge a management,
consulting or other fee for their service 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. For more detailed information about who may
purchase and hold Advisor Class shares see the Statement of Additional
Information. A shareholder's Advisor Class shares will automatically convert to
Class A shares of the Fund under certain circumstances. For a more detailed
description of the conversion feature and Class A shares, see "Conversion
Feature."
Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares of the Fund in order
to be approved by AFD for investment in Advisor Class shares. Share certificates
are issued only upon request. See the Subscription Application and Statement of
Additional Information for more information.
The Fund may refuse any order to purchase Advisor Class shares. In this regard,
the Fund reserves 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 the Fund Values its Shares
The net asset value of Advisor Class shares of the Fund is calculated by
dividing the value of the Fund's net assets allocable to the Advisor Class by
the outstanding shares of the Advisor Class. Shares are valued each day the
Exchange is open as of the close of regular trading (currently 4:00 p.m. Eastern
time). The securities in the Fund are valued 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 Fund's Directors believe would
accurately reflect fair market value.
HOW TO SELL SHARES
You may "redeem", i.e., sell your shares in the Fund to the Fund on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value (less, any applicable CDSC) next
calculated after the Fund receives your request in proper form. Proceeds
generally will be sent to you within seven days. However, for shares recently
purchased by check or electronic funds transfer, the Fund will not send proceeds
until it 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
documents are required by your fee based program or employee benefit plan, you
should contact your financial representative.
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<PAGE>
Selling Shares Through Your Financial Representative
Your financial representative must receive your request before 4:00 p.m. Eastern
time, and your financial representative must transmit your request to the Fund
by 5:00 p.m. Eastern time, for you to receive that day's net asset value (less
any applicable CDSC). Your financial representative is responsible for
furnishing all necessary documentation to the Fund and may charge you for this
service.
Selling Shares Directly To The Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. 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. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
(800) 221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to (800) 221-5672.
Telephone redemption requests must be made by 4:00 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and may be made
only once in any 30-day period. A shareholder who has completed the Telephone
Transactions section of the Subscription Application, or the Shareholder Options
form obtained from AFS, can elect to have the proceeds of his or her redemption
sent to his or her bank via an electronic funds transfer. Proceeds of telephone
redemptions also may be sent by check to a shareholder's address of record.
Redemption requests by electronic funds transfer may not exceed $100,000 and
redemption requests by check may not exceed $50,000. Telephone redemption is not
available for shares held in nominee or "street name" accounts or retirement
plan accounts or shares held by a shareholder who has changed his or her address
of record within the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, the Fund may suspend redemptions or postpone payment for
up to seven days or longer, as permitted by federal securities law. The Fund
reserves 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
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic 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 fails to do so. Dealers and
agents may charge a commission for handling telephonic 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 application. A shareholder manual
explaining all available services will be provided upon request. To request a
shareholder manual, call (800) 227-4618.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of the Fund for Advisor Class shares
of other Alliance Mutual Funds (including AFD Exchange Reserves, a money market
fund managed by Alliance). Exchanges of shares are made at the net asset values
next determined, without sales or service charges. Exchanges may be made by
telephone or written request. Telephone exchange requests must be received by
AFS by 4:00 p.m. Eastern time on a Fund business day in order to receive that
day's net asset value.
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. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
GENERAL
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 the 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 the Fund, including requirements as to the
minimum initial and subsequent investment amounts.
The Fund offers three classes of shares other than the Advisor Class, which are
Class A, Class B and Class C. All classes of the shares of the Fund have a
common investment objective and investment portfolio. Class A shares are offered
with an initial sales charge and pay a distribution services fee. Class B shares
have a contingent deferred sales charge (a "CDSC")
11
<PAGE>
and also pay a distribution services fee. Class C shares have no initial sales
charge or CDSC as long as they are not redeemed within one year of purchase, but
pay a distribution services fee. Because Advisor Class shares have no initial
sales charge or CDSC and pay no distribution services fee, Advisor Class shares
are expected to have different performance from Class A, Class B or Class C
shares. You may obtain more information about Class A, Class B and Class C
shares, which are not offered by this Prospectus, by contacting AFS by telephone
at (800) 221-5672 or by contacting your financial representative.
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Management Of The Fund
- --------------------------------------------------------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of the Fund,
subject to the general supervision and control of the Directors of the Fund.
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1997 of more than $199 billion (of which
more than $71 billion represented the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds, public
employee retirement systems, investment companies, foundations and endowment
funds. The 54 registered investment companies managed by Alliance comprising
more than 116 separate investment portfolios currently have over two million
shareholders. As of June 30, 1997, Alliance provided investment management
services to employee benefit plans for 29 of the Fortune 100 companies.
Alliance Capital Management Corporation ("ACMC"), the sole general partner of,
and the owner of a 1% general partnership interest in, Alliance, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies in the United
States, which is a wholly-owned subsidiary of The Equitable Companies
Incorporated, a holding company controlled by AXA-UAP, a French insurance
holding company. Certain information concerning the ownership and control of
Equitable by AXA-UAP is set forth in the Statement of Additional Information
under "Management of the Fund."
Under the Advisory Agreement, the Fund pays Alliance a fee at the annual rate of
1.10% of the Fund's average daily net assets up to $100 million, .95% of the
next $100 million of the Fund's average daily net assets, and .80% of the Fund's
average daily net assets over $200 million. The fee is accrued daily and paid
monthly.
The person primarily responsible for the day-to-day management of the Fund's
portfolio since August 1995 has been Jeremy R. Kramer, a Vice President of ACMC,
with which he has been associated since 1993. Previously, he was a securities
analyst with Neuberger & Berman.
DISTRIBUTION SERVICES AGREEMENT
The fund has entered into a Distribution Services Agreement with AFD with
respect to the Advisor Class shares. The Glass-Steagal Act and other applicable
laws may limit the ability of a bank or other depository institution to become
an underwriter or distributor of securities. However, in the opinion of the
Fund's management, based on the advice of counsel, these laws do not prohibit
such depository institutions from providing services for investment companies
such as the administrative, accounting and other services referred to in the
Agreement. In the event that a change in these laws prevented a bank from
providing such services, it is expected that other service arrangements would be
made and that shareholders would not be adversely affected.
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Dividends, Distributions
- --------------------------------------------------------------------------------
And Taxes
- --------------------------------------------------------------------------------
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 the Fund without charge by returning to
Alliance, with appropriate instructions, the check representing such 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
the Fund.
Each income dividend and capital gains distribution, if any, declared by the
Fund on its outstanding shares will, at the election of each shareholder, be
paid in cash or in additional shares of the Fund having an aggregate net asset
value as of the payment date of such dividend or distribution equal to the cash
amount of such income dividend or distribution. Election to receive income
dividends and distributions in cash or shares is made at the time shares are
initially purchased and may be changed at any time prior to the record date for
a particular dividend or distribution. Cash dividends can be paid by check or,
if the shareholder so elects, electronically via the ACH network. There is no
sales or other charge in connection with the reinvestment of dividends and
capital gains distributions.
While it is the intention of the 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 such dividend or distribution must
necessarily depend
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<PAGE>
upon 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 the Fund
will pay any dividends or realize any capital gains.
The Fund expects to distribute substantially all of its net realized capital
gains prior to December 31, 1997. As of September 30, 1997 the Fund had net
undistributed realized capital gains, substantially all of which were short-term
capital gains, of approximately $18.4 million, or $3.09 per share. Additionally,
a reduction in the number of outstanding shares of the Fund (e.g., from net
redemptions of shares) will proportionately increase the per share amount of any
distribution of capital gains. As the Fund recently converted from a closed-end
to an open-end investment company, and as the Fund's shares became redeemable as
of the date of this Prospectus, it is anticipated that the Fund will experience
substantial redemptions in the near term. The Fund estimates that if it were to
experience, for example, net redemptions reducing the number of its outstanding
shares by one-half and were required to sell portfolio securities at their
September 30, 1997 valuations in order to raise additional cash to meet those
redemption requests (resulting in the realization of additional short-term and
long-term capital gains), net undistributed realized capital gains, expected to
consist principally of net short-term capital gains, could rise to more than
$8.00 per share. The precise amount of the Fund's year-end distributions cannot
be determined at this time. Investors considering a purchase of Fund shares
prior to any such distribution should first consult their tax advisers.
Distributions of short-term capital gains are taxed to recipient shareholders as
ordinary income. If you buy shares just before the Fund deducts a distribution
from its net asset value, you will pay the full price for the shares and then
receive a portion of the price back as a taxable distribution.
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. To the extent that
the Fund is liable for foreign income taxes withheld at the source, the 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,
but there can be no assurance that the Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
The Fund intends to qualify to be taxed 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 relieves the Fund of federal income taxes on that part of its taxable
income, including net capital gains, which it pays out to its shareholders.
Dividends out of net ordinary income and distributions of net short-term capital
gains are taxable to the recipient shareholders as ordinary income. In the case
of corporate shareholders, such dividends may be eligible for the
dividends-received deduction, except that the amount eligible for the deduction
is limited to the amount of qualifying dividends received by the Fund. A
corporation's dividends-received deduction will be disallowed with respect to a
dividend unless the corporation holds shares in the Fund on the ex-dividend date
and for at least 45 other days during the 90-day period beginning 45 days prior
to the ex-dividend date. Furthermore, the dividends-received deduction will be
disallowed to the extent a corporation's investment in shares of the Fund is
financed with indebtedness.
Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains--that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on capital assets held
for more than one year but not more than 18 months ("mid-term gains"), and a
second rate (generally 20%) applies to the balance of such net capital gains
("adjusted net capital gains"). Distributions of mid-term gains and adjusted net
capital gains will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund. Distributions of net capital gains are
not eligible for the dividends-received deduction referred to above.
Under the 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.
Any dividend or distribution received by a shareholder on shares of the Fund
will have the effect of reducing the net asset value of such shares by the
amount of such dividend or distribution. Furthermore, a dividend or distribution
made shortly after the purchase of such shares by a shareholder, although in
effect a return of capital to that particular shareholder, would be taxable to
him or her as described above. If a shareholder held shares six months or less
and during that period received a distribution of net capital gains, any loss
realized on the sale of such shares during such six-month period would be a
long-term capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of the Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, generally
will not be taxable to the plan. Distributions from such plans will be taxable
to individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
Distributions by the Fund may be subject to state and local taxes. The Fund is
qualified to do business in the Commonwealth of Pennsylvania and, therefore, is
subject to the Pennsylvania foreign franchise and corporate net income tax in
respect of its business activities in Pennsylvania.
13
<PAGE>
Accordingly, shares of the Fund are exempt from Pennsylvania personal property
taxes. The Fund anticipates continuing such business activities but reserves the
right to suspend them at any time, resulting in the termination of the
exemption.
The Fund will be required to withhold 31% of any payments made to a shareholder
if the shareholder has not provided a certified taxpayer identification number
to the Fund, or the Secretary of the Treasury notifies the Fund that a
shareholder has not reported all interest and dividend income required to be
shown on the shareholder's Federal income tax return.
Under certain circumstances, if the Fund realizes losses 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. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Shareholders will be advised annually as to the federal tax status of dividends
and capital gain distributions made by the Fund. Shareholders are urged to
consult their tax advisers regarding their own tax situation.
- --------------------------------------------------------------------------------
Conversion Feature
- --------------------------------------------------------------------------------
CONVERSION 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 and Sale of
Shares--How to Buy Shares," and by investment advisory clients of, and certain
other persons associated with, Alliance and its affiliates or the Fund. If (i) a
holder of Advisor Class shares ceases to participate in the 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 and Sale of Shares--How to Buy Shares" or (ii) the holder is otherwise
no longer eligible to purchase Advisor Class shares as described in this
Prospectus (each, a "Conversion Event"), then all Advisor Class shares held by
the shareholder will convert automatically and without notice to the
shareholder, other than the notice contained in this Prospectus, to Class A
shares of the Fund during the calendar month following the month in which the
Fund is informed of the occurrence of the Conversion Event. The failure of a
shareholder or a fee-based program to satisfy the minimum investment
requirements to purchase Advisor Class shares will not constitute a Conversion
Event. The conversion would occur on the basis of the relative net asset values
of the two classes and without the imposition of any sales load, fee or other
charge.
DESCRIPTION OF CLASS A SHARES
The following tables set forth maximum transaction costs, annual expenses, per
share income and capital charges for Class A shares of the Fund. Class A shares
are subject to a distribution fee that may not exceed an annual rate of .30%.
The higher fees mean a higher expense ratio, so Class A shares pay
correspondingly lower dividends and may have a lower net asset value than
Advisor Class shares.
Shareholder Transaction Expenses are one of several factors to consider when you
invest in the Fund. The following table summarizes your maximum transaction
costs from investing in Class A shares of the Fund and annual expenses for Class
A shares of the Fund. The "Example" following the table below shows the
cumulative expenses attributable to a hypothetical $1,000 investment for the
periods specified.
CLASS A SHARES
Maximum sales charge imposed on purchases
(as a percentage of offering price)(a) ................ None
(sales charge
waived)
Sales charge imposed on dividend
reinvestments ......................................... None
Deferred sales charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower) ......................... None
Exchange Fee ................................................... None
Operating Expenses
Management fees ................................................ 1.10%
12b-1 fees ..................................................... .30%
Other expenses(b) .............................................. 1.13%
-----
Total fund operating expenses .................................. 2.53%
=====
Example
After 1 year ................................................... $ 26
After 3 years .................................................. $ 79
After 5 years .................................................. $135
After 10 years ................................................. $287
- --------------------------------------------------------------------------------
(a) Advisor Class shares convert to Class A shares at asset value and without
the imposition of any sales charge and accordingly the maximum sales charge
of 4.25% on most purchases of Class A shares for cash does not apply.
(b) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholders's account.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that the investor in the Fund will bear directly
or indirectly. Long-term shareholders of Class A shares of the Fund may pay
aggregate sales charges totaling more than the economic equivalent of the
maximum initial sales charges permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc. The Rule 12b-1 fee for Class A comprises
a service fee not exceeding .25% of the aggregate average daily net assets of
the Fund attributable to Class A and an asset-
14
<PAGE>
based sales charge equal to the remaining portion of the Rule 12b-1 fee. "Other
Expenses" for Class A shares are based on estimated amounts for the Fund's
current fiscal year. The Example set forth above assumes reinvestment of all
dividends and distributions and utilizes a 5% annual rate of return as mandated
by Commission regulation. The Example should not be considered representative of
past or future expenses: actual expenses may be greater or less than those
shown.
Financial Highlights. The following table presents per share income and capital
changes for a share outstanding throughout each period indicated. The Fund
operated as a closed-end investment company through October 3, 1997, when it
converted to an open-end investment company and all shares of its common stock
then outstanding were reclassified as Class A shares. Except as indicated below,
the information in the table has been audited by Ernst & Young LLP, the
independent auditors of the Fund. A report of Ernst & Young LLP on the
information with respect to the Fund appears in the Fund's Statement of
Additional Information. The following information should be read in conjunction
with the financial statements and related notes which are included in the Fund's
Statement of Additional Information.
