<PAGE>
As filed with the Securities and Exchange
Commission on October 31, 1997
File Nos. 33-42034
811-6372
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 18 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17 X
Alliance Income Builder Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office)
(Zip Code)
Registrant's Telephone Number, including Area Code:
(800) 221-5672
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Copies of communications to:
Thomas G. MacDonald
Seward & Kissel
One Battery Park Plaza
New York, New York 10004
<PAGE>
It is proposed that this filing will become effective (check
appropriate box)
X immediately upon filing pursuant to paragraph (b)
_____ on (date) pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
_____ This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-lA Item No. Location in Prospectus (Caption)
PART A
Item 1. Cover Page...........................Cover Page
Item 2. Synopsis.............................The Funds At a
Glance
Item 3. Condensed Financial Information......Financial
Highlights
Item 4. General Description of Registrant....Description of
the Funds;
General
Information
Item 5. Management of the Fund...............Management of the
Funds; General
Information
Item 6. Capital Stock and Other
Securities...........................Dividends,
Distributions and
Taxes; General
Information
Item 7. Purchase of Securities Being
Offered..............................Purchase and Sale
of Shares;
General
Information
Item 8. Redemption or Repurchase.............Purchase and Sale
of Shares
Item 9. Pending Legal Proceedings............Not Applicable
Location in Statement of
PART B Additional Information (Caption)
Item 10. Cover Page...........................Cover Page
Item 11. Table of Contents....................Cover Page
Item 12. General Information and History......General
Information
<PAGE>
Item 13. Investment Objectives and
Policies.............................Investment
Policies and
Restrictions
Item 14. Management of the Registrant.........Management of the
Fund
Item 15. Control Persons and Principal
Holders of Securities................General
Information
Item 16. Investment Advisory and Other
Services.............................Management of the
Fund
Item 17. Brokerage Allocation.................Portfolio
Transactions
Item 18. Capital Stock and Other
Securities...........................General
Information
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered..........Purchase of
Shares;
Redemption and
Repurchase of
Shares
Item 20. Tax Status...........................Dividends,
Distributions and
Taxes
Item 21. Underwriters.........................General
Information
Item 22. Calculation of Performance Data......General
Information
Item 23. Financial Statements.................Report of
Independent
Auditors;
Financial
Statements
<PAGE>
<PAGE>
THE ALLIANCE
------------
STOCK FUNDS
------------
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
November 1, 1997
Domestic Stock Funds Global Stock Funds
- -The Alliance Fund -Alliance International Fund
- -Alliance Growth Fund -Alliance Worldwide Privatization Fund
- -Alliance Premier Growth Fund -Alliance New Europe Fund
- -Alliance Technology Fund -Alliance All-Asia Investment Fund
- -Alliance Quasar Fund -Alliance Global Small Cap Fund
Total Return Funds
-Alliance Strategic Balanced Fund
-Alliance Balanced Shares
-Alliance Income Builder Fund
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
-Alliance Real Estate Investment Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Funds at a Glance ..................................................... 2
Expense Information ....................................................... 4
Financial Highlights ...................................................... 7
Glossary .................................................................. 19
Description of the Funds .................................................. 20
Investment Objectives and Policies ........................................ 20
Additional Investment Practices ........................................ 30
Certain Fundamental Investment Policies ................................ 37
Risk Considerations .................................................... 40
Purchase and Sale of Shares ............................................... 44
Management of the Funds ................................................... 47
Dividends, Distributions and Taxes ........................................ 51
General Information ....................................................... 53
</TABLE>
- --------------------------------------------------------------------------------
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund 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.
Each 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 licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
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.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
Total Return Funds
Strategic Balanced Fund
Seeks . . . A high long-term total return by investing in a combination of
equity and debt securities.
2
<PAGE>
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks and fixed-income securities, and also in equity-type securities such as
warrants, preferred stocks and convertible debt instruments.
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Income Builder Fund
Seeks . . . Both an attractive level of current income and long-term growth of
income and capital.
Invests Principally in . . . A non-diversified portfolio of fixed-income
securities and dividend-paying common stocks. Alliance currently expects to
continue to maintain approximately 60% of the Fund's net assets in fixed-income
securities and 40% in equity securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
Real Estate Investment Fund
Seeks . . . Total return on its assets from long-term growth of capital and from
income.
Invests Principally in . . . A diversified portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Distributions...
Balanced Shares, Income Builder Fund, Utility Income Fund, Growth and Income
Fund and Real Estate Investment Fund make distributions quarterly to
shareholders. These distributions may include ordinary income and capital gain
(each of which is taxable) and a return of capital (which is generally
non-taxable). See "Dividends, Distributions and Taxes."
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds 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. An investment in the Real Estate
Investment Fund is subject to certain risks associated with the direct ownership
of real estate in general, including possible declines in the value of real
estate, general and local economic conditions, environmental problems and
changes in interest rates. These risks are fully discussed in this Prospectus.
Getting Started . . .
Shares of the Funds 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 Funds offer
several time and money saving services to investors. Be sure to ask your
financial representative about:
- --------------------------------------------------------------------------------
AUTOMATIC REINVESTMENT
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
RETIREMENT PLANS
- --------------------------------------------------------------------------------
SHAREHOLDER COMMUNICATIONS
- --------------------------------------------------------------------------------
DIVIDEND DIRECTION PLANS
- --------------------------------------------------------------------------------
AUTO EXCHANGE
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
- --------------------------------------------------------------------------------
A CHOICE OF PURCHASE PLANS
- --------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
24 HOUR INFORMATION
- --------------------------------------------------------------------------------
[LOGO]
Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in a Fund and annual expenses for each class of shares of each
Fund. For each Fund, the "Examples" to the right of the table below show 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% 1.0%
during the during the
first year, first year,
decreasing 1.0% 0% thereafter
annually to 0%
after the
fourth year (b)
Exchange fee ......................................................... None None None
</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 redemptions within one year of purchase. See "Purchase and Sale of
Shares--How to Buy Shares" -page 44.
(b) Class B shares of each Fund other than Premier Growth Fund automatically
convert to Class A shares after eight years and the Class B shares of
Premier Growth Fund convert to Class A shares after six years. See "Purchase
and Sale of Shares--How to Buy Shares" -page 44.
<TABLE>
<CAPTION>
====================================================================================================================================
Operating Expenses Examples
- -------------------------------------------------------------- ------------------------------------------------------------------
Alliance Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .70% .70% .70% After 1 year $ 53 $ 59 $ 19 $ 29 $ 19
12b-1 fees .19% 1.00% 1.00% After 3 years $ 74 $ 79 $ 59 $ 58 $ 58
Other expenses (a) .15% .17% .16% After 5 years $ 97 $101 $101 $101 $101
---- ---- ---- After 10 years $164 $197(b) $197(b) $218 $218
Total fund
operating expenses 1.04% 1.87% 1.86%
==== ==== ====
<CAPTION>
Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .75% .75% .75% After 1 year $ 55 $ 60 $ 20 $ 30 $ 20
12b-1 fees .30% 1.00% 1.00% After 3 years $ 82 $ 82 $ 62 $ 63 $ 63
Other expenses (a) .25% .24% .25% After 5 years $111 $107 $107 $108 $108
---- ---- ---- After 10 years $193 $214(b) $214(b) $233 $233
Total fund
operating expenses 1.30% 1.99% 2.00%
==== ==== ====
<CAPTION>
Premier Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 59 $ 64 $ 24 $ 34 $ 24
12b-1 fees .33% 1.00% 1.00% After 3 years $ 92 $ 92 $ 72 $ 72 $ 72
Other expenses (a) .32% .32% .32% After 5 years $128 $124 $124 $124 $124
---- ---- ---- After 10 years $230 $249(b) $249(b) $266 $266
Total fund
operating expenses 1.65% 2.32% 2.32%
==== ==== ====
<CAPTION>
Technology Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (g) 1.11% 1.11% 1.11% After 1 year $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 95 $ 96 $ 76 $ 76 $ 76
Other expenses (a) .33% .33% .33% After 5 years $133 $130 $130 $130 $130
---- ---- ---- After 10 years $239 $260(b) $260(b) $278 $278
Total fund
operating expenses 1.74% 2.44% 2.44%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 6.
4
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Operating Expenses Examples
- -------------------------------------------------------------- ------------------------------------------------------------------
Quasar Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (g) 1.15% 1.15% 1.15% After 1 year $ 60 $ 67 $ 27 $ 36 $ 26
12b-1 fees .21% 1.00% 1.00% After 3 years $ 96 $101 $ 81 $ 81 $ 81
Other expenses (a) .43% .47% .46% After 5 years $135 $139 $139 $139 $139
---- ---- ---- After 10 years $244 $275(b) $275(b) $294 $294
Total fund
operating expenses 1.79% 2.62% 2.61%
==== ==== ====
<CAPTION>
International Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees
(after waiver) (c) .85% .85% .85% After 1 year $ 58 $ 65 $ 25 $ 35 $ 25
12b-1 fees .17% 1.00% 1.00% After 3 years $ 90 $ 96 $ 76 $ 75 $ 75
Other expenses (a) .56% .58% .57% After 5 years $125 $130 $130 $129 $129
---- ---- ---- After 10 years $222 $256(b) $256(b) $276 $276
Total fund
operating expenses (d) 1.58% 2.43% 2.42%
==== ==== ====
<CAPTION>
Worldwide Privatization Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 94 $ 96 $ 76 $ 75 $ 75
Other expenses (a) .42% .43% .42% After 5 years $132 $130 $130 $129 $129
---- ---- ---- After 10 years $237 $259(b) $259(b) $276 $276
Total fund
operating expenses 1.72% 2.43% 2.42%
==== ==== ====
<CAPTION>
New Europe Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.06% 1.06% 1.06% After 1 year $ 62 $ 68 $ 28 $ 38 $ 28
12b-1 fees .30% 1.00% 1.00% After 3 years $104 $105 $ 85 $ 85 $ 85
Other expenses (a) .69% .69% .68% After 5 years $148 $145 $145 $145 $145
---- ---- ---- After 10 years $270 $291(b) $291(b) $307 $307
Total fund
operating expenses 2.05% 2.75% 2.74%
==== ==== ====
<CAPTION>
All-Asia Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees After 1 year $ 73 $ 78 $ 38 $ 48 $ 38
(after waiver) (c) .65% .65% .65% After 3 years $135 $137 $117 $117 $117
12b-1 fees .30% 1.00% 1.00% After 5 years $199 $197 $197 $197 $197
Other expenses After 10 years $371 $390(b) $390(b) $405 $405
Administration fees
(after waiver) (f) .00% .00% .00%
Other operating expenses (a) 2.17% 2.17% 2.17%
---- ---- ----
Total other expenses 2.17% 2.17% 2.17%
==== ==== ====
Total fund
operating expenses (d) 3.12% 3.82% 3.82%
==== ==== ====
<CAPTION>
Global Small Cap Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 66 $ 71 $ 31 $ 41 $ 31
12b-1 fees .30% 1.00% 1.00% After 3 years $114 $116 $ 96 $ 96 $ 96
Other expenses (a) 1.11% 1.11% 1.10% After 5 years $166 $163 $163 $163 $163
---- ---- ---- After 10 years $305 $326(b) $326(b) $341 $341
Total fund
operating expenses 2.41% 3.11% 3.10%
==== ==== ====
<CAPTION>
Strategic Balanced Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees
(after waiver) (c) .09% .09% .09% After 1 year $ 56 $ 62 $ 22 $ 32 $ 22
12b-1 fees .30% 1.00% 1.00% After 3 years $ 85 $ 86 $ 66 $ 66 $ 66
Other expenses (a) 1.02% 1.03% 1.03% After 5 years $116 $114 $114 $114 $114
---- ---- ---- After 10 years $204 $227(b) $227(b) $245 $245
Total fund
operating expenses (d) 1.41% 2.12% 2.12%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 6.
5
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- -------------------------------------------------------------- ------------------------------------------------------------------
Balanced Shares Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .63% .63% .63% After 1 year $ 57 $ 63 $ 23 $ 33 $ 23
12b-1 fees .24% 1.00% 1.00% After 3 years $ 87 $ 90 $ 70 $ 70 $ 70
Other expenses (a) .60% .62% .60% After 5 years $119 $120 $120 $119 $119
---- ---- ---- After 10 years $211 $239(b) $239(b) $256 $256
Total fund
operating expenses 1.47% 2.25% 2.23%
==== ==== ====
<CAPTION>
Income Builder Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .75% .75% .75% After 1 year $ 64 $ 70 $ 30 $ 40 $ 30
12b-1 fees .30% 1.00% 1.00% After 3 years $108 $110 $ 90 $ 91 $ 91
Other expenses (a) 1.15% 1.17% 1.18% After 5 years $155 $154 $154 $154 $154
---- ---- ---- After 10 years $285 $307(b) $307(b) $325 $325
Total fund
operating expenses 2.20% 2.92% 2.93%
==== ==== ====
<CAPTION>
Utility Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.00% 0.00% 0.00% After 1 year $ 57 $ 62 $ 22 $ 32 $ 22
(after waiver) (c) After 3 years $ 88 $ 89 $ 69 $ 69 $ 69
12b-1 fees .30% 1.00% 1.00% After 5 years $121 $118 $118 $118 $118
Other expenses (a) 1.20% 1.20% 1.20% After 10 years $214 $236(b) $236(b) $253 $253
---- ---- ----
Total fund
operating expenses (e) 1.50% 2.20% 2.20%
==== ==== ====
<CAPTION>
Growth and Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .51% .51% .51% After 1 year $ 52 $ 58 $ 18 $ 28 $ 18
12b-1 fees .21% 1.00% 1.00% After 3 years $ 72 $ 76 $ 56 $ 55 $ 55
Other expenses (a) .25% .27% .25% After 5 years $ 94 $ 96 $ 96 $ 95 $ 95
---- ---- ---- After 10 years $156 $188(b) $188(b) $207 $207
Total fund
operating expenses .97% 1.78% 1.76%
==== ==== ====
<CAPTION>
Real Estate Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .90% .90% .90% After 1 year $ 60 $ 65 $ 25 $ 35 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 96 $ 96 $ 76 $ 76 $ 76
Other expenses (a) .57% .54% .53% After 5 years $134 $130 $130 $130 $130
---- ---- ---- After 10 years $242 $261(b) $261(b) $277 $277
Total fund
operating expenses 1.77% 2.44% 2.43%
==== ==== ====
</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. The expenses shown do
not reflect the application of credits that reduce Fund expenses.
(b) Assumes Class B shares converted to Class A shares after eight years, or
six years with respect to Premier Growth Fund.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be .75% for Strategic Balanced Fund and Utility Income Fund, 1.00%
for All-Asia Investment Fund and 1.01% for International Fund.
International Fund's fee, absent the voluntary fee waiver, is calculated
based on average daily net assets. Maximum contractual rate, based on
quarter-end net assets, is 1.00%.
(d) Net of voluntary fee waiver and/or expense reimbursement. In the absence of
such waiver and/or reimbursement, total fund operating expenses for
Strategic Balanced Fund would have been 2.08%, 2.76% and 2.76%,
respectively, for Class A, Class B and Class C shares, total fund operating
expenses for All-Asia Investment Fund would have been 3.61%, 4.33% and
4.30%, respectively, for Class A, Class B and Class C shares annualized and
total fund operating expenses for International Fund would have been 1.74%,
2.59% and 2.58%, respectively, for Class A, Class B and Class C annualized.
(e) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 3.38%, 4.08%, 4.07%,
respectively, for Class A, Class B and Class C shares.
(f) Net of voluntary fee waiver. Absent such fee waiver, administration fees
would have been .15% for the Fund's Class A, Class B and Class C shares.
Reflects the fees payable by All-Asia Investment Fund to Alliance pursuant
to an administration agreement.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund and Technology
Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. Long-term shareholders of a 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 Funds--Distribution Services Agreements."
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. "Management fees" for International Fund and All-Asia Investment Fund and
"Adminstration fee" for All-Asia Investment Fund have been restated to reflect
current voluntary fee waivers. The examples set forth above assume reinvestment
of all dividends and distributions and utilize a 5% annual rate of return as
mandated by Commission regulations. The examples should not be considered
representative of past or future expenses; actual expenses may be greater or
less than those shown.
6
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables on the following pages present, for each Fund, per share income and
capital changes for a share outstanding throughout each period indicated. Except
as otherwise indicated, the information in the tables for Alliance Fund, Growth
Fund, Premier Growth Fund, Strategic Balanced Fund, Balanced Shares, Utility
Income Fund, Worldwide Privatization Fund and Growth and Income Fund has been
audited by Price Waterhouse LLP, the independent auditors for each Fund, and for
All-Asia Investment Fund, Technology Fund, Quasar Fund, International Fund, New
Europe Fund, Global Small Cap Fund, Real Estate Investment Fund and Income
Builder Fund by Ernst & Young LLP, the independent auditors for each Fund. A
report of Price Waterhouse LLP or Ernst & Young LLP, as the case may be, on the
information with respect to each Fund, appears in the Fund's Statement of
Additional Information. The following information for each Fund 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 a 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.
7
<PAGE>
<TABLE>
<CAPTION>
Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
---------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Fund
Class A
12/1/96 to 5/31/97+++ ........... $ 7.71 $ (.01)(b) $ .67 $ .66 $ (.02) $(1.06)
Year ended 11/30/96 ............. 7.72 .02 1.06 1.08 (.02) (1.07)
Year ended 11/30/95 ............. 6.63 .02 2.08 2.10 (.01) (1.00)
1/1/94 to 11/30/94** ............ 6.85 .01 (.23) (.22) 0.00 0.00
Year ended 12/31/93 ............. 6.68 .02 .93 .95 (.02) (.76)
Year ended 12/31/92 ............. 6.29 .05 .87 .92 (.05) (.48)
Year ended 12/31/91 ............. 5.22 .07 1.70 1.77 (.07) (.63)
Year ended 12/31/90 ............. 6.87 .09 (.32) (.23) (.18) (1.24)
Year ended 12/31/89 ............. 5.60 .12 1.19 1.31 (.04) 0.00
Year ended 12/31/88 ............. 5.15 .08 .80 .88 (.08) (.35)
Year ended 12/31/87 ............. 6.87 .08 .27 .35 (.13) (1.94)
Year ended 12/31/86 ............. 11.15 .11 .87 .98 (.10) (5.16)
Class B
12/1/96 to 5/31/97+++ ........... $ 7.40 $ (.03)(b) $ .63 $ .60 $ 0.00 $(1.06)
Year ended 11/30/96 ............. 7.49 (.01) .99 .98 0.00 (1.07)
Year ended 11/30/95 ............. 6.50 (.03) 2.02 1.99 0.00 (1.00)
1/1/94 to 11/30/94** ............ 6.76 (.03) (.23) (.26) 0.00 0.00
Year ended 12/31/93 ............. 6.64 (.03) .91 .88 0.00 (.76)
Year ended 12/31/92 ............. 6.27 (.01)(b) .87 .86 (.01) (.48)
3/4/91++ to 12/31/91 ............ 6.14 .01 (b) .79 .80 (.04) (.63)
Class C
12/1/96 to 5/31/97+++ ........... $ 7.41 $ (.03)(b) $ .62 $ .59 $ 0.00 $(1.06)
Year ended 11/30/96 ............. 7.50 (.02) 1.00 .98 0.00 (1.07)
Year ended 11/30/95 ............. 6.50 (.03) 2.03 2.00 0.00 (1.00)
1/1/94 to 11/30/94** ............ 6.77 (.03) (.24) (.27) 0.00 0.00
5/3/93++ to 12/31/93 ............ 6.67 (.02) .88 .86 0.00 (.76)
Growth Fund (i)
Class A
11/1/96 to 4/30/97+++ ........... $34.91 $ (.01)(b) $ 1.91 $ 1.90 $ 0.00 $(1.03)
Year ended 10/31/96 ............. 29.48 .05 6.20 6.25 (.19) (.63)
Year ended 10/31/95 ............. 25.08 .12 4.80 4.92 (.11) (.41)
5/1/94 to 10/31/94** ............ 23.89 .09 1.10 1.19 0.00 0.00
Year ended 4/30/94 .............. 22.67 (.01)(c) 3.55 3.54 0.00 (2.32)
Year ended 4/30/93 .............. 20.31 .05 (c) 3.68 3.73 (.14) (1.23)
Year ended 4/30/92 .............. 17.94 .29 (c) 3.95 4.24 (.26) (1.61)
9/4/90++ to 4/30/91 ............. 13.61 .17 (c) 4.22 4.39 (.06) 0.00
Class B
11/1/96 to 4/30/97+++ ........... $29.21 $ (.11)(b) $ 1.60 $ 1.49 $ 0.00 $(1.03)
Year ended 10/31/96 ............. 24.78 (.12) 5.18 5.06 0.00 (.63)
Year ended 10/31/95 ............. 21.21 (.02) 4.01 3.99 (.01) (.41)
5/1/94 to 10/31/94** ............ 20.27 .01 .93 .94 0.00 0.00
Year ended 4/30/94 .............. 19.68 (.07)(c) 2.98 2.91 0.00 (2.32)
Year ended 4/30/93 .............. 18.16 (.06)(c) 3.23 3.17 (.03) (1.62)
Year ended 4/30/92 .............. 16.88 .17 (c) 3.67 3.84 (.21) (2.35)
Year ended 4/30/91 .............. 14.38 .08 (c) 3.22 3.30 (.09) (.71)
Year ended 4/30/90 .............. 14.13 .01 (b)(c) 1.26 1.27 0.00 (1.02)
Year ended 4/30/89 .............. 12.76 (.01)(c) 2.44 2.43 0.00 (1.06)
10/23/87+ to 4/30/88 ............ 10.00 (.02)(c) 2.78 2.76 0.00 0.00
Class C
11/1/96 to 4/30/97+++ ........... $29.22 $ (.11)(b) $ 1.60 $ 1.49 $ 0.00 $(1.03)
Year ended 10/31/96 ............. 24.79 (.12) 5.18 5.06 0.00 (.63)
Year ended 10/31/95 ............. 21.22 (.03) 4.02 3.99 (.01) (.41)
5/1/94 to 10/31/94** ............ 20.28 .01 .93 .94 0.00 0.00
8/2/93++ to 4/30/94 ............. 21.47 (.02)(c) 1.15 1.13 0.00 (2.32)
Premier Growth Fund
Class A
12/1/96 to 5/31/97+++ ........... $17.98 $ (.03)(b) $ 2.64 $ 2.61 $ 0.00 $(1.08)
Year ended 11/30/96 ............. 16.09 (.04)(b) 3.20 3.16 0.00 (1.27)
Year ended 11/30/95 ............. 11.41 (.03) 5.38 5.35 0.00 (.67)
Year ended 11/30/94 ............. 11.78 (.09) (.28) (.37) 0.00 0.00
Year ended 11/30/93 ............. 10.79 (.05) 1.05 1.00 (.01) 0.00
9/28/92+ to 11/30/92 ............ 10.00 .01 .78 .79 0.00 0.00
Class B
12/1/96 to 5/31/97+++ ........... $17.52 $ (.09)(b) $ 2.56 $ 2.47 $ 0.00 $(1.08)
Year ended 11/30/96 ............. 15.81 (.14)(b) 3.12 2.98 0.00 (1.27)
Year ended 11/30/95 ............. 11.29 (.11) 5.30 5.19 0.00 (.67)
Year ended 11/30/94 ............. 11.72 (.15) (.28) (.43) 0.00 0.00
Year ended 11/30/93 ............. 10.79 (.10) 1.03 .93 0.00 0.00
9/28/92+ to 11/30/92 ............ 10.00 0.00 .79 .79 0.00 0.00
Class C
12/1/96 to 5/31/97+++ ........... $17.54 $ (.09)(b) $ 2.57 $ 2.48 $ 0.00 $(1.08)
Year ended 11/30/96 ............. 15.82 (.14)(b) 3.13 2.99 0.00 (1.27)
Year ended 11/30/95 ............. 11.30 (.08) 5.27 5.19 0.00 (.67)
Year ended 11/30/94 ............. 11.72 (.09) (.33) (.42) 0.00 0.00
5/3/93++ to 11/30/93 ............ 10.48 (.05) 1.29 1.24 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 18.
8
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
- ------------- ----------- ------------ ------------ ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (1.08) $ 7.29 10.46% $1,024,652 1.05%* (.16)%* 107% $0.0559
(1.09) 7.71 16.49 999,067 1.04 .30 80 0.0646
(1.01) 7.72 37.87 945,309 1.08 .31 81 --
0.00 6.63 (3.21) 760,679 1.05* .21* 63 --
(.78) 6.85 14.26 831,814 1.01 .27 66 --
(.53) 6.68 14.70 794,733 .81 .79 58 --
(.70) 6.29 33.91 748,226 .83 1.03 74 --
(1.42) 5.22 (4.36) 620,374 .81 1.56 71 --
(.04) 6.87 23.42 837,429 .75 1.79 81 --
(.43) 5.60 17.10 760,619 .82 1.38 65 --
(2.07) 5.15 4.90 695,812 .76 1.03 100 --
(5.26) 6.87 12.60 652,009 .61 1.39 46 --
$ (1.06) $ 6.94 9.98% $ 50,785 1.88%* (.99)%* 107% $0.0559
(1.07) 7.40 15.47 44,450 1.87 (.53) 80 0.0646
(1.00) 7.49 36.61 31,738 1.90 (.53) 81 --
0.00 6.50 (3.85) 18,138 1.89* (.60)* 63 --
(.76) 6.76 13.28 12,402 1.90 (.64) 66 --
(.49) 6.64 13.75 3,825 1.64 (.04) 58 --
(.67) 6.27 13.10 852 1.64* .10* 74 --
$ (1.06) $ 6.94 9.83% $ 15,670 1.86%* (.97)%* 107% $0.0559
(1.07) 7.41 15.48 13,899 1.86 (.51) 80 0.0646
(1.00) 7.50 36.79 10,078 1.89 (.51) 81 --
0.00 6.50 (3.99) 6,230 1.87* (.59)* 63 --
(.76) 6.77 13.95 4,006 1.94* (.74)* 66 --
$ (1.03) $ 35.78 5.46% $ 579,580 1.24%* (.03)%* 19% $0.0537
(.82) 34.91 21.65 499,459 1.30 .15 46 0.0584
(.52) 29.48 20.18 285,161 1.35 .56 61 --
0.00 25.08 4.98 167,800 1.35* .86* 24 --
(2.32) 23.89 15.66 102,406 1.40 (f) .32 87 --
(1.37) 22.67 18.89 13,889 1.40 (f) .20 124 --
(1.87) 20.31 23.61 8,228 1.40 (f) 1.44 137 --
(.06) 17.94 32.40 713 1.40*(f) 1.99* 130 --
$ (1.03) $ 29.67 5.12% $2,829,994 1.94%* (.74)%* 19% $0.0537
(.63) 29.21 20.82 2,498,097 1.99 (.54) 46 0.0584
(.42) 24.78 19.33 1,052,020 2.05 (.15) 61 --
0.00 21.21 4.64 751,521 2.05* .16* 24 --
(2.32) 20.27 14.79 394,227 2.10 (f) (.36) 87 --
(1.65) 19.68 18.16 56,704 2.15 (f) (.53) 124 --
(2.56) 18.16 22.75 37,845 2.15 (f) .78 137 --
(.80) 16.88 24.72 22,710 2.10 (f) .56 130 --
(1.02) 14.38 8.81 15,800 2.00 (f) .07 165 --
(1.06) 14.13 20.31 7,672 2.00 (f) (.03) 139 --
0.00 12.76 27.60 1,938 2.00*(f) (.40)* 52 --
$ (1.03) $ 29.68 5.11% $ 472,104 1.94%* (.73)%* 19% $0.0537
(.63) 29.22 20.81 403,478 2.00 (.55) 46 0.0584
(.42) 24.79 19.32 226,662 2.05 (.15) 61 --
0.00 21.22 4.64 114,455 2.05* .16* 24 --
(2.32) 20.28 5.27 64,030 2.10*(f) (.31)* 87 --
$ (1.08) $ 19.51 15.70% $ 215,464 1.57%* (.36)%* 47% $0.0598
(1.27) 17.98 21.52 172,870 1.65 (.27) 95 0.0651
(.67) 16.09 49.95 72,366 1.75 (.28) 114 --
0.00 11.41 (3.14) 35,146 1.96 (.67) 98 --
(.01) 11.78 9.26 40,415 2.18 (.61) 68 --
0.00 10.79 7.90 4,893 2.17* .91* 0 --
$ (1.08) $ 18.91 15.29% $ 550,297 2.26%* (1.05)%* 47% $0.0598
(1.27) 17.52 20.70 404,137 2.32 (.94) 95 0.0651
(.67) 15.81 49.01 238,088 2.43 (.95) 114 --
0.00 11.29 (3.67) 139,988 2.47 (1.19) 98 --
0.00 11.72 8.64 151,600 2.70 (1.14) 68 --
0.00 10.79 7.90 19,941 2.68*(f) .35*(f) 0 --
$ (1.08) $ 18.94 15.33% $ 91,551 2.25% (1.05)%* 47% $0.0598
(1.27) 17.54 20.76 60,194 2.32 (.94) 95 0.0651
(.67) 15.82 48.96 20,679 2.42 (.97) 114 --
0.00 11.30 (3.58) 7,332 2.47 (1.16) 98 --
0.00 11.72 11.83 3,899 2.79* (1.35)* 68 --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
---------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Technology Fund
Class A
12/1/96 to 5/31/97+++ ........... $51.15 $ (.20)(b) $ .70 $ .50 $ 0.00 $ (.42)
Year ended 11/30/96 ............. 46.64 (.39)(b) 7.28 6.89 0.00 (2.38)
Year ended 11/30/95 ............. 31.98 (.30) 18.13 17.83 0.00 (3.17)
1/1/94 to 11/30/94** ............ 26.12 (.32) 6.18 5.86 0.00 0.00
Year ended 12/31/93 ............. 28.20 (.29) 6.39 6.10 0.00 (8.18)
Year ended 12/31/92 ............. 26.38 (.22)(b) 4.31 4.09 0.00 (2.27)
Year ended 12/31/91 ............. 19.44 (.02) 10.57 10.55 0.00 (3.61)
Year ended 12/31/90 ............. 21.57 (.03) (.56) (.59) 0.00 (1.54)
Year ended 12/31/89 ............. 20.35 0.00 1.22 1.22 0.00 0.00
Year ended 12/31/88 ............. 20.22 (.03)(c) .16 .13 0.00 0.00
Year ended 12/31/87 ............. 23.11 (.10)(c) 4.54 4.44 0.00 (7.33)
Year ended 12/31/86 ............. 20.64 (.14)(c) 2.62 2.48 (.01) 0.00
Class B
12/1/96 to 5/31/97+++ ........... $49.76 $ (.35)(b) $ .66 $ .31 $ 0.00 $ (.42)
Year ended 11/30/96 ............. 45.76 (.70)(b) 7.08 6.38 0.00 (2.38)
Year ended 11/30/95 ............. 31.61 (.60)(b) 17.92 17.32 0.00 (3.17)
1/1/94 to 11/30/94** ............ 25.98 (.23) 5.86 5.63 0.00 0.00
5/3/93++ to 12/31/93 ............ 27.44 (.12) 6.84 6.72 0.00 (8.18)
Class C
12/1/96 to 5/31/97+++ ........... $49.76 $ (.35)(b) $ .66 $ .31 $ 0.00 $ (.42)
Year ended 11/30/96 ............. 45.77 (.70)(b) 7.07 6.37 0.00 (2.38)
Year ended 11/30/95 ............. 31.61 (.58)(b) 17.91 17.33 0.00 (3.17)
1/1/94 to 11/30/94** ............ 25.98 (.24) 5.87 5.63 0.00 0.00
5/3/93++ to 12/31/93 ............ 27.44 (.13) 6.85 6.72 0.00 (8.18)
Quasar Fund
Class A
10/1/96 to 3/31/97+++ ........... $27.92 $ (.11)(b) $ .27 $ .16 $ 0.00 $(4.11)
Year ended 9/30/96 .............. 24.16 (.25) 8.82 8.57 0.00 (4.81)
Year ended 9/30/95 .............. 22.65 (.22)(b) 5.59 5.37 0.00 (3.86)
Year ended 9/30/94 .............. 24.43 (.60) (.36) (.96) 0.00 (.82)
Year ended 9/30/93 .............. 19.34 (.41) 6.38 5.97 0.00 (.88)
Year ended 9/30/92 .............. 21.27 (.24) (1.53) (1.77) 0.00 (.16)
Year ended 9/30/91 .............. 15.67 (.05) 5.71 5.66 (.06) 0.00
Year ended 9/30/90 .............. 24.84 .03 (b) (7.18) (7.15) 0.00 (2.02)
Year ended 9/30/89 .............. 17.60 .02(b) 7.40 7.42 0.00 (.18)
Year ended 9/30/88 .............. 24.47 (.08)(c) (2.08) (2.16) 0.00 (4.71)
Year ended 9/30/87(d) ........... 21.80 (.14)(c) 5.88 5.74 0.00 (3.07)
Class B
10/1/96 to 3/31/97+++ ........... $26.13 $ (.19)(b) $ .24 $ .05 $ 0.00 $(4.11)
Year ended 9/30/96 .............. 23.03 (.20) 8.11 7.91 0.00 (4.81)
Year ended 9/30/95 .............. 21.92 (.37)(b) 5.34 4.97 0.00 (3.86)
Year ended 9/30/94 .............. 23.88 (.53) (.61) (1.14) 0.00 (.82)
Year ended 9/30/93 .............. 19.07 (.18) 5.87 5.69 0.00 (.88)
Year ended 9/30/92 .............. 21.14 (.39) (1.52) (1.91) 0.00 (.16)
Year ended 9/30/91 .............. 15.66 (.13) 5.67 5.54 (.06) 0.00
9/17/90++ to 9/30/90 ............ 17.17 (.01) (1.50) (1.51) 0.00 0.00
Class C
10/1/96 to 3/31/97+++ ........... $26.14 $ (.19)(b) $ .23 $ .04 $ 0.00 $(4.11)
Year ended 9/30/96 .............. 23.05 (.20) 8.10 7.90 0.00 (4.81)
Year ended 9/30/95 .............. 21.92 (.37)(b) 5.36 4.99 0.00 (3.86)
Year ended 9/30/94 .............. 23.88 (.36) (.78) (1.14) 0.00 (.82)
5/3/93++ to 9/30/93 ............. 20.33 (.10) 3.65 3.55 0.00 0.00
International Fund
Class A
Year ended 6/30/97 .............. $18.32 $ .06 (b) $ 1.51 $ 1.57 $ (.12) $(1.08)
Year ended 6/30/96 .............. 16.81 .05 (b) 2.51 2.56 0.00 (1.05)
Year ended 6/30/95 .............. 18.38 .04 .01 .05 0.00 (1.62)
Year ended 6/30/94 .............. 16.01 (.09) 3.02 2.93 0.00 (.56)
Year ended 6/30/93 .............. 14.98 (.01) 1.17 1.16 (.04) (.09)
Year ended 6/30/92 .............. 14.00 .01 (b) 1.04 1.05 (.07) 0.00
Year ended 6/30/91 .............. 17.99 .05 (3.54) (3.49) (.03) (.47)
Year ended 6/30/90 .............. 17.24 .03 2.87 2.90 (.04) (2.11)
Year ended 6/30/89 .............. 16.09 .05 3.73 3.78 (.13) (2.50)
Year ended 6/30/88 .............. 23.70 .17 (1.22) (1.05) (.21) (6.35)
Class B
Year ended 6/30/97 .............. $17.45 $ (.09)(b) $ 1.43 $ 1.34 $ 0.00 $(1.08)
Year ended 6/30/96 .............. 16.19 (.07)(b) 2.38 2.31 0.00 (1.05)
Year ended 6/30/95 .............. 17.90 (.01) (.08) (.09) 0.00 (1.62)
Year ended 6/30/94 .............. 15.74 (.19)(b) 2.91 2.72 0.00 (.56)
Year ended 6/30/93 .............. 14.81 (.12) 1.14 1.02 0.00 (.09)
Year ended 6/30/92 .............. 13.93 (.11)(b) 1.02 .91 (.03) 0.00
9/17/90++ to 6/30/91 ............ 15.52 .03 (1.12) (1.09) (.03) (.47)
Class C
Year ended 6/30/97 .............. $17.46 $ (.09)(b) $ 1.44 $ 1.35 $ 0.00 $(1.08)
Year ended 6/30/96 .............. 16.20 (.07)(b) 2.38 2.31 0.00 (1.05)
Year ended 6/30/95 .............. 17.91 (.14) .05 (.09) 0.00 (1.62)
Year ended 6/30/94 .............. 15.74 (.11) 2.84 2.73 0.00 (.56)
5/3/93++ to 6/30/93 ............. 15.93 0.00 (.19) (.19) 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 18.
10
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
- ------------- ----------- ------------ ------------ ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (.42) $ 51.23 .99% $631,967 1.64%* (.81)%* 28% $ 0.0576
(2.38) 51.15 16.05 594,861 1.74 (.87) 30 0.0612
(3.17) 46.64 61.93 398,262 1.75 (.77) 55 --
0.00 31.98 22.43 202,929 1.66* (1.22)* 55 --
(8.18) 26.12 21.63 173,732 1.73 (1.32) 64 --
(2.27) 28.20 15.50 173,566 1.61 (.90) 73 --
(3.61) 26.38 54.24 191,693 1.71 (.20) 134 --
(1.54) 19.44 (3.08) 131,843 1.77 (.18) 147 --
0.00 21.57 6.00 141,730 1.66 .02 139 --
0.00 20.35 0.64 169,856 1.42 (f) (.16)(f) 139 --
(7.33) 20.22 19.16 167,608 1.31 (f) (.56)(f) 248 --
(.01) 23.11 12.03 147,733 1.13 (f) (.57)(f) 141 --
$ (.42) $ 49.65 .64% $864,200 2.35%* (1.50)%* 28% $ 0.0576
(2.38) 49.76 15.20 660,921 2.44 (1.61) 30 0.0612
(3.17) 45.76 60.95 277,111 2.48 (1.47) 55 --
0.00 31.61 21.67 18,397 2.43* (1.95)* 55 --
(8.18) 25.98 24.49 1,645 2.57* (2.30)* 64 --
$ (.42) $ 49.65 .64% $145,146 2.36%* (1.50)%* 28% $ 0.0576
(2.38) 49.76 15.17 108,488 2.44 (1.60) 30 0.0612
(3.17) 45.77 60.98 43,161 2.48 (1.47) 55 --
0.00 31.61 21.67 7,470 2.41* (1.94)* 55 --
(8.18) 25.98 24.49 1,096 2.52* (2.25)* 64 --
$ (4.11) $ 23.97 .88% $265,131 1.54%* (.81)%* 75% $ 0.0533
(4.81) 27.92 42.42 229,798 1.79 (1.11) 168 0.0596
(3.86) 24.16 30.73 146,663 1.83 (1.06) 160 --
(.82) 22.65 (4.05) 155,470 1.67 (1.15) 110 --
(.88) 24.43 31.58 228,874 1.65 (1.00) 102 --
(.16) 19.34 (8.34) 252,140 1.62 (.89) 128 --
(.06) 21.27 36.28 333,806 1.64 (.22) 118 --
(2.02) 15.67 (30.81) 251,102 1.66 .16 90 --
(.18) 24.84 42.68 263,099 1.73 .10 90 --
(4.71) 17.60 (8.61) 90,713 1.28(f) (.40)(f) 58 --
(3.07) 24.47 29.61 134,676 1.18(f) (.56)(f) 76 --
$ (4.11) $ 22.07 .48% $229,756 2.35%* (1.61)%* 75% $ 0.0533
(4.81) 26.13 41.48 112,490 2.62 (1.96) 168 0.0596
(3.86) 23.03 29.78 16,604 2.65 (1.88) 160 --
(.82) 21.92 (4.92) 13,901 2.50 (1.98) 110 --
(.88) 23.88 30.53 16,779 2.46 (1.81) 102 --
(.16) 19.07 (9.05) 9,454 2.42 (1.67) 128 --
(.06) 21.14 35.54 7,346 2.41 (1.28) 118 --
0.00 15.66 (8.79) 71 2.09* (.26)* 90 --
$ (4.11) $ 22.07 .44% $ 66,742 2.34%* (1.59)%* 75% $ 0.0533
(4.81) 26.14 41.46 28,541 2.61 (1.94) 168 0.0596
(3.86) 23.05 29.87 1,611 2.64* (1.76)* 160 --
(.82) 21.92 (4.92) 1,220 2.48 (1.96) 110 --
0.00 23.88 17.46 118 2.49* (1.90)* 102 --
$ (1.20) $ 18.69 9.30% $190,173 1.74%(l) .31% 94% $ 0.0363
(1.05) 18.32 15.83 196,261 1.72 .31 78 --
(1.62) 16.81 .59 165,584 1.73 .26 119 --
(.56) 18.38 18.68 201,916 1.90 (.50) 97 --
(.13) 16.01 7.86 161,048 1.88 (.14) 94 --
(.07) 14.98 7.52 179,807 1.82 .07 72 --
(.50) 14.00 (19.34) 214,442 1.73 .37 71 --
(2.15) 17.99 16.98 265,999 1.45 .33 37 --
(2.63) 17.24 27.65 166,003 1.41 .39 87 --
(6.56) 16.09 (4.20) 132,319 1.41 .84 55 --
$ (1.08) $ 17.71 8.37% $ 77,725 2.59%(l) (.51)% 94% $ 0.0363
(1.05) 17.45 14.87 72,470 2.55 (.46) 78 --
(1.62) 16.19 (.22) 48,998 2.57 (.62) 119 --
(.56) 17.90 17.65 29,943 2.78 (1.15) 97 --
(.09) 15.74 6.98 6,363 2.70 (.96) 94 --
(.03) 14.81 6.54 5,585 2.68 (.70) 72 --
(.50) 13.93 (6.97) 3,515 3.39* 84* 71 --
$ (1.08) $ 17.73 8.42% $ 23,268 2.58%(l) (.51)% 94% $ 0.0363
(1.05) 17.46 14.85 26,965 2.53 (.47) 78 --
(1.62) 16.20 (.22) 19,395 2.54 (.88) 119 --
(.56) 17.91 17.72 13,503 2.78 (1.12) 97 --
0.00 15.74 (1.19) 229 2.57* .08* 94 --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Net
Net Increase
Asset Net Realized and (Decrease) Dividends Distributions Distributions
Value Of Investment Unrealized In Net Asset From Net in Excess Of From Net
Beginning Income Gain (Loss) On Value From Investment Net Investment Realized
Fiscal Year or Period Period (Loss) Investments Operations Income Income Gains
---------------------- ---------- ---------- --------------- ------------ ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/97 ...... $12.13 $ .15 (b) $ 2.55 $ 2.70 $ (.15) $ 0.00 $(1.42)
Year ended 6/30/96 ...... 10.18 .10 (b) 1.85 1.95 0.00 0.00 0.00
Year ended 6/30/95 ...... 9.75 .06 .37 .43 0.00 0.00 0.00
6/2/94+ to 6/30/94 ...... 10.00 .01 (.26) (.25) 0.00 0.00 0.00
Class B
Year ended 6/30/97 ...... $11.96 $ .08 (b) $ 2.50 $ 2.58 $ (.08) $ 0.00 $(1.42)
Year ended 6/30/96 ...... 10.10 (.02) 1.88 1.86 0.00 0.00 0.00
Year ended 6/30/95 ...... 9.74 .02 .34 .36 0.00 0.00 0.00
6/2/94+ to 6/30/94 ...... 10.00 .00 (.26) (.26) 0.00 0.00 0.00
Class C
Year ended 6/30/97 ...... $11.96 $ .12 (b) $ 2.46 $ 2.58 $ (.08) $ 0.0 $(1.42)
Year ended 6/30/96 ...... 10.10 .03 1.83 1.86 0.00 0.00 0.00
2/8/95++ to 6/30/95 ..... 9.53 .05 .52 .57 0.00 0.00 0.00
New Europe Fund
Class A
Year ended 7/31/97 ...... $15.84 $ .07 (b) $ 4.20 $ 4.27 $ (.15) $ (.03) $(1.32)
Year ended 7/31/96 ...... 15.11 .18 1.02 1.20 0.00 0.00 (.47)
Year ended 7/31/95 ...... 12.66 .04 2.50 2.54 (.09) 0.00 0.00
Period ended 7/31/94** .. 12.53 .09 .04 .13 0.00 0.00 0.00
Year ended 2/28/94 ...... 9.37 .02 (b) 3.14 3.16 0.00 0.00 0.00
Year ended 2/28/93 ...... 9.81 .04 (.33) (.29) (.15) 0.00 0.00
Year ended 2/29/92 ...... 9.76 .02 (b) .05 .07 (.02) 0.00 0.00
4/2/90+ to 2/28/91 ...... 11.11 (e) .26 (.91) (.65) (.26) 0.00 (.44)
Class B
Year ended 7/31/97 ...... $15.31 $ (.04)(b) $ 4.02 $ 3.98 $ 0.00 $ (.10) $(1.32)
Year ended 7/31/96 ...... 14.71 .08 .99 1.07 0.00 0.00 (.47)
Year ended 7/31/95 ...... 12.41 (.05) 2.44 2.39 (.09) 0.00 0.00
Period ended 7/31/94** .. 12.32 .07 .02 .09 0.00 0.00 0.00
Year ended 2/28/94 ...... 9.28 (.05)(b) 3.09 3.04 0.00 0.00 0.00
Year ended 2/28/93 ...... 9.74 (.02) (.33) (.35) (.11) 0.00 0.00
3/5/91++ to 2/29/92 ..... 9.84 (.04)(b) (.04) (.08) (.02) 0.00 0.00
Class C
Year ended 7/31/97 ...... $15.33 $ (.04)(b) $ 4.02 $ 3.98 $ 0.00 $ (.10) $(1.32)
Year ended 7/31/96 ...... 14.72 .08 1.00 1.08 0.00 0.00 (.47)
Year ended 7/31/95 ...... 12.42 (.07) 2.46 2.39 (.09) 0.00 0.00
Period ended 7/31/94** .. 12.33 .06 .03 .09 0.00 0.00 0.00
5/3/93++ to 2/28/94 ..... 10.21 (.04)(b) 2.16 2.12 0.00 0.00 0.00
All-Asia Investment Fund
Class A
11/1/96 to 4/30/97+++ ... $11.04 $ (.13)(b) $ (.50) $ (.63) $ 0.00 $ 0.00 $ (.34)
Year ended 10/31/96 ..... 10.45 (.21)(b)(c) .88 .67 0.00 0.00 (.08)
11/28/94+ to 10/31/95 ... 10.00 (.19)(c) .64 .45 0.00 0.00 0.00
Class B
11/1/96 to 4/30/97+++ ... $10.90 $ (.16)(b) $ (.49) $ (.65) $ 0.00 $ 0.00 $ (.34)
Year ended 10/31/96 ..... 10.41 (.28)(b)(c) .85 .57 0.00 0.00 (.08)
11/28/94+ to 10/31/95 ... 10.00 (.25)(c) .66 .41 0.00 0.00 0.00
Class C
11/1/96 to 4/30/97+++ ... $10.91 $ (.16)(b) $ (.49) $ (.65) $ 0.00 $ 0.00 $ (.34)
Year ended 10/31/96 ..... 10.41 (.28)(b)(c) .86 .58 0.00 0.00 (.08)
11/28/94+ to 10/31/95 ... 10.00 (.35)(c) .76 .41 0.00 0.00 0.00
Global Small Cap Fund
Class A
Year ended 7/31/97 ...... $11.61 $ (.15)(b) $ 2.97 $ 2.82 $ 0.00 $ 0.00 $(1.56)
Year ended 7/31/96 ...... 10.38 (.14)(b) 1.90 1.76 0.00 0.00 (.53)
Year ended 7/31/95 ...... 11.08 (.09) 1.50 1.41 0.00 0.00 (2.11)(j)
Period ended 7/31/94** .. 11.24 (.15)(b) (.01) (.16) 0.00 0.00 0.00
Year ended 9/30/93 ...... 9.33 (.15) 2.49 2.34 0.00 0.00 (.43)
Year ended 9/30/92 ...... 10.55 (.16) (1.03) (1.19) 0.00 0.00 (.03)
Year ended 9/30/91 ...... 8.26 (.06) 2.35 2.29 0.00 0.00 0.00
Year ended 9/30/90 ...... 15.54 (.05)(b) (4.12) (4.17) 0.00 0.00 (3.11)
Year ended 9/30/89 ...... 11.41 (.03) 4.25 4.22 0.00 0.00 (.09)
Year ended 9/30/88 ...... 15.07 (.05) (1.83) (1.88) 0.00 0.00 (1.78)
Year ended 9/30/87 ...... 15.47 (.07) 4.19 4.12 (.04) 0.00 (4.48)
Class B
Year ended 7/31/97 ...... $11.03 $ (.21)(b) $ 2.77 $ 2.56 $ 0.00 $ 0.00 $(1.56)
Year ended 7/31/96 ...... 9.95 (.20)(b) 1.81 1.61 0.00 0.00 (.53)
Year ended 7/31/95 ...... 10.78 (.12) 1.40 1.28 0.00 0.00 (2.11)(j)
Period ended 7/31/94** .. 11.00 (.17)(b) (.05) (.22) 0.00 0.00 0.00
Year ended 9/30/93 ...... 9.20 (.15) 2.38 2.23 0.00 0.00 (.43)
Year ended 9/30/92 ...... 10.49 (.20) (1.06) (1.26) 0.00 0.00 (.03)
Year ended 9/30/91 ...... 8.26 (.07) 2.30 2.23 0.00 0.00 0.00
9/17/90++ to 9/30/90 .... 9.12 (.01) (.85) (.86) 0.00 0.00 0.00
Class C
Year ended 7/31/97 ...... $11.05 $ (.22)(b) $ 2.78 $ 2.56 $ 0.00 $ 0.00 $(1.56)
Year ended 7/31/96 ...... 9.96 (.20)(b) 1.82 1.62 0.00 0.00 (.53)
Year ended 7/31/95 ...... 10.79 (.17) 1.45 1.28 0.00 0.00 (2.11)(j)
Period ended 7/31/94** .. 11.00 (.17)(b) (.04) (.21) 0.00 0.00 0.00
5/3/93++ to 9/30/93 ..... 9.86 (.05) 1.19 1.14 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 18.
12
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
- ------------- ---------- ------------ ------------ ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (1.57) $ 13.26 25.16% $561,793 1.72% 1.27% 48% $ 0.0132
0.00 12.13 19.16 672,732 1.87 .95 28 --
0.00 10.18 4.41 13,535 2.56 .66 36 --
0.00 9.75 (2.50) 4,990 2.75* 1.03* 0 --
$ (1.50) $ 13.04 24.34% $121,173 2.43% .66% 48% $ 0.0132
0.00 11.96 18.42 83,050 2.83 (.20) 28 --
0.00 10.10 3.70 79,359 3.27 .01 36 --
0.00 9.74 (2.60) 22,859 3.45* .33* 0 --
$ (1.50) $ 13.04 24.33% $ 12,929 2.42% 1.06% 48% $ 0.0132
0.00 11.96 18.42 2,383 2.57 .63 28 --
0.00 10.10 5.98 338 3.27* 2.65* 36 --
$ (1.50) $ 18.61 28.78% $ 78,578 2.05%(l) .40% 89% $ 0.0569
(.47) 15.84 8.20 74,026 2.14 1.10 69 --
(.09) 15.11 20.22 86,112 2.09 .37 74 --
0.00 12.66 1.04 86,739 2.06* 1.85* 35 --
0.00 12.53 33.73 90,372 2.30 .17 94 --
(.15) 9.37 (2.82) 79,285 2.25 .47 125 --
(.02) 9.81 .74 108,510 2.24 .16 34 --
(.70) 9.76 (5.63) 188,016 1.52* 2.71* 48 --
$ (1.42) $ 17.87 27.76% $ 66,032 2.75%(l) (.23)% 89% $ 0.0569
(.47) 15.31 7.53 42,662 2.86 .59 69 --
(.09) 14.71 19.42 34,527 2.79 (.33) 74 --
0.00 12.41 .73 31,404 2.76* 1.15* 35 --
0.00 12.32 32.76 20,729 3.02 (.52) 94 --
(.11) 9.28 (3.49) 1,732 3.00 (.50) 125 --
(.02) 9.74 .03 1,423 3.02* (.71)* 34 --
$ (1.42) $ 17.89 27.73% $ 16,907 2.74%(l) (.23)% 89% $ 0.0569
(.47) 15.33 7.59 10,141 2.87 .58 69 --
(.09) 14.72 19.40 7,802 2.78 (.33) 74 --
0.00 12.42 .73 11,875 2.76* 1.15* 35 --
0.00 12.33 20.77 10,886 3.00* (.52)* 94 --
$ (.34) $ 10.07 (5.99)% $ 8,840 3.45%* (2.29)%* 56% $ 0.0269
(.08) 11.04 6.43 12,284 3.37*(f) (1.75) 66 0.0280
0.00 10.45 4.50 2,870 4.42*(f) (1.87)* 90 --
$ (.34) $ 9.91 (6.26)% $ 19,696 4.16%* (2.99)%* 56% $ 0.0269
(.08) 10.90 5.49 23,784 4.07(f) (2.44) 66 0.0280
0.00 10.41 4.10 5,170 5.20*(f) (2.64)* 90 --
$ (.34) $ 9.92 (6.25)% $ 2,898 4.14%* (2.98)%* 56% $ 0.0269
(.08) 10.91 5.59 4,228 4.07(f) (2.42) 66 0.0280
0.00 10.41 4.10 597 5.84*(f) (3.41)* 90 --
$ (1.56) $ 12.87 26.47% $ 85,217 2.41%(l) (1.25)% 129% $ 0.0364
(.53) 11.61 17.46 68,623 2.51 (1.22) 139 --
(2.11) 10.38 16.62 60,057 2.54(f) (1.17) 128 --
0.00 11.08 (1.42) 61,372 2.42* (1.26)* 78 --
(.43) 11.24 25.83 65,713 2.53 (1.13) 97 --
(.03) 9.33 (11.30) 58,491 2.34 (.85) 108 --
0.00 10.55 27.72 84,370 2.29 (.55) 104 --
(3.11) 8.26 (31.90) 68,316 1.73 (.46) 89 --
(.09) 15.54 37.34 113,583 1.56 (.17) 106 --
(1.78) 11.41 (8.11) 90,071 1.54(f) (.50) 74 --
(4.52) 15.07 34.11 113,305 1.41(f) (.44) 98 --
$ (1.56) $ 12.03 25.42% $ 31,946 3.11%(l) (1.92)% 129% $ 0.0364
(.53) 11.03 16.69 14,247 3.21 (1.88) 139 --
(2.11) 9.95 15.77 5,164 3.20(f) (1.92) 128 --
0.00 10.78 (2.00) 3,889 3.15* (1.93)* 78 --
(.43) 11.00 24.97 1,150 3.26 (1.85) 97 --
(.03) 9.20 (12.03) 819 3.11 (1.31) 108 --
0.00 10.49 27.00 121 2.98 (1.39) 104 --
0.00 8.26 (9.43) 183 2.61* (1.30)* 89 --
$ (1.56) $ 12.05 25.37% $ 8,718 3.10%(l) (1.93)% 129% $ 0.0364
(.53) 11.05 16.77 4,119 3.19 (1.85) 139 --
(2.11) 9.96 15.75 1,407 3.25(f) (2.10) 128 --
0.00 10.79 (1.91) 1,330 3.13* (1.92)* 78 --
0.00 11.00 11.56 261 3.75* (2.51)* 97 --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
---------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Strategic Balanced Fund (i)
Class A
Year ended 7/31/97 .......... $18.48 $ .47(b)(c) $ 3.56 $ 4.03 $ (.39) $(2.33)
Year ended 7/31/96 .......... 17.98 .35(b)(c) 1.08 1.43 (.32) (.61)
Year ended 7/31/95 .......... 16.26 .34(c) 1.64 1.98 (.22) (.04)
Period ended 7/31/94** ...... 16.46 .07(c) (.27) (.20) 0.00 0.00
Year ended 4/30/94 .......... 16.97 .16(c) .74 .90 (.24) (1.17)
Year ended 4/30/93 .......... 17.06 .39(c) .59 .98 (.42) (.65)
Year ended 4/30/92 .......... 14.48 .27(c) 2.80 3.07 (.17) (.32)
9/4/90++ to 4/30/91 ......... 12.51 .34(c) 1.66 2.00 (.03) 0.00
Class B
Year ended 7/31/97 .......... $15.89 $ .28(b)(c) $ 3.02 $ 3.30 $ (.27) $(2.33)
Year ended 7/31/96 .......... 15.56 .16(b)(c) .98 1.14 (.20) (.61)
Year ended 7/31/95 .......... 14.10 .22(c) 1.40 1.62 (.12) (.04)
Period ended 7/31/94** ...... 14.30 .03(c) (.23) (.20) 0.00 0.00
Year ended 4/30/94 .......... 14.92 .06(c) .63 .69 (.14) (1.17)
Year ended 4/30/93 .......... 15.51 .23(c) .53 .76 (.25) (1.10)
Year ended 4/30/92 .......... 13.96 .22(c) 2.70 2.92 (.29) (1.08)
Year ended 4/30/91 .......... 12.40 .43(c) 1.60 2.03 (.47) 0.00
Year ended 4/30/90 .......... 11.97 .50(b)(c) .60 1.10 (.25) (.42)
Year ended 4/30/89 .......... 11.45 .48(c) 1.11 1.59 (.30) (.77)
10/23/87+ to 4/30/88 ........ 10.00 .13(c) 1.38 1.51 (.06) 0.00
Class C
Year ended 7/31/97 .......... $15.89 $ .28(b)(c) $ 3.02 $ 3.30 $ (.27) $(2.33)
Year ended 7/31/96 .......... 15.57 .14(b)(c) .99 1.13 (.20) (.61)
Year ended 7/31/95 .......... 14.11 .16(c) 1.46 1.62 (.12) (.04)
Period ended 7/31/94** ...... 14.31 .03(c) (.23) (.20) 0.00 0.00
8/2/93++ to 4/30/94 ......... 15.64 .15(c) (.17) (.02) (.14) (1.17)
Balanced Shares
Class A
Year ended 7/31/97 .......... $14.01 $ .31(b) $ 3.97 $ 4.28 $ (.32) $(1.80)
Year ended 7/31/96 .......... 15.08 .37 .45 .82 (.41) (1.48)
Year ended 7/31/95 .......... 13.38 .46 1.62 2.08 (.36) (.02)
Period ended 7/31/94** ...... 14.40 .29 (.74) (.45) (.28) (.29)
Year ended 9/30/93 .......... 13.20 .34 1.29 1.63 (.43) 0.00
Year ended 9/30/92 .......... 12.64 .44 .57 1.01 (.45) 0.00
Year ended 9/30/91 .......... 10.41 .46 2.17 2.63 (.40) 0.00
Year ended 9/30/90 .......... 14.13 .45 (2.14) (1.69) (.40) (1.63)
Year ended 9/30/89 .......... 12.53 .42 2.18 2.60 (.46) (.54)
Year ended 9/30/88 .......... 16.33 .46 (1.07) (.61) (.44) (2.75)
Year ended 9/30/87 .......... 14.64 .67 1.62 2.29 (.60) 0.00
Class B
Year ended 7/31/97 .......... $13.79 $ .19(b) $ 3.89 $ 4.08 $ (.24) $(1.80)
Year ended 7/31/96 .......... 14.88 .28 .42 .70 (.31) (1.48)
Year ended 7/31/95 .......... 13.23 .30 1.65 1.95 (.28) (.02)
Period ended 7/31/94** ...... 14.27 .22 (.75) (.53) (.22) (.29)
Year ended 9/30/93 .......... 13.13 .29 1.22 1.51 (.37) 0.00
Year ended 9/30/92 .......... 12.61 .37 .54 .91 (.39) 0.00
2/4/91++ to 9/30/91 ......... 11.84 .25 .80 1.05 (.28) 0.00
Class C
Year ended 7/31/97 .......... $13.81 $ .20(b) $ 3.89 $ 4.09 $ (.24) $(1.80)
Year ended 7/31/96 .......... 14.89 .26 .45 .71 (.31) (1.48)
Year ended 7/31/95 .......... 13.24 .30 1.65 1.95 (.28) (.02)
Period ended 7/31/94** ...... 14.28 .24 (.77) (.53) (.22) (.29)
5/3/93++ to 9/30/93 ......... 13.63 .11 .71 .82 (.17) 0.00
Income Builder Fund (h)
Class A
11/1/96 to 4/30/97+++ ....... $11.57 $ .24(b) $ .69 $ .93 $ (.25) $ (.61)
Year ended 10/31/96 ......... 10.70 .56(b) .98 1.54 (.55) (.12)
Year ended 10/31/95 ......... 9.69 .93(b) .59 1.52 (.51) 0.00
3/25/94++ to 10/31/94 ....... 10.00 .96 (1.02) (.06) (.05)(g) (.20)
Class B
11/1/96 to 4/30/97+++ ....... $11.55 $ .20(b) $ .70 $ .90 $ (.22) $ (.61)
Year ended 10/31/96 ......... 10.70 .47(b) .98 1.45 (.48) (.12)
Year ended 10/31/95 ......... 9.68 .63(b) .83 1.46 (.44) 0.00
3/25/94++ to 10/31/94 ....... 10.00 .88 (.98) (.10) (.06)(g) (.16)
Class C
11/1/96 to 4/30/97+++ ....... $11.52 $ .21(b) $ .68 $ .89 $ (.22) $ (.61)
Year ended 10/31/96 ......... 10.67 .46(b) .99 1.45 (.48) (.12)
Year ended 10/31/95 ......... 9.66 .40(b) 1.05 1.45 (.44) 0.00
Year ended 10/31/94 ......... 10.47 .50 (.85) (.35) (.11)(g) (.35)
Year ended 10/31/93 ......... 9.80 .52 .51 1.03 (.36) 0.00
Year ended 10/31/92 ......... 10.00 .55 (.28) .27 (.47) 0.00
10/25/91+ to 10/31/91 ....... 10.00 .01 0.00 .01 (.01) 0.00
Utility Income Fund
Class A
12/1/96 to 5/31/97+++ ....... $10.59 $ .16(b)(c) $ .07 $ .23 $ (.18) $ (.13)
Year ended 11/30/96 ......... 10.22 .18(b)(c) .65 .83 (.46) 0.00
Year ended 11/30/95 ......... 8.97 .27(c) 1.43 1.70 (.45) 0.00
Year ended 11/30/94 ......... 9.92 .42(c) (.89) (.47) (.48) 0.00
10/18/93+ to 11/30/93 ....... 10.00 .02(c) (.10) (.08) 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 18.
14
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
- ------------- --------- ------------ ------------ ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (2.72) $ 19.79 23.90% $ 20,312 1.41%(f)(l) 2.50%(c) 170% $ 0.0395
(.93) 18.48 8.05 18,329 1.40(f) 1.78 173 --
(.26) 17.98 12.40 10,952 1.40(f) 2.07 172 --
0.00 16.26 (1.22) 9,640 1.40(f) 1.63* 21 --
(1.41) 16.46 5.06 9,822 1.40*(f) 1.67 139 --
(1.07) 16.97 5.85 8,637 1.40(f) 2.29 98 --
(.49) 17.06 20.96 6,843 1.40(f) 1.92 103 --
(.03) 14.48 16.00 443 1.40*(f) 3.54* 137 --
$ (2.60) $ 16.59 23.01% $ 28,037 2.12%(f)(l) 1.78%(f) 170% $ 0.0395
(.81) 15.89 7.41 28,492 2.10(f) .99(f) 173 --
(.16) 15.56 11.63 37,301 2.10(f) 1.38(f) 172 --
0.00 14.10 (1.40) 43,578 2.10*(f) .92*(f) 21 --
(1.31) 14.30 4.29 43,616 2.10(f) .93(f) 139 --
(1.35) 14.92 4.96 36,155 2.15(f) 1.55(f) 98 --
(1.37) 15.51 20.14 31,842 2.15(f) 1.34(f) 103 --
(.47) 13.96 16.73 22,552 2.10(f) 3.23(f) 137 --
(.67) 12.40 8.85 19,523 2.00(f) 3.85(f) 120 --
(1.07) 11.97 14.66 5,128 2.00(f) 4.31(f) 103 --
(.06) 11.45 15.10 2,344 2.00*(f) 2.44*(f) 72 --
$ (2.60) $ 16.59 23.01% $ 3,045 2.12%(f)(l) 1.78% 170% $ 0.0395
(.81) 15.89 7.34 3,157 2.10(f) .99 173 --
(.16) 15.57 11.62 4,113 2.10(f) 1.38 172 --
0.00 14.11 (1.40) 4,317 2.10*(f) .93* 21 --
(1.31) 14.31 .45 4,289 2.10*(f) .69* 139 --
$ (2.12) $ 16.17 33.46% $115,500 1.47%(l) 2.11% 207% $ 0.0552
(1.89) 14.01 5.23 102,567 1.38 2.41 227 --
(.38) 15.08 15.99 122,033 1.32 3.12 179 --
(.57) 13.38 (3.21) 157,637 1.27* 2.50* 116 --
(.43) 14.40 12.52 172,484 1.35 2.50 188 --
(.45) 13.20 8.14 143,883 1.40 3.26 204 --
(.40) 12.64 25.52 154,230 1.44 3.75 70 --
(2.03) 10.41 (13.12) 140,913 1.36 4.01 169 --
(1.00) 14.13 22.27 159,290 1.42 3.29 132 --
(3.19) 12.53 (1.10) 111,515 1.42 3.74 190 --
(.60) 16.33 15.80 129,786 1.17 4.14 136 --
$ (2.04) $ 15.83 32.34% $ 24,192 2.25%(l) 1.32% 207% $ 0.0552
(1.79) 13.79 4.45 18,393 2.16 1.61 227 --
(.30) 14.88 15.07 15,080 2.11 2.30 179 --
(.51) 13.23 (3.80) 14,347 2.05* 1.73* 116 --
(.37) 14.27 11.65 12,789 2.13 1.72 188 --
(.39) 13.13 7.32 6,499 2.16 2.46 204 --
(.28) 12.61 8.96 1,830 2.13* 3.19* 70 --
$ (2.04) $ 15.86 32.37% $ 5,510 2.23%(l) 1.37% 207% $ 0.0552
(1.79) 13.81 4.52 6,096 2.15 1.63 227 --
(.30) 14.89 15.06 5,108 2.09 2.32 179 --
(.51) 13.24 (3.80) 6,254 2.03* 1.81* 116 --
(.17) 14.28 6.01 1,487 2.29* 1.47* 188 --
$ (.86) $ 11.64 8.31% $ 1,943 2.30%* 4.22%* 169% $ 0.0519
(.67) 11.57 14.82 2,056 2.20 4.92 108 0.0600
(.51) 10.70 16.22 1,398 2.38 5.44 92 --
(.25) 9.69 (.54) 600 2.52* 6.11* 126 --
$ (.83) $ 11.62 8.01% $ 7,328 3.01%* 3.53%* 169% $ 0.0519
(.60) 11.55 13.92 5,775 2.92 4.19 108 0.0600
(.44) 10.70 15.55 3,769 3.09 4.73 92 --
(.22) 9.68 (.99) 1,998 3.09* 5.07* 126 --
$ (.83) $ 11.58 7.94% $ 43,577 3.00%* 3.53%* 169% $ 0.0519
(.60) 11.52 13.96 44,441 2.93 4.13 108 0.0600
(.44) 10.67 15.47 49,107 3.02 4.81 92 --
(.46) 9.66 (3.44) 64,027 2.67 3.82 126 --
(.36) 10.47 10.65 106,034 2.32 6.85 101 --
(.47) 9.80 2.70 152,617 2.33 5.47 108 --
(.01) 10.00 .11 41,813 0.00*(f) .94* 0 --
$ (.31) $ 10.51 2.19% $ 3,571 1.50%*(f) 3.06%* 23% $ 0.0411
(.46) 10.59 8.47 3,294 1.50(f) 1.67 98 0.0536
(.45) 10.22 19.58 2,748 1.50(f) 2.48 162 --
(.48) 8.97 (4.86) 1,068 1.50(f) 4.13 30 --
0.00 9.92 (.80) 229 1.50*(f) 2.35* 11 --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
---------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Utility Income Fund (continued)
Class B
12/1/96 to 5/31/97+++ ......... $10.57 $ .12(b)(c) $ .08 $ .20 $ (.15) $ (.13)
Year ended 11/30/96 ........... 10.20 .10(b)(c) .67 .77 (.40) 0.00
Year ended 11/30/95 ........... 8.96 .18(c) 1.45 1.63 (.39) 0.00
Year ended 11/30/94 ........... 9.91 .37(c) (.91) (.54) (.41) 0.00
10/18/93+ 11/30/93 ............ 10.00 .01(c) (.10) (.09) 0.00 0.00
Class C
12/1/96 to 5/31/97+++ ......... $10.59 $ .12(b)(c) $ .07 $ .19 $ (.15) $ (.13)
Year ended 11/30/96 ........... 10.22 .11(b)(c) .66 .77 (.40) 0.00
Year ended 11/30/95 ........... 8.97 .18(c) 1.46 1.64 (.39) 0.00
Year ended 11/30/94 ........... 9.92 .39(c) (.93) (.54) (.41) 0.00
10/27/93+ to 11/30/93 ......... 10.00 .01(c) (.09) (.08) 0.00 0.00
Growth and Income Fund
Class A
11/1/96 to 4/30/97+++ ......... $ 3.00 $ .03(b) $ .36 $ .39 $ (.03) $ (.38)
Year ended 10/31/96 ........... 2.71 .05 .50 .55 (.05) (.21)
Year ended 10/31/95 ........... 2.35 .02 .52 .54 (.06) (.12)
Year ended 10/31/94 ........... 2.61 .06 (.08) (.02) (.06) (.18)
Year ended 10/31/93 ........... 2.48 .06 .29 .35 (.06) (.16)
Year ended 10/31/92 ........... 2.52 .06 .11 .17 (.06) (.15)
Year ended 10/31/91 ........... 2.28 .07 .56 .63 (.09) (.30)
Year ended 10/31/90 ........... 3.02 .09 (.30) (.21) (.10) (.43)
Year ended 10/31/89 ........... 3.05 .10 .43 .53 (.08) (.48)
Year ended 10/31/88 ........... 3.48 .10 .33 .43 (.08) (.78)
Year ended 10/31/87 ........... 3.52 .11 (.03) .08 (.12) 0.00
Class B
11/1/96 to 4/30/97+++ ......... $ 2.99 $ .01(b) $ .36 $ .37 $ (.02) $ (.38)
Year ended 10/31/96 ........... 2.69 .03 .51 .54 (.03) (.21)
Year ended 10/31/95 ........... 2.34 .01 .49 .50 (.03) (.12)
Year ended 10/31/94 ........... 2.60 .04 (.08) (.04) (.04) (.18)
Year ended 10/31/93 ........... 2.47 .05 .28 .33 (.04) (.16)
Year ended 10/31/92 ........... 2.52 .04 .11 .15 (.05) (.15)
2/8/91++ to 10/31/91 .......... 2.40 .04 .12 .16 (.04) 0.00
Class C
11/1/96 to 4/30/97+++ ......... $ 2.99 $ .01(b) $ .37 $ .38 $ (.02) $ (.38)
Year ended 10/31/96 ........... 2.70 .03 .50 .53 (.03) (.21)
Year ended 10/31/95 ........... 2.34 .01 .50 .51 (.03) (.12)
Year ended 10/31/94 ........... 2.60 .04 (.08) (.04) (.04) (.18)
5/3/93 ++ to 10/31/93 ......... 2.43 .02 .17 .19 (.02) 0.00
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 ........... $10.00 $ .30(b) $ 2.88 $ 3.18 $ (.38)(m) $ 0.00
Class B
Year ended 10/1/96+ to 8/31/97 $10.00 $ .23(b) $ 2.89 $ 3.12 $ (.33)(m) $ 0.00
Class C
Year ended 10/1/96+ to 8/31/97 $10.00 $ .23(b) $ 2.89 $ 3.12 $ (.33)(m) $ 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 18.