Further information about the Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge by
contacting Alliance Fund Services, Inc. at the address or the "For Literature"
telephone number shown on the cover of this Prospectus.
<TABLE>
<CAPTION>
Six
Months June 1,
ended 1990*
April 30, Year Ended October 31, to
1997 ------------------------------------------------------ October 31,
(unaudited) 1996 1995 1994 1993 1992 1991 1990
------------ ------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 16.48 $ 12.37 $ 11.74 $ 10.97 $ 10.78 $ 13.12 $ 12.46 $ 13.83
Income From Investment Operations
Net investment income (loss)................ (.10)(a) (.13)(a) .03 0 .01 .01 .13 .20
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions...... .62 4.26 .60 .77 .18 (2.17) .87 (1.57)
Net increase (decrease) in net
asset value from operations........ .52 4.13 .63 .77 .19 (2.16) 1.00 (1.37)
Less: Dividends And Distributions
Dividends from net investment income........ 0 (.02) 0 0 0 (.10) (.25) 0
Distributions from net realized gain
on investments and foreign
currency transactions.............. (1.13) 0 0 0 0 (.08) (.09) 0
-------- -------- ------- ------- ------- ------- ------- -------
Total dividends and distributions........... (1.13) (.02) 0 0 0 (.18) (.34) 0
-------- -------- ------- ------- ------- ------- ------- -------
Net asset value, end of period.............. $ 15.87 $ 16.48 $ 12.37 $ 11.74 $ 10.97 $ 10.78 $ 13.12 $ 12.46
======== ======== ======= ======= ======= ======= ======= =======
Total Return
Total investment return based on
net asset value (b)................ 4.43% 33.48% 5.37% 7.02% 1.76% (16.59)% 8.66% (10.68)%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)... $94,705 $100,271 $85,416 $81,102 $75,805 $74,442 $90,612 $86,041
Ratio of expenses to average net assets..... 1.51%(c) 1.60% 1.57% 1.67% 1.62% 1.63% 1.49% 1.72%(c)
Ratio of net investment income
(loss) to average net assets....... (1.19)%(c) (.85)% .21% (.04)% .15% .10% .95% 3.59%(c)
Portfolio turnover rate..................... 167% 268% 109% 42% 25% 41% 32% 4%
Average commission rate (d)................. $ .0503 $ .0313 -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment return calculated for a period of
less than one year is not annualized.
(c) Annualized.
(d) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for trades on which
commissions are charged. This amount includes commissions paid to foreign
brokers which may materially affect the rate shown. Amounts paid in foreign
currencies have been converted into U.S. dollars using the prevailing
exchange rate on the date of the transaction.
15
<PAGE>
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
The Fund is a Maryland corporation organized on February 20, 1990. It commenced
operations, as a closed-end management investment company, on June 1, 1990.
Effective after the close of business on October 3, 1997, the Fund converted to
an open-end management investment company and all shares of its common stock
then outstanding were reclassified as Class A shares. The Fund commenced a
continuous public offering of its Class A shares, Class B shares, Class C shares
and Advisor Class shares on October 6, 1997.
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 in the Fund will be entitled to share pro rata with other holders
of the same class of shares in 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 or fee. The Fund is empowered to establish, without shareholder approval,
additional portfolios, which may have different investment objectives, and
additional classes of shares. 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 as a single series or class on matters, such as the election of
Directors, that affect each portfolio or class in substantially the same manner.
Class A, Class B, Class 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 bears its
own distribution expenses, Class B shares convert to Class A shares after eight
years and Advisor Class shares convert to Class A shares under certain
circumstances. Each class of shares 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. Certain additional
matters relating to the Fund's organization are discussed in its Statement of
Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as the Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Fund.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Fund.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return, which is computed
separately for each class of shares, including 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's advertisements may quote performance rankings or ratings of the Fund
by financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare the Fund's performance to
various indices.
ADDITIONAL INFORMATION
This Prospectus and the Statement of Additional Information, which has been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statement filed by the Fund with the Commission under the
Securities Act. 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.
16
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK
<PAGE>
SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
ALLIANCE GLOBAL ENVIRONMENT FUND
ADVISOR CLASS
(see instructions at the front of the application)
- --------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Owner's Name (First Name) (MI) (Last Name)
[_][_][_][-][_][_][-][_][_][_][_]
Social Security Number (Required to open account)
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Joint Owner's Name* (First Name ) (MI) (Last Name)
*Joint Tenants with right of survivorship unless Alliance Fund Services is
informed otherwise.
[_] GIFT/TRANSFER TO A MINOR
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Custodian - One Name Only (First Name) (MI) (Last Name)
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Minor (First Name) (MI) (Last Name)
[_][_][_][-][_][_][-][_][_][_][_]
Minor's Social Security Number (Required to open account)
Under the State of (Minor's Residence) Uniform Gifts/Transfer to Minor's Act
[_] TRUST ACCOUNT
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Trustee
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Trust
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Trust (cont'd)
[_][_][_][_][_][_][_][_][_][_][_][_][_] [_][_][_][_][_][_][_][_][_][_][_]
Trust Dated Tax ID or Social Security Number
(Required to open account)
[_] OTHER
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
[_][_][_][_][_][_][_][_][_][_][_][_][_] [_][_][_][_][_][_][_][_][_][_][_]
- --------------------------------------------------------------------------------
2. YOUR ADDRESS
- --------------------------------------------------------------------------------
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Street
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
City State Zip Code
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
If Non-U.S., Specify Country
[_][_][_][-][_][_][_][-][_][_][_][_] [_][_][_][-][_][_][_][-][_][_][_][_]
Daytime Phone Evening Phone
I am a: [_] U.S. Citizen [_] Non-Resident Alien
[_] Resident Alien [_] Other
- -
For Alliance Use Only
- -
<PAGE>
- --------------------------------------------------------------------------------
3. YOUR INITIAL INVESTMENT
- --------------------------------------------------------------------------------
I hereby subscribe for shares of Alliance Global Enviroment Fund and elect
distribution options as indicated.
Dividend and Capital Gain Distribution Options:
BROKER/DEALER USE ONLY
WIRE CONFIRM
- ----------------------
R REINVEST DISTRIBUTIONS into my fund account.
----------------------
C SEND MY DISTRIBUTIONS IN CASH to the address I have provided in
-----------------------------
Section 2. (Complete Section 4D for direct deposit to your bank
account. Complete Section 4E for payment to a third party).
D DIRECT MY DISTRIBUTIONS TO ANOTHER ALLIANCE FUND. Complete the
------------------------------------------------
appropriate portion of Section 4A to direct your distributions
(dividends and capital gains) to the Advisor Class Shares of
another Alliance Fund.
- --------------------------- ------------- ------------------------------
MAKE ALL CHECKS PAYABLE TO: ADVISOR CLASS DISTRIBUTIONS OPTIONS *CIRCLE*
ALLIANCE FUND SERVICES ------------------------------
------------- ----------------
- --------------------------- ------------- DIVIDENDS CAPITAL GAINS
- --------------------------- ------------- ------------- ----------------
ALLIANCE FUND NAME
- --------------------------- (481) R C D R C D
ALLIANCE GLOBAL
ENVIRONMENT FUND $
- --------------------------- -------------- ------------- ----------------
- ---------------------------
TOTAL INVESTMENT $
- --------------------------- --------------
<PAGE>
MY SOCIAL SECURITY (TAX IDENTIFICATION ) NUMBER IS:
[_][_][_][_][_][_][_][_][_]
- --------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS
- --------------------------------------------------------------------------------
- ------------------------------------
A. AUTOMATIC INVESTMENT PLANS (AIP)
- ------------------------------------
[_] WITHDRAW FROM MY BANK ACCOUNT
I authorize Alliance to draw on my bank account for investment in my fund
account(s) as indicated below (Complete Section 4D also for the bank account you
wish to use).
<TABLE>
<CAPTION>
Monthly Dollar Amount Day of Withdrawal
Fund Name ($25 minimum) (1st thru 31st) Circle "all" or applicable months
<S> <C> <C> <C>
All J F M A M J J A S O N D
- ----------------------- --------------------------- --------------------------- ---------------------------------
All J F M A M J J A S O N D
- ----------------------- --------------------------- --------------------------- ---------------------------------
All J F M A M J J A S O N D
- ----------------------- --------------------------- --------------------------- ---------------------------------
All J F M A M J J A S O N D
- ----------------------- --------------------------- --------------------------- ---------------------------------
</TABLE>
Your bank must be a member of the National Automated Clearing House Association
(NACHA).
[_] DIRECT MY DISTRIBUTIONS
As indicated in Section 3, I would like my dividends and/or capital gains
directed to the same class of shares of another Alliance fund.
<TABLE>
<CAPTION>
"From" Fund Account #
"From" Fund Name (if existing) "To" Fund Name "To" Fund Account # (if existing)
<S> <C> <C> <C>
[_] New
[_] Existing
- ----------------------- --------------------------- --------------------------- ---------------------------------
[_] New
[_] Existing
- ----------------------- --------------------------- --------------------------- ---------------------------------
[_] New
[_] Existing
- ----------------------- --------------------------- --------------------------- ---------------------------------
[_] New
[_] Existing
- ----------------------- --------------------------- --------------------------- ---------------------------------
</TABLE>
[_] EXCHANGE SHARES MONTHLY
I authorize Alliance to transact monthly exchanges within the same class of
shares between my fund accounts as listed below.
<TABLE>
<CAPTION>
"From" Fund Account # Dollar Amount Day of Exchange** "To" Fund Account #
"From" Fund Name (if existing) ($25 minimum) (1st thru 31st) "To" Fund Name (if existing)
<S> <C> <C> <C> <C> <C>
[_] New
[_] Existing
- -------------------- --------------------- --------------- ----------------- -------------- -------------------
[_] New
[_] Existing
- -------------------- --------------------- --------------- ----------------- -------------- -------------------
[_] New
[_] Existing
- -------------------- --------------------- --------------- ----------------- -------------- -------------------
[_] New
[_] Existing
- -------------------- --------------------- --------------- ----------------- -------------- -------------------
</TABLE>
**Shares exchanged will be redeemed at the net asset value on the "Day of
Exchange" (If the "Day of Exchange" is not a fund business day, the exchange
transaction will be processed on the next fund business day). The exchange
privilege is not available if stock certificates have been issued.
- -------------------------------------
B. Systematic Withdrawal Plans (SWP)
- -------------------------------------
In order to establish a SWP, you must reinvest all dividends and capital gains
and own or purchase shares of the Fund having a current net asset value of at
least:
. $10,000 for monthly payments,
. $5,000 for bi-monthly payments,
. $4,000 for quarterly or less frequent payments
Your bank must be a member of the National Automated Clearing House Association
(NACHA) in order for you to receive SWP proceeds directly into your checking
account.
[_] I authorize Alliance to transact periodic redemptions from my fund account
and send the proceeds to me as indicated below.
<TABLE>
<CAPTION>
Fund Name Dollar Amount ($50 minimum) Circle "all" or applicable months
<S> <C> <C>
All J F M A M J J A S O N D
- ---------------------------------------------------- --------------------------- ---------------------------------
All J F M A M J J A S O N D
- ---------------------------------------------------- --------------------------- ---------------------------------
All J F M A M J J A S O N D
- ---------------------------------------------------- --------------------------- ---------------------------------
All J F M A M J J A S O N D
- ---------------------------------------------------- --------------------------- ---------------------------------
</TABLE>
(1st-31st)
I would like to have these payments occur on or about the [ ] of the
months circled above.
PLEASE SEND MY SWP PROCEEDS TO:
[_] MY CHECKING ACCOUNT (VIA EFT) (Complete Section 4D)
[_] MY ADDRESS OF RECORD (VIA CHECK)
[_] THE PAYEE AND ADDRESS SPECIFIED IN SECTION 4E (VIA CHECK)
<PAGE>
- -------------------------------------
C. PURCHASES AND REDEMPTIONS VIA EFT
- -------------------------------------
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange
shares for your account. Purchase and redemption requests will be processed
via electronic funds transfer (EFT) to and from your bank account.
Instructions: . Review the information in the Prospectus about telephone
transaction services.
. If you select the telephone purchase or redemption privilege,
you must write "VOID" across the face of a check from the
bank account you wish to use and attach it to Section 4D of
this application.
PURCHASES AND REDEMPTIONS VIA EFT
[_] I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected. In the case of shares purchased by check,
redemption proceeds may not be made available until the fund is reasonably
assured that the check has cleared, normally 15 calendar days after the
purchase date.
- --------------------
D. BANK INFORMATION
- --------------------
This bank account information will be used for:
[_] Distributions (Section 3) [_] Automatic Investments (Section 4A)
[_] Systematic Withdrawals [_] Telephone Transactions (Section 4C)
(Section 4B)
Please attach a voided check:
- - -
TAPE PREPRINTED VOIDED CHECK HERE.
We Cannot Establish These Services Without it.
- - -
Your bank must be a member of the National Automated Clearing House Association
(NACHA) in order to have EFT transactions processed to your fund account. For
EFT transactions, the fund requires signatures of bank account owners exactly as
they appear on bank records.
- -------------------------------
E. THIRD PARTY PAYMENT DETAILS
- -------------------------------
This third party payee information will be used for:
[_] Distributions (Section 3) [_] Systematic Withdrawals (Section 4B)
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Address - Line 1
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Address - Line 2
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Address - Line 3
<PAGE>
- --------------------------------------------------------------------------------
5. SHAREHOLDER AUTHORIZATION THIS SECTION MUST BE COMPLETED
- --------------------------------------------------------------------------------
TELEPHONE EXCHANGES AND REDEMPTIONS BY CHECK
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an authorized
employee of an investment dealer or agent requesting a redemption or exchange on
my behalf. (NOTE: Telephone exchanges may only be processed between accounts
that have identical registrations.) Telephone redemption checks will only be
mailed to the name and address of record; and the address must have no change
within the last 30 days. The maximum telephone redemption amount is $50,000.
This service can be enacted once every 30 days.
[_] I do not elect the telephone exchange service.
[_] I do not elect the telephone redemption by check service.
I CERTIFY UNDER PENALTY OF PERJURY THAT THE NUMBER SHOWN IN SECTION 1 OF THIS
FORM IS MY CORRECT TAX IDENTIFICATION NUMBER OR SOCIAL SECURITY NUMBER AND THAT
I HAVE NOT BEEN NOTIFIED THAT THIS ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.