16
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
- ------------- --------- ------------ ------------ ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (.28) $ 10.49 1.86% $ 12,972 2.20%*(f) 2.40%* 23% $0.0411
(.40) 10.57 7.82 13,561 2.20(f) .95 98 0.0536
(.39) 10.20 18.66 10,988 2.20(f) 1.60 162 --
(.41) 8.96 (5.59) 2,353 2.20(f) 3.53 30 --
0.00 9.91 (.90) 244 2.20*(f) 2.84* 11 --
$ (.28) $ 10.50 1.76% $ 3,195 2.20%*(f) 2.39%* 23% $0.0411
(.40) 10.59 7.81 3,376 2.20(f) .94 98 0.0536
(.39) 10.22 18.76 3,500 2.20(f) 1.88 162 --
(.41) 8.97 (5.58) 2,651 2.20(f) 3.60 30 --
0.00 9.92 (.80) 18 2.20*(f) 3.08* 11 --
$ (.41) $ 2.98 13.29% $628,306 .91%* 1.76%* 55% $0.0585
(.26) 3.00 21.51 553,151 .97 1.73 88 0.0625
(.18) 2.71 24.21 458,158 1.05 1.88 142 --
(.24) 2.35 (.67) 414,386 1.03 2.36 68 --
(.22) 2.61 14.98 459,372 1.07 2.38 91 --
(.21) 2.48 7.23 417,018 1.09 2.63 104 --
(.39) 2.52 31.03 409,597 1.14 2.74 84 --
(.53) 2.28 (8.55) 314,670 1.09 3.40 76 --
(.56) 3.02 21.59 377,168 1.08 3.49 79 --
(.86) 3.05 16.45 350,510 1.09 3.09 66 --
(.12) 3.48 2.04 348,375 .86 2.77 60 --
$ (.40) $ 2.96 12.60% $326,163 1.72%* .96%* 55% $0.0585
(.24) 2.99 21.20 235,263 1.78 .91 88 0.0625
(.15) 2.69 22.84 136,758 1.86 1.05 142 --
(.22) 2.34 (1.50) 102,546 1.85 1.56 68 --
(.20) 2.60 14.22 76,633 1.90 1.58 91 --
(.20) 2.47 6.22 29,656 1.90 1.69 104 --
(.04) 2.52 6.83 10,221 1.99* 1.67* 84 --
$ (.40) $ 2.97 12.98% $ 78,967 1.70%* .97%* 55% $0.0585
(.24) 2.99 20.72 61,356 1.76 .93 88 0.0625
(.15) 2.70 23.30 35,835 1.84 1.04 142 --
(.22) 2.34 (1.50) 19,395 1.84 1.61 68 --
(.02) 2.60 7.85 7,774 1.96* 1.45* 91 --
$ (.38) $ 12.80 32.24% $ 37,638 1.77%*(l) 2.73%* 20% $0.0518
$ (.33) $ 12.79 31.49% $186,802 2.44%*(l) 2.08%* 20% $0.0518
$ (.33) $ 12.79 31.49% $ 42,719 2.43%*(l) 2.06%* 20% $0.0518
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
- ----------
+ Commencement of operations.
++ Commencement of distribution.
+++ Unaudited.
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment returns calculated for periods of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and/or expense reimbursement.
(d) Adjusted for a 200% stock dividend paid to shareholders of record on
January 15, 1988.
(e) Net of offering costs of ($.05).
(f) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, giving effect to the expense offset arrangement described
in (l) below, would have been as follows:
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
All-Asia Investment Fund
Class A -- -- 10.57%# 3.62% --
Class B -- -- 11.32%# 4.32% --
Class C -- -- 11.38%# 4.32% --
Growth Fund
Class A 1.94% 1.84% 1.46% -- -- --
Class B 2.65% 2.52% 2.13% -- -- --
Class C -- -- 2.13%# --
Premier Growth
Class A 3.33%# -- -- -- -- --
Class B 3.78%# -- -- -- -- --
<CAPTION>
Net investment income ratios for Premier Growth would have been (.25%#) for
Class A and (.75%#) for Class B for this same period.
<S> <C> <C> <C> <C> <C>
Global Small Cap Fund
Class A -- -- 2.61% -- --
Class B -- -- 3.27% -- --
Class C -- -- 3.31% -- --
Strategic Balanced Fund
Class A 1.85% 1.70%1 1.81% 1.76% 2.06%
1.94%#2
Class B 2.56% 2.42%1 2.49% 2.47% 2.76%
2.64%#2
Class C -- 2.07%#1 2.50% 2.48% 2.76%
2.64%#2
Utility Income Fund
Class A 145.63%# 13.72% 4.86%# 3.38% 3.41%
Class B 133.62%# 14.42% 5.34%# 4.08% 4.12%
Class C 148.03%# 14.42% 5.99%# 4.07% 4.11%
</TABLE>
- ----------
# annualized
1. For the period ended April 30, 1994
2. For the period ended July 31, 1994
For the expense ratios of the Funds in years prior to fiscal year 1992, assuming
the Funds had borne all expenses, please see the Financial Statements in each
Fund's Statement of Additional Information.
(g) "Dividends from Net Investment Income" includes a return of capital. Income
Builder Fund had a return of capital with respect to Class A shares, for
the period ended October 31, 1994, of $(.01); with respect to Class B
shares, $(.01); and with respect to Class C shares, for the year ended
October 31, 1994, $(.02).
(h) On March 25, 1994, all existing shares of Income Builder Fund, previously
known as Alliance Multi-Market Income and Growth Trust, were converted into
Class C shares.
(i) Prior to July 22, 1993, Equitable Capital Management Corporation
("Equitable Capital") served as the investment adviser to the predecessor
to The Alliance Portfolios, of which Growth Fund and Strategic Balanced
Fund are series. On July 22, 1993, Alliance acquired the business and
substantially all assets of Equitable Capital and became investment adviser
to the Funds.
(j) "Distributions from Net Realized Gains" includes a return of capital of
$(.12).
(k) 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.
(l) The following funds benefitted from an expense offset arrangement with the
transfer agent. Had such expense offset not been in effect, the ratio of
expenses to average net assets, absent the assumption and/or
waiver/reimbursement of expenses described in (f) above, would have been as
follows:
<TABLE>
<CAPTION>
Balanced Shares 1997 International Fund 1997 Strategic Balanced 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 1.46% Class A 1.73% Class A 1.40%
Class B 2.24% Class B 2.58% Class B 2.10%
Class C 2.22% Class C 2.56% Class C 2.10%
<CAPTION>
Real Estate 1997 Global Small Cap Fund 1997 New Europe 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 1.77% Class A 2.38% Class A 2.04%
Class B 2.43% Class B 3.08% Class B 2.74%
Class C 2.42% Class C 3.08% Class C 2.73%
</TABLE>
(m) Distributions from net investment income include a tax return of capital of
$.08, $.09 and $.09 for Class A, B and C shares, respectively.
18
<PAGE>
- -------------------------------------------------------------------------------
GLOSSARY
- -------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus.
Equity securities are (i) common stocks, partnership interests, business trust
shares and other equity or ownership interests in business enterprises, and (ii)
securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
Hong Kong, the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch Investors Service, L.P.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
19
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- --------------------------------------------------------------------------------
Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
Domestic Stock Funds
The Domestic Stock Funds have been designed to offer investors seeking capital
appreciation a range of alternative approaches to investing in the U.S. equity
markets.
The Alliance Fund
The Alliance Fund, Inc. ("Alliance Fund") is a diversified investment company
that seeks long-term growth of capital and income primarily through investment
in common stocks. The Fund normally invests substantially all of its assets in
common stocks that Alliance believes will appreciate in value, but it may invest
in other types of securities such as convertible securities, high grade
instruments, U.S. Government securities and high quality, short-term obligations
such as repurchase agreements, bankers' acceptances and domestic certificates of
deposit, and may invest without limit in foreign securities. While the
diversification and generally high quality of the Fund's investments cannot
prevent fluctuations in market values, they tend to limit investment risk and
contribute to achieving the Fund's objective. The Fund generally does not effect
portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund may also: (i) make secured loans of its portfolio securities equal in
value up to 25% of its total assets to brokers, dealers and financial
institutions; (ii) enter into repurchase agreements of up to one week in
duration with commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily available
market quotations do not exceed 10% of its net assets; and (iii) write
exchange-traded covered call options with respect to up to 25% of its total
assets. For additional information on the use, risks and costs of these policies
and practices see "Additional Investment Practices."
Alliance Growth Fund
Alliance Growth Fund ("Growth Fund") is a diversified investment company that
seeks long-term growth of capital. Current income is only an incidental
consideration. The Fund seeks to achieve its objective by investing primarily in
equity securities of companies with favorable earnings outlooks and whose
long-term growth rates are expected to exceed that of the U.S. economy over
time. The Fund's investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated
fixed-income and convertible bonds. See "Risk Considerations--Securities
Ratings" and "--Investment in Lower-Rated Fixed-Income Securities." The Fund
generally will not invest in securities rated at the time of purchase below Caa-
by Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. If the credit rating of a
security held by the Fund falls below its rating at the time of purchase (or
Alliance determines that the quality of such security has so deteriorated), the
Fund may continue to hold the security if such investment is considered
appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements of up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40 companies will be represented in the Fund's
portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity securities of which are traded principally in the U.S.
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis
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and research of its large internal research staff, which generally follows a
primary research universe of more than 600 companies that have strong
management, superior industry positions, excellent balance sheets and superior
earnings growth prospects. An emphasis is placed on identifying companies whose
substantially above average prospective earnings growth is not fully reflected
in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options; (ii)
invest up to 10% of its total assets in warrants; (iii) invest in restricted
securities and in other assets having no ready market if as a result no more
than 10% of the Fund's net assets are invested in such securities and assets;
(iv) lend portfolio securities equal in value to not more than 30% of the Fund's
total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities,
Alliance considers the economic and political outlook, the values of specific
securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10% of its total assets may be
invested in such securities or assets; (ii) make short sales of securities
"against the box," but not more than 15% of its net assets may be deposited on
short sales; and (iii) write call options and purchase and sell
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put and call options written by others. For additional information on the use,
risks and costs of these policies and practices see "Additional Investment
Practices."
Global Stock Funds
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. In this
regard, at June 30, 1997, approximately 28% of the Fund's assets were invested
in securities of Japanese issuers. The Fund may invest in companies, wherever
organized, that Alliance judges have their principal activities and interests
outside the U.S. These companies may be located in developing countries, which
involves exposure to economic structures that are generally less diverse and
mature, and to political systems which can be expected to have less stability,
than those of developed countries. The Fund currently does not intend to invest
more than 10% of its total assets in companies in, or governments of, developing
countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or
over-the-counter; (v) lend portfolio securities equal in value to not more than
30% of its total assets; and (vi) enter into repurchase agreements of up to
seven days' duration, provided that not more than 10% of the Fund's total assets
would be so invested. For additional information on the use, risks and costs of
these policies and practices see "Additional Investment Practices."
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy, and the
Fund will thus emphasize investments in such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established
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economies, including France, Great Britain, Germany and Italy, and those with
developing economies, including Argentina, Mexico, Chile, Indonesia, Malaysia,
Poland and Hungary, are engaged in privatizations. The Fund will invest in any
country believed to present attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its investments in
any industry, it is permitted to invest more than 25% of its total assets in
issuers whose primary business activity is that of national commercial banking.
Prior to so concentrating, however, the Fund's Directors must determine that its
ability to achieve its investment objective would be adversely affected if it
were not permitted to concentrate. The staff of the Commission is of the view
that registered investment companies may not, absent shareholder approval,
change between concentration and non-concentration in a single industry. The
Fund disagrees with the staff's position but has undertaken that it will not
concentrate in the securities of national commercial banks until, if ever, the
issue is resolved. If the Fund were to invest more than 25% of its total assets
in national commercial banks, the Fund's performance could be significantly
influenced by events or conditions affecting this industry, which is subject to,
among other things, increases in interest rates and deteriorations in general
economic conditions, and the Fund's investments may be subject to greater risk
and market fluctuation than if its portfolio represented a broader range of
investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain
a non-convertible security that is downgraded below C or determined by Alliance
to have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter in forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund will invest in companies that Alliance
believes possess rapid growth potential. Thus, the Fund will emphasize
investments in larger, established companies, but will also invest in smaller,
emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although the Fund will not invest more than 20% of its total assets in
issuers based therein, or more than 10% of its total assets in issuers based in
any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country, at times 25% or more of its assets may be
invested in issuers located in a single country. During such times, the Fund
would be subject to a correspondingly greater risk of loss due to
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adverse political or regulatory developments, or an economic downturn, within
that country. In this regard, at July 31, 1997, approximately 32% of the Fund's
assets were invested in securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a
non-diversified investment company whose investment objective is to seek
long-term capital appreciation. In seeking to achieve its investment objective,
the Fund will invest at least 65% of its total assets in equity securities (for
the purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, but less than 50%, of its
assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and India have recently relaxed investment
restrictions and Vietnamese direct investments have recently become available to
U.S. investors. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings", "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of Additional Information for
a description of such ratings. The Fund will not retain a security that is
downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and
"semi-governmental securities;" (iv) invest up to 25% of its net assets in
equity-linked debt securities with the objective of realizing capital
appreciation; (v) invest up to 25% of its net assets in loans and other direct
debt instruments; (vi) write covered put and call options on
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securities of the types in which it is permitted to invest and on
exchange-traded index options; (vii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, securities issued by foreign government entities, or common stock
and may purchase and write options on future contracts; (viii) purchase and
write put and call options on foreign currencies for hedging purposes; (ix)
purchase or sell forward contracts; (x) enter into interest rate swaps and
purchase or sell interest rate caps and floors; (xi) enter into forward
commitments for the purchase or sale of securities; (xii) enter into standby
commitment agreements; (xiii) enter into currency swaps for hedging purposes;
(xiv) enter into repurchase agreements pertaining to U.S. Government securities
with member banks of the Federal Reserve System or primary dealers in such
securities; (xv) make short sales of securities or maintain a short position, in
each case only if "against the box;" and (xvi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1 billion. Because the
Fund applies the U.S. size standard on a global basis, its foreign investments
might rank above the lowest 20%, and, in fact, might in some countries rank
among the largest, by market capitalization in local markets. Normally, the Fund
invests at least 65% of its assets in equity securities of these smaller
capitalization issuers, and these issuers are located in at least three
countries, one of which may be the U.S. Up to 35% of the Fund's total assets may
be invested in securities of companies whose market capitalizations exceed the
Fund's size standard. The Fund's portfolio securities may be listed on a U.S. or
foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Total Return Funds
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current income.
Alliance Strategic Balanced Fund
Alliance Strategic Balanced Fund ("Strategic Balanced Fund") is a diversified
investment company that seeks a high long-term total return by investing in a
combination of equity and debt securities. The portion of the Fund's assets
invested in each type of security varies in accordance with economic conditions,
the general level of common stock prices, interest rates and other relevant
considerations, including the risks associated with each investment medium. The
Fund's investment objective is not fundamental.
The Fund's equity securities will generally consist of dividend-paying common
stocks and other equity securities of companies with favorable earnings outlooks
and long-term growth rates that Alliance expects will exceed that of the U.S.
economy. The Fund's debt securities may include U.S. Government securities and
securities issued by private corporations. The Fund may also invest in
mortgage-backed securities, adjustable rate securities, asset-backed securities
and so-called "zero-coupon" bonds and "payment-in-kind" bonds.
As a fundamental policy, the Fund will invest at least 25% of its total assets
in fixed-income securities, which for this purpose include debt securities,
preferred stocks and that portion of the value of convertible securities that is
attributable to the fixed-income characteristics of those securities.
The Fund's debt securities will generally be of investment grade. See "Risk
Considerations--Securities Ratings" and "Investment in Lower-Rated Fixed-Income
Securities." In the event that the rating of any debt securities held by the
Fund falls below investment grade, the Fund will not be obligated to
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dispose of such obligations and may continue to hold them if considered
appropriate under the circumstances.
The Fund may also: (i) invest in foreign securities, although the Fund will not
generally invest more than 15% of its total assets in foreign securities; (ii)
invest, without regard to this 15% limit, in Eurodollar CDs, which are
dollar-denominated certificates of deposit issued by foreign branches of U.S.
banks that are not insured by any agency or instrumentality of the U.S.
Government; (iii) write covered call and put options on securities it owns or in
which it may invest; (iv) buy and sell put and call options and buy and sell
combinations of put and call options on the same underlying securities; (v) lend
portfolio securities amounting to not more than 25% of its total assets; (vi)
enter into repurchase agreements on up to 25% of its total assets; (vii)
purchase and sell securities on a forward commitment basis; (viii) buy or sell
foreign currencies, options on foreign currencies, foreign currency futures
contracts (and related options) and deal in forward foreign exchange contracts;
(ix) buy and sell stock index futures contracts and buy and sell options on
those contracts and on stock indices; (x) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; and (xi)
invest in securities that are not publicly traded, including Rule 144A
securities. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds, senior debt
securities and preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market outlooks. The Fund
may invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above. See "Risk Considerations--Foreign Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Income Builder Fund
Alliance Income Builder Fund, Inc. ("Income Builder Fund") is a non-diversified
investment company that seeks an attractive level of current income and
long-term growth of income and capital by investing principally in fixed-income
securities and dividend-paying common stocks. Its investments in equity
securities emphasize common stocks of companies with a historical or projected
pattern of paying rising dividends. Normally, at least 65% of the Fund's total
assets are invested in income-producing securities. The Fund may vary the
percentage of assets invested in any one type of security based upon Alliance's
evaluation as to the appropriate portfolio structure for achieving the Fund's
investment objective, although Alliance currently maintains approximately 60% of
the Fund's net assets in fixed-income securities and 40% in equity securities.
The Fund may invest in fixed-income securities of domestic and foreign issuers,
including U.S. Government securities and repurchase agreements pertaining
thereto, corporate fixed-income securities of U.S. issuers, qualifying bank
deposits and prime commercial paper.
The Fund may maintain up to 35% of its net assets in lower-rated securities. See
"Risk Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a non-convertible security
that is downgraded below CCC or determined by Alliance to have undergone similar
credit quality deterioration following purchase.
Foreign securities in which the Fund invests may include fixed-income securities
of foreign corporate and governmental issuers, denominated in U.S. Dollars, and
equity securities of foreign corporate issuers, denominated in foreign
currencies or in U.S. Dollars. The Fund will not invest more than 10% of its net
assets in equity securities of foreign issuers nor more than 15% of its total
assets in issuers of any one foreign country. See "Risk Considerations Foreign
Investment."
The Fund may also: (i) invest up to 5% of its net assets in rights or warrants;
(ii) invest in depositary receipts and U.S. Dollar denominated securities issued
by supranational entities; (iii) write covered put and call options and purchase
put and call options on securities of the types in which it is permitted to
invest that are exchange-traded; (iv) purchase and sell exchange-traded options
on any securities index composed of the types of securities in which it may
invest; (v) enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, foreign government
securities, corporate fixed income securities, or common stock, and purchase and
write options on future contracts; (vi) purchase and write put and call options
on foreign currencies and enter into forward contracts for hedging purposes;
(vii) enter into interest rate swaps and purchase or sell interest rate caps and
floors; (viii) enter into forward commitments for the purchase or sale of
securities; (ix) enter into standby commitment agreements; (x) enter into
repurchase agreements pertaining to U.S.
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Government securities with member banks of the Federal Reserve System or primary
dealers in such securities; (xi) make short sales of securities or maintain a
short position as described below under "Additional Investment Policies and
Practices Short Sales;" and (xii) make secured loans of its portfolio securities
not in excess of 20% of its total assets to brokers, dealers and financial
institutions. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. The Fund may invest in securities of both U.S. and foreign
issuers, although no more than 15% of the Fund's total assets will be invested
in issuers in any one foreign country. The utilities industry consists of
companies engaged in (i) the manufacture, production, generation, provision,
transmission, sale and distribution of gas and electric energy, and
communications equipment and services, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities for
the public, or (ii) the provision of other utility or utility-related goods and
services, including, but not limited to, entities engaged in water provision,
cogeneration, waste disposal system provision, solid waste electric generation,
independent power producers and non-utility generators. The Fund is designed to
take advantage of the characteristics and historical performance of securities
of utility companies, many of which pay regular dividends and increase their
common stock dividends over time. As a fundamental policy, the Fund normally
invests at least 65% of its total assets in securities of companies in the
utilities industry. The Fund considers a company to be in the utilities industry
if, during the most recent twelve-month period, at least 50% of the company's
gross revenues, on a consolidated basis, were derived from its utilities
activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a security that is downgraded
below B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition and regulatory
changes. There can also be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval for
rate increases. In addition, because many foreign utility companies use fuels
that cause more pollution than those used in the U.S., such utilities may yet be
required to invest in pollution control equipment. Foreign utility regulatory
systems vary from country to country and may evolve in ways different from
regulation in the U.S. The percentage of the Fund's assets invested in issuers
of
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particular countries will vary. See "Risk Considerations--Foreign Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate
fixed-income securities of domestic issuers, corporate fixed-income securities
of foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter in forward commitments for the purchase
or sale of securities; (xi) enter into standby commitment agreements; (xii)
enter into repurchase agreements pertaining to U.S. Government securities with
member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund has restricted its investments in securities in this category to
issues of high quality. The Fund may also purchase and sell financial forward
and futures contracts and options thereon for hedging purposes. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund, Inc. ("Real Estate Investment Fund") is a
diversified investment company that seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of real estate investment trusts ("REITS") and
other real estate industry companies. A "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or interests therein. The
equity securities in which the Fund will invest for this purpose consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock or convertible securities ("real
estate equity securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These instruments are
described below. The risks associated with the Fund's transactions in REMICs,
CMOs and other types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk. See "Risk Considerations" for a description of these and other
risks.
As to any investment in Real Estate Equity Securities, Alliance's analysis will
focus on determining the degree to which the company involved can achieve
sustainable growth in cash flow and dividend paying capability. Alliance
believes that the primary determinant of this capability is the economic
viability of property markets in which the company operates and that the
secondary determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will purchase
Real Estate Equity Securities when, in the judgment of Alliance, their market
price does not adequately reflect this potential. In making this determination,
Alliance will take into account fundamental
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trends in underlying property markets as determined by proprietary models, site
visits conducted by individuals knowledgeable in local real estate markets,
price-earnings ratios (as defined for real estate companies), cash flow growth
and stability, the relationship between asset value and market price of the
securities, dividend payment history, and such other factors which Alliance may
determine from time to time to be relevant. Alliance will attempt to purchase
for the Fund Real Estate Equity Securities of companies whose underlying
portfolios are diversified geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
Investment Process for Real Estate Equity Securities. The Fund's investment
strategy with respect to Real Estate Equity Securities is based on the premise
that property market fundamentals are the primary determinant of growth
underlying the success of Real Estate Equity Securities. Value added management
will further distinguish the most attractive Real Estate Equity Securities. The
Fund's research and investment process is designed to identify those companies
with strong property fundamentals and strong management teams. This process is
comprised of real estate market research, specific property inspection and
securities analysis.
The universe of property-owning real estate industry firms consists of
approximately 130 companies of sufficient size and quality to merit
consideration for investment by the Fund. In implementing the Fund's research
and investment process, Alliance will avail itself of the consulting services of
CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held company and the
largest real estate services company in the United States, comprised of real
estate brokerage, property and facilities management, and real estate finance
and investment advisory activities (CBC in August of 1997 acquired Koll
Management Services ("Koll"), which previously provided these consulting
services to Alliance). In 1996, CBC (and Koll, on a combined basis) completed
25,000 sale and lease transactions, managed over 4,100 client properties,
created over $3.5 billion in mortgage originations, and completed over 2,600
appraisal and consulting assignments. In addition, they advised and managed for
institutions over $4 billion in real estate investments. As consultant to
Alliance, CBC provides access to its proprietary model, REIT-Score, that
analyzes the approximately 12,000 properties owned by these 130 companies. Using
proprietary databases and algorithms, CBC analyzes local market rent, expense,
and occupancy trends, market specific transaction pricing, demographic and
economic trends, and leading indicators of real estate supply such as building
permits. Over 650 asset-type specific geographic markets are analyzed and ranked
on a relative scale by CBC in compiling its REIT-Score database. The relative
attractiveness of these real estate industry companies is similarly ranked based
on the composite rankings of the properties they own. See "Management of the
Funds--Consultant to Adviser" for more information about CBC.
Once the universe of real estate industry companies has been distilled through
the market research process, CBC's local market presence provides the capability
to perform site specific inspections of key properties. This analysis examines
specific location, condition, and sub-market trends. CBC's use of locally based
real estate professionals provides Alliance with a window on the operations of
the portfolio companies as information can immediately be put in the context of
local market events. Only those companies whose specific property portfolios
reflect the promise of their general markets will be considered for initial and
continued investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance will make extensive use of CBC's
network of industry analysts in order to assess trends in tenant industries.
This information is then used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
Alliance believes that this process will result in a portfolio that will consist
of Real Estate Equity Securities of companies that own assets in the most
desirable markets across the country, diversified geographically and by property
type.
The short-term investments in which Real Estate Investment Fund may invest are:
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not so rated, of equivalent credit quality as
determined by Alliance. The Fund expects that it will not retain a debt security
which is downgraded below BBB or Baa or, if unrated, determined by
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Alliance to have undergone similar credit quality deterioration, subsequent to
purchase by the Fund.
The Fund may also engage in the following investment practices to the extent
indicated: (i) invest up to 10% of its net assets in rights or warrants; (ii)
invest up to 15% of its net assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund; (iii) lend portfolio
securities equal in value to not more than 25% of total assets; (iv) enter into
repurchase agreements of up to seven days' duration; (v) enter into forward
commitment transactions as long as the Fund's aggregate commitments under such
transactions are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of securities or maintain
a short position but only if at all times when a short position is open not more
than 25% of the Fund's net assets (taken at market value) is held as collateral
for such sales; and (viii) invest in illiquid securities unless, as a result,
more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above. Convertible Securities. Prior to conversion, convertible
securities have the same general characteristics as non-convertible debt
securities, which provide a stable stream of income with yields that are
generally higher than those of equity securities of the same or similar issuers.
The price of a convertible security will normally vary with changes in the price
of the underlying stock, although the higher yield tends to make the convertible
security less volatile than the underlying common stock. As with debt
securities, the market value of convertible securities tends to decline as
interest rates increase and increase as interest rates decline. While
convertible securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock. Convertible debt securities that are rated Baa or lower by Moody's or BBB
or lower by S&P, Duff & Phelps or Fitch and comparable unrated securities as
determined by Alliance may share some or all of the risks of non-convertible
debt securities with those ratings. For a description of these risks, see "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities."
Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to buy
equity securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination thereof. If the
market price of the underlying security 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.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by 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, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities except with respect to Growth Fund, Strategic Balanced
Fund and Income Builder Fund, where investments in ADRs are deemed to be
investments in securities issued by U.S. issuers and those in GDRs and other
types of depositary receipts are deemed to be investments in the underlying
securities.