By selecting any of the above telephone privileges, I agree that neither the
Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund Services,
Inc. or other Fund Agent will be liable for any loss, injury, damage or expense
as a result of acting upon telephone instructions purporting to be on my behalf,
that the Fund reasonably believes to be genuine, and that neither the Fund nor
any such party will be responsible for the authenticity of such telephone
instructions. I understand that any or all of these privileges may be
discontinued by me or the Fund at any time. I understand and agree that the Fund
reserves the right to refuse any telephone instructions and that my investment
dealer or agent reserves the right to refuse to issue any telephone instructions
I may request.
For non-residents only: Under penalties of perjury, I certify that to the best
of my knowledge and belief, I qualify as a foreign person as indicated in
Section 2.
I am of legal age and capacity and have received and read the Prospectus and
agree to its terms.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATE REQUIRED TO AVOID BACKUP WITHHOLDING.
- -------------------------------------- ---------------
Signature Date
- --------------------------------------------------------------------------------
Signature Date Acceptance Date
- --------------------------------------------------------------------------------
DEALER/AGENT AUTHORIZATION FOR SELECTED DEALERS OR AGENTS ONLY.
- --------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 5, as well as the legal capacity of the
shareholder.
- --------------------------------------------------------------------------------
Dealer/Agent Firm Authorized Signature
- --------------------------------------------------------------------------------
Representative First Name MI Last Name
- --------------------------------------------------------------------------------
Representative Number
- --------------------------------------------------------------------------------
Branch Office Address
- --------------------------------------------------------------------------------
City State Zip Code
( )
- --------------------------------------------------------------------------------
Branch Number Branch Phone
<PAGE>
ALLIANCE SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
ALLIANCE GLOBAL ENVIRONMENT
FUND ADVISOR CLASS
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
- --------------------------------------------------------------------------------
TO OPEN YOUR NEW ALLIANCE ACCOUNT...
Please complete the application For certified or overnight deliveries,
and mail it to: send to:
ALLIANCE FUND SERVICES, INC. ALLIANCE FUND SERVICES, INC.
P.O. BOX 1520 500 PLAZA DRIVE
SECAUCUS, NEW JERSEY 07096-1520 SECAUCUS, NEW JERSEY 07094
- ---------
SECTION 1 YOUR ACCOUNT REGISTRATION (REQUIRED)
- ---------
Complete one of the available choices.
To ensure proper tax reporting to the IRS:
. Individuals, Joint Tenants and Gift/Transfer to a Minor:
o Indicate your name(s) exactly as it appears on your
social security card.
. Trust/Other:
o Indicate the name of the entity exactly as it appeared
on the notice you received from the IRS when your
Employer Identification number was assigned.
- ---------
SECTION 2 YOUR ADDRESS (REQUIRED)
- ---------
Complete in full.
- ---------
SECTION 3 YOUR INITIAL INVESTMENT (REQUIRED)
- ---------
For each fund in which you are investing: 1) Write the dollar amount of your
initial purchase 2) Circle a distribution option for your dividends 3) Circle a
distribution option for your capital gains. All distributions (dividends and
capital gains) will be reinvested into your fund account unless you direct
otherwise. If you want distributions sent directly to your bank account, then
you must complete Section 4D and attach a voided check for that account. If you
want your distributions sent to a third party you must complete Section 4E.
- ---------
SECTION 4 YOUR SHAREHOLDER OPTIONS (COMPLETE ONLY THOSE OPTIONS YOU WANT)
- ---------
A. AUTOMATIC INVESTMENT PLANS (AIP) - You can make periodic investments into any
of your Alliance Funds in one of three ways. First, by a periodic withdrawal
($25 minimum) directly from your bank account and invested into an Alliance
Fund. Second, you can direct your distributions (dividends and capital gains)
from one Alliance Fund into another Fund. Or third, you can automatically
exchange monthly ($25 minimum) shares of one Alliance Fund for shares of
another Fund. To elect one of these options, complete the appropriate portion
of Section 4A.
B. SYSTEMATIC WITHDRAWAL PLANS (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be
made via Electronic Funds Transfer (EFT) to your bank account or by check.
C. TELEPHONE TRANSACTIONS VIA EFT - Complete this option if you would like to be
able to transact via telephone between your fund account and your bank
account.
D. BANK INFORMATION - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a voided check of the account you wish to use to this section of
the application.
E. THIRD PARTY PAYMENT DETAILS - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person
and/or address other than those provided in section 1 or 2, complete this
option.
- ---------
SECTION 5 SHAREHOLDER AUTHORIZATION (REQUIRED)
- ---------
All owners must sign. If it is a custodial, corporate, or trust account, the
custodian, an authorized officer, or the trustee respectively must sign.
IF WE CAN ASSIST YOU IN ANY WAY, PLEASE DO NOT HESITATE TO CALL US AT:
(800) 221-5672.
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 333-30409 and 811-5993.
<PAGE>
ALLIANCE GLOBAL
ENVIRONMENT FUND, 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
October 6, 1997
_________________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the current Prospectus for Alliance Global Environment Fund, Inc.
(the "Fund") that offers the Class A, Class B and Class C shares
of the Fund dated October 6, 1997 and the current Prospectus
for the Fund that offers the Advisor Class shares of the Fund
dated October 6, 1997 (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 either Prospectus may be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone number shown above.
TABLE OF CONTENTS
Page
Description of the Fund............................... 2
Management of the Fund................................ 8
Expenses of the Fund.................................. 15
Purchase of Shares.................................... 17
Redemption and Repurchase of Shares................... 35
Shareholder Services.................................. 39
Net Asset Value....................................... 46
Dividends, Distributions and Taxes.................... 47
Brokerage and Portfolio Transactions.................. 55
General Information................................... 57
Financial Statements and Report of
Independent Auditors................................ 60
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
________________________________________________________________
DESCRIPTION OF THE FUND
________________________________________________________________
Additional Information with Respect to Global Environmental
Matters
Existing laws in the United States and Europe already
mandate remedial efforts to deal with pollution. In addition,
the Adviser believes that there is an emerging political
consensus in the United States and Western Europe that additional
governmental action to control and prevent future pollution is
vital to the environment and the global economy. In the United
States, the Environmental Protection Agency (the "EPA") has the
duty of imposing and enforcing environmental standards on
American industry. The EPA has identified over 1,000 toxic waste
sites that require immediate attention. To date, Congress has
enacted at least 20 major pieces of environmental protection
legislation covering, among other things, solid waste, water
pollution, air pollution, and nuclear waste. A Congressional
study recently estimated that the cost of cleanup of chemically
contaminated sites may be near $500 billion over the next 50
years. In addition, many state legislatures are implementing
rigorous environmental statutes that, for instance, require state
approval before closing, terminating or transferring ownership of
industrial facilities. In the private sector, a growing number
of companies have elected representatives of environmental
interests to their boards of directors. In the opinion of the
Adviser, as federal, state and local legislation becomes more
stringent, many Environmental Companies, as well as Beneficiary
Companies involved in the development and manufacture of
environmentally safe products will be afforded additional
opportunities for growth.
Existing European environmental laws are generally less
rigorous than those in the United States. Moreover, in many
industrial zones in Eastern Europe, air and water pollution have
reached unprecedented levels and, more generally, there has been
little application of the services and technologies marketed by
Environmental Companies. While there can be no assurance that
Eastern European governments will sustain environmentally
protective policies or that their weakened economies will prove
able to afford the cost of effective policies of this nature, the
Adviser believes that it is likely that over the long term many
Eligible Companies, especially those based in Western Europe,
will benefit from substantial additional demand for their goods
and services from Eastern Europe.
Environmental awareness is growing in Japan as well,
leading to new demands on the Japanese government to take steps
2
<PAGE>
to protect the environment, both in Japan and abroad, through the
funding of environmental programs and the promotion of
environmentally sensitive technologies. Japanese industry, which
developed innovate anti-pollution technologies to effectively
purify contaminated gas and wastes emitted from automobiles and
factories, is now being provided with governmental incentives
(including research grants) to develop new technologies in other
areas. As a result of its participation in the United Nations
Environment Program, Japan has recently agreed to monitor the
transboundary movement of hazardous industrial wastes in Asia.
In addition, Japan has announced plans to establish regulations
under which industrial wastes produced in Japan can be properly
processed. The Japanese government also has pledged to increase
overseas development assistance for pollution control and other
environmental projects in developing countries. In the opinion
of the Adviser, the active role of the Japanese government in the
development of environmentally sensitive technologies and its
participation in global environmental projects will provide
significant additional growth opportunities for many
Environmental Companies and Beneficiary Companies.
In other areas of the world, environmental protection
issues are also moving to the forefront. In the Pacific Rim,
countries are now experiencing the side effects of their
industrialization. For example, Australia's rain forest has been
substantially destroyed (there are tentative plans to replant one
billion trees by the year 2000) and forest damage is also
extensive in Thailand, Indonesia and the Philippines. To date,
however, government regulation in this area has been slow to
develop as a result of enforcement problems, legislative delays
and the expenses associated with compliance. In Australia,
growing political awareness of environmental issues has begun to
affect the regulatory framework. Recent measures aimed at
addressing these concerns have included, among other things, a
national review of state pollution laws aimed at achieving
uniform penalty and enforcement standards, tighter controls on
emissions affecting the ozone layer and investigations regarding
the greenhouse effect.
Additional Investment Policies and Practices
The Fund may engage in the following investment policies
and practices to the extent described in the Prospectus.
Illiquid Securities. Historically, illiquid securities
have included securities subject to contractual or legal
restrictions on resale because they have not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), securities which are otherwise not readily marketable and
repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the
3
<PAGE>
Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid
securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a
mutual fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions within seven
days. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a
public offering of securities.
In recent years, however, a large institutional market
has developed for certain securities that are not registered
under the Securities Act, including repurchase agreements,
commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand
for repayment. The fact that there are contractual or legal
restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such
investments.
The Fund may invest in restricted securities issued
under Section 4(2) of the Securities Act, which exempts from
registration "transactions by an issuer not involving any public
offering." Section 4(2) instruments are restricted in the sense
that they can only be resold through the issuing dealer to
institutional investors and in private transactions; they cannot
be resold to the general public without registration.
Rule 144A under the Securities Act allows a broader
institutional trading market for securities otherwise subject to
restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of
the Securities Act for resales of certain securities to qualified
institutional buyers. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
securities held by the Fund, however, could affect adversely the
marketability of such portfolio securities and the Fund might be
unable to dispose of such securities promptly or at reasonable
prices. Rule 144A has already produced enhanced liquidity for
many restricted securities, and market liquidity for such
securities may continue to expand as a result of this regulation
and the consequent inception of the PORTAL System sponsored by
the National Association of Securities Dealers, Inc., an
4
<PAGE>
automated system for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers.
The Adviser, under the supervision of the Board of
Directors, will monitor the liquidity of restricted securities in
the Fund's portfolio. In reaching liquidity decisions, the
Adviser will consider, among other factors, the following:
(1) the frequency of trades and quotes for the security; (2) the
number of dealers making quotations to purchase or sell the
security; (3) the number of other potential purchasers of the
security; (4) the number of dealers undertaking to make a market
in the security; (5) the nature of the security (including its
unregistered nature) and the nature of the marketplace for the
security (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer);
and (6) any applicable Securities and Exchange Commission (the
"Commission") interpretation or position with respect to such
type of security.
Currency Swaps. Currency swaps involve the individually
negotiated exchange by the 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. The
net amount of the excess, if any, of the Fund's obligations over
its entitlements with respect to each currency swap will be
accrued on a daily basis and an amount of liquid assets having an
aggregate net asset value at least equal to the accrued excess
will be maintained in a segregated account by the Fund's
custodian. The Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-
paying ability of the other party thereto 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 other party to such a transaction, the
Fund will have contractual remedies pursuant to the agreements
related to the transactions.
General. The successful use of the Fund's investment
practices draws upon the Adviser's special skills and experience
with respect to such instruments and usually depends on the
Investment Adviser's ability to forecast price movements
correctly. Should prices move unexpectedly, the 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. In addition, the correlation
between movements in the prices of such instruments and movements
5
<PAGE>
in the prices of the securities hedged will not be perfect and
could produce unanticipated losses.
The Fund's ability to dispose of its position in options
depends on the availability of liquid markets in such
instruments. If a secondary market does not exist with respect
to an 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 an option purchased
by the Fund would have to be exercised in order for the Fund to
realize any profit. 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" in the Statement of Additional Information of the Fund.
Future Developments. The 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.
Defensive Position. For temporary defensive purposes,
the Fund may vary from its investment objective during periods in
which conditions in securities markets or other economic or
political conditions warrant. During such periods, the Fund may
reduce its position in equity securities and increase without
limit its position in short-term, liquid, high-grade debt
securities, which may include securities issued by the U.S.
government, its agencies and, instrumentalities ("U.S. Government
Securities"), bank deposits, money market instruments, short-term
(for this purpose, securities with a remaining maturity of one
year or less) debt securities, including notes and bonds, rated A
or higher by Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Ratings Services ("S&P"), Duff & Phelps Credit
Rating Co. ("Duff & Phelps") or Fitch Investors Service, Inc.
("Fitch") or, if not so rated, of equivalent investment quality
as determined by the Adviser.
Certain Fundamental Investment Policies
The following restrictions may not be changed without a
vote of a majority of the Fund's outstanding voting securities.
The Fund may not: (i) purchase more than 10% of the
outstanding voting securities of any one issuer; (ii) invest more
than 15% of the value of its total assets in the securities of
6
<PAGE>
any one issuer or 25% or more of the value of its total assets in
the same industry, except that the Fund will invest more than 25%
of its total assets in Environmental Companies, provided that
this restriction does not apply to U.S. Government securities,
but will apply to foreign government obligations unless the
Commission permits their exclusion; (iii) 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; (iv) borrow money or issue senior
securities, except that the Fund may borrow (a) from a bank if
immediately after such borrowing there is asset coverage of at
least 300% as defined in the 1940 Act and (b) for temporary
purposes in an amount not exceeding 5% of the value of the total
assets of the Fund; (v) 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; (vi) purchase a
security (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange) if, as a result, the Fund
would own any securities of an open-end investment company or
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 the aggregate; (vii) invest in
companies for the purpose of exercising control; (viii) make
short sales of securities or maintain a short position, unless at
all times when a short position is open it owns an equal amount
of such securities or securities convertible into or exchangeable
for, without payment of any further consideration, securities of
the same issue as, and equal in amount to, the securities sold
short ("short sales against the box"), and unless not more than
5% of the Fund's net assets (taken at market value) is held as
collateral for such sales at any onetime; (ix) buy or write
(i.e., sell) put or call options, except (a) the Fund may buy
foreign currency options or write covered foreign currency
options and options on foreign currency futures and (b) the Fund
may purchase warrants; or (x) (a) purchase or sell real estate,
except that it may 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
7
<PAGE>
acquire securities in private placements under circumstances in
which, if such securities were sold, the Fund might be deemed to
be an underwriter within the meaning of the Securities Act.