A supranational entity is an entity designated or supported by the
national government of one or more countries to promote economic reconstruction
or development. Examples of supranational entities include, among others, the
World Bank (International Bank for Reconstruction and Development) and the
European Investment Bank. A European Currency Unit is a basket of specified
amounts of the currencies of the member states of the European Economic
Community. "Semi-governmental securities" are securities issued by entities
owned by either a national, state or equivalent government or are obligations of
one of such government jurisdictions which are not backed by its full faith and
credit and general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the securities. As a result of the pass-through of
prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity would indicate. Prepayments occur when the mortgagor on a
mortgage prepays the remaining principal before the mortgage's scheduled
maturity date. Because the prepayment characteristics of the underlying
mortgages vary, it is impossible to predict accurately the realized yield or
average life of a particular issue of pass-
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through certificates. Prepayments are important because of their effect on the
yield and price of the mortgage-backed securities. During periods of declining
interest rates, prepayments can be expected to accelerate and a Fund investing
in such securities would be required to reinvest the proceeds at the lower
interest rates then available. Conversely, during periods of rising interest
rates, a reduction in prepayments may increase the effective maturity of the
securities, subjecting them to a greater risk of decline in market value in
response to rising interest rates. In addition, prepayments of mortgages
underlying securities purchased at a premium could result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Some adjustable rate securities are backed by
pools of mortgage loans. Although the rate-adjustment feature may reduce sharp
changes in the value of adjustable rate securities, these securities can change
in value based on changes in market interest rates or the issuer's
creditworthiness. Changes in the interest rate on adjustable rate securities may
lag behind changes in prevailing market interest rates. Also, some adjustable
rate securities (or the underlying mortgages) are subject to caps or floors that
limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt securities, the
values of equity-linked debt securities will generally vary inversely with
changes in interest rates. The Fund's ability to dispose of equity-linked debt
securities will depend on the availability of liquid markets for such
securities. Investment in equity-linked debt securities may be considered to be
speculative. As with other securities, the Fund could lose its entire investment
in equity-linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to the Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate the
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If the Fund does not receive scheduled interest or principal payments
on such indebtedness, the Fund's share price and yield could be adversely
affected. Loans that are fully secured offer the Fund more protection than
unsecured loans in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a secured
loan would satisfy the borrower's obligation, or that the collateral can be
liquidated. Indebtedness of borrowers whose creditworthiness is poor may involve
substantial risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries will
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also involve a risk that the governmental entities responsible for the repayment
of the debt may be unable, or unwilling, to pay interest and repay principal
when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of the Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
the Fund to pay additional cash on demand. These commitments may have the effect
of requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Mortgage-Backed Securities and Associated Risks. Mortgage-Backed Securities
include mortgage pass-through certificates and multiple-class pass-through
securities, such as REMIC pass-through certificates, CMOs and stripped
mortgage-backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate Investment Fund may
invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans. Multiple-Class
Pass-Through Securities and Collateralized Mortgage Obligations. Mortgage-Backed
Securities also include CMOs and REMIC pass-through or participation
certificates, which may be issued by, among others, U.S. Government agencies and
instrumentalities as well as private lenders. CMOs and REMIC certificates are
issued in multiple classes and the principal of and interest on the mortgage
assets may be allocated among the several classes of CMOs or REMIC certificates
in various ways. Each class of CMOs or REMIC certificates, often referred to as
a "tranche," is issued at a specific adjustable or fixed interest rate and must
be fully retired no later than its final distribution date. Generally, interest
is paid or accrues on all classes of CMOs or REMIC certificates on a monthly
basis. Real Estate Investment Fund will not invest in the lowest tranche of CMOs
and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although the Fund does
not intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those generally associated with investing in the real estate
industry in general. These unique risks include the failure of a counterparty to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations--Mortgage-Backed
Securities" for a more complete description of the characteristics of
Mortgage-Backed Securities and associated risks.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps and any assets
used to cover currency swaps and most privately negotiated investments in state
enterprises that have not yet conducted an initial equity offering, (ii)
over-the-counter options and assets used to cover over-the-counter options, and
(iii) repurchase agreements not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent
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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 a Fund's Directors. Investment in
non-publicly traded securities by each of Growth Fund and Strategic Balanced
Fund is restricted to 5% of its total assets (not including for these purposes
Rule 144A securities, to the extent permitted by applicable law) and is also
subject to the 15% restriction on investment in illiquid securities described
above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resales of securities.
Options. An option gives the purchaser of the option, upon payment of a premium,
the right to deliver to (in the case of a put) or receive from (in the case of a
call) the writer a specified amount of a security on or before a fixed date at a
predetermined price. A call option written by a Fund is "covered" if the Fund
owns the underlying security, has an absolute and immediate right to acquire
that security upon conversion or exchange of another security it holds, or holds
a call option on the underlying security with an exercise price equal to or less
than that of the call option it has written. A put option written by a Fund is
covered if the Fund holds a put option on the underlying securities with an
exercise price equal to or greater than that of the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Income Builder Fund and
Utility Income Fund each may write call options for cross-hedging purposes. A
Fund would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write uncovered call options. Technology Fund and Global
Small Cap Fund will not write a call option if the premium to be received by the
Fund in doing so would not produce an annualized return of at least 15% of the
then current market value of the securities subject to the option (without
giving effect to commissions, stock transfer taxes and other expenses that are
deducted from premium receipts). Technology Fund, Quasar Fund and Global Small
Cap Fund will not write a call option if, as a result, the aggregate of the
Fund's portfolio securities subject to outstanding call options (valued at the
lower of the option price or market value of such securities) would exceed 15%
of the Fund's total assets or more than 10% of the Fund's assets would be
committed to call options that at the time of sale have a remaining term of more
than 100 days. The aggregate cost of all outstanding options purchased and held
by each of Premier Growth Fund, Technology Fund, Quasar Fund and Global Small
Cap Fund will at no time exceed 10% of the Fund's total assets. Neither
International Fund nor New Europe Fund will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified
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dollar multiple of the value of the index on the expiration date of the contract
("current contract value") and the price at which the contract was originally
struck. No physical delivery of the securities underlying the index is made.
Options on futures contracts written or purchased by a 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 market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, and Income Builder
Fund will also not do so if immediately thereafter the aggregate of initial
margin deposits on all the outstanding futures contracts of the Fund and
premiums paid on outstanding options on futures contracts would exceed 5% of the
market value of the total assets of the Fund. Premier Growth Fund and Growth and
Income Fund may not purchase or sell a stock index future if immediately
thereafter more than 30% of its total assets would be hedged by stock index
futures. Premier Growth Fund and Growth and Income Fund may not purchase or sell
a stock index future if, immediately thereafter, the sum of the amount of margin
deposits on the Fund's existing futures positions would exceed 5% of the market
value of the Fund's total assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, 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 a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
contracts 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.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions.
Growth Fund and Strategic Balanced Fund may also purchase and sell foreign
currency on a spot basis.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds
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to be received, in determining its net asset value. Any unrealized appreciation
or depreciation reflected in such valuation of a "when, as and if issued"
security would be canceled in the event that the required conditions did not
occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if Alliance were to forecast incorrectly
the direction of interest rate movements, a Fund might be required to complete
such when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by New Europe Fund, All-Asia
Investment Fund, Worldwide Privatization Fund, Income Builder Fund, Real
Estate Investment Fund or Utility Income Fund if, as a result, the Fund's
aggregate commitments under such transactions would be more than 30% of the
Fund's total assets. In the event the other party to a forward commitment
transaction were to default, a Fund might lose the opportunity to invest money
at favorable rates or to dispose of securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
Income Builder Fund, will enter into a standby commitment with a remaining term
in excess of 45 days. Investments in standby commitments will be limited so that
the aggregate purchase price of the securities subject to the commitments will
not exceed 25% with respect to New Europe Fund and Real Estate Investment Fund,
50% with respect to Worldwide Privatization Fund and All-Asia Investment Fund,
and 20% with respect to Utility Income Fund, of the Fund's assets taken at the
time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each currency swap will
be accrued on a daily basis. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the 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,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund and Utility Income Fund, the exchange
commitments can involve payments in the same currency or in different
currencies. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the party
selling such interest rate cap. The purchase of an interest rate floor entitles
the purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on an agreed principal amount
from the party selling the interest rate floor.
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A Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap, cap
and floor is accrued daily. A Fund will not enter into an interest rate swap,
cap or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is then rated in the highest rating category
of at least one nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Worldwide Privatization Fund, All-Asia
Investment Fund, Income Builder Fund and Utility Income Fund each may make short
sales of securities or maintain short positions only for the purpose of
deferring realization of gain or loss for U.S. federal income tax purposes,
provided that at all times when a short position is open the Fund owns an equal
amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund and Real Estate
Investment Fund may not make a short sale if as a result more than 25% of the
Fund's net assets would be held as collateral for short sales. If the price of
the security sold short increases between the time of the short sale and the
time a Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain. See
"Certain Fundamental Investment Policies." Certain special federal income tax
considerations may apply to short sales entered into by a Fund. See "Dividends,
Distributions and Taxes" in the relevant Fund's Statement of Additional
Information.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income 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. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest or distributions. A Fund may pay reasonable
finders', administrative and custodial fees in connection with a loan. A Fund
will not lend its 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, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are no
daily price fluctuation limits
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with respect to certain options and forward contracts, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
In addition, the correlation between movements in the prices of futures
contracts, options and forward contracts and movements in the prices of the
securities and currencies hedged or used for cover will not be perfect and could
produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option), with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a 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 each Fund that invests
in options and futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime commercial
paper and other types of short-term debt securities including notes and bonds.
For Funds that may invest in foreign countries, such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities each Fund
may invest in while in a temporary defensive position, please see such Fund's
Statement of Additional Information.
Portfolio Turnover. Portfolio turnover rates are set forth under "Financial
Highlights." These portfolio turnover rates are greater than those of most other
investment companies, including those which emphasize capital appreciation as a
basic policy. 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 each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each 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 a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof; (iii)
in oil, gas or other mineral exploration or development programs; or (iv) more
than 5% of its gross assets in securities the disposition of which would be
subject to restrictions under the federal securities laws.
Growth Fund and Strategic Balanced Fund each may not: (i) invest more than 5% of
its total assets in the securities of any one issuer (other than U.S. Government
securities and repurchase agreements relating thereto), although up to 25% of
each Fund's total assets may be invested without regard to this restriction; or
(ii) invest 25% or more of its total assets in the securities of any one
industry.
Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than: (a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
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and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase would cause 10% or more of its total assets to be invested in the
securities of such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings. The exception contained in clause (i)(b) above is subject
to the operating policy regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be deemed
to prohibit the Fund from purchasing the securities of any issuer pursuant to
the exercise of rights distributed to the Fund by the issuer, except that no
such purchase may be made if as a result the Fund will fail to meet the
diversification requirements of the Code and any such acquisition in excess of
the foregoing 15% or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to U.S. Government securities, but
will apply to foreign government securities unless the Commission permits their
exclusion); (iii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the Fund's total assets will be repaid
before any subsequent investments are made; or (iv) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if,
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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 general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding 5% of the total assets of the Fund; or (iv) 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 and unless not more than 5% of the Fund's net assets is
held as collateral for such sales at any one time.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Income Builder Fund may not: (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry, except that
this restriction does not apply to U.S. Government securities; (ii) borrow money
except from banks for temporary or emergency purposes, including the meeting of
redemption requests that might require the untimely disposition of securities;
borrowing in the aggregate may not exceed 15%, and borrowing for purposes other
than meeting redemptions may not exceed 5%, of the Fund's total assets
(including the amount borrowed) less liabilities (not including the amount
borrowed) at the time borrowing is made; securities will not be purchased while
borrowings in excess of 5% of the Fund's total assets are outstanding; or (iii)
pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), 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 net assets would be invested in securities of any one or more closed-end
investment companies.
Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S. Government obligations or (ii) own more
than 10% of the outstanding voting securities of any issuer.
Real Estate Investment Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer (other than the
U.S. Government and its agencies or instrumentalities) not greater in value than
5% of the Fund's total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if as a result
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such issuer; (iii)
invest 25% or more of its total assets in the securities of issuers conducting
their principal business activities in any one industry, other than the real
estate industry in which the Fund will invest at least 25% or more of its total
assets, except that this restriction does not apply to U.S. Government
securities; (iv) purchase or sell real estate, except that it may purchase and
sell securities of companies which deal in real estate or interests therein,
including Real Estate Equity
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Securities; or (v) borrow money except for temporary or emergency purposes or to
meet redemption requests, in an amount not exceeding 5% of the value of its
total assets at the time the borrowing is made.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
New Europe Fund, All-Asia Investment Fund, and Worldwide Privatization Fund and
a substantial portion of the assets of Global Small Cap Fund will be invested in
securities denominated in foreign currencies, and a corresponding portion of
these Funds' revenues will be received in such currencies. Therefore, the dollar
equivalent of their net assets, distributions and income will be adversely
affected by reductions in the value of certain foreign currencies relative to
the U.S. dollar. If the value of the foreign currencies in which a Fund receives
its income falls relative to the U.S. dollar between receipt of the income and
the making of Fund distributions, the Fund may be required to liquidate
securities in order to make distributions if it has insufficient cash in U.S.
dollars to meet distribution requirements that the Fund must satisfy to qualify
as a regulated investment company for federal income tax purposes. Similarly, if
an exchange rate declines between the time a Fund incurs expenses in U.S.
dollars and the time cash expenses are paid, the amount of the currency required
to be converted into U.S. dollars in order to pay expenses in U.S. dollars could
be greater than the equivalent amount of such expenses in the currency at the
time they were incurred. In light of these risks, a Fund may engage in certain
currency hedging transactions, which themselves involve certain special risks.
See "Additional Investment Practices" above.
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, a 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 settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. 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 a Fund. In addition, the
repatriation of investment income, capital or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority,
and if a deterioration occurs in a country's balance of payments, the country
could impose temporary restrictions on foreign capital remittances.
A Fund could also 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 a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a 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 a Fund's investments. Furthermore, transaction
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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, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling--dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. dollar. The pound sterling continued to fall in early 1993,
but recovered due to interest rate cuts throughout Europe and an upturn in the
economy of the United Kingdom. The average exchange rate of the U.S. dollar to
the pound sterling was 1.50 in 1993 and 1.56 in 1996. On September 30, 1997 the
U.S. dollar-pound sterling exchange rate was 1.61.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
4118.5 at the end of 1996, up approximately 12% from the end of 1995. On
September 30, 1997 the FT-SE 100 index closed at 5244.2, up approximately 27%
from the end of 1996.
The public sector borrowing requirement ("PSBR"), a mandated measure of the
amount required to balance the budget, has been, over the last two fiscal years,
higher than forecast. The general government fiscal deficit has been in excess
of the eligibility limit prescribed by the European Union for countries that
intend to participate in the Economic and Monetary Union ("EMU"), which is
scheduled to take effect in January 1999. The government, however, expects that
the deficit will drop below that limit during calendar year 1997 and will
continue to drop in the 1997-98 and 1998-99 fiscal years. Although the
government has not yet made a formal announcement with respect to the United
Kingdom's participation in the EMU, remarks of the Chancellor of the Exchequer
made in mid-October 1997 suggest that the United Kingdom will not participate in
the EMU beginning in January 1999 but may do so thereafter.
From 1979 until 1997 the Conversative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar, but has fallen
from its post-World War II high (in 1995) against the U.S. dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1993. In
1994, the TOPIX closed at 1,559.09, up approximately 8% from the end of 1993; in
1995, the TOPIX closed at 1,577.70, up approximately 1% from the end of 1994;
and in 1996, the TOPIX closed at 1,470.94, down approximately 7% from the end of
1995. On September 30, 1997, the TOPIX closed at 1,388.22, down 5.6% from the
end of 1996. Certain valuation measures, such as price-to-book value and
price-to-cash flow ratios, indicate that the Japanese stock market is near its
lowest level in the last twenty years relative to other world markets. The
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price/earnings ratios of First Section companies, however, are on average high
in comparison with other major stock markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan has returned to a single-party government led by Prime Minister Ryutaro
Hashimoto. While Mr. Hashimoto's party, does not control a majority of the seats
in the parliament it is only three seats short of the 251 seats required to
attain a majority in the House of Representatives (down from a 12-seat shortfall
just after the October 1996 election). For further information regarding Japan,
see the Statements of Additional Information of All-Asia Investment Fund and
International Fund.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund may emphasize investment in,
smaller, emerging companies. Investment in such companies involves greater risks
than is customarily associated with securities of more established companies.
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 Real Estate Industry. Although Real Estate Investment Fund does not invest
directly in real estate, it does invest primarily in Real Estate Equity
Securities and does have a policy of concentration of its investments in the
real estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates. To the extent that assets underlying the Fund's
investments are concentrated geographically, by property type or in certain
other respects, the Fund may be subject to certain of the foregoing risks to a
greater extent.
In addition, if Real Estate Investment Fund receives rental income or income
from the disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Investments by the Fund in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common Stocks.
Mortgage-Backed Securities. As discussed above, investing in Mortgage-Backed
Securities involves certain unique risks in addition to those risks associated
with investment in the real estate industry in general. These risks include the
failure of a counterparty to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest rates
decline, the value of an investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of an investment in fixed
rate obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align
42
<PAGE>
themselves to reflect changes in market interest rates, causing the value of
such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage
pass-through securities in particular, may be less effective than other types of
U.S. Government securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes. 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 a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between eight and 15
years in the case of Income Builder Fund, between five and 25 years in the case
of Utility Income Fund and between one year or less and 30 years in the case of
all other Funds that invest in such securities. In periods of increasing
interest rates, each of the Funds may, to the extent it holds mortgage-backed
securities, be subject to the risk that the average dollar-weighted maturity of
the Fund's portfolio of debt or other fixed- income securities may be extended
as a result of lower than anticipated prepayment rates. See "Additional
Investment Practices--Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
43
<PAGE>
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in
lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of Additional Information for each Fund that invests in lower-rated
securities for a description of the bond ratings of Moody's, S&P, Duff & Phelps
and Fitch.
Certain lower-rated securities in which Growth Fund, Income Builder Fund,
Strategic Balanced and Utility Income Fund may invest may contain call or
buy-back features that permit the issuers thereof to call or repurchase such
securities. Such securities may present risks based on prepayment expectations.
If an issuer exercises such a provision, a Fund may have to replace the called
security with a lower yielding security, resulting in a decreased rate of return
to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund and Income Builder Fund is a "non-diversified"
investment company, which means the Fund is not limited in the proportion of its
assets that may be invested in the securities of a single issuer. However, each
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" in each
Fund's 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. A Fund's investments in
U.S. Government securities and other regulated investment companies are not
subject to these limitations. Because each of Worldwide Privatization Fund, New
Europe Fund, All-Asia Investment Fund and Income Builder Fund is a
non-diversified investment company, it may invest in a smaller number of
individual issuers than a diversified investment company, and an investment in
such 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 any of the Funds 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"), each Fund's principal
underwriter. The minimum initial investment in each Fund is $250. The minimum
for subsequent investments in each Fund is $50. Investments of $25 or more are
allowed under the automatic investment program of each Fund. Share certificates
are issued only upon request. See the Subscription Application and Statements 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
44
<PAGE>
Shareholder Options form obtained from Alliance Fund Services, Inc. ("AFS"),
each 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.
Each Fund offers three classes of shares through this prospectus, Class A, Class
B and Class C. The Funds may refuse any order to purchase shares. In this
regard, the Funds reserve 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:
<TABLE>
<CAPTION>
Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
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
- --------------------------------------------------------------------------------
</TABLE>
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. Certain purchases of Class A shares may qualify for reduced or
eliminated sales charges in accordance with a Fund's Combined Purchase
Privilege, Cumulative Quantity Discount, Statement of Intention, Privilege for
Certain Retirement Plans, Reinstatement Privilege and Sales at Net Asset Value
programs. Consult the Subscription Application and Statements 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. A Fund will thus receive the full amount of your purchase. 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.
The amount of the CDSC for Class B shares for each Fund is as set forth below.
Class B shares of a Fund purchased prior to the date of this Prospectus may be
subject to a different CDSC schedule, which was disclosed in the Fund's
prospectus in use at the time of purchase and is set forth in the Fund's current
Statement of Additional Information.
<TABLE>
<CAPTION>
Year Since Purchase CDSC
-------------------------------------------
<S> <C>
First ............................. 4.0%
Second ............................ 3.0%
Third ............................. 2.0%
Fourth ............................ 1.0%
Fifth ............................. None
</TABLE>
Class B shares are subject to higher distribution fees than Class A shares for a
period (after which they convert to Class A shares) of eight years, or six years
with respect to Premier Growth Fund. 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 at net asset value without any initial sales
charge. A 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 Statements of Additional Information.
How the Funds Value Their Shares
The net asset value of each Class of shares of a 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 a 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 accurately
reflects fair market value.
Employee Benefit Plans
Certain employee benefit plans, including employer-sponsored tax-qualified
401(k) plans and other defined contribution retirement plans ("Employee Benefit
Plans"), may establish requirements as to the purchase, sale or exchange or
shares, including maximum and minimum initial investment requirements, that are
different from those described in this Prospectus. Such Employee Benefit Plans
may also not offer all classes of shares of the Funds. In order to enable
participants investing through such Employee Benefit Plans to purchase shares of
the Funds, the maximum and minimum investment amounts may be different for
shares purchased through these Employee Benefit Plans from those described in
this Prospectus. In addition, the Class A, Class B and Class C CDSC may be
waived for investments made through such Employee Benefit Plans.
45
<PAGE>
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 no CDSC as long as the shares are held for
one year or more. Consult your financial agent. Dealers and agents may receive
differing compensation for selling Class A, Class B or Class C shares. There is
no size limit on purchases of Class A shares. The maximum purchase of Class B
shares is $250,000. The maximum purchase of Class C shares is $1,000,000.
Each 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 Funds. 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 can 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 a Fund, including requirements as to the minimum initial and subsequent
investment amounts.
In addition to the discount or commission paid to dealers or agents, AFD from
time to time pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., an affiliate of AFD, in connection
with the sale of shares of the Funds. 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 Funds. On some occasions, such cash or other incentives will
be conditioned upon the sale of a specified minimum dollar amount of the shares
of a Fund and/or other Alliance Mutual Funds during a specific period of time.
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.
HOW TO SELL SHARES
You may "redeem", i.e., sell your shares in a 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, a 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 a Fund and may charge
you for this service.
Selling Shares Directly To A 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
1-800-221-5672
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, except for
certain omnibus accounts, 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"
46
<PAGE>
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, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
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 Subscription Application. A shareholder's
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 any 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 capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
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 each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
Principal occupation
during the past
Fund Employee; year; title five years
- --------------------------------------------------------------------------------
The Alliance Fund Alden M. Stewart since 1997-- Associated with
Executive Vice President of Alliance since
Alliance Capital Management 1993; prior
Corporation (ACMC*) thereto,
associated with
Equitable Capital
Management
Corporation
("Equitable
Capital")**
Randall E. Haase since 1997-- Associated with
Senior Vice President of ACMC Alliance since July
1993; prior
thereto,
associated with
Equitable Capital
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance since
July 1993; prior
thereto,
associated with
Equitable Capital
Premier Growth Fund Alfred Harrison since inception-- Associated with
Vice Chairman of ACMC Alliance
Technology Fund Peter Anastos since 1992-- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992-- Associated with
Senior Vice President of ACMC Alliance since
1992; prior
thereto
associated with
College
Retirement
Equities Fund
Quasar Fund Alden M. Stewart since 1994-- (see above)
(see above)
Randall E. Haase since 1994-- (see above)
(see above)
International Fund A. Rama Krishna since 1993-- Associated with
Senior Vice President of ACMC Alliance since
and director of Asian Equity 1993; prior
research thereto,
Chief Investment
Strategist and
Director--Equity
Research for CS
First Boston
47
<PAGE>
Principal occupation
during the past
Fund Employee; year; title five years
- -------------------------------------------------------------------------------
Worldwide Privatization Mark H. Breedon since inception-- Associated with
Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited ***
New Europe Fund Steven Beinhacker Associated with
Vice President of ACMC Alliance
All-Asia Investment A. Rama Krishna since inception-- (see above)
Fund (see above)
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
Strategic Balanced Nicholas D.P. Carn Associated with
Fund since 1997-- Alliance since
Vice President of ACMC 1997; prior
thereto, Chief
Investment
Officer and
Portfolio Manager
at Draycott
Partners
Balanced Shares Paul Rissman since 1997-- Associated with
Senior Vice President of ACMC Alliance
Income Builder Fund Andrew M. Aran since 1994-- Associated with
Senior Vice President of ACMC Alliance
Thomas M. Perkins since 1991-- Associated with
Senior Vice President of ACMC Alliance
Vita Marie Pike since 1997 Associated with
Vice President of ACMC Alliance
Corinne Molof Hill since 1997 Associated with
Vice President of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- Associated with
(See above) Alliance
Growth & Income Paul Rissman since 1994-- Associated with
Fund (see above) Alliance
Real Estate Daniel G. Pine since (1996) Associated with
Investment Fund Senior Vice President of ACMC Alliance since
1996; prior
thereto, Senior
Vice President of
Desai Capital
Management
David Kruth since 1997 Associated with
Vice President of ACMC Alliance since
1997; prior
thereto Senior
Vice President of
the Yarmouth
Group
- --------------------------------------------------------------------------------
* The sole general partner of Alliance.
** Equitable Capital was, prior to Alliance's acquisition of it, a management
firm under common control with Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1997 totaling more than $199 billion (of
which approximately $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 116
separate investment portfolios currently have over two million shareholders. As
of June 30, 1997, Alliance was an investment manager of employee benefit plan
assets for 29 of the Fortune 100 companies.
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 each Fund's
Statement of Additional Information under "Management of the Funds."
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Premier Growth Fund, Mr. Harrison has ultimate responsibility for the
management of 35 portfolios of discretionary tax-exempt accounts of
institutional clients managed as described below without significant
client-imposed restrictions ("Historical Portfolios"). These accounts have
substantially the same investment objectives and policies and are managed in
accordance with essentially the same investment strategies and techniques as
those for Premier Growth Fund, except for the ability of Premier Growth Fund to
use futures and options as hedging tools and to invest in warrants. The
Historical Portfolios are also not subject to certain limitations,
diversification requirements and other restrictions to which Premier Growth
Fund, as a registered investment company, is subject and which if applicable to
the Historical Portfolios, may have adversely affected the performance results
of the Historical Portfolios. See "Investment Objective and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the eighteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios and cumulatively through
September 30, 1997. As of September 30, 1997, the assets in the Historical
Portfolios totaled approximately $12.4 billion and the average size of an
institutional account in the Historical Portfolio was $355 million. Each
Historical Portfolio has a nearly identical composition of individual investment
holdings and related percentage weightings.
The performance data is gross of advisory fees charged to those accounts. Total
returns would be lower if advisory fees had been taken into account. The
performance data includes the cost of brokerage commissions, but excludes
custodial fees, transfer agency costs and other administrative expenses that
will be payable by Premier Growth Fund and will result in a higher expense ratio
for Premier Growth Fund. Expenses associated with the distribution of Class A,
Class B and Class C shares of Premier Growth Fund in accordance with the plan
adopted by Premier Growth Fund's Board of Directors pursuant to Rule 12b-1 of
the 1940 Act ("distribution fees")
48
<PAGE>
are also excluded. See "Expense Information." The performance data has also not
been adjusted for corporate or individual taxes, if any, payable by the account
owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The composite total returns set forth below
are calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation. In contrast with
the securities in the Russell Price-Driven Indices, companies in the Growth
Index tend to exhibit higher price-to-book and price-earnings ratios, lower
dividend yield and higher forecasted growth values.
To the extent Premier Growth Fund does not invest in U.S. common stocks or
utilizes investment techniques such as futures or options, the S&P 500 and
Russell 1000 Growth Index may not be substantially comparable to Premier Growth
Fund. The S&P 500 and Russell 1000 Growth Index are included to illustrate
material economic and market factors that existed during the time period shown.
The S&P 500 and Russell 1000 Growth Index do not reflect the deduction of any
fees. If Premier Growth Fund were to purchase a portfolio of securities
substantially identical to the securities comprising the S&P 500 Index or the
Russell 1000 Growth Index, Premier Growth Fund's performance relative to the
index would be reduced by Premier Growth Fund's expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees, transfer agency
costs and other administrative expenses as well as by the impact on Premier
Growth Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios as measured against certain
broad based market indices and against the composite performance of other
open-end growth mutual funds. Investors should not rely on the following
performance data of the Historical Portfolios as an indication of future
performance of Premier Growth Fund. The composite investment performance for the
periods presented may not be indicative of future rates of return. Other methods
of computing investment performance may produce different results, and the
results for different periods may vary.
<TABLE>
<CAPTION>
Schedule of Composite Investment Performance Historical Portfolios*
Russell Lipper
Historical S&P 500 1000 Growth
Portfolios Index Growth Index Fund Index
Total Return Total Return Total Return Total Return
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Year ended:
December 31, 1996 ................................ 23.22 22.96 23.12 17.48
December 31, 1995** .............................. 41.12 37.58 37.19 32.65
December 31, 1994 ................................ (3.83) 1.32 2.66 (1.57)
December 31, 1993 ................................ 11.62 10.08 2.90 11.98
December 31, 1992 ................................ 13.27 7.62 5.00 7.63
December 31, 1991 ................................ 40.19 30.47 41.16 35.20
December 31, 1990 ................................ (0.57) (3.10) (0.26) (5.00)
December 31, 1989 ................................ 40.08 31.69 35.92 28.60
December 31, 1988 ................................ 11.96 16.61 11.27 15.80
December 31, 1987 ................................ 9.57 5.25 5.31 1.00
December 31, 1986 ................................ 28.60 18.67 15.36 15.90
December 31, 1985 ................................ 38.68 31.73 32.85 30.30
December 31, 1984 ................................ (2.33) 6.27 (.95) (2.80)
December 31, 1983 ................................ 21.95 22.56 15.98 22.30
December 31, 1982 ................................ 29.23 21.55 20.46 20.20
December 31, 1981 ................................ (0.10) (4.92) (11.31) (8.40)
December 31, 1980 ................................ 52.10 32.50 39.57 37.30
December 31, 1979 ................................ 31.99 18.61 23.91 27.40
Cumulative total return for
the period January 1,
1979 to September
30, 1997 ......................................... 3748.17 1888.65 1656.41 1772.84
</TABLE>
- --------------------------------------------------------------------------------
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion.
** During this period, the Historical Portfolios differed from Premier Growth
Fund in that Premier Growth Fund invested a portion (4.54%) of its net
assets in warrants on equity securities in which the Historical Portfolios
were unable, by their investment restrictions, to purchase. In lieu of
warrants, the Historical Portfolios acquired the common stock upon which
the warrants were based. During this period, Premier Growth Fund's total
return, at net asset value, was 46.87%.
49
<PAGE>
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 1997, and for more than one year assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
<TABLE>
<CAPTION>
Average Annual Total Returns
-----------------------------------------------
Russell Lipper
Historical S&P 500 1000 Growth
Portfolios Index Growth Index Fund Index
---------- ----- ------------ ----------
<S> <C> <C> <C> <C>
Three years .................... 33.26 29.92 29.81 24.84
Five years ..................... 22.99 20.77 19.66 18.62
Ten years ...................... 17.03 14.75 14.66 13.19
Since January 1, 1979 .......... 21.07 11.69 16.51 16.18
</TABLE>
ADMINISTRATOR TO ALL-ASIA INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
CONSULTANT TO ALLIANCE WITH RESPECT TO INVESTMENT IN REAL ESTATE SECURITIES
Alliance, with respect to investment in real estate securities, has retained as
a consultant CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held
company and the largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities management, and real
estate finance and investment advisory activities (CBC in August of 1997
acquired Koll, which previously provided these consulting services to Alliance).
In 1996, CBC (and Koll, on a combined basis) completed 25,000 sale and lease
transactions, managed over 4,100 client properties, created over $3.5 billion in
mortgage originations, and completed over 2,600 appraisal and consulting
assignments. In addition, they advised and managed for institutions over $4
billion in real estate investments. CBC will make available to Alliance the CBC
National Real Estate Index, which gathers, analyzes and publishes targeted
research data for the 65 largest U.S. markets, based on a variety of
public-sector and private-sector sources as well as CBC's proprietary database
of approximately 60,000 property transactions representing over $400 billion of
investment property. This information provides a substantial component of the
research and data used to create the REIT-Score model. As a consultant, CBC
provides to Alliance, at Alliance's expense, such in-depth information regarding
the real estate market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-family properties
as Alliance shall from time to time request. CBC will not furnish advice or make
recommendations regarding the purchase or sale of securities by the Fund nor
will it be responsible for making investment decisions involving Fund assets.
CBC is one of the three largest fee-based property management firms in the
United States, the largest commercial real estate lease brokerage firm in the
country, the largest investment property brokerage firm in the country, as well
as one of the largest publishers of real estate research, with approximately
6,000 employees nationwide. CBC will provide Alliance with exclusive access to
its REIT-Score model which ranks approximately 130 REITS based on the relative
attractiveness of the property markets in which they own real estate. This model
scores the approximately 12,000 individual properties owned by these companies.
REIT-Score is in turn based on CBC's National Real Estate Index which gathers,
analyzes and publishes targeted research for the 65 largest U.S. real estate
markets based on a variety of public- and private-sector sources as well as
CBC's proprietary database of 60,000 commercial property transactions
representing over $400 billion of investment property and over 3,000 tracked
properties which report rent and expense data quarterly. CBC has previously
provided access to its REIT-Score model results primarily to the institutional
market through subscriptions. The model is no longer provided to any research
publications and the Fund is currently the only mutual fund available to retail
investors that has access to CBC's REIT-Score model.
DISTRIBUTION SERVICES AGREEMENTS
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. Each Fund has adopted one or more "Rule
12b-1 plans" (for each Fund, a "Plan") and has entered into a Distribution
Services Agreement (the "Agreement") with AFD. Pursuant to its Plan, a Fund pays
to AFD a Rule 12b-1 distribution services fee, which may not exceed an annual
rate of .30% (.50% with respect to Growth Fund, Premier Growth Fund and
Strategic Balanced Fund) 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, for distribution
expenses. The Directors of Growth Fund and Strategic Balanced Fund currently
limit payments with respect to Class A shares under the Plan to .30% of each
Fund's aggregate average daily net assets attributable to Class A shares. The
Directors of Premier Growth Fund currently limit payments under the Plan with
respect to sales of Class A shares made after November 1993 to .30% of the
Fund's aggregate average daily net assets. The Plans provide that a portion of
the distribution services fee in an amount not to exceed .25% of the aggregate
average daily net assets of each 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 Plans provide that AFD will use the distribution services fee received from
a 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 Plans 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
50
<PAGE>
respect to Class C shares, of the assets maintained in a Fund by their
customers. Distribution services fees received from the Funds, except Growth
Fund and Strategic Balanced 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
Funds, with respect to Class B and Class C shares, may be used for these
purposes. The Plans also provide that Alliance may use its own resources to
finance the distribution of each Fund's shares.
The Funds are not obligated under the Plans to pay any distribution services fee
in excess of the amounts set forth above. Except as noted below for Growth Fund
and Strategic Balanced Fund, with respect to Class A shares of each 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.
Except as noted below for Growth Fund and Strategic Balanced Fund, AFD's
compensation with respect to Class B and Class C shares under the Plans of the
other Funds is directly tied to its expenses incurred. 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 applicable Plan
with respect to the class involved and, in the case of Class B and Class C
shares, payments received from CDSCs. The excess will be carried forward by AFD
and reimbursed from distribution services fees payable under the Plan with
respect to the class involved and, in the case of Class B and Class C shares,
payments subsequently received through CDSCs, so long as the Plan and the
Agreement are in effect. Since AFD's compensation under the Plans of Growth Fund
and Strategic Balanced Fund is not directly tied to the expenses incurred by
AFD, the amount of compensation received by it under the applicable Plan during
any year may be more or less than its actual expenses.