Whenever any investment restriction states a maximum
percentage of the Fund's assets which may be invested in any
security or other asset, it is intended that such maximum
percentage limitation be determined immediately after, and as a
result of the Fund's acquisition of, such securities or other
assets. Accordingly, any later increase or decrease in
percentage beyond the specified limitation resulting from a
change in values or net assets will not be considered a violation
of any such maximum.
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Directors and Officers
The Directors and principal officers of the Fund, their
ages and their principal occupations during the past five years
are set forth below. Each such Director and officer is also a
director, trustee or officer of other registered investment
companies sponsored by the Adviser. Unless otherwise specified,
the address of each of the following persons is 1345 Avenue of
the Americas, New York, New York 10105.
Directors
JOHN D. CARIFA, 52,* Chairman and President of the Fund,
is the President, Chief Operating Officer, Chief Financial
Officer and a Director of Alliance Capital Management
Corporation, the general partner of the Adviser ("ACMC"), with
which he has been associated since prior to 1992.
DAVID H. DIEVLER, 68, was formerly a Senior Vice
President of ACMC with which he had been associated since prior
to 1991 through 1994. He is currently an Independent Financial
Consultant. His address is P.O. Box 167, Spring Lake, New Jersey
07762.
JOHN H. DOBKIN, 55, has been the President of Historic
Hudson Valley (historic preservation) since 1990. He was
formerly Director of the National Academy of Design. His address
_________________________
* An "interested person" of the Fund as defined in the
Investment Company Act of 1940, as amended (the "1940 Act").
8
<PAGE>
is Historic Hudson Valley, 150 White Plains Road, Tarrytown, New
York 10591.
W.H. HENDERSON, 70, 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 consulting business.
Mr. Henderson is currently a Director of a number of investment
companies.
STIG HOST, 71, is the Chairman and Chief Executive
Officer of International Energy Corp. (oil and gas exploration),
with which he has been associated since prior to 1991. He is
also Chairman and Director of Kriti Exploration, Inc. (oil and
gas exploration and production), Managing Director of Kriti Oil
and Minerals, N.V., Chairman of Kriti Properties and Development
Corporation (real estate), Chairman of International Marine
Sales, Inc. (marine fuels), a Director of Florida Fuels, Inc.
(marine fuels) and President of Alexander Host Foundation. He is
also a Trustee of the Winthrop Focus Funds. His address is
36 Keofferam Road, Old Greenwich, Connecticut 06870.
RICHARD M. LILLY, 67, was formerly President and Chief
Executive Officer of Esso Italiana, S.p.A., Esso Europe-Africa
Services and Esso North Europe A/S since prior to 1991. His
address is 70 Palace Gardens Terrace, London W8 4RR England.
ALAN STOGA, 46, has been a Managing Director and a
member of the Board of Directors of Kissinger Associates, Inc.
since prior to 1992. 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, 37, Senior Vice President, is an
Executive Vice President of ACMC, with which she has been
associated since July 1993. Prior thereto, she was employed by
Equitable Capital since prior to 1992.
MARK H. BREEDON, 44, Vice President-Investments, is a
Vice President of ACMC and a Director and Senior Vice President
of Alliance Capital Limited ("ACL"), with which he has been
associated since prior to 1992.
9
<PAGE>
FRANCIS P. REEVES, 24, Vice President, is a Vice
President of ACL with which he has been associated since March
1996. Prior thereto, he was an investment adviser for Citibank
and an assistant trader for Mitsubishi Finance International.
JEREMY R. KRAMER, 35, Vice President-Investments, is a
Vice President of ACMC with which he has been associated since
1993. Previously, he was a securities analyst with Neuberger &
Berman.
THOMAS BARDONG, 52, Vice President, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1992.
DANIEL V. PANKER, 58, Vice President, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1992.
EDMUND P. BERGAN, JR., 47, 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 1992.
DOMENICK PUGLIESE, 36, Assistant Secretary, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since May 1995. Previously, he was Vice
President and Counsel of Concord Holding Corporation since 1994
and prior thereto he was Vice President and Associate General
Counsel of Prudential Securities since 1992.
MARK D. GERSTEN, 46, Treasurer and Chief Financial
Officer, is a Senior Vice President of ("AFS"), with which he has
been associated since prior to 1992.
VINCENT S. NOTO, 32, Controller, is an Assistant Vice
President of AFS, with which he has been associated since 1992.
The Fund does not pay any fees to, or reimburse expenses
of, its Directors who are considered "interested persons" of the
Fund. The aggregate compensation paid by the Fund to each of the
Directors during its fiscal year ended October 31, 1996, the
aggregate compensation paid to each of the Directors during the
calendar year 1996 by all of the funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies (and separate investment portfolios within
those companies) in the Alliance Fund Complex with respect to
which each of the Directors serves as a director or trustee, are
set forth below. Neither the Fund nor any other fund in the
Alliance Fund Complex provides compensation in the form of
10
<PAGE>
pension or retirement benefits to any of its directors or
trustees.
Total Number
Total Number of Investment
of Funds in Portfolios
the Alliance Within the
Total Fund Complex, Funds,
Compensation Including the Including the
From the Fund, as to Fund, as to
Alliance Fund which the which the
Name of Aggregate Complex, Director is a Director is a
Director Compensation Including the Director or Director or
of the Fund From the Fund Fund Trustee Trustee
John D. Carifa $ -0- $ -0- 52 114
David H. Dievler $ 4,900 $182,200 45 79
John H. Dobkin $ 4,900 $121,250 31 52
W.H. Henderson $10,500 $ 31,750 5 5
Stig Host $10,500 $ 31,750 5 5
Richard M. Lilly $10,500 $ 31,750 5 5
Alan Stoga $10,500 $ 31,750 5 5
As of August 21, 1997 the Directors and officers of the
Fund as a group owned less than 1% of the shares of the Fund.
Adviser
Alliance Capital Management L.P., a New York Stock
Exchange ("Exchange") listed company with principal offices at
1345 Avenue of the Americas, New York, New York 10105, has been
retained under an Advisory Agreement (the "Advisory Agreement")
to provide investment advice and, in general, to conduct the
management and investment program of the Fund, subject to the
supervision and control of the Board of Directors of the Fund.
Alliance is a leading international investment manager
supervising client accounts with assets as of September 30, 1997
of more than $199 billion (of which more than $71 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds. As of September 30, 1997, the
Adviser managed employee benefit assets for 29 of the FORTUNE 100
companies. As of that date, the Adviser and its subsidiaries
employed approximately 1,450 employees who operated out of five
domestic offices and the offices of subsidiaries in , Istanbul,
London, Mumbai, Paris, Sao Paolo, Sydney, Tokyo, Toronto,
Bahrain, Luxembourg and Singapore. The fifty-four registered
investment companies 116 separate investment portfolios managed
by the Adviser currently have more than two million shareholders.
11
<PAGE>
ACMC, the sole general partner of, and the owner of a 1%
general partnership interest in, the Adviser, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society
of the United States ("Equitable"), one of the largest life
insurance companies in the United States and a wholly-owned
subsidiary of The Equitable Companies Incorporated ("ECI"), a
holding company controlled by AXA-UAP, a French insurance holding
company. As of March 1, 1997, ACMC, Inc. and Equitable Capital
Management Corporation, each a wholly-owned direct or indirect
subsidiary of Equitable, together with Equitable, owned in the
aggregate approximately 57% of the issued and outstanding units
representing assignments of beneficial ownership of limited
partnership interests in the Advisor ("Units"). As of March 31,
1997, approximately 34% and 9% of the Units were owned by the
public and employees of the Adviser and its subsidiaries,
respectively, including an employee of the Adviser who serves as
a Director of the Fund.
As of March 1, 1997, AXA-UAP and its subsidiaries owned
60.7% of the issued and outstanding shares of the capital stock
of ECI. ECI is a public company with shares traded on the
Exchange. AXA-UAP, a French company, is the holding company for
an international group of insurance and related financial
services companies. AXA-UAP's insurance operations include
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities, principally in Western Europe, North America and
the Asia/Pacific area. AXA-UAP is also engaged in asset
management, investment banking, securities trading, brokerage,
real estate and other financial services activities principally
in the United States, as well as in Western Europe and the
Asia/Pacific area.
Based on information provided by AXA-UAP, on March 1,
1997, 22.5% of the issued ordinary shares (representing 33.0% of
the voting power) of AXA-UAP were controlled directly and
indirectly by Finaxa, a French holding company. As of March 1,
1997, 61.4% of the shares (representing 72.0% of the voting
power) of Finaxa were owned by four French mutual insurance
companies (the "Mutuelles AXA") (one of which, AXA Assurances
I.A.R.D. Mutuelle, owned 34.9% of the shares, representing 40.0%
of the voting power), and 23.7% of the shares of Finaxa
(representing 14.6% of the voting power) were owned by Banque
Paribas, a French bank ("Paribas"). Including the ordinary
shares owned by Finaxa, on March 1, 1997, the Mutuelles AXA
directly or indirectly controlled 26.0% of the issued ordinary
shares (representing 38.1% of the voting power) of AXA-UAP.
Acting as a group, the Mutuelles AXA control AXA-UAP and Finaxa.
In November 1996, AXA offered (the "Exchange Offer") to
acquire 100% of the ordinary shares ("UAP Shares") of FF10 each
12
<PAGE>
of Compagnie UAP, a societe anonyme organized under the laws of
France ("UAP"), in exchange for ordinary shares ("Shares") and
Certificates of Guaranteed Value ("Certificates") of AXA. Each
UAP shareholder that tendered UAP Shares in the Exchange Offer
received two Shares and two Certificates for every five UAP
Shares so tendered. On January 24, 1997, AXA acquired 91.37% of
the outstanding UAP Shares. AXA-UAP currently intends to merge
(the "Merger") with UAP at some future date in 1997. It is
anticipated that approximately 11,706,826 additional Shares will
be issued in connection with the Merger to UAP shareholders who
did not tender UAP shares in the Exchange Offer. If the Merger
had been completed at March 1, 1997, Finaxa would have
beneficially owned (directly and indirectly) approximately 21.7%
of the Shares (representing approximately 32.0% of the voting
power), and the Mutuelles AXA would have controlled (directly or
indirectly through their interest in Finaxa) 25.1% of the issued
ordinary shares (representing 36.8% of the voting power) of
AXA-UAP. On January 17, 1997, AXA announced its intention to
redeem its outstanding 6% Bonds (the "Bonds"). Between
February 14, 1997 and May 14, 1997, holders of the Bonds had the
option to convert each Bond into 5.15 Shares. On May 15, 1997,
each Bond still outstanding was redeemed into cash at FF1,285
plus FF9.29 accrued interest. Finaxa converted the Bonds it had
owed into 2,153,308 Shares. After giving effect to the conversion
of all outstanding Bonds into Shares and to the Merger as if it
had been completed at March 1, 1997, Finaxa would have
beneficially owned (directly and indirectly) approximately 21.4%
of the Shares (representing 31.3% of the voting power), and the
Mutuelles AXA would have controlled (directly or indirectly
through their interest in Finaxa) 24.7% of the issued ordinary
shares (representing 36.0% of the voting power) or AXA-UAP.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Directors and officers of
the Fund who are affiliated persons of the Adviser. The Adviser
or its affiliates also furnishes the Fund, without charge,
management supervision and assistance and office facilities and
provides persons satisfactory to the Fund's Board of Directors to
serve as the Fund's officers. Under the Advisory Agreement, the
Fund pays the Adviser a fee at the annual rate of 1.10% of the
Fund's average daily net assets up to $100 million, .95% of the
next $100 million of the Fund's average daily net assets, and
.80% of the Fund's average daily net assets over $200 million.
The fee is accrued daily and paid monthly.
The Advisory Agreement is terminable without penalty by
a vote of a majority of the Fund's outstanding voting securities,
or by a vote of a majority of the Fund's Directors on 60 days'
written notice or by the Adviser on 60 days' written notice, and
will automatically terminate in the event of its assignment. The
13
<PAGE>
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 thereunder,
the Adviser shall not be liable for any action or failure to act
in accordance with its duties thereunder.
The Advisory Agreement became effective on October 6,
1997 in connection with the conversion of the Fund to an open-end
investment company. The Advisory Agreement replaced an
Investment Management and Administration Agreement ("Management
Agreement") between the Fund and the Adviser. At a meeting
called for such purpose and held on April 23, 1997, the Advisory
Agreement was approved by a majority of the members of the Board
of Directors, including a majority of the Directors who are not
parties thereto nor interested persons of any such party as
defined in the 1940 Act. At a meeting held on July 17, 1997, a
majority of the outstanding voting securities of the Fund
approved the Advisory Agreement. The Advisory Agreement will
continue in effect until December 31, 1997 and thereafter for
successive twelve-month periods (computed from each January 1),
provided that such continuance is approved at least annually by a
vote of a majority of the Fund's outstanding voting securities or
by the Fund's Board of Directors, including in either case,
approval by a majority of the Directors who are not parties to
the Advisory Agreement or interested persons of any such party as
defined by the 1940 Act.
The rate of the advisory fee payable under the Advisory
Agreement is the same as the rate payable of management fee under
the Management Agreement, except that under the Management
Agreement the Adviser was paid a monthly fee at an annual rate
computed upon the Fund's average weekly net assets. For the
fiscal years of the Fund ended in 1996, 1995 and 1994, the
Adviser received from the Fund $1,073,769, $890,857 and $865,412,
respectively, in management fees.
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.
14
<PAGE>
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to the following registered investment
companies: ACM Institutional Reserves, Inc., AFD Exchange
Reserves, The Alliance Fund, Inc., Alliance All-Asia Investment
Fund, Inc., Alliance Balanced Shares, Inc., Alliance Bond Fund,
Inc., Alliance Capital Reserves, Alliance Developing Markets
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 High Yield Fund, Inc., Alliance Income Builder
Fund, Inc., Alliance International Fund, 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/Regent Sector Opportunity Fund, Inc.,
Alliance Short-Term Multi-Market Trust, Inc., Alliance Technology
Fund, Inc., Alliance Utility Income Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance World Income Trust, Inc.,
Alliance Worldwide Privatization Fund, Inc., The Alliance
Portfolios, Fiduciary Management Associates and The Hudson River
Trust, all registered open-end investment companies; and to ACM
Government Income Fund, Inc., ACM Government Securities Fund,
Inc., ACM Government Spectrum Fund, Inc., ACM Government
Opportunity Fund, Inc., ACM Managed Income Fund, Inc., ACM
Managed Dollar 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.
________________________________________________________________
EXPENSES OF THE FUND
________________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund's shares and to permit the Fund to pay distribution
services fees to defray expenses associated with distribution of
its Class A, Class B and Class C shares in accordance with a plan
15
<PAGE>
of distribution which is included in the Agreement and has been
duly adopted and approved in accordance with Rule 12b-1 adopted
by the Commission under the 1940 Act (the "Rule 12b-1 Plan").
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 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 in that in each
case the sales charge and/or distribution services fee provides
for the financing of the distribution of the relevant class of
the Fund's shares.
Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund for their review on a quarterly basis. Also, the Agreement
provides that the selection and nomination of Directors who are
not "interested persons" of the Fund, as defined in the 1940 Act,
are committed to the discretion of such disinterested Directors
then in office.
The Agreement became effective on October 6, 1997. The
Agreement will continue in effect for successive twelve-month
periods with respect to a class (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
12b-1 Plan or any agreement related thereto.
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.
In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
16
<PAGE>
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.
All material amendments to the Agreement must be
approved by a vote of the Directors or the holders of the Fund's
outstanding voting securities, voting separately by class, and in
either case, by a majority of the disinterested Directors, cast
in person at a meeting called for the purpose of voting on such
approval; and the Agreement may not be amended in order to
increase materially the costs that a particular class may bear
pursuant to the Agreement without the approval of a majority of
the holders of the outstanding voting shares of the class or
classes affected. The Agreement may be terminated (a) by the
Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting
separately by class or by a majority vote of the Directors who
are not "interested persons" as defined in the 1940 Act, or
(b) by the Principal Underwriter. To terminate the Agreement,
any party must give the other parties 60 days' written notice; to
terminate the Rule 12b-1 Plan only, the Fund need give no notice
to the Principal Underwriter. The Agreement will terminate
automatically in the event of its assignment.
Transfer Agency Agreement
Pursuant to a Transfer Agency Agreement that became
effective on October 6, 1997, Alliance Fund Services, Inc., an
indirect wholly-owned subsidiary of the Adviser, receives a
transfer agency fee per account holder of each of the Class A
shares, Class B shares, Class C shares and Advisor Class shares
of the Fund, plus reimbursement for out-of-pocket expenses. The
transfer agency fee with respect to the Class B and Class C
shares is higher than the transfer agency fee with respect to the
Class A and Advisor Class shares. Prior thereto, State Street
Bank and Trust Company, which is not affiliated with the Fund or
the Adviser, provided transfer agency services to 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."
17
<PAGE>
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), without any
initial sales charge and, as long as the shares are held for one
year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset-
based sales charge, in each case as described below. Shares of
the Fund that are offered subject to a sales charge are offered
through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered
into selected agent agreements with the Principal Underwriter
("selected agents") and (iii) the Principal Underwriter.
Advisor Class shares of the Fund may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, (iii) by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares), or
(iv) by directors and present or retired full-time employees of
Koll Real Estate Services. 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
18
<PAGE>
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
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
19
<PAGE>
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. If the selected dealer, agent or financial
representative fails to do so, the investor's right to that day's
closing price must be settled between the investor and the
selected dealer, agent or financial representative, as
applicable. If the selected dealer, agent or financial
representative, as applicable, receives the order after the close
of regular trading on the Exchange, the price will be based on
the net asset value determined as of the close of regular trading
on the Exchange on the next day it is open for trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase orders may not exceed $500,000. Payment for
shares purchased by telephone can be made only by electronic
funds transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription. As
a convenience to the subscriber, and to avoid unnecessary expense
to the Fund, stock 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 amount paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
20
<PAGE>
including EQ Financial Consultants, Inc., formerly Equico
Securities, Inc., an affiliate of the Principal Underwriter, in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part, to provide
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, cash or other incentives
will be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other Alliance Mutual
Funds, as defined below, during a specific period of time. On
some occasions, such cash or other incentives may take the form
of payment for attendance at seminars, meals, sporting events or
theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel taken by persons
associated with a dealer or agent and their immediate family
members to urban or resort locations within or outside the United
States. Such dealer or agent may elect to receive cash
incentives of equivalent amount in lieu of such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B shares and Class C shares
each bear the expense of a higher distribution services fee than
that borne by Class A shares, and Advisor Class shares do not
bear such a fee, (iii) Class B shares and Class C shares bear
higher transfer agency costs than those borne by Class A shares
and Advisor Class shares, (iv) each of Class A, Class B and
Class C shares has exclusive voting rights with respect to
provisions of the Rule 12b-1 Plan pursuant to which its
distribution services fee is paid and other matters for which
separate class voting is appropriate under applicable law,
provided that, if the Fund submits to a vote of the Class A
shareholders, an amendment to the Rule 12b-1 Plan that would
materially increase the amount to be paid thereunder with respect
to the Class A shares, then such amendment will also be submitted
to the Class B and the Advisor Class shareholders, and the
Class A, Class B and Advisor Class shareholders will vote
separately by class and (v) Class B 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.
21
<PAGE>
Alternative Retail Purchase Arrangements -- Class A, Class B and
Class C Shares**
The alternative purchase arrangements available with
respect to Class A shares, Class B shares 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 charge on
Class B shares prior to conversion, or the accumulated
distribution services fee and contingent deferred sales charge 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) for more than $250,000 for Class B
shares. Class C shares will normally not be suitable for the
investor who qualifies to purchase Class A shares at net asset
value. For this reason, the Principal Underwriter will reject
any order for more than $1,000,000 for Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
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
_________________________
** Advisor Class shares are sold only to investors described
above in this section under "--General."
22
<PAGE>
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.
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 or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price 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.
23
<PAGE>
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 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 A shares will be waived
on certain redemptions, as described below under "--Class B
Shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers and agents for selling
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
24
<PAGE>
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.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$100,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of shares of the Fund
on April 30, 1997, the date of the most recent financial
statements of the Fund set forth herein (which was prior to the
reclassification of such shares as Class A shares).
Net Asset Value per Class A Share at $15.87
April 30, 1997
Class A Per Share Sales Charge
4.25% of offering price (4.44% of
net asset value per share) .71
_______
Class A Per Share Offering Price to
the public $16.58
======
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.
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
25
<PAGE>
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
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets 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 High Yield Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
26
<PAGE>
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "For Literature" telephone number
shown on the front cover of this Statement of Additional
Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all shares of the Fund
held by the investor and (b) all shares of any
other Alliance Mutual Fund held by the investor;
and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with that
of the investor into a single "purchase" (see
above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the sales charge for the $100,000 purchase
would be at the 2.25% rate applicable to a single $300,000
purchase of shares of the Fund, rather than the 3.25% rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
27
<PAGE>
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 be necessary to invest
only a total of $60,000 during the following 13 months in shares
of the Fund or any other Alliance Mutual Fund, to qualify for the
3.25% sales charge on the total amount being invested (the sales
charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
28
<PAGE>
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 Alliance Fund Services, Inc.
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 shares of the Fund will be that normally applicable,
under the schedule of sales charges set forth in this Statement
of Additional Information, to an investment 13 times larger than
such initial purchase. The sales charge applicable to each
succeeding monthly purchase will be that normally applicable,
under such schedule, to an investment equal to the sum of (i) the
total purchase previously made during the 13-month period, and
(ii) the current month's purchase multiplied by the number of
months (including the current month) remaining in the 13-month
period. Sales charges previously paid during such period will
not be retroactively adjusted on the basis of later purchases.
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that
(i) such reinvestment is made within 120 calendar days after the
redemption or repurchase date and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the redemption or repurchase 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.
29
<PAGE>
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,
Alliance Fund Services, Inc. and their affiliates; officers and
directors of ACMC, the Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates; officers, directors and
present full-time employees of selected dealers or agents; or the
spouse, or a 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, Alliance
Fund Services, Inc. and their affiliates; certain employee
benefit plans for employees of the Adviser, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates;
(iv) registered investment advisers or other financial
intermediaries who charge a management, consulting or other fee
for their service and who purchase shares through a broker or
agent approved by the Principal Underwriter and clients of such
registered investment advisers or financial intermediaries whose
accounts are linked to the master account of such investment
adviser or financial intermediary on the books of such approved
broker or agent;
(v) persons participating in a fee-based program,
sponsored and maintained by a registered broker-dealer or other
financial intermediary and approved by the Principal Underwriter,
pursuant to which such persons pay an asset-based fee to such
broker-dealer or financial intermediary, or its affiliates or
agents, for services in the nature of investment advisory or
administrative services;
(vi) persons who establish to the Principal
Underwriter's satisfaction that they are investing within such
time period as may be designated by the Principal Underwriter,
proceeds of redemption of shares of such other registered
investment companies as may be designated from time to time by
the Principal Underwriter;
30
<PAGE>
(vii) 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; and
(viii) persons who both (a) held shares of the Fund at
the effective time of the conversation of the Fund from a closed-
end to an open-end investment company, and (b) thereafter have
continuously held Class A shares of the Fund.
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.
To illustrate, assume that an investor purchased 100
Class B shares at $10 per share (at a cost of $1,000) and in the
31
<PAGE>
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 the
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 %
Year Since Purchase of Dollar Amount Subject to Charge
____________________ _______________________________________
First 4%
Second 3%
Third 2%
Fourth 1%
Fifth and thereafter 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 Internal Revenue Code of 1986 as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative or by the estate of any such person or relative, or
32
<PAGE>
(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
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
33
<PAGE>
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 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 Advisor Class shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts, employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares-- General," and by
investment advisory clients of, and by certain other persons
34
<PAGE>
associated with, the Adviser and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan, or to be associated with the
investment adviser or financial intermediary, in each case that
satisfies the requirements to purchase shares set forth under
"Purchase of Shares--General" or (ii) the holder is otherwise no
longer eligible to purchase Advisor Class shares as described in
the Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
shares held by the shareholder will convert automatically and
without notice to the shareholder, other than the notice
contained in the Advisor Class Prospectus and this Statement of
Additional Information, to Class A shares of the Fund during the
calendar month following the month in which the Fund is informed
of the occurrence of the Conversion Event. The failure of a
shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event. The conversion would occur on the
basis of the relative net asset values of the two classes and
without the imposition of any sales load, fee or other charge.
Class A shares currently bear a .30% distribution services fee
and have a higher expense ratio than Advisor Class shares. As a
result, Class A shares may pay correspondingly lower dividends
and have a lower net asset value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law. The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem his Advisor Class shares, which would constitute a taxable
event under federal income tax law.
________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
35
<PAGE>
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 Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission
may by order permit for the protection of security holders of the
Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment received by a shareholder upon
redemption or repurchase of his shares, assuming the shares
constitute capital assets in his hands, will result in long-term
or short-term capital gains (or loss) depending upon the
shareholder's holding period and basis in respect of the shares
redeemed.
To redeem shares of the Fund for which no share
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
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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
Funds Transfer once in any 30 day period (except for certain
omnibus accounts) of shares for which no stock certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from Alliance Fund Services, Inc.
A telephone redemption request may not exceed $100,000 (except
for certain omnibus accounts), and must be made by 4:00 p.m.
Eastern time on a Fund business day as defined above. Proceeds
of telephone redemptions will be sent by electronic funds
transfer to a shareholder's designated bank account at a bank
selected by the shareholder that is a member of the NACHA.
Telephone Redemption By Check. Except for certain
omnibus accounts or as noted below, each Fund shareholder is
eligible to request redemption by check, once in any 30-day
period, 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. Telephone redemption by check
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. A shareholder
otherwise eligible for telephone redemption by check may cancel
the privilege by written instruction to Alliance Fund Services,
Inc., 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
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difficulty in reaching Alliance Fund Services, Inc. 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 Alliance Fund Services, Inc. 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. Neither the Fund
nor the Adviser, the Principal Underwriter or Alliance Fund
Services, Inc. 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.
Temporary Fee Applicable to Redemptions and Exchanges of
Certain Class A Shares. Class A shares of the Fund that were
outstanding and reclassified as Class A shares at the time the
Fund converted to an open-end investment company and that are
redeemed or exchanged for shares of other Alliance Mutual Funds
on or prior to October 2, 1998, will be subject to a fee equal to
2% of the net asset value of such shares at the time of such
redemption or exchange. The fee will be deducted from the amount
otherwise payable to holders of such Class A shares upon
redemption or exchange and will be retained by the Fund. The fee
will not be imposed with respect to other outstanding Class A
shares of the Fund or shares issued upon reinvestment of
dividends paid on shares of the Fund. In determining the amount
of the fee with respect to a particular redemption or exchange,
it will be assumed that the redemption or exchange is first of
any shares to which the fee does not apply and second of any
shares to which the fee does apply. The fee may be reduced or
terminated at any time at the direction of the Board of Directors
of the Fund.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
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<PAGE>
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. 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.
________________________________________________________________
SHAREHOLDER SERVICES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectuses 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
39
<PAGE>
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 Alliance Fund Services, Inc. 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 Alliance). 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, Alliance
Fund Services, Inc. and their affiliates may on a tax-free basis,
exchange Class A shares of the Fund for Advisor Class shares of
the Fund. Exchanges of shares are made at the net asset value
next determined and without sales or service charges. Exchanges
may be made by telephone or written request. Telephone exchange
requests must be received by Alliance Fund Services, Inc. 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 purpose 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.
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Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call Alliance Fund Services, Inc. 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.
Each Fund shareholder and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc., receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. 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 exchange 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 Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
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<PAGE>
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. 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 Alliance Fund Services, Inc. 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
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. 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.
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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 or
her 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 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
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to Alliance Fund Services, Inc. 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 Alliance
Fund Services, Inc.
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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 distributions 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 Alliance Fund Services, Inc. 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 Alliance Fund Services, Inc. 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,
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
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<PAGE>
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 Alliance Fund Services, Inc. at the address or
the "For Literature" telephone number shown on the cover of this
Statement of Additional Information.
CDSC Waiver for Class B 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
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 Alliance Fund Services, Inc., a
shareholder can arrange for copies of his or her account
statements to be sent to another person.
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________________________________________________________________
NET ASSET VALUE
________________________________________________________________
The per share net asset value is determined once daily
as of the next close of regular trading on the Exchange
(currently 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 trading in the types
of securities in which the Fund invests might materially affect
the value of Fund shares and on such other days as the Directors
of the Fund deem necessary in order to comply with Rule 22c-1
under the 1940 Act. A Fund business day is any day on which the
Exchange is open for trading. The net asset value is the net
worth of the Fund (assets including securities at market value
minus liabilities) divided by the number of Fund shares
outstanding.
The assets belonging to the Class A shares, the Class B
shares, the Class C shares and the 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
accrued expenses and liabilities allocated to that class from the
assets belonging to that class.
All securities listed on an exchange for which market
quotations are readily available are valued at the closing price
on the exchange on the day of valuation or, if no such closing
price is available, at the mean of bid and ask price quoted on
such day. Other securities for which market quotations are
readily available will be valued in a like manner. Options will
be valued at such market value or fair value if no market exists.