Unreimbursed distribution expenses incurred as of the end of each Fund's most
recently completed fiscal period, and carried over for reimbursement in future
years in respect of the Class B and Class C shares for all Funds were, as of
that time, as follows:
<TABLE>
<CAPTION>
Amount of Unreimbursed Distribution Expenses
(as % of Net Assets of Class)
------------------------------------------------------------------------
Class B Class C
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Fund ...................................... $ 2,718,791 (6.12%) $ 815,553 (5.87%)
Growth Fund ........................................ $63,986,412 (2.56%) $ 2,280,463 (0.57%)
Premier Growth Fund ................................ $ 9,179,357 (2.27%) $ 597,937 (0.99%)
Technology Fund .................................... $20,749,046 (3.14%) $ 892,004 (0.82%)
Quasar Fund ........................................ $ 3,754,485 (3.34%) $ 408,356 (1.43%)
International Fund ................................. $ 2,566,420 (3.30%) $ 807,347 (3.47%)
Worldwide Privatization Fund ....................... $ 5,013,479 (4.14%) $ 251,109 (1.94%)
New Europe Fund .................................... $ 2,535,456 (3.84%) $ 541,239 (3.20%)
All-Asia Investment Fund ........................... $ 1,402,190 (5.90%) $ 93,183 (2.20%)
Global Small Cap Fund .............................. $ 2,055,687 (6.43%) $ 586,919 (6.73%)
Strategic Balanced Fund ............................ $ 1,172,983 (4.18%) $ 372,907 (12.25%)
Balanced Shares .................................... $ 1,533,382 (6.34%) $ 463,860 (8.42%)
Income Builder Fund ................................ $ 748,972 (12.97%) $ 1,789,259 (4.03%)
Utility Income Fund ................................ $ 1,114,037 (8.21%) $ 406,214 (12.03%)
Growth and Income Fund ............................. $ 5,883,895 (2.50%) $ 975,417 (1.59%)
Real Estate Investment Fund ........................ $ 6,726,437 (3.60%) $ 366,120 (0.86%)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Plans are in compliance with rules of the National Association of Securities
Dealers, Inc. which effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to .75% and .25%,
respectively, of the average annual net assets attributable to that class. The
rules also limit the aggregate of all front-end, deferred and asset-based sales
charges imposed with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of shares of that
class, plus interest at the prime rate plus 1% per annum.
The Glass-Steagall Act and other applicable laws may limit the ability of a bank
or other depository institution to become an underwriter or distributor of
securities. However, in the opinion of the Funds' 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 Agreements. In the event that a
change in these laws prevented a bank from providing such services, it is
expected that other services arrangements would be made and that shareholders
would not be adversely affected. The State of Texas requires that shares of a
Fund may be sold in that state only by dealers or other financial institutions
that are registered there as broker-dealers.
- --------------------------------------------------------------------------------
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 that 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
that Fund.
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund having an
aggregate net asset value as of the close of business on the day following the
declaration date of such dividend or distribution equal to the cash amount of
such income dividend or distribution. Election to receive 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 a 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,
51
<PAGE>
except that the higher distribution services fees applicable to Class B and C
shares, and any incremental transfer agency costs relating to Class B and Class
C shares, will be borne exclusively by the class to which they relate.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains. Since REITs pay
distributions based on cash flow, without regard to depreciation and
amortization, a portion of the distributions paid to Real Estate Investment Fund
and subsequently distributed to shareholders may be a nontaxable return of
capital. The final determination of the amount of a Fund's return of capital
distributions for the period will be made after the end of each calendar year.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that a Fund distributes its taxable income and net
capital gain to its shareholders, qualification as a regulated investment
company relieves that 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.
Distributions received from a REIT generally do not constitute qualifying
dividends. A corporation's dividends-received deduction generally will be
disallowed unless the corporation holds shares in the Fund at least 46 days
during the 90-day period beginning 45 days before the date on which the
corporation becomes entitled to receive the dividend. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of a Fund is financed with indebtedness.
Distributions of net capital gains are not eligible for the dividends-received
deduction referred to above.
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 received by a shareholder of Real Estate Investment Fund may
include nontaxable returns of capital, which will reduce a shareholder's basis
in shares of the Fund. If that basis is reduced to zero (which could happen if
the shareholder does not reinvest distributions and returns of capital are
significant) any further returns of capital will be taxable as capital gain.
Under the current federal tax law, the amount of an income dividend or capital
gains distribution declared by a 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 a 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 a 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 a Fund may be subject to state and local taxes. Alliance Fund,
Premier Growth Fund, Technology Fund, Income Builder Fund, Quasar Fund, New
Europe Fund, Balanced Shares and Growth and Income Fund are qualified to do
business in the Commonwealth of Pennsylvania and, therefore, are subject to the
Pennsylvania foreign franchise and corporate net income tax in respect of their
business activities in Pennsylvania. Accordingly, shares of such Funds are
exempt from Pennsylvania personal property taxes. These Funds anticipate
continuing such business activities but
52
<PAGE>
reserve the right to suspend them at any time, resulting in the termination of
the exemptions.
A 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 a 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 a 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 gains and return of capital distributions made by a Fund for the
preceding year. 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, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance Worldwide Privatization
Fund, Inc. (1994), Alliance New Europe Fund, Inc. (1990), Alliance All-Asia
Investment Fund, Inc. (1994), Alliance Global Small Cap Fund, Inc. (1966),
Alliance Income Builder Fund, Inc. (1991), Alliance Utility Income Fund, Inc.
(1993), Alliance Growth and Income Fund, Inc. (1932), and Alliance Real Estate
Investment Fund, Inc. (1996). Each of the following Funds is either a
Massachusetts business trust or a series of a Massachusetts business trust
organized in the year indicated: Alliance Growth Fund and Alliance Strategic
Balanced Fund (each a series of The Alliance Portfolios) (1987), and Alliance
International Fund (1980). Prior to August 2, 1993, The Alliance Portfolios was
known as The Equitable Funds, Growth Fund was known as The Equitable Growth Fund
and Strategic Balanced Fund was known as The Equitable Balanced Fund. Prior to
March 22, 1994, Income Builder Fund was known as Alliance Multi-Market Income
and Growth Trust, Inc.
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 a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares less any applicable CDSC. The
Funds are 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 a
Fund, each share of the portfolio or class would normally be entitled to one
vote for all purposes. Generally, shares of each portfolio and class would vote
together as a single class on matters, such as the election of Directors, that
affect each portfolio and class in substantially the same manner. Class A, B, C
and Advisor Class shares have identical voting, dividend, liquidation and other
rights, except that each class bears its own transfer agency expenses, each of
Class A, Class B and Class C shares bears its own distribution expenses and
Class B shares and Advisor Class shares convert to Class A shares under certain
circumstances. Each class of shares votes separately with respect to a 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 a
Fund, are entitled to receive the net assets of the Fund. Since this Prospectus
sets forth information about all the Funds, it is theoretically possible that a
Fund might be liable for any materially inaccurate or incomplete disclosure in
this Prospectus concerning another Fund. Based on the advice of counsel,
however, the Funds believe that the potential liability of each Fund with
respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a 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 each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds. 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 Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for Class A, Class B and Class C shares. Such advertisements disclose
a Fund's average annual compounded total return for the periods prescribed by
the Commission. A 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
53
<PAGE>
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
a Fund are assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases and redemptions of a Fund's shares are assumed
to have been paid.
Balanced Shares, Growth and Income Fund, Income Builder Fund, Strategic Balanced
Fund and Utility Income Fund may also advertise their "yield," which is also
computed separately for Class A, Class B and Class C shares. A Fund's yield for
any 30-day (or one-month) period is computed by dividing the net investment
income per share earned during such period by the maximum public offering price
per share on the last day of the period, and then annualizing such 30-day (or
one-month) yield in accordance with a formula prescribed by the Commission which
provides for compounding on a semi-annual basis.
Strategic Balanced Fund, Balanced Shares, Income Builder Fund, Utility Income
Fund and Growth and Income Fund may also state in sales literature an "actual
distribution rate" for each class which is computed in the same manner as yield
except that actual income dividends declared per share during the period in
question are substituted for net investment income per share. The actual
distribution rate is computed separately for Class A, Class B and Class C
shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements 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.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
54
<PAGE>
<PAGE>
THE ALLIANCE
------------
STOCK FUNDS
------------
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)
November 1, 1997
Domestic Stock Funds Global Stock Funds
- -The Alliance Fund -Alliance International Fund
- -Alliance Growth Fund -Alliance Worldwide Privatization Fund
- -Alliance Premier Growth Fund -Alliance New Europe Fund
- -Alliance Technology Fund -Alliance All-Asia Investment Fund
- -Alliance Quasar Fund -Alliance Global Small Cap Fund
Total Return Funds
-Alliance Strategic Balanced Fund
-Alliance Balanced Shares
-Alliance Income Builder Fund
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
-Alliance Real Estate Investment Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Funds at a Glance ................................................... 2
Expense Information ..................................................... 4
Glossary ................................................................ 7
Financial Highlights .................................................... 7
Description of the Funds ................................................ 10
Investment Objectives and Policies ................................... 10
Additional Investment Practices ...................................... 20
Certain Fundamental Investment Policies .............................. 27
Risk Considerations .................................................. 30
Purchase and Sale of Shares ............................................. 35
Management of the Funds ................................................. 36
Dividends, Distributions and Taxes ...................................... 40
Conversion Feature ...................................................... 41
General Information ..................................................... 52
</TABLE>
- --------------------------------------------------------------------------------
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund 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 each 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., each 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 other persons associated
with, Alliance Capital Management L.P. and its affiliates or the Funds. 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 licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
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.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
Total Return Funds
Strategic Balanced Fund
Seeks . . . A high long-term total return by investing in a combination of
equity and debt securities.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks and fixed-income securities, and also in equity-type securities such as
warrants, preferred stocks and convertible debt instruments.
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
2
<PAGE>
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Income Builder Fund
Seeks . . . Both an attractive level of current income and long-term growth of
income and capital.
Invests Principally in . . . A non-diversified portfolio of fixed-income
securities and dividend-paying common stocks. Alliance currently expects to
continue to maintain approximately 60% of the Fund's net assets in fixed-income
securities and 40% in equity securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
Real Estate Investment Fund
Seeks . . . Total return on its assets from long-term growth of capital and from
income.
Invests Principally in . . . A diversified portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Distributions...
Balanced Shares, Income Builder Fund, Utility Income Fund, Growth and Income
Fund and Real Estate Investment Fund make distributions quarterly to
shareholders. These distributions may include ordinary income and capital gain
(each of which is taxable) and a return of capital (which is generally
nontaxable). See "Dividends, Distributions and Taxes."
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds 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. An investment in the Real Estate
Investment Fund is subject to certain risks associated with the direct ownership
of real estate in general, including possible declines in the value of real
estate, general and local economic conditions, environmental problems and
changes in interest rates. These risks are fully discussed in this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative. Each
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"), each
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 Funds, 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 same
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 at least $250,000 in Advisor Class shares of each
Fund in which the program invests 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 licenses from the owner, Alliance
Capital Management L.P.
3
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in the Advisor Class shares of each Fund and estimated annual
expenses for Advisor Class shares of each Fund. For each Fund, the "Examples" to
the right of the table below show the cumulative expenses attributable to a
hypothetical $1,000 investment in Advisor Class shares for the periods
specified.
<TABLE>
<CAPTION>
Advisor Class Shares
--------------------
<S> <C>
Maximum sales charge imposed on purchases ............ None
Sales charge imposed on dividend reinvestments ....... None
Deferred sales charge ................................ None
Exchange fee ......................................... None
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Examples
---------------------------------------------------- --------------------------------------------
Alliance Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .70% After 1 year $ 9
12b-1 fees None After 3 years $ 27
Other expenses (a) .15% After 5 years $ 47
---- After 10 years $105
Total fund
operating expenses (b) .85%
====
Growth Fund Advisor Class Advisor Class
------------- -------------
Management fees .75% After 1 year $ 10
12b-1 fees None After 3 years $ 32
Other expenses (a) .25% After 5 years $ 55
---- After 10 years $122
Total fund
operating expenses (b) 1.00%
====
Premier Growth Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 13
12b-1 fees None After 3 years $ 42
Other expenses (a) .32% After 5 years $ 72
---- After 10 years $159
Total fund
operating expenses (b) 1.32%
====
Technology Fund Advisor Class Advisor Class
------------- -------------
Management fees (g) 1.11% After 1 year $ 15
12b-1 fees None After 3 years $ 46
Other expenses (a) .33% After 5 years $ 79
---- After 10 years $172
Total fund
operating expenses (b) 1.44%
====
Quasar Fund Advisor Class Advisor Class
------------- -------------
Management fees (g) 1.15% After 1 year $ 16
12b-1 fees None After 3 years $ 50
Other expenses (a) .43% After 5 years $ 86
---- After 10 years $188
Total fund
operating expenses (b) 1.58%
====
International Fund Advisor Class Advisor Class
------------- -------------
Management fees
(after waiver) (c) .85% After 1 year $ 16
12b-1 fees None After 3 years $ 48
Other expenses (a) .68% After 5 years $ 83
---- After 10 years $182
Total fund
operating expenses (b) (e) 1.53%
====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes and the discussion following these tables on
page 6.
4
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
---------------------------------------------------- --------------------------------------------
Worldwide Privatization Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 20
12b-1 fees None After 3 years $ 62
Other expenses (a) .96% After 5 years $106
---- After 10 years $229
Total fund
operating expenses (b) 1.96%
====
New Europe Fund
Management fees 1.06% After 1 year $ 17
12b-1 fees None After 3 years $ 54
Other expenses (a) .65% After 5 years $ 93
---- After 10 years $202
Total fund
operating expenses (b) 1.71%
====
All-Asia Investment Fund
Management fees
(after waiver) (c) .65% After 1 year $ 29
12b-1 fees None After 3 years $ 87
Other expenses After 5 years $149
Administration fees After 10 years $315
(after waiver) (d) .00%
Other operating expenses (a) 2.17%
----
Total other expenses 2.17%
====
Total fund
operating expenses (b) (e) 2.82%
====
Global Small Cap Fund
Management fees 1.00% After 1 year $ 21
12b-1 fees None After 3 years $ 64
Other expenses (a) 1.05% After 5 years $110
---- After 10 years $238
Total fund
operating expenses (b) 2.05%
====
Strategic Balanced Fund
Management fees
(after waiver) (c) .09% After 1 year $ 11
12b-1 fees None After 3 years $ 35
Other expenses (a) 1.01% After 5 years $ 61
---- After 10 years $134
Total fund
operating expenses (b) (e) 1.10%
====
Balanced Shares
Management fees .63% After 1 year $ 13
12b-1 fees None After 3 years $ 41
Other expenses (a) .67% After 5 years $ 71
---- After 10 years $157
Total fund
operating expenses (b) 1.30%
====
Income Builder Fund
Management fees .75% After 1 year $ 19
12b-1 fees None After 3 years $ 59
Other expenses (a) 1.20% After 5 years $100
---- After 10 years $211
Total fund
operating expenses (b) 1.95%
====
Utility Income Fund
Management fees
(after waiver) (c) 0.00% After 1 year $ 12
12b-1 fees None After 3 years $ 38
Other expenses (a) 1.20% After 5 years $ 66
---- After 10 years $145
Total fund
operating expenses (b) (f) 1.20%
====
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
---------------------------------------------------- --------------------------------------------
Growth and Income Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .51% After 1 year $ 8
12b-1 fees None After 3 years $ 24
Other expenses (a) .25% After 5 years $ 42
---- After 10 years $ 94
Total fund
operating expenses (b) .76%
====
Real Estate Investment Fund
Management fees .90% After 1 year $ 15
12b-1 fees None After 3 years $ 46
Other expenses (a) .55% After 5 years $ 79
---- After 10 years $174
Total fund
operating expenses (b) 1.45%
====
</TABLE>
- --------------------------------------------------------------------------------
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance. The expenses shown do
not include the application of credits that reduce Fund expenses.
(b) The expense information does not reflect any charges or expenses imposed by
your financial representative or your employee benefit plan.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be 1.00% for All-Asia Investment Fund and .75% for Strategic Balanced
Fund and Utility Income Fund and 1.01% for International Fund.
International Fund's fee, absent the voluntary fee waiver, is calculated
based on average daily net assets. Maximum contractual rate, based on
quarter-end net assets, is 1.00%.
(d) Net of voluntary fee waiver. Absent such fee waiver, administration fees
would have been .15% for the Fund's shares. Reflects the fees
payable by All-Asia Investment Fund to Alliance pursuant to an
administration agreement.
(e) Net of voluntary fee waiver and/or expense reimbursement. In the absence of
such waiver and/or reimbursement, total fund operating expenses for
Strategic Balanced Fund would have been 2.35%, total fund operating
expenses for All-Asia Investment Fund would have been 3.32% annualized and
total fund operating expenses for International Fund would have been 1.69%,
annualized.
(f) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 3.48%.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund and Technology
Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. The information shown in the table for the Alliance Fund, Premier
Growth Fund, Technology Fund, Quasar Fund, All-Asia Investment Fund, Strategic
Balanced Fund, Income Builder Fund, Utility Income Fund and Growth and Income
Fund reflects expenses based on the Funds' most recent fiscal periods. For all
other Funds, "Other Expenses" are based on estimated amounts for those Fund's
current fiscal year. "Management fees" for International Fund and All-Asia
Investment Fund and "Administration fee" for All-Asia Investment Fund have been
restated to reflect current voluntary fee waivers. The Examples set forth above
assume reinvestment of all dividends and distributions and utilize a 5% annual
rate of return as mandated by Commission regulations. The Examples should not be
considered representative of future expenses; actual expenses may be greater or
less than those shown.
6
<PAGE>
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus.
Equity securities are (i) common stocks, partnership interests, business trust
shares and other equity or ownership interests in business enterprises, and (ii)
securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
Hong Kong, the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch Investors Service, L.P.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables on the following pages present per share income and capital changes
for an Advisor Class share outstanding throughout each period indicated. Except
as otherwise indicated, information for Alliance Fund, Growth Fund, Premier
Growth Fund, Strategic Balanced Fund, Balanced Shares, Utility Income Fund,
Worldwide Privatization Fund and Growth and Income Fund has been audited by
Price Waterhouse LLP, the independent auditors for each such Fund, and for
All-Asia Investment Fund, Technology Fund, Quasar Fund, International Fund, New
Europe Fund, Global Small Cap Fund, Real Estate Investment Fund and Income
Builder Fund by Ernst & Young LLP, the independent auditors for each such Fund.
A report of Price Waterhouse LLP or Ernst & Young LLP, as the case may be, on
the information with respect to each Fund, appears in the Fund's Statement of
Additional Information. The following information for each Fund 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 a 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.
7
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase Distributions
Value Unrealized (Decrease) In Dividends From In Excess Of
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Income
--------------------- ------------ -------------- ------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Fund
Advisor Class
12/1/96 to 5/31/97++ $ 7.71 $(.01)(b) $ .67 $ .66 $(.04) $0.00
10/2/96+ to 11/30/96 6.99 0.00 .72 .72 0.00 0.00
Growth Fund
Advisor Class
11/1/96 to 4/30/97++ $34.91 $ .02(b) $1.94 $1.96 $0.00 $0.00
10/2/96+ to 10/31/96 34.14 0.00(b) .77 .77 0.00 0.00
Premier Growth Fund
Advisor Class
12/1/96 to 5/31/97++ $17.99 $(.02)(b) $2.66 $2.64 $0.00 $0.00
10/2/96+ to 11/30/96 15.94 (.01)(b) 2.06 2.05 0.00 0.00
Technology Fund
Advisor Class
12/1/96 to 5/31/97++ $51.17 $(.10)(b) $ .68 $ .58 $0.00 $0.00
10/2/96+ to 11/30/96 47.32 (.05)(b) 3.90 3.85 0.00 0.00
Quasar Fund
Advisor Class
10/2/96+ to 3/31/96++ $27.82 $(.04)(b) $ .33 $ .29 $0.00 $0.00
International Fund
Advisor Class
Year ended 6/30/97 $17.96 $ .16(b) $1.78 $1.94 $(.15) $0.00
Worldwide Privatization Fund
Advisor Class
Year ended 6/30/97 $12.14 $ .18(b) $2.52 $2.70 $(.19) $0.00
New Europe Fund
Advisor Class
Year ended 7/31/97 $16.25 $ .11(b) $3.76 $3.87 $(.09) $(.14)
All-Asia Investment Fund
Advisor Class
11/1/96 to 4/30/97++ $11.04 $(.09)(b) $(.53) $(.62) $0.00 $0.00
10/2/96+ to 10/31/96 11.65 0.00(c) (.61) (.61) 0.00 0.00
Global Small Cap Fund
Advisor Class
Year ended 7/31/97 $12.56 $(.08)(b) $1.97 $1.89 $0.00 $0.00
Strategic Balanced Fund
Advisor Class
Year ended 7/31/97 $19.49 $ .42(b)(c) $(.12) $(.30) $0.00 $0.00
Balanced Shares
Advisor Class
Year ended 7/31/97 $14.79 $ .23 $3.22 $3.45 $(.27) $0.00
Income Builder Fund
Advisor Class
10/2/96 to 4/30/97++ $10.00 $ .25(b) $2.27 $2.52 $(.27) $0.00
Utility Income Fund
Advisor Class
12/1/96 to 5/31/97++ $10.59 $ .18(b)(c) $ .07 $ .25 $(.20) $0.00
10/2/96+ to 11/30/96 9.95 .03(c) .61 .64 0.00 0.00
Growth and Income Fund
Advisor Class
11/1/96 to 4/30/97++ $ 3.00 $ .03 $ .36 $ .39 $(.03)
10/2/96+ to 10/31/96 2.97 0.00 .03 .03 0.00 $0.00
Real Estate Investment Fund
Advisor Class
10/1/96+ to 8/31/97 $10.00 $ .35(b) $2.88 $3.23 $(.41)(f) $0.00
</TABLE>
- --------------------------------------------------------------------------------
+ Commencement of distribution.
++ Unaudited
* Annualized.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment returns calculated for periods of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and/or expense reimbursement.
(d) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent fiscal year, their expense
ratios, giving effect to the expense offset arrangements described in (e)
below, would have been as follows:
<TABLE>
<CAPTION>
1996 1997 1997
<S> <C> <C> <C> <C>
All-Asia Investment Fund Strategic Balanced
Advisor Class 5.54%# -- Advisor Class 2.35%#
Utility Income Fund
Advisor Class 3.48%# 3.14#
Real Estate Investment Fund
Advisor Class 1.47%#
</TABLE>
-------------
# annualized
8
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Distributions Dividends Value Return Based Period Expenses Income (Loss) Average
From Net And End Of on Net Asset (000's To Average To Average Portfolio Commission
Realized Gains Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate
-------------- ------------- --------- ------------ ----------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$(1.06) $(1.10) $ 7.27 10.43% $ 8,693 .89%* (.19)%* 107% $0.0559
0.00 0.00 7.71 10.30 1,083 .89* 0.38* 80 0.0646
$(1.03) $(1.03) $35.84 5.64% $54,075 .99%* .11%* .19% $0.0537
0.00 0.00 34.91 2.26 946 1.26* 0.50* 46 0.0584
$(1.08) $(1.08) $19.55 15.87% $33,225 1.28%* (.30)%* 47% $0.0598
0.00 0.00 17.99 12.86 1,922 1.50* (.48)* 95 0.0651
$(.42) $ (.42) $51.33 1.15% $77,548 1.55%* (.48)%* 28% $0.0576
0.00 0.00 51.17 8.14 566 1.75* (1.21)* 30 0.0612
$(4.11) $(4.11) $24.00 1.36% $14,761 1.34%*(e) (.40)%* 75% $0.0533
$(1.08) $(1.23) $18.67 11.57% $ 8,697 1.69%* (1.47)%* 94% $0.0363
$(1.42) $(1.61) $13.23 25.24% $ 374 1.96%* 2.97%* 48% $0.0132
$(1.32) $(1.55) $18.57 25.76% $ 4,430 1.71%* .77%* 89% $0.0569
$(.34) $ (.34) $10.08 (5.89)% $ 2,479 3.44%* (2.30)%* 56% $0.0269
0.00 0.00 11.04 (5.24) 27 3.07*(d) 1.63* 66 0.0280
$(1.56) $(1.56) $12.89 17.08% $ 333 2.05%*(e) (.84)%* 129% $0.0364
$ 0.00 $ 0.00 $19.79 1.54% $ 50 1.10%(d)(e)* 3.40%* 170% $0.0395
$(1.80) $(2.07) $16.17 25.96% $ 1,565 1.30%*(e) 2.15%* 207% $0.0552
$(.61) $ (.88) $11.64 8.48% $ 73 2.07%* 4.56%* 169% $0.0519
$(.13) $ (.33) $10.51 2.35% $ 39 1.20%*(d) 3.45%* 23% $0.0411
0.00 0.00 10.59 6.33 33 1.20*(d) 4.02* 98 0.0536
$(.38) $(.41) $ 2.98 13.46% $ 1,850 .75%* 1.95%* 55% $0.0585
0.00 0.00 3.00 1.01 87 0.37* 3.40* 88 0.0625
$0.00 $ (.41)(f) $12.82 32.72% $ 2,313 1.45%*(d)(e) 3.07%* 20% $0.0518
</TABLE>
- --------------------------------------------------------------------------------
(e) The following funds benefitted from an expense offset arrangement with the
transfer agent. Had such expense offsets not been in effect, the rate of
expense to average net assets absent the assumption and/or waiver
reimbursement of expenses described in note(d) above would have been as
follows:
<TABLE>
<CAPTION>
1997 1997
---- ----
<S> <C> <C>
International Fund New Europe Fund
Advisor Class 1.69%# Advisor Class 1.71%#
Global Small Cap Fund Balanced Shares Fund
Advisor Class 2.04%# Advisor Class 1.29%#
Strategic Balanced Fund Real Estate Fund
Advisor Class 2.35%# Advisor Class 1.44%#
</TABLE>
- ------------
# annualized
(f) Distribution from net investment income include a tax return of capital of
$.03.
9
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- --------------------------------------------------------------------------------
Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
Domestic Stock Funds
The Domestic Stock Funds have been designed to offer investors seeking capital
appreciation a range of alternative approaches to investing in the U.S. equity
markets.
The Alliance Fund
The Alliance Fund, Inc. ("Alliance Fund") is a diversified investment company
that seeks long-term growth of capital and income primarily through investment
in common stocks. The Fund normally invests substantially all of its assets in
common stocks that Alliance believes will appreciate in value, but it may invest
in other types of securities such as convertible securities, high grade
instruments, U.S. Government securities and high quality, short-term obligations
such as repurchase agreements, bankers' acceptances and domestic certificates of
deposit, and may invest without limit in foreign securities. While the
diversification and generally high quality of the Fund's investments cannot
prevent fluctuations in market values, they tend to limit investment risk and
contribute to achieving the Fund's objective. The Fund generally does not effect
portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund may also: (i) make secured loans of its portfolio securities equal in
value up to 25% of its total assets to brokers, dealers and financial
institutions; (ii) enter into repurchase agreements of up to one week in
duration with commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily available
market quotations do not exceed 10% of its net assets; and (iii) write
exchange-traded covered call options with respect to up to 25% of its total
assets. For additional information on the use, risks and costs of these policies
and practices see "Additional Investment Practices."
Alliance Growth Fund
Alliance Growth Fund ("Growth Fund") is a diversified investment company that
seeks long-term growth of capital. Current income is only an incidental
consideration. The Fund seeks to achieve its objective by investing primarily in
equity securities of companies with favorable earnings outlooks and whose
long-term growth rates are expected to exceed that of the U.S. economy over
time. The Fund's investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated
fixed-income and convertible securities. See "Risk Considerations--Securities
Ratings" and "--Investment in Lower-Rated Fixed-Income Securities." The Fund
generally will not invest in securities rated at the time of purchase below Caa-
by Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. If the credit rating of a
security held by the Fund falls below its rating at the time of purchase (or
Alliance determines that the quality of such security has so deteriorated), the
Fund may continue to hold the security if such investment is considered
appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements of up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40 companies will be represented in the Fund's
portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity securities of which are traded principally in the U.S.
10
<PAGE>
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more than
600 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options; (ii)
invest up to 10% of its total assets in warrants; (iii) invest in restricted
securities and in other assets having no ready market if as a result no more
than 10% of the Fund's net assets are invested in such securities and assets;
(iv) lend portfolio securities equal in value to not more than 30% of the Fund's
total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities,
Alliance considers the economic and political outlook, the values of specific
securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10%
11
<PAGE>
of its total assets may be invested in such securities or assets; (ii) make
short sales of securities "against the box," but not more than 15% of its net
assets may be deposited on short sales; and (iii) write call options and
purchase and sell put and call options written by others. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Global Stock Funds
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. In this
regard, at June 30, 1997, approximately 28% of the Fund's assets were invested
in securities of Japanese issuers. The Fund may invest in companies, wherever
organized, that Alliance judges have their principal activities and interests
outside the U.S. These companies may be located in developing countries, which
involves exposure to economic structures that are generally less diverse and
mature, and to political systems which can be expected to have less stability,
than those of developed countries. The Fund currently does not intend to invest
more than 10% of its total assets in companies in, or governments of, developing
countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or
over-the-counter; (v) lend portfolio securities equal in value to not more than
30% of its total assets; and (vi) enter into repurchase agreements of up to
seven days' duration, provided that not more than 10% of the Fund's total assets
would be so invested. For additional information on the use, risks and costs of
these policies and practices see "Additional Investment Practices."
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy, and the
Fund will thus emphasize investments in such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through
12
<PAGE>
privatization a government or state divests or transfers all or a portion of its
interest in a state enterprise to some form of private ownership. Governments
and states with established economies, including France, Great Britain, Germany
and Italy, and those with developing economies, including Argentina, Mexico,
Chile, Indonesia, Malaysia, Poland and Hungary, are engaged in privatizations.
The Fund will invest in any country believed to present attractive investment
opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its investments in
any industry, it is permitted to invest more than 25% of its total assets in
issuers whose primary business activity is that of national commercial banking.
Prior to so concentrating, however, the Fund's Directors must determine that its
ability to achieve its investment objective would be adversely affected if it
were not permitted to concentrate. The staff of the Commission is of the view
that registered investment companies may not, absent shareholder approval,
change between concentration and non-concentration in a single industry. The
Fund disagrees with the staff's position but has undertaken that it will not
concentrate in the securities of national commercial banks until, if ever, the
issue is resolved. If the Fund were to invest more than 25% of its total assets
in national commercial banks, the Fund's performance could be significantly
influenced by events or conditions affecting this industry, which is subject to,
among other things, increases in interest rates and deteriorations in general
economic conditions, and the Fund's investments may be subject to greater risk
and market fluctuation than if its portfolio represented a broader range of
investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations--Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain
a non-convertible security that is downgraded below C or determined by Alliance
to have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter in forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund will invest in companies that Alliance
believes possess rapid growth potential. Thus, the Fund will emphasize
investments in larger, established companies, but will also invest in smaller,
emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although the Fund will not invest more than 20% of its total assets in
issuers based therein, or more than 10% of its total assets in issuers based in
any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country,
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at times 25% or more of its assets may be invested in issuers located in a
single country. During such times, the Fund would be subject to a
correspondingly greater risk of loss due to adverse political or regulatory
developments, or an economic downturn, within that country. In this regard, at
July 31, 1997, approximately 32% of the Fund's assets were invested in
securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a
non-diversified investment company whose investment objective is to seek
long-term capital appreciation. In seeking to achieve its investment objective,
the Fund will invest at least 65% of its total assets in equity securities (for
the purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, but less than 50%, of its
assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and India have recently relaxed investment
restrictions and Vietnamese direct investments have recently become available to
U.S. investors. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings," "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of Additional Information for
a description of such ratings. The Fund will not retain a security that is
downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and
"semi-governmental securities;" (iv) invest up to 25% of its net assets in
equity-linked debt securities with
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the objective of realizing capital appreciation; (v) invest up to 25% of its net
assets in loans and other direct debt instruments; (vi) write covered put and
call options on securities of the types in which it is permitted to invest and
on exchange-traded index options; (vii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, securities issued by foreign government entities, or common stock
and may purchase and write options on future contracts; (viii) purchase and
write put and call options on foreign currencies for hedging purposes; (ix)
purchase or sell forward contracts; (x) enter into interest rate swaps and
purchase or sell interest rate caps and floors; (xi) enter into forward
commitments for the purchase or sale of securities; (xii) enter into standby
commitment agreements; (xiii) enter into currency swaps for hedging purposes;
(xiv) enter into repurchase agreements pertaining to U.S. Government securities
with member banks of the Federal Reserve System or primary dealers in such
securities; (xv) make short sales of securities or maintain a short position, in
each case only if "against the box;" and (xvi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1 billion. Because the
Fund applies the U.S. size standard on a global basis, its foreign investments
might rank above the lowest 20%, and, in fact, might in some countries rank
among the largest, by market capitalization in local markets. Normally, the Fund
invests at least 65% of its assets in equity securities of these smaller
capitalization issuers, and these issuers are located in at least three
countries, one of which may be the U.S. Up to 35% of the Fund's total assets may
be invested in securities of companies whose market capitalizations exceed the
Fund's size standard. The Fund's portfolio securities may be listed on a U.S. or
foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Total Return Funds
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current income.
Alliance Strategic Balanced Fund
Alliance Strategic Balanced Fund ("Strategic Balanced Fund") is a diversified
investment company that seeks a high long-term total return by investing in a
combination of equity and debt securities. The portion of the Fund's assets
invested in each type of security varies in accordance with economic conditions,
the general level of common stock prices, interest rates and other relevant
considerations, including the risks associated with each investment medium. The
Fund's investment objective is not fundamental.
The Fund's equity securities will generally consist of dividend-paying common
stocks and other equity securities of companies with favorable earnings outlooks
and long-term growth rates that Alliance expects will exceed that of the U.S.
economy. The Fund's debt securities may include U.S. Government securities and
securities issued by private corporations. The Fund may also invest in
mortgage-backed securities, adjustable rate securities, asset-backed securities
and so-called "zero-coupon" bonds and "payment-in-kind" bonds.
As a fundamental policy, the Fund will invest at least 25% of its total assets
in fixed-income securities, which for this purpose include debt securities,
preferred stocks and that portion of the value of convertible securities that is
attributable to the fixed-income characteristics of those securities.
The Fund's debt securities will generally be of investment grade. See "Risk
Considerations--Securities Ratings" and
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"--Investment in Lower-Rated Fixed-Income Securities." In the event that the
rating of any debt securities held by the Fund falls below investment grade, the
Fund will not be obligated to dispose of such obligations and may continue to
hold them if considered appropriate under the circumstances.
The Fund may also: (i) invest in foreign securities, although the Fund will not
generally invest more than 15% of its total assets in foreign securities; (ii)
invest, without regard to this 15% limit, in Eurodollar CDs, which are
dollar-denominated certificates of deposit issued by foreign branches of U.S.
banks that are not insured by any agency or instrumentality of the U.S.
Government; (iii) write covered call and put options on securities it owns or in
which it may invest; (iv) buy and sell put and call options and buy and sell
combinations of put and call options on the same underlying securities; (v) lend
portfolio securities amounting to not more than 25% of its total assets; (vi)
enter into repurchase agreements on up to 25% of its total assets; (vii)
purchase and sell securities on a forward commitment basis; (viii) buy or sell
foreign currencies, options on foreign currencies, foreign currency futures
contracts (and related options) and deal in forward foreign exchange contracts;
(ix) buy and sell stock index futures contracts and buy and sell options on
those contracts and on stock indices; (x) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; and (xi)
invest in securities that are not publicly traded, including Rule 144A
securities. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds, senior debt
securities and preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market outlooks. The Fund
may invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above. See "Risk Considerations--Foreign Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Income Builder Fund
Alliance Income Builder Fund, Inc. ("Income Builder Fund") is a non-diversified
investment company that seeks an attractive level of current income and
long-term growth of income and capital by investing principally in fixed-income
securities and dividend-paying common stocks. Its investments in equity
securities emphasize common stocks of companies with a historical or projected
pattern of paying rising dividends. Normally, at least 65% of the Fund's total
assets are invested in income-producing securities. The Fund may vary the
percentage of assets invested in any one type of security based upon Alliance's
evaluation as to the appropriate portfolio structure for achieving the Fund's
investment objective, although Alliance currently maintains approximately 60% of
the Fund's net assets in fixed-income securities and 40% in equity securities.
The Fund may invest in fixed-income securities of domestic and foreign issuers,
including U.S. Government securities and repurchase agreements pertaining
thereto, corporate fixed-income securities of U.S. issuers, qualifying bank
deposits and prime commercial paper.
The Fund may maintain up to 35% of its net assets in lower-rated securities. See
"Risk Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a non-convertible security
that is downgraded below CCC or determined by Alliance to have undergone similar
credit quality deterioration following purchase.
Foreign securities in which the Fund invests may include fixed-income securities
of foreign corporate and governmental issuers, denominated in U.S. Dollars, and
equity securities of foreign corporate issuers, denominated in foreign
currencies or in U.S. Dollars. The Fund will not invest more than 10% of its net
assets in equity securities of foreign issuers nor more than 15% of its total
assets in issuers of any one foreign country. See "Risk Considerations--Foreign
Investment."
The Fund may also: (i) invest up to 5% of its net assets in rights or warrants;
(ii) invest in depositary receipts and U.S. Dollar denominated securities issued
by supranational entities; (iii) write covered put and call options and purchase
put and call options on securities of the types in which it is permitted to
invest that are exchange-traded; (iv) purchase and sell exchange-traded options
on any securities index composed of the types of securities in which it may
invest; (v) enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, foreign government
securities, corporate fixed income securities, or common stock, and purchase and
write options on future contracts; (vi) purchase and write put and
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call options on foreign currencies and enter into forward contracts for hedging
purposes; (vii) enter into interest rate swaps and purchase or sell interest
rate caps and floors; (viii) enter into forward commitments for the purchase or
sale of securities; (ix) enter into standby commitment agreements; (x) enter
into repurchase agreements pertaining to U.S. Government securities with member
banks of the Federal Reserve System or primary dealers in such securities; (xi)
make short sales of securities or maintain a short position as described below
under "Additional Investment Policies and Practices--Short Sales;" and (xii)
make secured loans of its portfolio securities not in excess of 20% of its total
assets to brokers, dealers and financial institutions. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. The Fund may invest in securities of both U.S. and foreign
issuers, although no more than 15% of the Fund's total assets will be invested
in issuers in any one foreign country. The utilities industry consists of
companies engaged in (i) the manufacture, production, generation, provision,
transmission, sale and distribution of gas and electric energy, and
communications equipment and services, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities for
the public, or (ii) the provision of other utility or utility-related goods and
services, including, but not limited to, entities engaged in water provision,
cogeneration, waste disposal system provision, solid waste electric generation,
independent power producers and non-utility generators. The Fund is designed to
take advantage of the characteristics and historical performance of securities
of utility companies, many of which pay regular dividends and increase their
common stock dividends over time. As a fundamental policy, the Fund normally
invests at least 65% of its total assets in securities of companies in the
utilities industry. The Fund considers a company to be in the utilities industry
if, during the most recent twelve-month period, at least 50% of the company's
gross revenues, on a consolidated basis, were derived from its utilities
activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a security that is downgraded
below B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition and regulatory
changes. There can also be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval for
rate increases. In addition, because
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many foreign utility companies use fuels that cause more pollution than those
used in the U.S., such utilities may yet be required to invest in pollution
control equipment. Foreign utility regulatory systems vary from country to
country and may evolve in ways different from regulation in the U.S. The
percentage of the Fund's assets invested in issuers of particular countries will
vary. See "Risk Considerations--Foreign Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate
fixed-income securities of domestic issuers, corporate fixed-income securities
of foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter in forward commitments for the purchase
or sale of securities; (xi) enter into standby commitment agreements; (xii)
enter into repurchase agreements pertaining to U.S. Government securities with
member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices--Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund has restricted its investments in securities in this category to
issues of high quality. The Fund may also purchase and sell financial forward
and futures contracts and options thereon for hedging purposes. For additional
information on the use, rights and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund, Inc. ("Real Estate Investment Fund") is a
diversified investment company that seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of real estate investment trusts ("REITs") and
other real estate industry companies. A "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or interests therein. The
equity securities in which the Fund will invest for this purpose consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock or convertible securities ("Real
Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These instruments are
described below. The risks associated with the Fund's transactions in REMICs,
CMOs and other types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk. See "Risk Considerations" for a description of these and other
risks.
As to any investment in Real Estate Equity Securities, Alliance's analysis will
focus on determining the degree to which the company involved can achieve
sustainable growth in cash flow and dividend paying capability. Alliance
believes that the primary determinant of this capability is the economic
viability of property markets in which the company operates and that the
secondary determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will purchase
Real Estate Equity
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Securities when, in the judgment of Alliance, their market price does not
adequately reflect this potential. In making this determination, Alliance will
take into account fundamental trends in underlying property markets as
determined by proprietary models, site visits conducted by individuals
knowledgeable in local real estate markets, price-earnings ratios (as defined
for real estate companies), cash flow growth and stability, the relationship
between asset value and market price of the securities, dividend payment
history, and such other factors which Alliance may determine from time to time
to be relevant. Alliance will attempt to purchase for the Fund Real Estate
Equity Securities of companies whose underlying portfolios are diversified
geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
Investment Process for Real Estate Equity Securities
Real Estate Investment Fund's investment strategy with respect to Real Estate
Equity Securities is based on the premise that property market fundamentals are
the primary determinant of growth underlying the success of Real Estate Equity
Securities. Value added management will further distinguish the most attractive
Real Estate Equity Securities. The Fund's research and investment process is
designed to identify those companies with strong property fundamentals and
strong management teams. This process is comprised of real estate market
research, specific property inspection and securities analysis.
The universe of property-owning real estate industry firms consists of
approximately 130 companies of sufficient size and quality to merit
consideration for investment by the Fund. In implementing the Fund's research
and investment process, Alliance will avail itself of the consulting services of
CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held company and the
largest real estate services company in the United States, comprised of real
estate brokerage, property and facilities management, and real estate finance
and investment advisory activities (CBC in August of 1997 acquired Koll
Management Services ("Koll"), which previously provided these consulting
services to Alliance). In 1996, CBC (and Koll, on a combined basis) completed
25,000 sale and lease transactions, managed over 4,100 client properties,
created over $3.5 billion in mortgage originations, and completed over 2,600
appraisal and consulting assignments. In addition, they advised and managed for
institutions over $4 billion in real estate investments. As consultant to
Alliance, CBC provides access to its proprietary model, REIT-Score, that
analyzes the approximately 12,000 properties owned by these 130 companies. Using
proprietary databases and algorithms, CBC analyzes local market rent, expense,
and occupancy trends, market specific transaction pricing, demographic and
economic trends, and leading indicators of real estate supply such as building
permits. Over 650 asset-type specific geographic markets are analyzed and ranked
on a relative scale by CBC in compiling its REIT-Score database. The relative
attractiveness of these real estate industry companies is similarly ranked based
on the cmposite rankings of the properties they own. See "Management of the
Funds--Consultant to Advir" for more information about CBC.
Once the universe of real estate industry companies has been distilled through
the market research process, CBC's local market presence provides the capability
to perform site specific inspections of key properties. This analysis examines
specific location, condition, and sub-market trends. CBC's use of locally based
real estate professionals provides Alliance with a window on the operations of
the portfolio companies as information can immediately be put in the context of
local market events. Only those companies whose specific property portfolios
reflect the promise of their general markets will be considered for initial and
continued investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance will make extensive use of CBC's
network of industry analysts in order to assess trends in tenant industries.
This information is then used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
Alliance believes that this process will result in a portfolio that will consist
of Real Estate Equity Securities of companies that own assets in the most
desirable markets across the country, diversified geographically and by property
type.
The short-term investments in which Real Estate Investment Fund may invest are:
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations
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issued or guaranteed by the U.S. Government or its agencies or instrumentalities
with remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not so rated, of equivalent credit quality as
determined by Alliance. The Fund expects that it will not retain a debt security
which is downgraded below BBB or Baa or, if unrated, determined by Alliance to
have undergone similar credit quality deterioration, subsequent to purchase by
the Fund.
The Fund may also engage in the following investment practices to the extent
indicated: (i) invest up to 10% of its net assets in rights or warrants; (ii)
invest up to 15% of its net assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund; (iii) lend portfolio
securities equal in value to not more than 25% of total assets; (iv) enter into
repurchase agreements of up to seven days' duration; (v) enter into forward
commitments transactions as long as the Fund's aggregate commitments under such
transactions are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of securities or maintain
a short position but only if at all times when a short position is open not more
than 25% of the Fund's net assets (taken at market value) is held as collateral
for such sales; and (viii) invest in illiquid securities unless, as a result,
more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which provide a
stable stream of income with yields that are generally higher than those of
equity securities of the same or similar issuers. The price of a convertible
security will normally vary with changes in the price of the underlying stock,
although the higher yield tends to make the convertible security less volatile
than the underlying common stock. As with debt securities, the market value of
convertible securities tends to decline as interest rates increase and increase
as interest rates decline. While convertible securities generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality, they offer investors the potential to benefit from increases in the
market price of the underlying common stock. Convertible debt securities that
are rated Baa or lower by Moody's or BBB or lower by S&P, Duff & Phelps or Fitch
and comparable unrated securities as determined by Alliance may share some or
all of the risks of non-convertible debt securities with those ratings. For a
description of these risks, see "Risk Considerations--Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities."
Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to buy
equity securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination thereof. If the
market price of the underlying security 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.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by 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, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities except with respect to Growth Fund, Strategic Balanced
Fund and Income Builder Fund, where investments in ADRs are deemed to be
investments in securities issued by U.S. issuers and those in GDRs and other
types of depositary receipts are deemed to be investments in the underlying
securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying
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mortgage-backed securities are passed through to the holders of the securities.
As a result of the pass-through of prepayments of principal on the underlying
securities, mortgage-backed securities are often subject to more rapid
prepayment of principal than their stated maturity would indicate. Prepayments
occur when the mortgagor on a mortgage prepays the remaining principal before
the mortgage's scheduled maturity date. Because the prepayment characteristics
of the underlying mortgages vary, it is impossible to predict accurately the
realized yield or average life of a particular issue of pass-through
certificates. Prepayments are important because of their effect on the yield and
price of the mortgage-backed securities. During periods of declining interest
rates, prepayments can be expected to accelerate and a Fund investing in such
securities would be required to reinvest the proceeds at the lower interest
rates then available. Conversely, during periods of rising interest rates, a
reduction in prepayments may increase the effective maturity of the securities,
subjecting them to a greater risk of decline in market value in response to
rising interest rates. In addition, prepayments of mortgages underlying
securities purchased at a premium could result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Some adjustable rate securities are backed by
pools of mortgage loans. Although the rate-adjustment feature may reduce sharp
changes in the value of adjustable rate securities, these securities can change
in value based on changes in market interest rates or the issuer's
creditworthiness. Changes in the interest rate on adjustable rate securities may
lag behind changes in prevailing market interest rates. Also, some adjustable
rate securities (or the underlying mortgages) are subject to caps or floors that
limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt securities, the
values of equity-linked debt securities will generally vary inversely with
changes in interest rates. The Fund's ability to dispose of equity-linked debt
securities will depend on the availability of liquid markets for such
securities. Investment in equity-linked debt securities may be considered to be
speculative. As with other securities, the Fund could lose its entire investment
in equity-linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to the Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate the
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If the
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Fund does not receive scheduled interest or principal payments on such
indebtedness, the Fund's share price and yield could be adversely affected.
Loans that are fully secured offer the Fund more protection than unsecured loans
in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral can be liquidated.
Indebtedness of borrowers whose creditworthiness is poor may involve substantial
risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries will also involve a risk that the governmental
entities responsible for the repayment of the debt may be unable, or unwilling,
to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of the Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
the Fund to pay additional cash on demand. These commitments may have the effect
of requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Mortgage-Backed Securities and Associated Risks. Mortgage-Backed Securities
include mortgage pass-through certificates and multiple-class pass-through
securities, such as REMIC pass-through certificates, CMOs and stripped
mortgage-backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate Investment Fund may
invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private lenders. CMOs and
REMIC certificates are issued in multiple classes and the principal of and
interest on the mortgage assets may be allocated among the several classes of
CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC
certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Generally, interest is paid or accrues on all classes
of CMOs or REMIC certificates on a monthly basis. Real Estate Investment Fund
will not invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although the Fund does
not intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those generally associated with investing in the real estate
industry in general. These unique risks include the failure of a counterparty to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations--Mortgage-Backed
Securities" for a more complete description of the characteristics of
Mortgage-Backed Securities and associated risks.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other
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securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market (e.g., when trading in the
security is suspended or, in the case of unlisted securities, when market makers
do not exist or will not entertain bids or offers), including many individually
negotiated currency swaps and any assets used to cover currency swaps and most
privately negotiated investments in state enterprises that have not yet
conducted an initial equity offering, (ii) over-the-counter options and assets
used to cover over-the-counter options, and (iii) repurchase agreements not
terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
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 a Fund's Directors. Investment in non-publicly traded
securities by each of Growth Fund and Strategic Balanced Fund is restricted to
5% of its total assets (not including for these purposes Rule 144A securities,
to the extent permitted by applicable law) and is also subject to the 15%
restriction on investment in illiquid securities described above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resales of securities.
Options. An option gives the purchaser of the option, upon payment of a premium,
the right to deliver to (in the case of a put) or receive from (in the case of a
call) the writer a specified amount of a security on or before a fixed date at a
predetermined price. A call option written by a Fund is "covered" if the Fund
owns the underlying security, has an absolute and immediate right to acquire
that security upon conversion or exchange of another security it holds, or holds
a call option on the underlying security with an exercise price equal to or less
than that of the call option it has written. A put option written by a Fund is
covered if the Fund holds a put option on the underlying securities with an
exercise price equal to or greater than that of the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Income Builder Fund and
Utility Income Fund each may write call options for cross-hedging purposes. A
Fund would write a call option for cross- hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write uncovered call options. Technology Fund and Global
Small Cap Fund will not write a call option if the premium to be received by the
Fund in doing so would not produce an annualized return of at least 15% of the
then current market value of the securities subject to the option (without
giving effect to commissions, stock transfer taxes and other expenses that are
deducted from premium receipts). Technology Fund, Quasar Fund and Global Small
Cap Fund will not write a call option if, as a result, the aggregate of the
Fund's portfolio securities subject to outstanding call options (valued at the
lower of the option price or market value of such securities) would exceed 15%
of the Fund's total assets or more than 10% of the Fund's assets would be
committed to call options that at the time of sale have a remaining term of more
than 100 days. The aggregate cost of all outstanding options purchased and held
by each of Premier Growth Fund, Technology Fund, Quasar Fund and Global Small
Cap Fund will at no time exceed 10% of the Fund's total assets. Neither
International Fund nor New Europe Fund will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
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Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
Options on futures contracts written or purchased by a 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 market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, and Income Builder
Fund will also not do so if immediately thereafter the aggregate of initial
margin deposits on all the outstanding futures contracts of the Fund and
premiums paid on outstanding options on futures contracts would exceed 5% of the
market value of the total assets of the Fund. Premier Growth Fund and Growth and
Income Fund may not purchase or sell a stock index future if immediately
thereafter more than 30% of its total assets would be hedged by stock index
futures. Premier Growth Fund and Growth and Income Fund may not purchase or sell
a stock index future if, immediately thereafter, the sum of the amount of margin
deposits on the Fund's existing futures positions would exceed 5% of the market
value of the Fund's total assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, 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 a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
contracts 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.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions.
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Growth Fund and Strategic Balanced Fund may also purchase and sell foreign
currency on a spot basis.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds to be received, in determining its net
asset value. Any unrealized appreciation or depreciation reflected in such
valuation of a "when, as and if issued" security would be canceled in the event
that the required conditions did not occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if Alliance were to forecast incorrectly
the direction of interest rate movements, a Fund might be required to complete
such when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by New Europe Fund, All-Asia
Investment Fund, Worldwide Privatization Fund, Income Builder Fund, Utility
Income Fund or Real Estate Investment Fund if, as a result, the Fund's aggregate
commitments under such transactions would be more than 30% of the Fund's total
assets. In the event the other party to a forward commitment transaction were to
default, a Fund might lose the opportunity to invest money at favorable rates or
to dispose of securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
Income Builder Fund, will enter into a standby commitment with a remaining term
in excess of 45 days. Investments in standby commitments will be limited so that
the aggregate purchase price of the securities subject to the commitments will
not exceed 25% with respect to New Europe Fund and Real Estate Investment Fund,
50% with respect to Worldwide Privatization Fund and All-Asia Investment Fund,
and 20% with respect to Utility Income Fund, of the Fund's assets taken at the
time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each currency swap will
be accrued on a daily basis. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the 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,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the
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price of securities the Fund anticipates purchasing at a later date. The Funds
do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund and Utility Income Fund, the exchange
commitments can involve payments in the same currency or in different
currencies. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the party
selling such interest rate cap. The purchase of an interest rate floor entitles
the purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on an agreed principal amount
from the party selling the interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap, cap
and floor is accrued daily. A Fund will not enter into an interest rate swap,
cap or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is then rated in the highest rating category
of at least one nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Worldwide Privatization Fund, All-Asia
Investment Fund, Income Builder Fund and Utility Income Fund each may make short
sales of securities or maintain short positions only for the purpose of
deferring realization of gain or loss for U.S. federal income tax purposes,
provided that at all times when a short position is open the Fund owns an equal
amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund and Real Estate
Investment Fund may not make a short sale if as a result more than 25% of the
Fund's net assets would be held as collateral for short sales. If the price of
the security sold short increases between the time of the short sale and the
time a Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain. See
"Certain Fundamental Investment Policies." Certain special federal income tax
considerations may apply to short sales entered into by a Fund. See "Dividends,
Distributions and Taxes" in the relevant Fund's Statement of Additional
Information.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned thereon
and the Fund may invest any cash collateral in portfolio
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<PAGE>
securities, thereby earning additional income, or receive an agreed upon amount
of income from a borrower who has delivered equivalent collateral. Each Fund
will have the right to regain record ownership of loaned securities or
equivalent securities in order to exercise ownership rights such as voting
rights, subscription rights and rights to dividends, interest or distributions.
A Fund may pay reasonable finders', administrative and custodial fees in
connection with a loan. A Fund will not lend its 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, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to certain options and forward
contracts, and adverse market movements could therefore continue to an unlimited
extent over a period of time. In addition, the correlation between movements in
the prices of futures contracts, options and forward contracts and movements in
the prices of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option), with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a 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 each Fund that invests
in options and futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime commercial
paper and other types of short-term debt securities including notes and bonds.
For Funds that may invest in foreign countries, such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities each Fund
may invest in while in a temporary defensive position, please see such Fund's
Statement of Additional Information.
Portfolio Turnover. Portfolio turnover rates for the existing classes of shares
of the Fund are set forth in the tables that begin on page 38. These portfolio
turnover rates are greater than those of most other investment companies,
including those which emphasize capital appreciation as a basic policy. 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 each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each 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 a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof; (iii)
in oil, gas or other mineral exploration or development programs; or (iv) more
than 5% of its gross assets in securities the disposition of which would be
subject to restrictions under the federal securities laws.
Growth Fund and Strategic Balanced Fund each may not: (i) invest more than 5% of
its total assets in the securities of any one issuer (other than U.S. Government
securities and repurchase agreements relating thereto), although up to 25% of
each Fund's total assets may be invested without regard to this restriction; or
(ii) invest 25% or more of its total assets in the securities of any one
industry.
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Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than: (a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase would cause 10% or more of its total assets to be invested in the
securities of such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings. The exception contained in clause (i)(b) above is subject
to the operating policy regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be
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deemed to prohibit the Fund from purchasing the securities of any issuer
pursuant to the exercise of rights distributed to the Fund by the issuer, except
that no such purchase may be made if as a result the Fund will fail to meet the
diversification requirements of the Code and any such acquisition in excess of
the foregoing 15% or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to U.S. Government securities, but
will apply to foreign government securities unless the Commission permits their
exclusion); (iii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the Fund's total assets will be repaid
before any subsequent investments are made; or (iv) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company, or
more than 10% of such value in closed-end investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding 5% of the total assets of the Fund; or (iv) 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 and unless not more than 5% of the Fund's net assets is
held as collateral for such sales at any one time.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Income Builder Fund may not: (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry, except that
this restriction does not apply to U.S. Government securities; (ii) borrow money
except from banks for temporary or emergency purposes, including the meeting of
redemption requests that might require the untimely disposition of securities;
borrowing in the aggregate may not exceed 15%, and borrowing for purposes other
than meeting redemptions may not exceed 5%, of the Fund's total assets
(including the amount borrowed) less liabilities (not including the amount
borrowed) at the time borrowing is made; securities will not be purchased while
borrowings in excess of 5% of the Fund's total assets are outstanding; or (iii)
pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), 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 net assets would be invested in securities of any one or more closed-end
investment companies.
Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S.
<PAGE>
Government obligations or (ii) own more than 10% of the outstanding voting
securities of any issuer.
Real Estate Investment Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer (other than the
U.S. Government and its agencies or instrumentalities) not greater in value than
5% of the Fund's total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if as a result
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such issuer; (iii)
invest 25% or more of its total assets in the securities of issuers conducting
their principal businesactivities in any one industry, other than the real
estatindustry in which the Fund will invest at least 25% or morof its total
assets, except that this restriction does not applto U.S. Government securities;
(iv) purchase or sell real estate, except thait may purchase and sell securities
of companies which deain real estate or interests therein, including Real Estate
Equity curities; or (v) borrow money except for temporary or emergey purposes or
to meet redemption requests, in an amount t exceeding 5% of the value of its
total assets at the time the borrowing is mad.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
New Europe Fund, All-Asia Investment Fund, and Worldwide Privatization Fund and
a substantial portion of the assets of Global Small Cap Fund will be invested in
securities denominated in foreign currencies, and a corresponding portion of
these Funds' revenues will be received in such currencies. Therefore, the dollar
equivalent of their net assets, distributions and income will be adversely
affected by reductions in the value of certain foreign currencies relative to
the U.S. dollar. If the value of the foreign currencies in which a Fund receives
its income falls relative to the U.S. dollar between receipt of the income and
the making of Fund distributions, the Fund may be required to liquidate
securities in order to make distributions if it has insufficient cash in U.S.
dollars to meet distribution requirements that the Fund must satisfy to qualify
as a regulated investment company for federal income tax purposes. Similarly, if
an exchange rate declines between the time a Fund incurs expenses in U.S.
dollars and the time cash expenses are paid, the amount of the currency required
to be converted into U.S. dollars in order to pay expenses in U.S. dollars could
be greater than the equivalent amount of such expenses in the currency at the
time they were incurred. In light of these risks, a Fund may engage in certain
currency hedging transactions, which themselves involve certain special risks.
See "Additional Investment Practices" above.
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, a 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 settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. 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
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for purchase by nationals. These restrictions or controls may at times limit or
preclude investment in certain securities and may increase the costs and
expenses of a Fund. In addition, the repatriation of investment income, capital
or the proceeds of sales of securities from certain countries is controlled
under regulations, including in some cases the need for certain advance
government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
A Fund could also 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 a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a 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 a Fund's investments. Furthermore, transaction
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling--dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. dollar. The pound sterling continued to fall in early 1993,
but recovered due to interest rate cuts throughout Europe and an upturn in the
economy of the United Kingdom. The average exchange rate of the U.S. dollar to
the pound sterling was 1.50 in 1993 and 1.56 in 1996. On September 30, 1997 the
U.S. dollar-pound sterling exchange rate was 1.61.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
4118.5 at the end of 1996, up approximately 12% from the end of 1995. On
September 30, 1997 the FT-SE 100 index closed at 5,244.2, up approximately 27%
from the end of 1996.
The public sector borrowing requirement, a mandated measure of the amount
required to balance the budget, has been, over the last two fiscal years, higher
than forecast. The general government fiscal deficit has been in excess of the
eligibility limit prescribed by the European Union for countries that intend to
participate in the Economic and Monetary Union ("EMU"), which is scheduled to
take effect in January 1999. The government, however, expects that the deficit
will drop below that limit during calendar year 1997 and will continue to drop
in the 1997-98 and 1998-99 fiscal years. Although the government has not yet
made a formal announcement with respect to the United Kingdom's participation in
the EMU, remarks of the Chancellor of the Exchequer made in mid-October 1997
suggest that the United Kingdom will not participate in the EMU beginning in
January 1999 but may do so thereafter.
From 1979 until 1997 the Conservative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar, but has fallen
from its post-World War II high (in 1995) against the U.S. dollar.
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Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1993. In
1994, the TOPIX closed at 1,559.09, up approximately 8% from the end of 1993; in
1995, the TOPIX closed at 1,577.70, up approximately 1% from the end of 1994;
and in 1996, the TOPIX closed at 1,470.94, down approximately 7% from the end of
1995. On September 30, 1997, the TOPIX closed at 1,388.32, down 5.6% from the
end of 1996. Certain valuation measures, such as price-to-book value and
price-to-cash flow ratios, indicate that the Japanese stock market is near its
lowest level in the last twenty years relative to other world markets. The
price/earnings ratios of First Section companies, however, are on average high
in comparison with other major stock markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan has returned to a single-party government led by Prime Minister Ryutaro
Hashimoto. While Mr. Hashimoto's party does not control a majority of the seats
in the parliament it is only three seats short of the 251 seats required to
attain a majority in the House of Representatives (down from a 12-seat shortfall
just after the October 1996 election). For further information regarding Japan,
see the Statements of Additional Information for All-Asia Investment Fund and
International Fund.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund may emphasize investment in,
smaller, emerging companies. Investment in such companies involves greater risks
than is customarily associated with securities of more established companies.
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 Real Estate Industry. Although Real Estate Investment Fund does not invest
directly in real estate, it does invest primarily in Real Estate Equity
Securities and does have a policy of concentration of its investments in the
real estate industry.
Therefore, an investment in the Fund is subject to certain risks associated with
the direct ownership of real estate and with the real estate industry in
general. These risks include, among others: possible declines in the value of
real estate; risks related to general and local economic conditions; possible
lack of availability of mortgage funds; overbuilding; extended vacancies of
properties; increases in competition, property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability to
third parties for damages resulting from, environmental problems; casualty or
condemnation losses; uninsured damages from floods, earthquakes or other natural
disasters; limitations on and variations in rents; and changes in interest
rates. To the extent that assets underlying the Fund's investments are
concentrated geographically, by property type or in certain other respects, the
Fund may be subject to certain of the foregoing risks to a greater extent.
In addition, if Real Estate Investment Fund receives rental income or income
from the disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Investments by the Fund in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common Stocks.
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Mortgage-Backed Securities. As discussed above, investing in Mortgage-Backed
Securities involves certain unique risks in addition to those risks associated
with investment in the real estate industry in general. These risks include the
failure of a counterparty to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest rates
decline, the value of an investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of an investment in fixed
rate obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage
pass-through securities in particular, may be less effective than other types of
U.S. Government securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes. 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 a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between eight and 15
years in the case of Income Builder Fund, between five and 25 years in the case
of Utility Income Fund and between one year or less and 30 years in the case of
all other Funds that invest in such securities. In periods of increasing
interest rates, each of the Funds may, to the extent it holds mortgage-backed
securities, be subject to the risk that the average dollar-weighted maturity of
the Fund's portfolio of debt or other fixed-income securities may be extended as
a result of lower than anticipated prepayment rates. See "Additional Investment
Practices--Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to
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capacity to pay interest and repay principal over time; their future cannot be
considered as well-assured. Securities rated B by Moody's, S&P, Duff & Phelps
and Fitch are considered to have highly speculative characteristics with respect
to capacity to pay interest and repay principal. Assurance of interest and
principal payments or of maintenance of other terms of the contract over any
long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in
lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of Additional Information for each Fund that invests in lower-rated
securities for a description of the bond ratings of Moody's, S&P, Duff & Phelps
and Fitch.
Certain lower-rated securities in which Growth Fund, Income Builder Fund,
Strategic Balanced Fund and Utility Income Fund may invest may contain call or
buy-back features that permit the issuers thereof to call or repurchase such
securities. Such securities may present risks based on prepayment expectations.
If an issuer exercises such a provision, a Fund may have to replace the called
security with a lower yielding security, resulting in a decreased rate of return
to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund and Income Builder Fund is a "non-diversified"
investment company, which means the Fund is not limited in the proportion of its
assets that may be invested in the securities of a single issuer. However, each
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" in each
Fund's 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. A Fund's investments in
U.S. Government securities and other regulated investment companies are not
subject to these limitations. Because each of Worldwide Privatization Fund, New
Europe Fund, All-Asia Investment Fund and Income Builder Fund is a
non-diversified investment company, it may invest in a smaller number of
individual issuers than a diversified investment company, and an investment in
such 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
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OF SHARES
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HOW TO BUY SHARES
Each Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares of each 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 Funds, 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 Statements of Additional
Information. A shareholder's Advisor Class shares will automatically convert to
Class A shares of the same 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 each Fund in which
the program invests 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 the Statements of Additional Information for more
information.
The Funds may refuse any order to purchase Advisor Class shares. In this regard,
the Funds reserve the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.
How the Funds Value Their Shares
The net asset value of Advisor Class shares of a 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 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 a 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 accurately reflects fair market value.
HOW TO SELL SHARES
You may "redeem," i.e., sell your shares in a 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 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, a 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.
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. Your
financial representative is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service.
Selling Shares Directly To A 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 representative, 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
1-800-221-5672
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 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and, except for
certain omnibus accounts, 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. Except for certain omnibus
accounts, 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
35
<PAGE>
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, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
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 failed 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.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of any 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 value
next determined and without sales or service charges. Exchanges may be made by
telephone or written request. Telephone exchange requests must be received by
AFS by 4:00 p.m. Eastern time on a Fund business day in order to receive that
day's net asset value. 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 a Fund that are different
from those described in this Prospectus. A transaction, service, administrative
or other similar fee may be charged by your broker-dealer, agent, financial
intermediary or other financial representative with respect to the purchase,
sale or exchange of Advisor Class shares made through such financial
representative. Such financial intermediaries may also impose requirements with
respect to the purchase, sale or exchange of shares that are different from, or
in addition to, those imposed by a Fund, including requirements as to the
minimum initial and subsequent investment amounts.
Each Fund offers three classes of shares other than the Advisor Class, which are
Class A, Class B and Class C. All classes of shares of a 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") 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 can 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 1-800-221-5672 or
by contacting your financial representative.