Futures contracts will be valued in a like manner, except that
open futures contracts sales will be valued using the closing
settlement price or, in the absence of such a price, the most
recent quoted asked price. If there are no quotations available
for the day of valuations, the last available closing price will
be used. Securities and assets for which market quotations are
not readily available (including investments that are subject to
limitations as to their sale) are valued at fair value as
determined in good faith by the Fund's Board of Directors.
Short-term debt securities that mature in less than 60
days are valued at amortized cost if their term to maturity from
date of purchase was less than 60 days, or by amortizing their
value on the 61st day prior to maturity if their term to maturity
from date of purchase when acquired by the Fund was more than 60
days, unless such amortized cost is determined by the Board of
Directors not to represent fair value.
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For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in
foreign currencies 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 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.
________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
________________________________________________________________
United States Federal Income Taxation of Dividends and
Distributions
General. The Fund intends to qualify and elect to be
treated as a "regulated investment company" under sections 851
through 855 of the Internal Revenue Code of 1986, as amended (the
"Code"). To so qualify, the Fund must, among other things,
(i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock or
securities or foreign currency, or certain other income
(including, but not limited to, gains from options, futures and
forward contracts) derived with respect to its business of
investing in stock, securities or currency; and (ii) diversify
its holdings so that, at the end of each quarter of its taxable
year, the following two conditions are met: (a) at least 50% of
the value of the Fund's assets is represented by cash, U.S.
Government Securities, securities of other regulated investment
companies and other securities with respect to which the Fund's
investment is limited, in respect of any one issuer, to an amount
not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (b) not more
than 25% of the value of the Fund's assets is invested in
securities of any one issuer (other than U.S. Government
Securities or securities of other regulated investment
companies); and (iii) with respect to its taxable years beginning
before November 1, 1997 derive less than 30% of its gross income
in each such taxable year from the sale or other disposition
within three months of their acquisition by the Fund of stocks,
securities, options, futures or forward contracts and foreign
currencies (or options, futures or forward contracts on foreign
currencies) that are not directly related to the Fund's principal
business of investing in stock or securities (or options and
futures with respect to stocks or securities). These
requirements, among other things, may limit the Fund's ability to
write and purchase options and futures contracts.
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If the Fund qualifies as a regulated investment company
for any taxable year and makes timely distributions to its
shareholders of 90% or more of its net investment income for that
year (calculated without regard to its net capital gain, i.e.,
the excess of its net long-term capital gain over its net short-
term capital loss), it will not be subject to federal income tax
on the portion of its taxable income for the year (including any
net capital gain) that it distributes to shareholders.
The Fund intends to also avoid the 4% federal excise tax
that would otherwise apply to certain undistributed income for a
given calendar year if it makes timely distributions to the
shareholders equal to at least the sum of (i) 98% of its ordinary
income for that year; (ii) 98% of its capital gain net income and
foreign currency gains for the twelve-month period ending on
October 31 of that year; and (iii) any ordinary income or capital
gain net income from the preceding calendar year that was not
distributed during that year. For this purpose, income or gain
retained by the Fund that is subject to corporate income tax will
be considered to have been distributed by the Fund by year-end.
For federal income and excise tax purposes, dividends declared
and payable to shareholders of record as of a date in October,
November or December of a given year but actually paid during the
immediately following January will be treated as if paid by the
Fund on December 31 of that calendar year, and will be taxable to
these shareholders for the year declared, and not for the year in
which the shareholders actually receive the dividend.
The Fund intends to make timely distributions of the
Fund's taxable income (including any net capital gain) so that
the Fund will not be subject to federal income or excise taxes.
However, exchange control or other regulations on the
repatriation of investment income, capital or the proceeds of
securities sales, if any exist or are enacted in the future, may
limit the Fund's ability to make distributions sufficient in
amount to avoid being subject to one or both of such federal
taxes.
Dividends and Distributions. Dividends of the Fund's
net ordinary income and distributions of any net realized short-
term capital gain are taxable to shareholders as ordinary income.
Dividends paid by the Fund and received by a corporate
shareholder are eligible for the dividends received deduction to
the extent that the Fund's income is derived from certain
dividends received from domestic corporations, provided the
corporate shareholder holds shares in the Fund for at least 46
days during the 90-day period beginning 45 days before the date
on which the shareholder becomes entitled to receive the
dividend. In determining the holding period of such shares for
this purpose, any period during which a shareholder's risk of
loss is offset by means of options, short sales or similar
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<PAGE>
transactions is not counted. In addition, the dividends received
deduction will be disallowed to the extent the investment in
shares of the Fund is financed with indebtedness.
The excess of net long-term capital gains over the net
short-term capital losses realized and distributed by the Fund to
its shareholders will be taxable to the shareholders as long-term
capital gains, irrespective of the length of time a shareholder
may have held his Fund shares. Any dividend or distribution
received by a shareholder on shares of the Fund will have the
effect of reducing the net asset value of such shares by the
amount of such dividend or distribution. Furthermore, a dividend
or distribution made shortly after the purchase of such shares by
a shareholder, although in effect a return of capital to that
particular shareholder, would be taxable to him as described
above. Dividends are taxable in the manner discussed regardless
of whether they are paid to the shareholder in cash or are
reinvested in additional shares of the Fund.
After the end of the taxable year, the Fund will notify
shareholders of the federal income tax status of any
distributions made by the Fund to shareholders during such year.
It is the present policy of the Fund to distribute to
shareholders all net investment income and to distribute realized
capital gains, if any, annually. There is no fixed dividend rate
and there can be no assurance that the Fund will pay any
dividends. The amount of any dividend or distribution paid on
shares of the Fund must necessarily depend upon the realization
of income and capital gains from the Fund's investments.
Sales and Redemptions. Any gain or loss arising from a
sale or redemption of Fund shares generally will be capital gain
or loss except in the case of a dealer or a financial
institution, and will be long-term capital gain or loss if such
shareholder has held such shares for more than one year at the
time of the sale or redemption; otherwise it will be short-term
capital gain or loss. In the case of an individual shareholder,
the applicable tax rate imposed on long-term capital gain differs
depending on whether the shares were held at the time of the sale
or redemption for more than eighteen months, or for more than one
year but not more than eighteen months. If a shareholder has
held shares in the Fund for six months or less and during that
period has received a distribution taxable to the shareholder as
a long-term capital gain, any loss recognized by the shareholder
on the sale of those shares during the six-month period will be
treated as a long-term capital loss to the extent of the
distribution. In determining the holding period of such shares
for this purpose, any period during which a shareholder's risk of
loss is offset by means of options, short sales or similar
transactions is not counted.
49
<PAGE>
Any loss realized by a shareholder on a sale or exchange
of shares of the Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30
days before and ending 30 days after the shares are sold or
exchanged. For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan would constitute a replacement if made
within the period. If disallowed, the loss will be reflected in
an upward adjustment to the basis of the shares acquired.
Foreign Taxes. Income received by the Fund may also be
subject to foreign income taxes, including withholding taxes. 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
stocks or securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal
Revenue Service to pass through to its shareholders the amount of
foreign taxes paid by the Fund. However, there can be no
assurance that the Fund will be able to do so. Pursuant to this
election a shareholder will be required to (i) include in gross
income (in addition to taxable dividends actually received) his
pro rata share of foreign taxes paid by the Fund, (ii) treat his
pro rata share of such foreign taxes as having been paid by him,
and (iii) either deduct such pro rata share of foreign taxes in
computing his taxable income or treat such foreign taxes as a
credit against United States federal income taxes. 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 taxes by the Fund. No
deduction for foreign taxes may be claimed by an individual
shareholder who does not itemize deductions. In addition,
certain shareholders may be subject to rules which limit or
reduce their ability to fully deduct, or claim a credit for,
their pro rata share of the foreign taxes paid by the Fund.
Under legislation enacted in August 1997, 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 at
least 16 days during the 30-day period beginning 15 days before
the date on which the shareholder becomes entitled to receive the
dividend. In determining the holding period of such shares for
this purpose, any period during which a shareholder's risk of
loss is offset by means of options, short sales or similar
transactions is not counted. Each shareholder will be notified
within 60 days after the close of the Fund's taxable year whether
the foreign taxes paid by the Fund will pass through for that
year, and if so, such notification will designate (i) the
shareholder's portion of the foreign taxes paid to each such
50
<PAGE>
country and (ii) the portion of dividends that represents income
derived from sources within each such country.
Backup Withholding. The Fund may be required to
withhold United States federal income tax at the rate of 31% of
all taxable distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer identification
numbers or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to
backup withholding. Corporate shareholders and certain other
shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
amounts so withheld may be credited against a shareholder's
United States federal income tax liability or refunded.
United States Federal Income Taxation of the Fund
The following discussion relates to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.
Passive Foreign Investment Companies. If the Fund owns
shares in a foreign corporation that constitutes a "passive
foreign investment company" (a "PFIC") for federal income tax
purposes and the Fund does not elect to treat the foreign
corporation as a "qualified electing fund" within the meaning of
the Code, the Fund may be subject to United States federal income
taxation on a portion of any "excess distribution" it receives
from the PFIC or any gain it derives from the disposition of such
shares, even if such income is distributed as a taxable dividend
by the Fund to its shareholders. The Fund may also be subject to
additional interest charges in respect of deferred taxes arising
from such distributions or gains. Any tax paid by the Fund as a
result of its ownership of shares in a PFIC will not give rise to
any deduction or credit to the Fund or to any shareholder. A
PFIC means any foreign corporation if, for the taxable year
involved, either (i) it derives at least 75% of its gross income
from "passive income" (including, but not limited to, interest,
dividends, royalties, rents and annuities), or (ii) on average,
at least 50% of the value (or adjusted tax basis, if elected) of
the assets held by the corporation produce "passive income."
Under legislation enacted in August 1997, the Fund will be
permitted to elect beginning with its taxable year beginning
November 1, 1998 to "mark-to-market" stock in a PFIC. Under such
an election, the Fund would include in income each year an amount
equal to the excess, if any, of the fair market value of the PFIC
stock as of the close of the taxable year over the Fund's
adjusted basis in the PFIC stock. The Fund would be allowed a
51
<PAGE>
deduction for the excess, if any, of the adjusted basis of the
PFIC stock over the fair market value of the PFIC stock as of the
close of the taxable year, but only to the extent of any net
mark-to-market gains included by the Fund for prior taxable
years. The Fund's adjusted basis in the PFIC stock would be
adjusted to reflect the amounts included in, or deducted from,
income under this election. Amounts included in income pursuant
to this election, as well as gain realized on the sale or other
disposition of the PFIC stock, would be treated as ordinary
income. The deductible portion of any mark-to-market loss, as
well as loss realized on the sale or other disposition of the
PFIC stock to the extent that such loss does not exceed the net
mark-to-market gains previously included by the Fund, would be
treated as ordinary loss. The Fund generally would not be
subject to the deferred tax and interest charge provisions
discussed above with respect to PFIC stock for which a mark-to-
market election has been made. If the Fund purchases shares in a
PFIC and the Fund does elect to treat the foreign corporation as
a "qualified electing fund" under the Code, the Fund may be
required to include in its income each year a portion of the
ordinary income and net capital gains of the foreign corporation,
even if this income is not distributed to the Fund. Any such
income would be subject to the 90% and calendar year distribution
requirements described above.
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
dividends 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 or
from the disposition or 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 gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, increase or decrease
the amount of the Fund's investment company taxable income
available to be distributed to its shareholders as ordinary
income, rather than increasing or decreasing the amount of the
Fund's net capital gain. Because section 988 losses reduce the
amount of ordinary dividends the Fund will be allowed to
distribute for a taxable year, such section 988 losses may result
in all or a portion of prior dividend distributions for such year
being recharacterized as a non-taxable return of capital to
shareholders, rather than as an ordinary dividend, reducing each
shareholder's basis in his Fund shares. If such distributions
exceed such shareholder's basis, such excess will be treated as a
gain from the sale of shares.
52
<PAGE>
Options and Futures Contracts. Certain listed options
and regulated futures contracts are considered "section 1256
contracts" for federal income tax purposes. Section 1256
contracts held by the Fund at the end of each taxable year will
be "marked to market" and treated for federal income tax purposes
as though sold for fair market value on the last business day of
such taxable year. Gain or loss realized by the Fund on section
1256 contracts will be considered 60% long-term and 40% short-
term capital gain or loss. 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.
With respect to equity options or options traded over-
the-counter, gain or loss realized by the Fund upon the lapse or
sale of such options held by the Fund will be either long-term or
short-term capital gain or loss depending upon the Fund's holding
period with respect to such option. However, gain or loss
realized upon the lapse or closing out of such options that are
written by the Fund will be treated as short-term capital gain or
loss. In general, if the Fund exercises an option, or an option
that the Fund has written is exercised, gain or loss on the
option will not be separately recognized but the premium received
or paid will be included in the calculation of gain or loss upon
disposition of the property underlying the option.
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 will 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 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.
53
<PAGE>
Tax Straddles. Any option or futures 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 is ordinary and at
least one position is capital. 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 Shareholders
The foregoing discussion relates only to United States
federal income tax law as it affects shareholders who are United
States citizens or residents or United States corporations. The
effects of federal income tax law on shareholders who are non-
resident alien individuals or foreign corporations may be
substantially different. Foreign investors should therefore
consult their counsel for further information as to the United
States tax consequences of receipt of income from the Fund.
Other Taxation
The Fund may be subject to state and local taxes.
54
<PAGE>
________________________________________________________________
BROKERAGE AND PORTFOLIO TRANSACTIONS
________________________________________________________________
The management of the Fund has the responsibility for
allocating its brokerage orders and may direct orders to any
broker. It is the Fund's general policy to seek favorable net
prices and prompt reliable execution in connection with the
purchase or sale of all portfolio securities. In the purchase
and sale of over-the-counter securities, it is the Fund's policy
to use the primary market makers except when a better price can
be obtained by using a broker. The Board of Directors has
approved, as in the best interests of the Fund and the
shareholders, a policy of considering, among other factors, sales
of the Fund's shares as a factor in the selection of broker-
dealers to execute portfolio transactions, subject to best
execution. The Adviser is authorized under the Advisory
Agreement to place brokerage business with such brokers and
dealers. The use of brokers who supply supplemental research and
analysis and other services may result in the payment of higher
commissions than those available from other brokers and dealers
who provide only the execution of portfolio transactions. In
addition, the supplemental research and analysis and other
services that may be obtained from brokers and dealers through
which brokerage transactions are affected may be useful to the
Adviser in connection with advisory clients other than the Fund.
Investment decisions for the Fund are made independently
from those for other investment companies and other advisory
accounts managed by the Adviser. It may happen, on occasion,
that the same security is held in the portfolio of the Fund and
one or more of such other companies or accounts. Simultaneous
transactions are likely when several funds or accounts are
managed by the same Adviser, particularly when a security is
suitable for the investment objectives of more than one of such
companies or accounts. When two or more companies or accounts
managed by the Adviser are simultaneously engaged in the purchase
or sale of the same security, the transactions are allocated to
the respective companies or accounts both as to amount and price,
in accordance with a method deemed equitable to each company or
account. In some cases this system may adversely affect the
price paid or received by the Fund or the size of the position
obtainable for the Fund.