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- -------------------------------------------------------------------------------
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 each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
36
<PAGE>
Principal occupation
during the past
Fund Employee; year; title five years
- --------------------------------------------------------------------------------
The Alliance Fund Alden M. Stewart since 1997-- Associated with
Executive Vice President of Alliance since
Alliance Capital Management 1993; prior
Corporation ("ACMC")* thereto,
associated with
Equitable Capital
Management
Corporation
("Equitable
Capital")**
Randall E. Haase since 1997-- Associated with
Senior Vice President of ACMC Alliance since July
1993; prior
thereto,
associated with
Equitable Capital
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance since
July 1993; prior
thereto,
associated with
Equitable Capital
Premier Growth Fund Alfred Harrison since inception-- Associated with
Vice Chairman of ACMC Alliance
Technology Fund Peter Anastos since 1992-- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992-- Associated with
Senior Vice President of ACMC Alliance since
1992; prior
thereto
associated with
College
Retirement
Equities Fund
Quasar Fund Alden M. Stewart since 1994-- (see above)
(see above)
Randall E. Haase since 1994-- (see above)
(see above)
International Fund A. Rama Krishna since 1993-- Associated with
Senior Vice President of ACMC Alliance since
and director of Asian Equity 1993, prior
research thereto,
Chief Investment
Strategist and
Director--Equity
Research for CS
First Boston
Worldwide Mark H. Breedon since inception-- Associated with
Privatization Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited ***
New Europe Fund Steven Beinhacker-- Associated with
Vice President of ACMC Alliance
All-Asia Investment A. Rama Krishna since inception-- (see above)
Fund (see above)
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance since
1993; prior thereto,
associated with
Equitable Capital
Strategic Balanced Nicholas D.P. Carn Associated with
Fund Vice President of ACMC Alliance since
1997; prior
thereto, Chief
Investment
Officer and
Portfolio Manager
at Draycott
Partners
Balanced Shares Paul Rissman since 1997-- Associated with
Senior Vice President of ACMC Alliance
Income Builder Fund Andrew M. Aran since 1994-- Associated with
Senior Vice President of ACMC Alliance
Thomas M. Perkins since 1991-- Associated with
Senior Vice President of ACMC Alliance
Vita Marie Pike since 1997-- Associated with
Vice President of ACMC Alliance
Corinne Molof Hill since 1997-- Associated with
Vice President of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- Associated with
(see above) Alliance
Growth & Income Paul Rissman since 1994-- Associated with
Fund (see above) Alliance
Real Estate Daniel G. Pine since 1996 Associated with
Investment Fund Senior Vice President Alliance since
of ACMC 1996; prior
thereto, Senior
Vice President of
Desai Capital
Management
David Kruth since 1997-- Associated with
Vice President of ACMC Alliance since
1997; prior
thereto Senior
Vice President of
the Yarmouth
Group
- ----------
* The sole general partner of Alliance.
** Equitable Capital was, prior to Alliance's acquisition of it, a management
firm under common control with Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1997 totaling more than $199 billion (of
which approximately $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 116
separate investment portfolios currently have over two million shareholders. As
of June 30, 1997, Alliance was an investment manager of employee benefit plan
assets for 29 of the Fortune 100 companies.
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
37
<PAGE>
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 each Fund's Statement of Additional Information under "Management of
the Funds."
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Premier Growth Fund, Mr. Harrison has ultimate responsibility for the
management of 35 portfolios of discretionary tax-exempt accounts of
institutional clients managed as described below without significant
client-imposed restrictions ("Historical Portfolios"). These accounts have
substantially the same investment objectives and policies and are managed in
accordance with essentially the same investment strategies and techniques as
those for Premier Growth Fund, except for the ability of Premier Growth Fund to
use futures and options as hedging tools and to invest in warrants. The
Historical Portfolios are also not subject to certain limitations,
diversification requirements and other restrictions to which Premier Growth
Fund, as a registered investment company, is subject and which if applicable to
the Historical Portfolios, may have adversely affected the performance results
of the Historical Portfolios. See "Investment Objective and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the eighteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios and cumulatively through
September 30, 1997. As of September 30, 1997, the assets in the Historical
Portfolios totaled approximately $12.4 billion and the average size of an
institutional account in the Historical Portfolio was $355 million. Each
Historical Portfolio has a nearly identical composition of individual investment
holdings and related percentage weightings.
The performance data is gross of advisory fees charged to those accounts. Total
returns would be lower if advisory fees had been taken into account. The
performance data includes the cost of brokerage commissions, but excludes
custodial fees, transfer agency costs and other administrative expenses that
will be payable by Premier Growth Fund and will result in a higher expense ratio
for Premier Growth Fund. Expenses associated with the distribution of Class A,
Class B and Class C shares of Premier Growth Fund in accordance with the plan
adopted by Premier Growth Fund's Board of Directors pursuant to Rule 12b-1 of
the 1940 Act ("distribution fees") are also excluded. See "Expense Information."
The performance data has also not been adjusted for corporate or individual
taxes, if any, payable by the account owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset-weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The composite total returns set forth below
are calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation. In contrast with
the securities in the Russell Price-Driven Indices, companies in the Growth
Index tend to exhibit higher price-to-book and price-earnings ratios, lower
dividend yield and higher forecasted growth values.
To the extent Premier Growth Fund does not invest in U.S. common stocks or
utilizes investment techniques such as futures or options, the S&P 500 and
Russell 1000 Growth Index may not be substantially comparable to Premier Growth
Fund. The S&P 500 and Russell 1000 Growth Index are included to illustrate
material economic and market factors that existed during the time period shown.
The S&P 500 and Russell 1000 Growth Index do not reflect the deduction of any
fees. If Premier Growth Fund were to purchase a portfolio of securities
substantially identical to the securities comprising the S&P 500 Index or the
Russell 1000 Growth Index, Premier Growth Fund's performance relative to the
index would be reduced by Premier Growth Fund's expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees, transfer agency
costs and other administrative expenses as well as by the impact on Premier
Growth Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
38
<PAGE>
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios as measured against certain
broad based market indices and against the composite performance of other
open-end growth mutual funds. Investors should not rely on the following
performance data of the Historical Portfolios as an indication of future
performance of Premier Growth Fund. The composite investment performance for the
periods presented may not be indicative of future rates of return. Other methods
of computing investment performance may produce different results, and the
results for different periods may vary.
Schedule of Composite Investment Performance--Historical Portfolios
<TABLE>
<CAPTION>
Russell Lipper
Historical S&P 500 1000 Growth
Portfolios Index Growth Index Fund Index
Total Return Total Return Total Return Total Return
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Year ended:
December 31, 1996 ... 23.22 22.96 23.12 17.48
December 31, 1995** . 41.12 37.58 37.19 32.65
December 31, 1994 ... (3.83) 1.32 2.66 (1.57)
December 31, 1993 ... 11.62 10.08 2.90 11.98
December 31, 1992 ... 13.27 7.62 5.00 7.63
December 31, 1991 ... 40.19 30.47 41.16 35.20
December 31, 1990 ... (0.57) (3.10) (0.26) (5.00)
December 31, 1989 ... 40.08 31.69 35.92 28.60
December 31, 1988 ... 11.96 16.61 11.27 15.80
December 31, 1987 ... 9.57 5.25 5.31 1.00
December 31, 1986 ... 28.60 18.67 15.36 15.90
December 31, 1985 ... 38.68 31.73 32.85 30.30
December 31, 1984 ... (2.33) 6.27 (.95) (2.80)
December 31, 1983 ... 21.95 22.56 15.98 22.30
December 31, 1982 ... 29.23 21.55 20.46 20.20
December 31, 1981 ... (0.10) (4.92) (11.31) (8.40)
December 31, 1980 ... 52.10 32.50 39.57 37.30
December 31, 1979 ... 31.99 18.61 23.91 27.40
Cumulative total return
for the period
January 1, 1979 to
September 30, 1997 ... 3748.17 1888.65 1656.41 1772.84
</TABLE>
- ----------
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion.
** During this period, the Historical Portfolios differed from Premier Growth
Fund in that Premier Growth Fund invested a portion (4.54%) of its net
assets in warrants on equity securities in which the Historical Portfolios
were unable, by their investment restrictions, to purchase. In lieu of
warrants, the Historical Portfolios acquired the common stock upon which
the warrants were based. During this period, Premier Growth Fund's total
return, at net asset value, was 46.87%.
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 1997, and for more than one year assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
<TABLE>
<CAPTION>
Average Annual Total Returns
------------------------------------------------
Russell Lipper
Historical S&P 500 1000 Growth
Portfolios Index Growth Index Fund Index
---------- ----- ------------ ----------
<S> <C> <C> <C> <C>
Three years ............... 33.26 29.92 29.81 24.84
Five years ................ 22.99 20.77 19.66 18.62
Ten years ................. 17.03 14.75 14.66 13.19
Since January 1, 1979 ..... 21.07 11.69 16.51 16.18
</TABLE>
ADMINISTRATOR TO ALL-ASIA INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
CONSULTANT TO ALLIANCE WITH RESPECT TO INVESTMENT IN REAL ESTATE SECURITIES
Alliance, with respect to investment in real estate securities, has retained as
a consultant CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held
company and the largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities management, and real
estate finance and investment advisory activities (CBC in August of 1997
acquired Koll, which previously provided these consulting services to Alliance).
In 1996, CBC (and Koll, on a combined basis) completed 25,000 sale and lease
transactions, managed over 4,100 client properties, created over $3.5 billion in
mortgage originations, and completed over 2,600 appraisal and consulting
assignments. In addition, they advised and managed for institutions over $4
billion in real estate investments. CBC will make available to Alliance the CBC
National Real Estate Index, which gathers, analyzes and publishes targeted
research data for the 65 largest U.S. markets, based on a variety of
public-sector and private-sector sources as well as CBC's proprietary database
of approximately 60,000 property transactions representing over $400 billion of
investment property. This information provides a substantial component of the
research and data used to create the REIT-Score model. As a consultant, CBC
provides to Alliance, at Alliance's expense, such in-depth information regarding
the real estate market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-family properties
as Alliance shall from time to time request. CBC will not furnish advice or make
recommendations regarding the pruchase or sale of securities by the Fund nor
will it be responsible for making investment decisions involving Fund assets.
CBC is one of the three largest fee-based property management firms in the
United States, the largest commercial real estate lease brokerage firm in the
country, the largest investment property brokerage firm in the country, as well
as one of the largest publishers of real estate research, with approximately
6,000 employees nationwide. CBC will privide Alliance with exclusive access to
its REIT-Score model which ranks approximately 130 REITs based on the relative
attractiveness of the property markets in which they own real estate. This model
scores the approximately 12,000 individual properties owned by these companies.
REIT-Score is in turn based on CBC's National Real Estate Index which gathers,
analyzes and publishes targeted research for the 65 largest U.S. real estate
markets based on a variety of public- and private-sector sources as well as
CBC's proprietary database of 60,000 commercial property transactions
representing over $400 billion of investment property and over 3,000 tracked
39
<PAGE>
properties which report rent and expense data quarterly. CBC has previously
provided access to its REIT-Score model results primarily to the institutional
market through subscriptions. The model is no longer provided to any research
publications and the Fund is currently the only mutual fund available to retail
investors that has access to CBC's REIT-Score model.
DISTRIBUTION SERVICES AGREEMENTS
Each Fund has entered into a Distribution Services Agreement with AFD with
respect to the Advisor Class shares. 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
Funds' 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
Agreements. 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. The State of Texas
requires that shares of a Fund may be sold in that state only by dealers or
other financial institutions that are registered there as broker-dealers.
- --------------------------------------------------------------------------------
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 that 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
that Fund.
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund 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 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 each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains. Since REITs pay
distributions based on cash flow, without regard to depreciation and
amortization, a portion of the distributions paid to Real Estate Investment Fund
and subsequently distributed to shareholders may be a nontaxable return of
capital. The final determination of the amount of a Fund's return of capital
distributions for the period will be made after the end of each calendar year.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes
paid (or to permit shareholders to claim a deduction for such foreign taxes),
but there can be no assurance that any Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that a Fund distributes its taxable income and net
capital gain to its shareholders, qualification as a regulated investment
company relieves that 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. Dividends
received from REITs generally do not constitute qualifying dividends. A
corporation's dividends-received deduction generally will be disallowed unless
the corporation holds shares in the Fund at least 46 days during the 90 day
period beginning 45 days before the date on which the corporation becomes
entitled to receive the dividend. Furthermore, the dividends-received deduction
will be disallowed to the extent a corporation's investment in shares of a Fund
is financed with indebtedness.
Distributions of net capital gains are not eligible for the dividends-received
deduction referred to above.
40
<PAGE>
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 received by a shareholder of Real Estate Investment Fund may
include nontaxable returns of capital, which will reduce a shareholder's basis
in shares of the Fund. If that basis is reduced to zero (which could happen if
the shareholder does not reinvest distributions and returns of capital are
significant) any further returns of capital will be taxable as capital gain.
Under the current federal tax law, the amount of an income dividend or capital
gains distribution declared by a 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 a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or 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 a Fund held
by a tax-deferred or qualified plan, generally such as an individual retirement
account, 403(b)(7) retirement plan or corporate pension or profit-sharing plan,
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 a Fund may be subject to state and local taxes. Alliance Fund,
Premier Growth Fund, Technology Fund, Income Builder Fund, Quasar Fund, New
Europe Fund, Balanced Shares and Growth and Income Fund are qualified to do
business in the Commonwealth of Pennsylvania and, therefore, are subject to the
Pennsylvania foreign franchise and corporate net income tax in respect of their
business activities in Pennsylvania. Accordingly, shares of such Funds are
exempt from Pennsylvania personal property taxes. These Funds anticipate
continuing such business activities but reserve the right to suspend them at any
time, resulting in the termination of the exemptions.
A 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 a 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 a 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 tax status of dividends and
capital gains and return of capital distributions. Shareholders are urged to
consult their tax advisors 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 "How to Buy Shares," and by
investment advisory clients of, and certain other persons associated with,
Alliance and its affiliates or the Funds. If (i) a holder of Advisor Class
shares ceases to participate in the fee-based program or plan, or to be
associated with an investment advisor or financial intermediary, in each case
that satisfies the requirements to purchase shares set forth under "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 sets forth maximum transaction costs, annual expenses, per share
income and capital charges for Class Ashares of each of the Funds. 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.
41
<PAGE>
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in Class A shares of a Fund and annual expenses for Class A
shares of each Fund. For each Fund, the "Examples" to the right of the table
below show the cumulative expenses attributable to a hypothetical $1,000
investment for the periods specified.
<TABLE>
<CAPTION>
Class A Shares
--------------
<S> <C>
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
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Examples(a)
- --------------------------------------- ------------------------------
<S> <C> <C> <C>
Alliance Fund Class A Class A
------- -------
Management fees .70% After 1 year $ 11
12b-1 fees .19% After 3 years $ 33
Other expenses (b) .15% After 5 years $ 57
---- After 10 years $127
Total fund
operating expenses 1.04%
====
Growth Fund Class A Class A
------- -------
Management fees .75% After 1 year $ 13
12b-1 fees .30% After 3 years $ 41
Other expenses (b) .25% After 5 years $ 71
---- After 10 years $157
Total fund
operating expenses 1.30%
====
Premier Growth Fund Class A Class A
------- -------
Management fees 1.00% After 1 year $ 17
12b-1 fees .33% After 3 years $ 52
Other expenses (b) .32% After 5 years $ 90
---- After 10 years $195
Total fund
operating expenses 1.65%
====
Technology Fund Class A Class A
------- -------
Management fees (g) 1.11% After 1 year $ 18
12b-1 fees .30% After 3 years $ 55
Other expenses (b) .33% After 5 years $ 94
---- After 10 years $205
Total fund
operating expenses 1.74%
====
Quasar Fund Class A Class A
------- -------
Management fees (g) 1.15% After 1 year $ 18
12b-1 fees .21% After 3 years $ 56
Other expenses (b) .43% After 5 years $ 97
---- After 10 years $211
Total fund
operating expenses 1.79%
====
International Fund Class A Class A
------- -------
Management fees
(after waiver) (c) .85% After 1 year $ 16
12b-1 fees .17% After 3 years $ 50
Other expenses (b) .56% After 5 years $ 86
---- After 10 years $188
Total fund
operating expenses (d) 1.58%
====
Worldwide Privatization Fund Class A Class A
------- -------
Management fees 1.00% After 1 year $ 17
12b-1 fees .30% After 3 years $ 54
Other expenses (b) .42% After 5 years $ 93
---- After 10 years $203
Total fund
operating expenses 1.72%
====
</TABLE>
- -------------------------------------------------------------------------------
Please refer to the footnotes on page 44.
42
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples(a)
- ------------------------------------------ ------------------------------
New Europe Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees 1.06% After 1 year $ 21
12b-1 fees .30% After 3 years $ 64
Other expenses (b) .69% After 5 years $110
---- After 10 years $238
Total fund
operating expenses 2.05%
====
All-Asia Investment Fund Class A Class A
------- -------
Management fees After 1 year $ 31
(after waiver) (c) .65% After 3 years $ 96
12b-1 fees .30% After 5 years $163
Other expenses After 10 years $343
Administration fees
(after waiver) (d) .00%
Other operating expenses(b) 2.17%
----
Total other expenses 2.17%
----
Total fund
operating expenses (e) 3.12%
====
Global Small Cap Fund Class A Class A
------- -------
Management fees 1.00% After 1 year $ 24
12b-1 fees .30% After 3 years $ 75
Other expenses (b) 1.11% After 5 years $129
---- After 10 years $275
Total fund
operating expenses 2.41%
====
Strategic Balanced Fund Class A Class A
------- -------
Management fees
(after waiver) (c) .09% After 1 year $ 14
12b-1 fees .30% After 3 years $ 44
Other expenses (b) 1.01% After 5 years $ 77
---- After 10 years $168
Total fund
operating expenses (e) 1.40%
====
Balanced Shares Class A Class A
------- -------
Management fees .63% After 1 year $ 15
12b-1 fees .24% After 3 years $ 46
Other expenses (b) .60% After 5 years $ 80
---- After 10 years $176
Total fund
operating expenses 1.47%
====
Income Builder Fund Class A Class A
------- -------
Management fees .75% After 1 year $ 23
12b-1 fees .30% After 3 years $ 70
Other expenses (b) 1.20% After 5 years $120
---- After 10 years $258
Total fund
operating expenses 2.25%
====
Utility Income Fund Class A Class A
------- -------
Management fees
(after waiver) (c) 0.00% After 1 year $ 15
12b-1 fees .30% After 3 years $ 47
Other expenses (b) 1.20% After 5 years $ 82
---- After 10 years $179
Total fund
operating expenses (f) 1.50%
====
Growth and Income Fund Class A Class A
------- -------
Management fees .51% After 1 year $ 10
12b-1 fees .21% After 3 years $ 31
Other expenses (b) .25% After 5 years $ 54
---- After 10 years $119
Total fund
operating expenses .97%
====
</TABLE>
- -------------------------------------------------------------------------------
Please refer to the footnotes on page 44.
43
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples(a)
- --------------------------------------- ------------------------------
<S> <C> <C> <C>
Real Estate Investment Fund Class A Class A
------- -------
Management fees .90% After 1 year $ 18
12b-1 fees .30% After 3 years $ 56
Other expenses (b) .57% After 5 years $ 96
----
Total fund
operating expenses 1.77% After 10 years $208
====
</TABLE>
- -------------------------------------------------------------------------------
(a) Advisor Class shares convert to Class A shares at net 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 shareholder's account.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be .75% for Strategic Balanced Fund and Utility Income Fund and 1.00%
for All-Asia Investment Fund and 1.01% for International Fund.
International Fund's fee, absent the voluntary fee waiver, is calculated
based on average daily net assets. Maximum contractual rate, based on
quarter-end net assets, is 1.00%.
(d) Net voluntary fee waiver. Absent such fee waiver, administration fees would
have been .15% for the Fund's Class A shares. Reflects the fees payable by
All-Asia Investment Fund to Alliance pursuant to an administration
agreement.
(e) Net of voluntary fee waiver and/or expense reimbursement. In the absence of
such waiver and/or reimbursement, total fund operating expenses for
Strategic Balanced Fund would have been 2.08 for Class A shares. Total fund
operating expenses for All-Asia Investment Fund would have been 3.62% for
Class A shares annualized and total fund operating expenses for
International Fund would have been 1.74%, for Class A, annualized.
(f) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 3.38 for Class A
shares.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund and Technology
Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. Long-term shareholders of Class A shares of a 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-based sales charge equal to the remaining
portion of the Rule 12b-1 fee. "Management fees" for International Fund and
All-Asia Investment Fund and "Administration fee" for All-Asia Investment Fund
have been restated to reflect current voluntary fee waivers. The Examples set
forth above assume reinvestment of all dividends and distributions and utilize a
5% annual rate of return as mandated by Commission regulations. The Examples
should not be considered representative of past or future expenses; actual
expenses may be greater or less than those shown.
Financial Highlights.The tables on the following pages present, for each Fund,
per share income and capital changes for a Class A share outstanding throughout
each period indicated. Except as indicated below, the information in the tables
for Alliance Fund, Growth Fund, Premier Growth Fund, Strategic Balanced Fund,
Balanced Shares, Utility Income Fund, Worldwide Privatization Fund and Growth
and Income Fund has been audited by Price Waterhouse LLP, the independent
auditors for each Fund, and for All-Asia Investment Fund, Technology Fund,
Quasar Fund, International Fund, New Europe Fund, Global Small Cap Fund and
Income Builder Fund by Ernst & Young LLP, the independent auditors for each
Fund. A report of Price Waterhouse LLP or Ernst & Young LLP, as the case may be,
on the information with respect to each Fund, appears in the Fund's Statement of
Additional Information. The following information for each Fund 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 a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting AFS
at the address or the "For Literature" telephone number shown on the cover of
this Prospectus.
44
<PAGE>
THIS PAGE IS INTENTIONALLY LEFT BLANK
-------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
------------------- ------------ -------------- ------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Fund
Class A
12/1/96 to 5/31/97+++ .. $ 7.71 $(.01)b $ .67 $ .66 $ (.02) $(1.06)
Year ended 11/30/96 .... 7.72 .02 1.06 1.08 (.02) (1.07)
Year ended 11/30/95 .... 6.63 .02 2.08 2.10 (.01) (1.00)
1/1/94 to 11/30/94** ... 6.85 .01 (.23) (.22) 0.00 0.00
Year ended 12/31/93 .... 6.68 .02 .93 .95 (.02) (.76)
Year ended 12/31/92 .... 6.29 .05 .87 .92 (.05) (.48)
Year ended 12/31/91 .... 5.22 .07 1.70 1.77 (.07) (.63)
Year ended 12/31/90 .... 6.87 .09 (.32) (.23) (.18) (1.24)
Year ended 12/31/89 .... 5.60 .12 1.19 1.31 (.04) 0.00
Year ended 12/31/88 .... 5.15 .08 .80 .88 (.08) (.35)
Year ended 12/31/87 .... 6.87 .08 .27 .35 (.13) (1.94)
Year ended 12/31/86 .... 11.15 .11 .87 .98 (.10) (5.16)
Growth Fund (i)
Class A
11/1/96 to 4/30/97+++ .. $34.91 $ (.01)(b) $ 1.91 $ 1.90 $ 0.00 $(1.03)
Year ended 10/31/96 .... 29.48 .05 6.20 6.25 (.19) (.63)
Year ended 10/31/95 .... 25.08 .12 4.80 4.92 (.11) (.41)
5/1/94 to 10/31/94** ... 23.89 .09 1.10 1.19 0.00 0.00
Year ended 4/30/94 ..... 22.67 (.01)(c) 3.55 3.54 0.00 (2.32)
Year ended 4/30/93 ..... 20.31 .05(c) 3.68 3.73 (.14) (1.23)
Year ended 4/30/92 ..... 17.94 .29(c) 3.95 4.24 (.26) (1.61)
9/4/90++ to 4/30/91 .... 13.61 .17(c) 4.22 4.39 (.06) 0.00
Premier Growth Fund
Class A
12/1/96 to 5/31/97+++ .. $17.98 $ (.03)(b) $ 2.64 $ 2.61 $ 0.00 $(1.08)
Year ended 11/30/96 .... 16.09 (.04)(b) 3.20 3.16 0.00 (1.27)
Year ended 11/30/95 .... 11.41 (.03) 5.38 5.35 0.00 (.67)
Year ended 11/30/94 .... 11.78 (.09) (.28) (.37) 0.00 0.00
Year ended 11/30/93 .... 10.79 (.05) 1.05 1.00 (.01) 0.00
9/28/92+ to 11/30/92 ... 10.00 .01 .78 .79 0.00 0.00
Technology Fund
Class A
12/1/96 to 5/31/97+++ .. $51.15 $ (.20)(b) $ .70 $ .50 $ 0.00 $ (.42)
Year ended 11/30/96 .... 46.64 .39(b) 7.28 6.89 0.00 (2.38)
Year ended 11/30/95 .... 31.98 (.30)(b) 18.13 17.83 0.00 (3.17)
1/1/94 to 11/30/94** ... 26.12 (.32) 6.18 5.86 0.00 0.00
Year ended 12/31/93 .... 28.20 (.29) 6.39 6.10 0.00 (8.18)
Year ended 12/31/92 .... 26.38 (.22)(b) 4.31 4.09 0.00 (2.27)
Year ended 12/31/91 .... 19.44 (.02) 10.57 10.55 0.00 (3.61)
Year ended 12/31/90 .... 21.57 (.03) (.56) (.59) 0.00 (1.54)
Year ended 12/31/89 .... 20.35 0.00 1.22 1.22 0.00 0.00
Year ended 12/31/88 .... 20.22 (.03) .16 .13 0.00 0.00
Year ended 12/31/87 .... 23.11 (.10) 4.54 4.44 0.00 (7.33)
Year ended 12/31/86 .... 20.64 (.14) 2.62 2.48 (.01) 0.00
Quasar Fund
Class A
10/1/96 to 3/31/97+++ .. $27.92 $ (.11)(b) $ .27 $ .16 $ 0.00 $(4.11)
Year ended 9/30/96 ..... 24.16 (.25) 8.82 8.57 0.00 (4.81)
Year ended 9/30/95 ..... 22.65 (.22)(b) 5.59 5.37 0.00 (3.86)
Year ended 9/30/94 ..... 24.43 (.60) (.36) (.96) 0.00 (.82)
Year ended 9/30/93 ..... 19.34 (.41) 6.38 5.97 0.00 (.88)
Year ended 9/30/92 ..... 21.27 (.24) (1.53) (1.77) 0.00 (.16)
Year ended 9/30/91 ..... 15.67 (.05) 5.71 5.66 (.06) 0.00
Year ended 9/30/90 ..... 24.84 .03(b) (7.18) (7.15) 0.00 (2.02)
Year ended 9/30/89 ..... 17.60 .02(b) 7.40 7.42 0.00 (.18)
Year ended 9/30/88 ..... 24.47 (.08) (2.08) (2.16) 0.00 (4.71)
Year ended 9/30/87(d) .. 21.80 (.14) 5.88 5.74 0.00 (3.07)
International Fund
Class A
Year ended 6/30/97 ..... $18.32 $ .06(b) $ 1.51 $ 1.57 $ (.12) $(1.08)
Year ended 6/30/96 ..... 16.81 .05(b) 2.51 2.56 0.00 (1.05)
Year ended 6/30/95 ..... 18.38 .04 .01 .05 0.00 (1.62)
Year ended 6/30/94 ..... 16.01 (.09) 3.02 2.93 0.00 (.56)
Year ended 6/30/93 ..... 14.98 (.01) 1.17 1.16 (.04) (.09)
Year ended 6/30/92 ..... 14.00 .01(b) 1.04 1.05 (.07) 0.00
Year ended 6/30/91 ..... 17.99 .05 (3.54) (3.49) (.03) (.47)
Year ended 6/30/90 ..... 17.24 .03 2.87 2.90 (.04) (2.11)
Year ended 6/30/89 ..... 16.09 .05 3.73 3.78 (.13) (2.50)
Year ended 6/30/88 ..... 23.70 .17 (1.22) (1.05) (.21) (6.35)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 50.
46
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
------------- ----------- ------------ ------------ ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (1.08) $ 7.29 10.46% $1,024,652 1.05%* (.16)%* 107% $0.0559
(1.09) 7.71 16.49 999,067 1.04 .30 80 0.0646
(1.01) 7.72 37.87 945,309 1.08 .31 81 --
0.00 6.63 (3.21) 760,679 1.05* .21* 63 --
(.78) 6.85 14.26 831,814 1.01 .27 66 --
(.53) 6.68 14.70 794,733 .81 .79 58 --
(.70) 6.29 33.91 748,226 .83 1.03 74 --
(1.42) 5.22 (4.36) 620,374 .81 1.56 71 --
(.04) 6.87 23.42 837,429 .75 1.79 81 --
(.43) 5.60 17.10 760,619 .82 1.38 65 --
(2.07) 5.15 4.90 695,812 .76 1.03 100 --
(5.26) 6.87 12.60 652,009 .61 1.39 46 --
$ (1.03) $ 35.78 5.46% $ 579,580 1.24%* (.03)%* 19% $0.0537
(.82) 34.91 21.65 499,459 1.30 .15 46 0.0584
(.52) 29.48 20.18 285,161 1.35 .56 61 --
0.00 25.08 4.98 167,800 1.35* .86* 24 --
(2.32) 23.89 15.66 102,406 1.40 (f) .32 87 --
(1.37) 22.67 18.89 13,889 1.40 (f) .20 124 --
(1.87) 20.31 23.61 8,228 1.40 (f) 1.44 137 --
(.06) 17.94 32.40 713 1.40*(f) 1.99* 130 --
$ (1.08) $ 19.51 15.70% $ 215,464 1.57%* (.36)%* 47% $0.0598
(1.27) 17.98 21.52 172,870 1.65 (.27) 95 0.0651
(.67) 16.09 49.95 72,366 1.75 (.28) 114 --
0.00 11.41 (3.14) 35,146 1.96 (.67) 98 --
(.01) 11.78 9.26 40,415 2.18 (.61) 68 --
0.00 10.79 7.90 4,893 2.17*(f) .91* 0 --
$ (.42) $ 51.23 .99% $ 631,967 1.64%* (.81)%* 28% $0.0576
(2.38) 51.15 16.05 594,861 1.74 (.87) 30 0.0612
(3.17) 46.64 61.93 398,262 1.75 (.77) 55 --
0.00 31.98 22.43 202,929 1.66* (1.22)* 55 --
(8.18) 26.12 21.63 173,732 1.73 (1.32) 64 --
(2.27) 28.20 15.50 173,566 1.61 (.90) 73 --
(3.61) 26.38 54.24 191,693 1.71 (.20) 134 --
(1.54) 19.44 (3.08) 131,843 1.77 (.18) 147 --
0.00 21.57 6.00 141,730 1.66 .02 139 --
0.00 20.35 0.64 169,856 1.42(f) (.16) 139 --
(7.33) 20.22 19.16 167,608 1.31(f) (.56) 248 --
(.01) 23.11 12.03 147,733 1.13(f) (.57) 141 --
$ (4.11) $ 23.97 .88% $ 265,131 1.54%* (.81)%* 75% $0.0533
(4.81) 27.92 42.42 229,798 1.79 (1.11) 168 0.0596
(3.86) 24.16 30.73 146,663 1.83 (1.06) 160 --
(.82) 22.65 (4.05) 155,470 1.67 (1.15) 110 --
(.88) 24.43 31.58 228,874 1.65 (1.00) 102 --
(.16) 19.34 (8.34) 252,140 1.62 (.89) 128 --
(.06) 21.27 36.28 333,806 1.64 (.22) 118 --
(2.02) 15.67 (30.81) 251,102 1.66 .16 90 --
(.18) 24.84 42.68 263,099 1.73 .10 90 --
(4.71) 17.60 (8.61) 90,713 1.28(f) (.40) 58 --
(3.07) 24.47 29.61 134,676 1.18(f) (.56) 76 --
$ (1.20) $ 18.69 9.30% $ 190,173 1.74% (l) .31% 94% $0.0363
(1.05) 18.32 15.83 196,261 1.72 .31 78 --
(1.62) 16.81 .59 165,584 1.73 .26 119 --
(.56) 18.38 18.68 201,916 1.90 (.50) 97 --
(.13) 16.01 7.86 161,048 1.88 (.14) 94 --
(.07) 14.98 7.52 179,807 1.82 .07 72 --
(.50) 14.00 (19.34) 214,442 1.73 .37 71 --
(2.15) 17.99 16.98 265,999 1.45 .33 37 --
(2.63) 17.24 27.65 166,003 1.41 .39 87 --
(6.56) 16.09 (4.20) 132,319 1.41 .84 55 --
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Net
Asset Realized and Increase Dividends In Excess Distributions
Value Net Unrealized (Decrease) In From Net Of Net From Net
Beginning Of Investment Gain (Loss) On Net Asset Value Investment Investment Realized
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Income Gains
--------------------- ------ ------------- ----------- --------------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/97 ...... $ 12.13 $ .15(b) $ 2.55 $ 2.70 $ (.15) $ 0.00 $ (1.42)
Year ended 6/30/96 ...... 10.18 .10(b) 1.85 1.95 0.00 0.00 0.00
Year ended 6/30/95 ...... 9.75 .06 .37 .43 0.00 0.00 0.00
6/2/94+ to 6/30/94 ...... 10.00 .01 (.26) (.25) 0.00 0.00 0.00
New Europe Fund
Class A
Year ended 7/31/97 ...... $ 15.84 $ .07(b) $ 4.20 $ 4.27 $ (.15) $ (.03) $ (1.32)
Year ended 7/31/96 ...... 15.11 .18 1.02 1.20 0.00 0.00 (.47)
Year ended 7/31/95 ...... 12.66 .04 2.50 2.54 (.09) 0.00 0.00
Period ended 7/31/94** .. 12.53 .09 .04 .13 0.00 0.00 0.00
Year ended 2/28/94 ...... 9.37 .02(b) 3.14 3.16 0.00 0.00 0.00
Year ended 2/28/93 ...... 9.81 .04 (.33) (.29) (.15) 0.00 0.00
Year ended 2/29/92 ...... 9.76 .02(b) .05 .07 (.02) 0.00 0.00
4/2/90+ to 2/28/91 ...... 11.11(e) .26 (.91) (.65) (.26) 0.00 (.44)
All-Asia Investment Fund
Class A
11/1/96 to 4/30/97+++ ... $ 11.04 $ (.13)(b) $ (.50) $ (.63) $ 0.00 $ 0.00 $ (.34)
Year ended 10/31/96 ..... 10.45 (.21)(b)(c) .88 .67 0.00 0.00 (.08)
11/28/94+ to 10/31/95 ... 10.00 (.19)(c) .64 .45 0.00 0.00 0.00
Global Small Cap Fund
Class A
Year ended 7/31/97 ...... $ 11.61 $ (.15)(b) $ 2.97 $ 2.82 $ 0.00 $ 0.00 $ (1.56)
Year ended 7/31/96 ...... 10.38 (.14)(b) 1.90 1.76 0.00 0.00 (.53)
Year ended 7/31/95 ...... 11.08 (.09) 1.50 1.41 0.00 0.00 (2.11)(j)
Period ended 7/31/94** .. 11.24 (.15)(b) (.01) (.16) 0.00 0.00 0.00
Year ended 9/30/93 ...... 9.33 (.15) 2.49 2.34 0.00 0.00 (.43)
Year ended 9/30/92 ...... 10.55 (.16) (1.03) (1.19) 0.00 0.00 (.03)
Year ended 9/30/91 ...... 8.26 (.06) 2.35 2.29 0.00 0.00 0.00
Year ended 9/30/90 ...... 15.54 (.05)(b) (4.12) (4.17) 0.00 0.00 (3.11)
Year ended 9/30/89 ...... 11.41 (.03) 4.25 4.22 0.00 0.00 (.09)
Year ended 9/30/88 ...... 15.07 (.05) (1.83) (1.88) 0.00 0.00 (1.78)
Year ended 9/30/87 ...... 15.47 (.07) 4.19 4.12 (.04) 0.00 (4.48)
Strategic Balanced Fund (i)
Class A
Year ended 7/31/97 ...... $ 18.48 $ .47(b)(c) $ 3.56 $ 4.03 $ (.39) $ 0.00 $ (2.33)
Year ended 7/31/96 ...... 17.98 .35(b)(c) 1.08 1.43 (.32) 0.00 (.61)
Year ended 7/31/95 ...... 16.26 .34(c) 1.64 1.98 (.22) 0.00 (.04)
Period ended 7/31/94** .. 16.46 .07(c) (.27) (.20) 0.00 0.00 0.00
Year ended 4/30/94 ...... 16.97 .16(c) .74 .90 (.24) 0.00 (1.17)
Year ended 4/30/93 ...... 17.06 .39(c) .59 .98 (.42) 0.00 (.65)
Year ended 4/30/92 ...... 14.48 .27(c) 2.80 3.07 (.17) 0.00 (.32)
9/4/90++ to 4/30/91 ..... 12.51 .34(c) 1.66 2.00 (.03) 0.00 0.00
Balanced Shares
Class A
Year ended 7/31/97 ...... $ 14.01 $ .31(b) $ 3.97 $ 4.28 $ (.32) $ 0.00 $ (.18)
Year ended 7/31/96 ...... 15.08 .37 .45 .82 (.41) 0.00 (1.48)
Year ended 7/31/95 ...... 13.38 .46 1.62 2.08 (.36) 0.00 (.02)
Period ended 7/31/94** .. 14.40 .29 (.74) (.45) (.28) 0.00 (.29)
Year ended 9/30/93 ...... 13.20 .34 1.29 1.63 (.43) 0.00 0.00
Year ended 9/30/92 ...... 12.64 .44 .57 1.01 (.45) 0.00 0.00
Year ended 9/30/91 ...... 10.41 .46 2.17 2.63 (.40) 0.00 0.00
Year ended 9/30/90 ...... 14.13 .45 (2.14) (1.69) (.40) 0.00 (1.63)
Year ended 9/30/89 ...... 12.53 .42 2.18 2.60 (.46) 0.00 (.54)
Year ended 9/30/88 ...... 16.33 .46 (1.07) (.61) (.44) 0.00 (2.75)
Year ended 9/30/87 ...... 14.64 .67 1.62 2.29 (.60) 0.00 0.00
Income Builder Fund (h)
Class A
11/1/96 to 4/30/97+++ ... $ 11.57 $ .24(b) $ .69 $ .93 $ (.25) $ 0.00 $ (.61)
Year ended 10/31/96 ..... 10.70 .56(b) .98 1.54 (.55) 0.00 (.12)
Year ended 10/31/95 ..... 9.69 .93(b) .59 1.52 (.51) 0.00 0.00
3/25/94++ to 10/31/94 ... 10.00 .96 (1.02) (.06) (.05) (g) 0.00 (.20)
Utility Income Fund
Class A
12/1/96 to 5/31/97+++ ... $ 10.59 $ .16(b)(c) $ .07 $ .23 $ (.18) $ 0.00 $ (.13)
Year ended 11/30/96 ..... 10.22 .18(b)(c) .65 .83 (.46) 0.00 0.00
Year ended 11/30/95 ..... 8.97 .27(c) 1.43 1.70 (.45) 0.00 0.00
Year ended 11/30/94 ..... 9.92 .42(c) (.89) (.47) (.48) 0.00 0.00
10/18/93+ to 11/30/93 ... 10.00 .02(c) (.10) (.08) 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 50.