Allocations are made by the officers of the Fund or of
the Adviser. Purchases and sales of portfolio securities are
determined by the Adviser and are placed with broker-dealers by
the order department of the Adviser.
55
<PAGE>
The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc. and subject
to seeking best execution, the Fund may consider sales of shares
of the Fund or other investment companies managed by the Adviser
as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, and with brokers which may have
their transactions cleared or settled, or both, by the Pershing
Division of DLJ for which DLJ may receive a portion of the
brokerage commissions. In such instances, the placement of
orders with such brokers would be consistent with the Fund's
objective of obtaining best execution and would not be dependent
upon the fact that DLJ is an affiliate of the Adviser.
During the fiscal years ended in 1996, 1995 and 1994,
the Fund incurred brokerage commissions amounting in the
aggregate to $875,673, $347,909 and $148,540, respectively.
During the fiscal years ended October 31, 1996, 1995 and 1994,
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 $0, respectively, were
paid to brokers utilizing the Pershing Division of DLJ. During
the fiscal year ended October 31, 1996, 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 October 31, 1996, of the Fund's aggregate dollar amount of
brokerage transactions involving the payment of commissions of 0%
were effected through DLJ and 0% were effected through brokers
utilizing the Pershing Division of DLJ. During the fiscal year
ended October 31, 1996, transactions in the portfolio securities
of the Fund aggregating $477,629,446 with associated brokerage
commissions of approximately $788,106 were allocated to persons
or firms supplying research services to the Fund or the Adviser.
56
<PAGE>
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Capitalization
The authorized capital stock of the Fund currently
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 $.001 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 series and
classes 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 or series
would be governed by the 1940 Act and the law of the State of
Maryland. If shares of another series 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 on matters, such as the election of Directors, that
affected both portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of
the Investment Advisory Contract and changes in investment
policy, shares of each portfolio would vote as a separate series.
At October 3, 1997, there were 5,967,269 shares of
common stock of the Fund outstanding, all of which were Class A
shares.
In a filing made with the Securities and Exchange
Commission (the "Commission") on April 7, 1997, Bowling Portfolio
Management, Inc., 2651 Observatory Avenue, Cincinnati, Ohio
45208-2040, reported beneficial ownership of 740,328 shares or
approximately 12.4%, of the Fund's common stock. As of
August 21, 1997, Nomura Securities Co. Ltd., 9-1, Nihonbashi 1-
Chrome, Chou-Ku, Tokyo 103, Japan, held of record 327,600 shares,
or approximately 5.5%, of the Fund's common stock.
Procedures for calling a shareholders' meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act will be available to shareholders
of the Fund. 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.
57
<PAGE>
Custodian
Brown Brothers Harriman & Co. ("Brown Brothers"), 40
Water Street, Boston, Massachusetts, 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, Brown Brothers
Harriman & Co. may enter into sub-custodial agreements for the
holding of the Fund's foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Distribution
Services 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 offered hereby are passed upon by Seward & Kissel, New
York, New York. Seward & Kissel has relied upon the opinion of
Venable, Baetjer and Howard, LLP, Baltimore, Maryland, for
matters relating to Maryland law.
Independent Auditors
Ernst & Young LLP, New York, New York, has been
appointed as independent auditors for the Fund.
Performance Information
From time to time the Fund advertises its "total
return." Computed separately for each class, the Fund's "total
return" is its average annual compounded total return for its
most recently completed one, five and ten-year periods (or the
period since the Fund's inception). The Fund's total return for
such a period is computed by finding, through the use of a
formula prescribed by the Securities and Exchange Commission, the
average annual compounded rate of return over the period that
would equate an assumed initial amount invested to the value of
such 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 charge applicable to
purchases of Fund shares is assumed to have been paid.
58
<PAGE>
From June 1, 1990 through October 3, 1997, the Fund
operated as a closed-end investment company. Effective after the
close of business on that date, the Fund commenced operations as
an open-end investment company and all outstanding shares of the
Fund were reclassified as Class A shares. The Fund's average
annual compounded total return based on net asset value for
Class A shares for the one- and five-year periods ended April 30,
1997, and from the inception of the Fund through that date, were
13.08%, 7.04% and 3.80%, respectively.
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. Total return information is useful in reviewing the
Fund's performance, but such information may not provide a basis
for comparison with bank deposits or other investments which pay
a fixed yield for a stated period of time. An investor's
principal invested in the Fund is not fixed and will fluctuate in
response to prevailing market conditions.
Advertisements quoting performance ratings of the Fund
as measured by financial publications or independent
organizations such as Lipper Analytical Services, Inc. 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 placed in newspapers,
magazines such as Barrons, Business Week, Changing Times, Forbes,
Investor's Daily, Money Magazine, The New York Times and The Wall
Street Journal or other media on behalf of the Fund.
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
Securities and Exchange Commission under the Securities Act.
Copies of the Registration Statement may be obtained at a
reasonable charge from the Securities and Exchange Commission or
may be examined, without charge, at the offices of the Securities
and Exchange Commission in Washington, D.C.
________________________________________________________________
59
<PAGE>
FINANCIAL STATEMENTS
________________________________________________________________
60
00250070.AX8
<PAGE>
ALLIANCE GLOBAL ENVIRONMENT FUND
ANNUAL REPORT
OCTOBER 31, 1996
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
ALLIANCE GLOBAL ENVIRONMENT FUND, INC.
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-94.6%
AUSTRALIA-2.3%
Brambles Industries, Ltd. 142,000 $ 2,351,833
CANADA-6.7%
Laidlaw, Inc. Cl. B. (a) 255,000 2,996,250
Laidlaw, Inc. Cl. B. 25,000 293,635
Philip Environmental, Inc. (b) 329,000 3,422,611
------------
6,712,496
FRANCE-2.4%
Generale des Eaux 20,000 2,390,571
JAPAN-1.9%
Ebara Corp. 135,000 1,945,860
NETHERLANDS-0.6%
Thermo Eurotech (b) (c) 165,000 583,380
UNITED STATES-80.7%
Allied Waste Industries, Inc. (b) 515,000 4,667,188
American Disposal Services, Inc. (b) 675,000 10,800,000
Culligan Water Technologies, Inc. (b) 110,000 4,125,000
Cuno, Inc. (b) 60,000 960,000
Cytec Industries, Inc. (b) 109,000 3,896,750
EMCOR Group, Inc. (b) 290,000 4,241,250
GNI Group, Inc. (b) 115,000 704,375
International Alliance Services (b) 40,800 408,000
International Technology Corp. (b) 1,600,000 3,800,000
Ionics, Inc. (b) 12,000 552,000
Landec Corp. (b) 600,000 5,325,000
Newpark Resources, Inc. (b) 110,000 4,125,000
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
Osmonics, Inc. (b) 31,000 $ 658,750
Polymer Group (b) 220,000 2,805,000
Republic Industries, Inc. (b) 300,000 9,337,500
Superior Services, Inc. (b) 35,000 603,750
Tetra Technologies, Inc. (b) 70,000 1,461,250
Thermatrix, Inc. (b) 30,000 300,000
Thermo Fibergen, Inc. (b) 70,000 883,750
Thermo Power Corp. (b) 175,000 1,673,438
Trex Medical Corp. (b) 35,000 616,875
UCAR International, Inc. 90,000 3,521,250
United Waste Systems, Inc. (b) 140,000 4,812,500
U.S. Filter Corp. (b) 170,000 5,865,000
USA Waste Services, Inc. (b) 150,000 4,800,000
------------
80,943,626
Total Common Stocks
(cost $85,791,431) 94,927,766
COMMERCIAL PAPER-4.8%
UNITED STATES-4.8%
American Express Co.
5.28%, 11/07/96 (d) 3,700 3,696,744
Prudential Insurance Co. of America
5.25%, 11/05/96 (d) 1,100 1,099,358
Total Commercial Paper
(amortized cost $4,796,102) 4,796,102
TOTAL INVESTMENTS-99.4%
(cost $90,587,533) 99,723,868
Other assets less liabilities-0.6% 546,936
NET ASSETS-100% $100,270,804
(a) Foreign security denominated in U.S. dollars.
(b) Non-income producing security.
(c) Restricted security, valued at fair value. (See Notes A and E.)
(d) Market yield effective at purchase date.
See notes to financials.
5
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
ALLIANCE GLOBAL ENVIRONMENT FUND, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $90,587,533) $ 99,723,868
Cash 27,836
Receivable for investment securities sold 2,510,721
Dividends receivable 66,200
Prepaid expenses 2,880
Total assets 102,331,505
LIABILITIES
Payable for investment securities purchased 1,567,538
Payable for capital stock redeemed 210,821
Management fee payable 94,278
Accrued expenses 188,064
Total liabilities 2,060,701
NET ASSETS $100,270,804
COMPOSITION OF NET ASSETS
Capital stock, at par $ 60,850
Additional paid-in capital 84,935,027
Accumulated net realized gain on investments and foreign
currency transactions 6,138,329
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 9,136,598
$100,270,804
NET ASSET VALUE PER SHARE (based on 6,084,969 shares outstanding) $16.48
See notes to financial statements.
6
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1996
ALLIANCE GLOBAL ENVIRONMENT FUND, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Dividends(net of foreign taxes withheld of $26,171) $ 568,489
Interest 159,711 $ 728,200
EXPENSES
Management fee 1,073,769
Custodian 175,519
Audit and legal 98,499
Directors' fees 66,715
Transfer agency 37,577
Registration 32,504
Printing 23,481
Miscellaneous 53,874
Total expenses 1,561,938
Net investment loss (833,738)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 20,448,020
Net realized loss on foreign currency transactions (565,933)
Net change in unrealized appreciation of:
Investments 6,304,365
Foreign currency denominated assets and liabilities (1,382)
Net gain on investments and foreign currency transactions 26,185,070
NET INCREASE IN NET ASSETS FROM OPERATIONS $25,351,332
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCE GLOBAL ENVIRONMENT FUND, INC.
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income (loss) $ (833,738) $ 170,945
Net realized gain on investments and foreign
currency transactions 19,882,087 348,367
Net change in unrealized appreciation of
investments and foreign currency denominated
assets and liabilities 6,302,983 3,795,897
Net increase in net assets from operations 25,351,332 4,315,209
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (138,142) -0-
CAPITAL STOCK TRANSACTIONS
Repurchase of fund shares (10,359,153) -0-
Total increase 14,854,037 4,315,209
NET ASSETS
Beginning of year 85,416,767 81,101,558
End of year (including undistributed net
investment income of $116,215 at
October 31, 1995) $100,270,804 $85,416,767
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
ALLIANCE GLOBAL ENVIRONMENT FUND, INC.
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Global Environment Fund, Inc. (the "Fund"), is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The following is a summary of significant accounting
policies followed by the Fund.
1. SECURITY VALUATION
All securities listed on an exchange for which market quotations are readily
available are valued at the closing price on the exchange on the day of
valuation or, if no such closing price is available, at the mean of the last
bid and ask price quoted on such day. Securities for which market quotations
are not readily available and restricted securities are valued in good faith at
fair value using methods determined by the Board of Directors. In determining
fair value, consideration is given to cost, operating and other financial data.
Short-term debt securities which mature in 60 days or less are valued at
amortized cost which approximates market value, unless this method does not
represent fair value.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the mean of the quoted bid and asked price of the respective
currency against the U.S. dollar on the valuation date.
Purchases and sales of portfolio securities are translated at the rates of
exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when earned or accrued.
Net realized loss on foreign currency transactions represents foreign exchange
gains and losses from the holding of foreign currencies, currency gains or
losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of dividends, interest and
foreign taxes receivable on the Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net change in unrealized appreciation
(depreciation) of foreign currency denominated assets and liabilities
represents net currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates.
3. TAXES
It is the Fund's policy to meet the requirements of the U.S. Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for Federal income or excise taxes are
required. Withholding taxes on foreign interest and dividends have been
provided for in accordance with the applicable tax requirements.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts as adjustments to interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
6. RECLASSIFICATION OF COMPONENTS OF NET ASSETS
As of October 31, 1996, the Fund reclassified certain components of net assets.
The reclassification resulted in a net decrease in accumulated net investment
loss of $855,665, and a net decrease in accumulated net realized gain on
investments and foreign currency transactions of $855,665. This
reclassification was the result of permanent book to tax differences resulting
from foreign currency and short-term gains and had no effect on net assets.
NOTE B: MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under an Investment Management and Administration Agreement, the Fund pays
Alliance Capital Management L.P., (the "Investment Manager"), a fee calculated
weekly and paid monthly, at an annualized rate of 1.10% of the Fund's average
weekly net assets up to $100 million, .95 of 1% of the next $100 million of the
Fund's average weekly net assets, and .80 of 1% of the Fund's average weekly
net assets over $200 million. Brokerage commissions paid on securities
transactions for the year ended October 31, 1996, amounted to $875,673, none of
which was paid to affiliated brokers.
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ALLIANCE GLOBAL ENVIRONMENT FUND, INC.
_______________________________________________________________________________
During the year ended October 31, 1996, the Fund entered into a Shareholder
Inquiry Agreement with Alliance Fund Services, Inc. ("AFS"), an affiliate of
the Investment Manager, whereby the Fund reimburses AFS for costs relating to
servicing phone inquiries for the Fund. The Fund reimbursed AFS $2,106 during
the year ended October 31, 1996 relating to shareholder servicing costs.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term and U.S.
Government obligations) aggregated $257,129,565 and $273,569,819 respectively,
for the year ended October 31, 1996. There were no purchases or sales of U.S.
government or government agency obligations for the year ended October 31,
1996. At October 31, 1996, the cost of securities for federal income tax
purposes was $91,203,530. Accordingly, gross unrealized appreciation of
investments was $14,057,906 and gross unrealized depreciation of investments
was $5,537,568 resulting in net unrealized appreciation of $8,520,338,
(excluding foreign currency transactions).
During the year ended October 31, 1996 the Fund utilized its full prior year
capital loss carryforward of $12,640,912 to reduce realized gains.
NOTE D: CAPITAL STOCK
There are 100,000,000 shares of $.01 par value common stock authorized. Of the
6,084,969 shares outstanding at October 31, 1996, the Investment Manager owned
7,169 shares. On March 14, 1996, the Fund initiated a share repurchase program.
The program allows for repurchase over a twelve month period of up to 20% of
the 6,907,169 shares outstanding at March 14, 1996. To date, 822,200 shares
have been repurchased at a total cost of $10,359,153. This includes $41,110 in
commissions paid to PaineWebber Incorporated. The average discount of market
price to net asset value of shares repurchased over the period of March 15,
1996 to October 31, 1996 was 19.87%.
NOTE E: RESTRICTED SECURITY
DATE ACQUIRED COST
--------------- ---------
Thermo Eurotech 3/19/91-4/15/91 $ 529,926
The security shown above, formerly known as Beheersmaatchappij J. Amerika N.V.,
is restricted as to sale and has been valued at fair value in accordance with
the procedures in Note A.
The value of this security at October 31, 1996 was $583,380 representing 0.6%
of net assets.
10
FINANCIAL HIGHLIGHTS
ALLIANCE GLOBAL ENVIRONMENT FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1996 1995 1994 1993 1992
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.37 $11.74 $10.97 $10.78 $13.12
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.13)(a) .03 -0- .01 .01
Net realized and unrealized gain (loss)
on investments
and foreign currency transactions 4.26 .60 .77 .18 (2.17)
Net increase (decrease) in net asset
value from operations 4.13 .63 .77 .19 (2.16)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.02) -0- -0- -0- (.10)
Distributions from net realized gain on
investments and foreign currency
transactions -0- -0- -0- -0- (.08)
Total dividends and distributions (.02) -0- -0- -0- (.18)
Net asset value, end of year $16.48 $12.37 $11.74 $10.97 $10.78
Market value, end of year $13.25 $9.375 $9.50 $9.25 $9.50
TOTAL RETURN
Total investment return based on: (b)
Market value 41.60% (1.32)% 2.70% (2.63)% (15.22)%
Net asset value 33.48% 5.37% 7.02% 1.76% (16.59)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $100,271 $85,416 $81,102 $75,805 $74,442
Ratio of expenses to average net assets 1.60% 1.57% 1.67% 1.62% 1.63%
Ratio of net investment income (loss)
to average net assets (.85)% .21% (.04)% .15% .10%
Portfolio turnover rate 268% 109% 42% 25% 41%
Average commission rate (c) $.0313 -- -- -- --
</TABLE>
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day of
each year reported. Dividends and distributions, if any, are assumed for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's Dividend Reinvestment and Cash Purchase Plan. Generally, total
investment return based on net asset value will be higher than total investment
return based on market value in years where there is an increase in the
discount or a decrease in the premium of the market value to the net asset
value from the beginning to the end of such years. Conversely, total investment
return based on net asset value will be lower than total investment return
based on market value in years where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from the
beginning to the end of such years.
(c) For fiscal years beginning on or after September 1, 1995, a Fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
11
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
ALLIANCE GLOBAL ENVIRONMENT FUND, INC.
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE GLOBAL ENVIRONMENT FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance Global Environment Fund, Inc. (the "Fund"), including the portfolio of
investments, as of October 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Global Environment Fund, Inc. at October 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the indicated periods, in conformity with generally accepted accounting
principles.
New York, New York
December 12, 1996
12
<PAGE>
ALLIANCE GLOBAL ENVIRONMENT FUND
SEMI-ANNUAL REPORT
APRIL 30, 1997
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED) ALLIANCE GLOBAL ENVIRONMENT FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-100.1%
AUSTRALIA-5.9%
Brambles Industries, Ltd. 142,000 $ 2,569,138
Memtec, Ltd. 128,000 2,960,000
------------
5,529,138
CANADA-3.7%
Laidlaw, Inc. Cl. B. (a) 255,000 3,474,375
FRANCE-2.9%
Generale des Eaux 20,000 2,785,916
JAPAN-1.8%
Ebara Corp. 135,000 1,744,062
NETHERLANDS-0.5%
Thermo Eurotech (b) (c) 165,000 507,959
UNITED KINGDOM-1.1%
Waste Management International Plc. (a) (b) 135,000 1,063,125
UNITED STATES-84.2%
Allied Waste Industries, Inc. (b) 85,000 945,625
Allwaste, Inc. (b) 700,000 6,212,500
American Disposal Services, Inc. (b) 325,000 5,321,875
American Waste Services, Inc. (b) 500,000 875,000
Costilla Energy, Inc. (b) 240,000 2,880,000
Culligan Water Technologies, Inc. (b) 30,000 1,226,250
Cuno, Inc. (b) 96,100 1,333,388
Cytec Industries, Inc. (b) 50,000 1,881,250
Eastern Environmental Services, Inc. (b) 20,000 257,500
Flanders Corp. (b) 120,000 870,000
GNI Group, Inc. (b) 100,000 700,000
GTS Duratek, Inc. (b) 35,000 280,000
International Alliance
Services (b) 493,400 4,687,300
Wts. 12/31/00 (b) 300,000 498,300
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
International Specialty Products, Inc. (b) 150,000 $ 1,950,000
International Technology Corp. (b) 437,000 3,113,625
Ionics, Inc. (b) 22,000 1,012,000
ITEQ, Inc. (b) 300,000 1,800,000
Landec Corp. (b) 675,000 3,543,750
Morrison Knudsen Corp. (b) 150,000 1,875,000
Newpark Resources, Inc. (b) 125,000 5,609,375
NuCo2, Inc. (b) 240,000 3,300,000
Osmonics, Inc. (b) 45,000 708,750
Polymer Group (b) 139,000 1,772,250
Puro Water Group, Inc. (b) 160,000 1,120,000
Republic Industries, Inc. (b) 230,000 5,706,875
Superior Services, Inc. (b) 150,000 3,300,000
United Waste Systems, Inc. (b) 190,000 6,412,500
U.S. Filter Corp. (b) 215,000 6,530,625
USA Waste Services, Inc. (b) 120,000 3,930,000
------------
79,653,738
Total Common Stocks
(cost $93,187,838) 94,758,313
TIME DEPOSIT-2.7%
Deutsche Bank 5.65%, 5/01/97
(cost $2,600,000) $2,600 2,600,000
TOTAL INVESTMENTS-102.8%
(cost $95,787,838) 97,358,313
Other assets less liabilities-(2.8%) (2,653,373)
NET ASSETS-100% $94,704,940
(a) Foreign security denominated in U.S. dollars.
(b) Non-income producing security.
(c) Restricted security, valued at fair value. (See notes A and E.)
See notes to financials.
5
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997 (UNAUDITED) ALLIANCE GLOBAL ENVIRONMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $95,787,838) $97,358,313
Cash 59,206
Receivable for investment securities sold 2,700,417
Dividends and interest receivable 62,425
Prepaid expenses 16,740
Total assets 100,197,101
LIABILITIES
Payable for investment securities purchased 5,221,024
Management fee payable 86,711
Accrued expenses 184,426
Total liabilities 5,492,161
NET ASSETS $94,704,940
COMPOSITION OF NET ASSETS
Capital stock, at par $ 59,673
Additional paid-in capital 83,360,882
Accumulated net investment loss (588,011)
Accumulated net realized gain on investments and foreign
currency transactions 10,304,471
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 1,567,925
$94,704,940
NET ASSET VALUE PER SHARE (based on 5,967,269 shares outstanding) $15.87
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1997 (UNAUDITED)
ALLIANCE GLOBAL ENVIRONMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $11,029) $108,738
Interest 49,468 $ 158,206
EXPENSES
Management fee 544,602
Custodian 80,369
Audit and legal 45,288
Directors' fees 29,326
Transfer agency 17,407
Printing 12,022
Registration 6,996
Miscellaneous 10,207
Total expenses 746,217
Net investment loss (588,011)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 10,962,504
Net realized loss on foreign currency transactions (9,561)
Net change in unrealized appreciation of:
Investments (7,565,861)
Foreign currency denominated assets and liabilities (2,812)
Net gain on investments and foreign currency transactions 3,384,270
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,796,259
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE GLOBAL ENVIRONMENT FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
APRIL 30,1997 OCTOBER 31,
(UNAUDITED) 1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (588,011) $ (833,738)
Net realized gain on investments and foreign
currency transactions 10,952,943 19,882,087
Net change in unrealized appreciation of
investments and foreign currency denominated
assets and liabilities (7,568,673) 6,302,983
Net increase in net assets from operations 2,796,259 25,351,332
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -0- (138,142)
Net realized gain on investments (6,786,801) -0-
CAPITAL STOCK TRANSACTIONS
Repurchase of fund shares (1,575,322) (10,359,153)
Total increase (decrease) (5,565,864) 14,854,037
NET ASSETS
Beginning of year 100,270,804 85,416,767
End of period $ 94,704,940 $100,270,804
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 (UNAUDITED) ALLIANCE GLOBAL ENVIRONMENT FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Global Environment Fund (the "Fund"), is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The following is a summary of significant accounting
policies followed by the Fund.
1. SECURITY VALUATION
All securities listed on an exchange for which market quotations are readily
available are valued at the closing price on the exchange on the day of
valuation or, if no such closing price is available, at the mean of the last
bid and ask price quoted on such day. Securities for which market quotations
are not readily available and restricted securities are valued in good faith at
fair value using methods determined by the Board of Directors. In determining
fair value, consideration is given to cost, operating and other financial data.
Short-term debt securities which mature in 60 days or less are valued at
amortized cost which approximates market value, unless this method does not
represent fair value.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the mean of the quoted bid and asked price of the respective
currency against the U.S. dollar on the valuation date.
Purchases and sales of portfolio securities are translated at the rates of
exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when earned or accrued.
Net realized loss on foreign currency transactions represents foreign exchange
gains and losses from the holding of foreign currencies, currency gains or
losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of dividends, interest and
foreign taxes receivable on the Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net change in unrealized appreciation
(depreciation) of foreign currency denominated assets and liabilities
represents net currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates.
3. TAXES
It is the Fund's policy to meet the requirements of the U.S. Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for Federal income or excise taxes are
required. Withholding taxes on foreign interest and dividends have been
provided for in accordance with the applicable tax requirements.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts as an adjustment to interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
For federal income tax purposes, the Fund's distributions of income and capital
gains are subject to recharacterization, which may include a tax return of
captial, at the end of the year to reflect the final investment results for
that year.
NOTE B: MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under an Investment Management and Administration Agreement, the Fund pays
Alliance Capital Management L.P., (the "Investment Manager"), a fee calculated
weekly and paid monthly, at an annualized rate of 1.10% of the Fund's average
weekly net assets up to $100 million, .95 of 1% of the next $100 million of the
Fund's average weekly net assets, and .80 of 1% of the Fund's average weekly
net assets over $200 million. Brokerage commissions paid on securities
transactions for the six months ended April 30, 1997, amounted to $270,381,
none of which was paid to affiliated brokers.
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GLOBAL ENVIRONMENT FUND
_______________________________________________________________________________
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Investment Manager, the Fund
reimburses AFS for costs relating to servicing phone inquiries for the Fund.
The Fund reimbursed AFS $790 during the six months ended April 30, 1997.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term and U.S.
government obligations) aggregated $82,692,805 and $86,258,901 respectively,
for the six months ended April 30, 1997. There were no purchases or sales of
U.S. government or government agency obligations for the six months ended April
30, 1997. At April 30, 1997, the cost of securities for federal income tax
purposes was $95,797,215. Accordingly, gross unrealized appreciation of
investments was $10,205,276 and gross unrealized depreciation of investments
was $8,644,178 resulting in net unrealized appreciation of $1,561,098,
(excluding foreign currency transactions).
NOTE D: CAPITAL STOCK
There are 100,000,000 shares of $.01 par value common stock authorized. Of the
5,967,269 shares outstanding at April 30, 1997, the Investment Manager owned
7,169 shares. On March 14, 1996, the Fund initiated a share repurchase program
which allowed for repurchase over a twelve month period of up to 20% of the
6,907,169 shares outstanding at March 14, 1996. During the period ended April
30, 1997, an additional 117,700 shares were repurchased at a cost of
$1,575,322. Through the duration of this program, 939,900 shares were
repurchased at a total cost of $11,934,475, representing 13.60% of the
6,907,169 shares outstanding at March 14, 1996. This includes $46,995 in
commissions paid to PaineWebber Incorporated. The average discount of market
price to net asset value of shares repurchased over the period of March 15,
1996 to March 14, 1997 was 19.6%.
NOTE E: RESTRICTED SECURITY
DATE ACQUIRED COST
--------------- ----------
Thermo Eurotech 3/19/91-4/15/91 $529,926
The security shown above, formerly known as Beheersmaatchappij J. Amerika N.V.,
is restricted as to sale and has been valued at fair value in accordance with
the procedures in Note A.
The value of this security at April 30, 1997 was $507,959 representing 0.5% of
net assets.
NOTE F: SUBSEQUENT EVENT
On April 23, 1997, Alliance Global Environment Fund, Inc. announced that its
Board of Directors has approved and recommended for stockholder approval the
conversion of the fund from a closed-end investment company to an open-end
investment company. The 1997 Annual Meeting of Stockholders of the Fund is
scheduled for July 17, 1997.
10
FINANCIAL HIGHLIGHTS ALLIANCE GLOBAL ENVIRONMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30,1997 ------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
------------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $16.48 $12.37 $11.74 $10.97 $10.78 $13.12
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.10)(a) (.13)(a) .03 -0- .01 .01
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .62 4.26 .60 .77 .18 (2.17)
Net increase (decrease) in net asset
value from operations .52 4.13 .63 .77 .19 (2.16)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.02) -0- -0- -0- (.10)
Distributions from net realized gain on
investments and foreign currency
transactions (1.13) -0- -0- -0- -0- (.08)
Total dividends and distributions (1.13) (.02) -0- -0- -0- (.18)
Net asset value, end of period $15.87 $16.48 $12.37 $11.74 $10.97 $10.78
Market value, end of period $14.625 $13.25 $ 9.375 $9.50 $ 9.25 $ 9.50
TOTAL RETURN
Total investment return based on: (b)
Market value 19.70% 41.60% (1.32)% 2.70% (2.63)% (15.22)%
Net asset value 4.43% 33.48% 5.37% 7.02% 1.76% (16.59)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $94,705 $100,271 $85,416 $81,102 $75,805 $74,442
Ratio of expenses to average net assets 1.51%(c) 1.60% 1.57% 1.67% 1.62% 1.63%
Ratio of net investment income (loss)
to average net assets (1.19)%(c) (.85)% .21% (.04)% .15% .10%
Portfolio turnover rate 167% 268% 109% 42% 25% 41%
Average commission rate (d) $.0503 $.0313 -- -- -- --
</TABLE>
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions, if any, are assumed for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's Dividend Reinvestment and Cash Purchase Plan. Generally, total
investment return based on net asset value will be higher than total investment
return based on market value in periods where there is an increase in the
discount or a decrease in the premium of the market value to the net asset
value from the beginning to the end of such years. Conversely, total investment
return based on net asset value will be lower than total investment return
based on market value in years where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from the
beginning to the end of such years.
(c) Annualized.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged. This amount includes commissions paid to foreign
brokers which may materially affect the the rate shown. Amounts paid in foreign
currencies have been converted into US dollars using the prevailing exchange
rate on the date of the transaction.
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