48
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
------------- ------ --------- -------- ---------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (1.57) $ 13.26 25.16% $561,793 1.72% 1.27% 48% $ 0.0132
0.00 12.13 19.16 672,732 1.87 .95 28 --
0.00 10.18 4.41 13,535 2.56 .66 36 --
0.00 9.75 (2.50) 4,990 2.75* 1.03* 0 --
$ (1.50) $ 18.61 28.78% $ 78,578 2.05%(l) .40% 89% $ 0.0569
(.47) 15.84 8.20 74,026 2.14 1.10 69 --
(.09) 15.11 20.22 86,112 2.09 .37 74 --
0.00 12.66 1.04 86,739 2.06* 1.85* 35 --
0.00 12.53 33.73 90,372 2.30 .17 94 --
(.15) 9.37 (2.82) 79,285 2.25 .47 125 --
(.02) 9.81 .74 108,510 2.24 .16 34 --
(.70) 9.76 (5.63) 188,016 1.52* 2.71* 48 --
$ (.34) $ 10.07 (5.99)% $ 8,840 3.45%* (2.29)%* 56% $ 0.0269
(.08) 11.04 6.43 12,284 3.37(f) (1.75) 66 0.0280
0.00 10.45 4.50 2,870 4.42(f)* (1.87)* 90 --
$ (1.56) $ 12.87 26.47% $ 85,217 2.41%(l) (1.25)% 129% $ 0.0364
(.53) 11.61 17.46 68,623 2.51 (1.22) 139 --
(2.11) 10.38 16.62 60,057 2.54(f) (1.17) 128 --
0.00 11.08 (1.42) 61,372 2.42* (1.26)* 78 --
(.43) 11.24 25.83 65,713 2.53 (1.13) 97 --
(.03) 9.33 (11.30) 58,491 2.34 (.85) 108 --
0.00 10.55 27.72 84,370 2.29 (.55) 104 --
(3.11) 8.26 (31.90) 68,316 1.73 (.46) 89 --
(.09) 15.54 37.34 113,583 1.56 (.17) 106 --
(1.78) 11.41 (8.11) 90,071 1.54(f) (.50) 74 --
(4.52) 15.07 34.11 113,305 1.41(f) (.44) 98 --
$ (2.72) $ 19.79 23.90% $ 20,312 1.41%(f)(l) 2.59% 170% $ 0.0395
(.93) 18.48 8.05 18,329 1.40(f) 1.78 173 --
(.26) 17.98 12.40 10,952 1.40(f) 2.07 172 --
0.00 16.26 (1.22) 9,640 1.40*(f) 1.63* 21 --
(1.41) 16.46 5.06 9,822 1.40(f) 1.67 139 --
(1.07) 16.97 5.85 8,637 1.40(f) 2.29 98 --
(.49) 17.06 20.96 6,843 1.40(f) 1.92 103 --
(.03) 14.48 16.00 443 1.40*(f) 3.54* 137 --
$ (2.12) $ 16.17 33.46% $115,500 1.47%(m) 2.11% 207% $ 0.0552
(1.89) 14.01 5.23 102,567 1.38 2.41 227 --
(.38) 15.08 15.99 122,033 1.32 3.12 179 --
(.57) 13.38 (3.21) 157,637 1.27* 2.50* 116 --
(.43) 14.40 12.52 172,484 1.35 2.50 188 --
(.45) 13.20 8.14 143,883 1.40 3.26 204 --
(.40) 12.64 25.52 154,230 1.44 3.75 70 --
(2.03) 10.41 (13.12) 140,913 1.36 4.01 169 --
(1.00) 14.13 22.27 159,290 1.42 3.29 132 --
(3.19) 12.53 (1.10) 111,515 1.42 3.74 190 --
(.60) 16.33 15.80 129,786 1.17 4.14 136 --
$ (.86) $ 11.64 8.31% $ 1,943 2.30%* 4.22%* 169% $ 0.0519
(.67) 11.57 14.82 2,056 2.20 4.92 108 0.0600
(.51) 10.70 16.22 1,398 2.38 5.44 92 --
(.25) 9.69 (.54) 600 2.52* 6.11* 126 --
$ (.31) $ 10.51 2.19% $ 3,571 1.50%(f)* 3.06%* 23% $ 0.0411
(.46) 10.59 8.47 3,294 1.50(f) 1.67 98 0.0536
(.45) 10.22 19.58 2,748 1.50(f) 2.48 162 --
(.48) 8.97 (4.86) 1,068 1.50(f) 4.13 30 --
0.00 9.92 (.80) 229 1.50*(f) 2.35* 11 --
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
--------------------- ------ ------------- ----------- --------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Growth and Income Fund
Class A
11/1/96 to 4/30/97+++ .. $ 3.00 $ .03 (b) $ .36 $ .39 $ (.03) $ (.38)
Year ended 10/31/96 .... 2.71 .05 .50 .55 (.05) (.21)
Year ended 10/31/95 .... 2.35 .02 .52 .54 (.06) (.12)
Year ended 10/31/94 .... 2.61 .06 (.08) (.02) (.06) (.18)
Year ended 10/31/93 .... 2.48 .06 .29 .35 (.06) (.16)
Year ended 10/31/92 .... 2.52 .06 .11 .17 (.06) (.15)
Year ended 10/31/91 .... 2.28 .07 .56 .63 (.09) (.30)
Year ended 10/31/90 .... 3.02 .09 (.30) (.21) (.10) (.43)
Year ended 10/31/89 .... 3.05 .10 .43 .53 (.08) (.48)
Year ended 10/31/88 .... 3.48 .10 .33 .43 (.08) (.78)
Year ended 10/31/87 .... 3.52 .11 (.03) .08 (.12) 0.00
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 .... $ 10.00 $ .30(b) $ 2.88 $ 3.18 $ (.38)(m) $ 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of operations.
++ Commencement of distribution.
+++ Unaudited.
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment returns calculated for periods of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and/or expense reimbursement.
(d) Adjusted for a 200% stock dividend paid to shareholders of record on
January 15, 1988.
(e) Net of offering costs of ($.05).
(f) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, giving effect to the expense offset arrangement described
in (l) below, would have been as follows:
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
All-Asia Investment Fund
Class A -- -- -- 10.57%# 3.62%
Growth Fund
Class A 1.94% 1.84% 1.46% -- --
Premier Growth
Class A 3.33%# -- -- -- --
Global Small Cap Fund
Class A -- -- -- 2.61% --
Strategic Balanced Fund
Class A -- 1.85% 1.70%1 1.81% 1.76% 2.06%
1.94%#2
Utility Income Fund
Class A -- 145.63%# 13.72% 4.86%# 3.38% 3.41%
</TABLE>
--------------
# annualized
1. For the period ended April 30, 1994
2. For the period ended July 31, 1994
For the expense ratios of the Funds in years prior to fiscal year 1992,
assuming the Funds had borne all expenses, please see the Financial
Statements in each Fund's Statement of Additional Information.
(g) "Dividends from Net Investment Income" includes a return of capital. Income
Builder Fund had a return of capital with respect to Class A shares, for
the period ended October 31, 1994, of $(.01).
(h) On March 25, 1994, all existing shares of Income Builder Fund, previously
known as Alliance Multi-Market Income and Growth Trust, were converted into
Class C shares.
(i) Prior to July 22, 1993, Equitable Capital Management Corporation
("Equitable Capital") served as the investment adviser to the predecessor
to The Alliance Portfolios, of which Growth Fund and Strategic Balanced
Fund are series. On July 22, 1993, Alliance acquired the business and
substantially all assets of Equitable Capital and became investment adviser
to the Funds.
(j) "Distributions from Net Realized Gains" includes a return of capital.
Global Small Cap Fund had a return of capital with respect to Class A
shares, for the year ended July 31, 1995, of $(.12).
(k) 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 changed.
(l) The following funds benefitted from an expense offset arrangement with the
transfer agent. Had such expense offsets not been in effect, the ratios of
expenses to average net assets, absent the assumption and/or
waiver/reimbursement of expenses described in (f) above, would have been as
follows:
<TABLE>
<CAPTION>
1997
-------
<S> <C>
International Fund
Class A 1.73%
Global Small Cap Fund
Class A 2.38%
Strategic Balanced Fund
Class A 2.08%
New Europe Fund
Class A 2.04%
Balanced Shares
Class A 1.46%
</TABLE>
(m) Distributions from net investment income include a tax return of capital of
$0.08.
50
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate (k)
- ------------- ------ --------- -------- ---------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (.41) $ 2.98 13.29% $628,306 .91%* 1.76%* 55% $ 0.0585
(.26) 3.00 21.51 553,151 .97 1.73 88 0.0625
(.18) 2.71 24.21 458,158 1.05 1.88 142 --
(.24) 2.35 (.67) 414,386 1.03 2.36 68 --
(.22) 2.61 14.98 459,372 1.07 2.38 91 --
(.21) 2.48 7.23 417,018 1.09 2.63 104 --
(.39) 2.52 31.03 409,597 1.14 2.74 84 --
(.53) 2.28 (8.55) 314,670 1.09 3.40 76 --
(.56) 3.02 21.59 377,168 1.08 3.49 79 --
(.86) 3.05 16.45 350,510 1.09 3.09 66 --
(.12) 3.48 2.04 348,375 .86 2.77 60 --
$ (.38) $ 12.80 32.24% $ 37,638 1.77%(l) 2.73%* 20% $ .0518
</TABLE>
51
<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, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance Worldwide Privatization
Fund, Inc. (1994), Alliance New Europe Fund, Inc. (1990), Alliance All-Asia
Investment Fund, Inc. (1994), Alliance Global Small Cap Fund, Inc. (1966),
Alliance Income Builder Fund, Inc. (1991), Alliance Utility Income Fund, Inc.
(1993), Alliance Growth and Income Fund, Inc. (1932) and Real Estate Investment
Fund, Inc. (1996). Each of the following Funds is either a Massachusetts
business trust or a series of a Massachusetts business trust organized in the
year indicated: Alliance Growth Fund and Alliance Strategic Balanced Fund (each
a series of The Alliance Portfolios) (1987), and Alliance International Fund
(1980). Prior to August 2, 1993, The Alliance Portfolios was known as The
Equitable Funds, Growth Fund was known as The Equitable Growth Fund and
Strategic Balanced Fund was known as The Equitable Balanced Fund. Prior to March
22, 1994, Income Builder Fund was known as Alliance Multi-Market Income and
Growth Trust, Inc.
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 a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares. The Funds are 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 a Fund, each share of the
portfolio or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together as a single
class on matters, such as the election of Directors, that affect each portfolio
and class in substantially the same manner. Advisor Class, Class A, Class B and
Class C 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 and Class B and
Advisor Class shares convert to Class A shares under certain circumstances. Each
class of shares votes separately with respect to 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 a Fund, are entitled to receive the net assets of the Fund. Since
this Prospectus sets forth information about all the Funds, it is theoretically
possible that a Fund might be liable for any materially inaccurate or incomplete
disclosure in this Prospectus concerning another Fund. Based on the advice of
counsel, however, the Funds believe that the potential liability of each Fund
with respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a 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 each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds.
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 Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for each class of shares, including Advisor Class shares. Such
advertisements disclose a Fund's average annual compounded total return for the
periods prescribed by the Commission. A 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 a Fund are assumed
to have been reinvested when paid and the maximum sales charges applicable to
purchases and redemptions of a Fund's shares are assumed to have been paid.
Balanced Shares, Growth and Income Fund, Income Builder Fund, Strategic Balanced
Fund and Utility Income Fund may also advertise their "yield," which is also
computed separately for each class of shares, including Advisor Class shares. A
Fund's yield for any 30-day (or one-month) period is computed by dividing the
net investment income per share earned during such period by the maximum public
offering price per share on the last day of the period, and then annualizing
such 30-day (or one-month) yield in accordance with a formula prescribed by the
Commission which provides for compounding on a semi-annual basis.
52
<PAGE>
Strategic Balanced Fund, Balanced Shares, Income Builder Fund, Utility Income
Fund and Growth and Income Fund may also state in sales literature an "actual
distribution rate" for each class which is computed in the same manner as yield
except that actual income dividends declared per share during the period in
question are substituted for net investment income per share. The actual
distribution rate is computed separately for each class of shares, including
Advisor Class shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements 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.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
53
<PAGE>
[LOGO] ALLIANCE INCOME BUILDER 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
February 3, 1997
(as amended October 31, 1997)
____________________________________________________________
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the current
Prospectus for the Alliance Income Builder Fund, Inc. (the
"Fund") that offers the Class A, Class B and Class C shares of
the Fund and the current Prospectus for the Fund that offers the
Advisor Class shares of the Fund (the "Advisor Class Prospectus"
and, together with the Prospectus for the Fund that offers the
Class A, Class B and Class C shares, the "Prospectuses"). Copies
of such Prospectuses may be obtained by contacting Alliance Fund
Services, Inc. at the address or the "For Literature" telephone
number shown above.
TABLE OF CONTENTS
Page
Investment Policies and Restrictions.....................
Management of the Fund...................................
Expenses of the Fund.....................................
Purchase of Shares.......................................
Redemption and Repurchase of Shares......................
Shareholder Services.....................................
Net Asset Value..........................................
Dividends, Distributions and Taxes.......................
Portfolio Transactions...................................
General Information......................................
Report of Independent Auditors and Financial
Statements.............................................
Appendix A: Description of Obligations..................
Issued or Guaranteed By U.S. Government................
Agencies or Instrumentalities.......................... A-1
Appendix B: Bond and Commercial Paper Ratings........... B-1
Appendix C: Options..................................... C-1
Appendix D: Futures Contracts, Options on...............
Futures Contracts and Options on Foreign
Currencies............................................. D-1
__________________________________________________________
(R): This registered service mark used under license from
the owner, Alliance Capital Management L.P.
<PAGE>
__________________________________________________________
INVESTMENT POLICIES AND RESTRICTIONS
__________________________________________________________
The following investment policies and restrictions
supplement, and should be read in conjunction with, the
information set forth in the Prospectus of the Fund under
the heading "Description of the Fund." The Fund's
investment objectives may not be changed without shareholder
approval. The Fund's investment policies described below
are not designated "fundamental policies" within the meaning
of the Investment Company Act of 1940, as amended (the "1940
Act") and, therefore, may be changed by the Directors of the
Fund without a shareholder vote. However, the Fund will not
change its investment policies without contemporaneous
written notice to shareholders.
Investment Policies
The Fund is a non-diversified, open-end management
investment company that seeks both an attractive level of
current income and long-term growth of income and capital by
investing substantially all of its assets in dividend-paying
equity securities and U.S. Dollar denominated debt
securities. The Fund seeks investment opportunities in
foreign, as well as domestic securities markets. The Fund
will invest in equity securities of companies with a
historical or projected pattern of paying rising dividends.
Under normal circumstances, at least 65% of the Fund's total
assets will be invested in income-producing debt and equity
securities.
The Fund will invest in equity securities, such as
common stocks, securities convertible into common stocks and
rights and warrants to subscribe for the purchase of common
stocks and in fixed-income securities, such as U.S. and non-
U.S. Government and corporate bonds and preferred stocks.
The Fund may vary the percentage of assets invested in any
one type of security based upon the evaluation by Alliance
Capital Management L.P., the Fund's adviser, (the "Adviser")
as to the appropriate portfolio structure for achieving the
Fund's investment objective under prevailing market,
economic and financial conditions. Certain securities (such
as fixed-income securities) will be selected on the basis of
their current yield, while other securities may be purchased
for their growth potential. The values of fixed-income
securities change as the general levels of interest rates
fluctuate. When interest rates decline, the values of
fixed-income securities can be expected to increase, and
2
<PAGE>
when interest rates rise, the values of fixed-income
securities can be expected to decrease.
Certificates of Deposit and Bankers' Acceptances.
Certificates of deposit are receipts issued by a depository
institution in exchange for the deposit of funds. The
issuer agrees to pay the amount deposited plus interest to
the bearer of the receipt on the date specified on the
certificate. The certificate usually can be traded in the
secondary market prior to maturity. Bankers' acceptances
typically arise from short-term credit arrangements designed
to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft
drawn on a bank by an exporter or an importer to obtain a
stated amount of funds to pay for specific merchandise. The
draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be
held by the accepting bank as an earning asset or it may be
sold in the secondary market at the going rate of discount
for a specific maturity. Although maturities for
acceptances can be as long as 270 days, most acceptances
have maturities of six months or less.
Commercial Paper. Commercial paper consists of
short-term (usually from 1 to 270 days) unsecured promissory
notes issued by corporations in order to finance their
current operations. A variable amount master demand note
(which is a type of commercial paper) represents a direct
borrowing arrangement involving periodically fluctuating
rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant
to which the lender may determine to invest varying amounts.
For a description of commercial paper ratings, see
Appendix B.
Convertible Securities. Convertible securities
include bonds, debentures, corporate notes and preferred
stocks that are convertible at a stated exchange rate into
common stock. Prior to their conversion, convertible
securities have the same general characteristics as non-
convertible debt securities, which provide a stable stream
of income with generally higher yields than those of equity
securities of the same or similar issuers. As with all debt
securities, the market value of convertible securities tends
to decline as interest rates increase and, conversely, to
increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields
than non-convertible debt securities of similar quality,
they do enable the investor to benefit from increases in the
market price of the underlying common stock. When the market
3
<PAGE>
price of the common stock underlying a convertible security
increases, the price of the convertible security
increasingly reflects the value of the underlying common
stock and may rise accordingly. As the market price of the
underlying common stock declines, the convertible security
tends to trade increasingly on a yield basis, and thus may
not depreciate to the same extent as the underlying common
stock. Convertible securities rank senior to common stocks
on an issuer's capital structure. They are consequently of
higher quality and entail less risk than the issuer's common
stock, although the extent to which such risk is reduced
depends in large measure upon the degree to which the
convertible security sells above its value as a fixed income
security.
Rights or Warrants. The Fund may invest up to 5%
of its net assets in rights or warrants which entitle the
holder to buy equity securities at a specific price for a
specific period of time, but will do so only if the equity
securities themselves are deemed appropriate by the Adviser
for inclusion in the Fund's portfolio. Rights and warrants
may be considered more speculative than certain other types
of investments because they do not entitle a holder to
dividends or voting rights with respect to the securities
which may be purchased nor do they represent any rights in
the assets of the issuing company. In addition, the value
of a right or warrant does not necessarily change with the
value of the underlying securities. A right or warrant
ceases to have value if it is not exercised prior to the
expiration date.
U.S. Government Securities. For a general
description of obligations issued or guaranteed by U.S.
Government agencies or instrumentalities, see Appendix A.
Options. For additional information on the use,
risks and costs of options, see Appendix C.
Options on Securities Indices. The Fund may
purchase and sell exchange-traded index options on any
securities index composed of the types of securities in
which the Fund may invest. An option on a securities index
is similar to an option on a security except that, rather
than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the chosen index is
greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option. There are
no specific limitations on the Fund's purchasing and selling
of options on securities indices.
4
<PAGE>
Through the purchase of listed index options, the
Fund could achieve many of the same objectives as through
the use of options on individual securities. Price
movements in the Fund's portfolio securities probably will
not correlate perfectly with movements in the level of the
index and, therefore, the Fund would bear a risk of loss on
index options purchased by it if favorable price movements
of the hedged portfolio securities do not equal or exceed
losses on the options or if adverse price movements of the
hedged portfolio securities are greater than gains realized
from the options.
Futures Contracts and Options on Futures Contracts.
The Fund may enter into futures contracts and options on
futures contracts as described in the Prospectus. The
successful use of such instruments draws upon the Adviser's
special skills and experience with respect to such
instruments and usually depends on the Adviser's ability to
forecast interest rate and currency exchange rate movements
correctly. Should interest or exchange rates move in an
unexpected manner, the Fund may not achieve the anticipated
benefits of futures contracts or options on futures
contracts or may realize losses and thus will be in a worse
position than if such strategies had not been used. In
addition, the correlation between movements in the price of
futures contracts or options on futures contracts and
movements in the price of the securities and currencies
hedged or used for cover will not be perfect and could
produce unanticipated losses.
The Board of Directors has adopted the requirement
that futures contracts and options on futures contracts only
be used as a hedge and not for speculation. In addition to
this requirement, the Board of Directors has also restricted
the Fund's use of futures contracts so that the aggregate of
the market value of the outstanding futures contracts
purchased by the Fund and the market value of the currencies
and futures contracts subject to outstanding options written
by the Fund may not exceed 50% of the market value of the
total assets of the Fund. These restrictions will not be
changed by the Fund's Board of Directors without considering
the policies and concerns of the various applicable federal
and state regulatory agencies.
For additional information on the use, risks and
costs of futures contracts and options on futures contracts,
see Appendix D.
Options on Foreign Currencies. For additional
information on the use, risks and costs of options on
foreign currencies, see Appendix D.
5
<PAGE>
Forward Foreign Currency Exchange Contracts. The
Fund may purchase or sell forward foreign currency exchange
contracts ("forward contracts") to attempt to minimize the
risk to the Fund of adverse changes in the relationship
between the U.S. Dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific
currency for an agreed price at a future date which is
individually negotiated and privately traded by currency
traders and their customers. The Fund 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. Additionally, for example, 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"). In
this situation 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"). To
the extent required by applicable law, the Fund's Custodian
will place liquid assets in a separate account of the Fund
having a value equal to the aggregate amount of the Fund's
commitments under forward contracts entered into with
respect to position hedges and cross-hedges. If the value
of the assets placed in a separate account declines,
additional liquid assets or securities will be placed in the
account on a daily basis so that the value of the account
will equal the amount of the Fund's commitments with respect
to such contracts. As an alternative to maintaining all or
part of the separate account, the Fund may purchase a call
option permitting the Fund to purchase the amount of foreign
currency being hedged by a forward sale contract at a price
no higher than the forward contract price or the Fund may
purchase a put option permitting the Fund to sell the amount
of foreign currency subject to a forward purchase contract
at a price as high or higher than the forward contract
price. In addition, the Fund may use such other methods of
6
<PAGE>
"cover" as are permitted by applicable law. Unanticipated
changes in currency prices may result in poorer overall
performance for the Fund than if it had not entered into
such contracts.
While these contracts are not presently regulated
by the Commodity Futures Trading Commission ("CFTC"), the
CFTC may in the future assert authority to regulate forward
contracts. In such event the Fund's ability to utilize
forward contracts in the manner set forth in the Prospectus
may be restricted. Forward contracts will reduce the
potential gain from a positive change in the relationship
between the U.S. Dollar and foreign currencies.
Unanticipated changes in currency prices may result in
poorer overall performance for the Fund than if it had not
entered into such contracts. The use of foreign currency
forward contracts will not eliminate fluctuations in the
underlying U.S. Dollar equivalent value of the prices of or
rates of return on the Fund's foreign currency-denominated
portfolio securities and the use of such techniques will
subject the Fund to certain risks.
The matching of the increase in value of a forward
contract and the decline in the U.S. Dollar equivalent value
of the foreign currency-denominated asset that is the
subject of the hedge generally will not be precise. In
addition, the Fund may not always be able to enter into
foreign currency forward contracts at attractive prices and
this will limit the Fund's ability to use such contract to
hedge or cross-hedge its assets. Also, with regard to the
Fund's use of cross-hedges, there can be no assurance that
historical correlations between the movement of certain
foreign currencies relative to the U.S. Dollar will
continue. Thus, at any time poor correlation may exist
between movements in the exchange rates of the foreign
currencies underlying the Fund's cross-hedges and the
movements in the exchange rates of the foreign currencies in
which the Fund's assets that are the subject of such cross-
hedges are denominated.
Foreign Securities. Investing in securities of
non-United States companies which are generally denominated
in foreign currencies involves certain considerations
comprising both risk and opportunity not typically
associated with investing in United States companies. These
considerations include changes in exchange rates and
exchange control regulation, political and social
instability, expropriation, imposition of foreign taxes,
less liquid markets and less available information than are
generally the case in the United States, higher transaction
costs, less government supervision of exchanges and brokers
7
<PAGE>
and issuers, difficulty in enforcing contractual
obligations, lack of uniform accounting and auditing
standards and greater price volatility. Additional risks
may be incurred in investing in particular countries.
Repurchase Agreements. The Fund may invest in
repurchase agreements pertaining to the types of securities
in which it invests. A repurchase agreement arises when a
buyer purchases a security and simultaneously agrees to
resell it to the vendor at an agreed-upon future date,
normally one day or a few days later. The resale price is
greater than the purchase price, reflecting an agreed-upon
market rate which is in effect for the period of time the
buyer's money is invested in the security and which is not
related to the coupon rate on the purchased security. Such
agreements permit the Fund to keep all of its assets at work
while retaining "overnight" flexibility in pursuit of
investments of a longer-term nature. The Fund maintains
procedures for evaluating and monitoring the
creditworthiness of vendors of repurchase agreements. In
addition, the Fund requires continual maintenance of
collateral held by the Fund's Custodian in an amount equal
to, or in excess of, the market value of the securities
which are the subject of the agreement. In the event that a
vendor defaulted on its repurchase obligation, the Fund
might suffer a loss to the extent that the proceeds from the
sale of the collateral were less than the repurchase price.
In the event of a vendor's bankruptcy, the Fund might be
delayed in, or prevented from, selling the collateral for
its benefit. Repurchase agreements may be entered into with
member banks of the Federal Reserve System including the
Fund's Custodian or "primary dealers" (as designated by the
Federal Reserve Bank of New York) in United States
Government securities.
Illiquid Securities. The Fund will not maintain
more than 15% of its net assets (taken at market value) in
illiquid securities. For this purpose, illiquid securities
include, among others, direct placements or other securities
which are subject to legal or contractual restrictions on
resale or for which there is no readily available market
(e.g. trading in the security is suspended or, in the case
of unlisted securities, market makers do not exist or will
not entertain bids or offers).
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 ("Securities Act") and
securities which are otherwise not readily marketable.
Securities which have not been registered under the
8
<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 foreign
securities. 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.
During the coming year, the Fund may invest up to
5% of its net assets (taken at market value) 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 and only 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 restrictions 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
9
<PAGE>
result of this regulation and the consequent inception of
the PORTAL System sponsored by the National Association of
Securities Dealers, Inc., an automated system for the
trading, clearance and settlement of unregistered securities
of domestic and foreign issuers. The Funds investments in
Rule 144A eligible securities are not subject to the
limitations described above on securities issued under
Section 4(2).
The Adviser, acting under the supervision of the
Board of Directors, will monitor the liquidity of restricted
securities in the Fund's portfolio that are eligible for
resale pursuant to Rule 144A. In reaching liquidity
decisions, the Adviser will consider, among others, the
following factors: (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 securities.
Investment in Closed-End Investment Companies
The Fund may invest in closed-end companies whose
investment objectives and policies are consistent with those
of the Fund. The Fund may invest up to 5% of its net assets
in securities of closed-end investment companies. However,
the Fund may not own more than 3% of the total outstanding
voting stock of any closed- end investment company. If the
Fund acquires shares in closed-end investment companies,
shareholders would bear both their proportionate share of
expenses in the Fund (including advisory fees) and,
indirectly, the expenses of such closed-end investment
companies (including management and advisory fees).
Certain Risk Considerations
Investments in Lower-Rated Fixed-Income Securities.
Adverse publicity and investor perceptions about lower-rated
securities, whether or not based on fundamental analysis,
may tend to decrease the market value and liquidity of such
lower- rated securities. The Adviser will try to reduce the
risk inherent in investment in lower-rated securities
through credit analysis, diversification and attention to
current developments and trends in interest rates and
10
<PAGE>
economic and political conditions. However, there can be no
assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, the Adviser's
research and credit analysis are a correspondingly important
aspect of its program for managing the Fund's securities
than would be the case if the Fund did not invest in lower-
rated securities. In considering investments for the Fund,
the Adviser will attempt to identify those high-risk, high-
yield securities whose financial condition is adequate to
meet future obligations, has improved or is expected to
improve in the future. The Adviser's analysis focuses on
relative values based on such factors as interest or
dividend coverage, asset coverage, earnings prospects, and
the experience and managerial strength of the issuer.
Non-rated securities will also be considered for
investment by the Fund when the Adviser believes that the
financial condition of the issuers of such securities, or
the protection afforded by the terms of the securities
themselves, limits the risk to the Fund to a degree
comparable to that of rated securities that are consistent
with the Fund's objective and policies.
In seeking to achieve the Fund's objective, there
will be times, such as during periods of rising interest
rates, when depreciation and realization of capital losses
on securities in the portfolio will be unavoidable.
Moreover, medium- and lower- rated securities and non-rated
securities of comparable quality may be subject to wider
fluctuations in yield and market values than higher-rated
securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the
cash income received from that security but are reflected in
the net asset value of the Fund.
Portfolio Turnover. The Adviser anticipates that
the Fund's annual rate of portfolio turnover will not be in
excess of 100% in future years. A 100% turnover rate would
occur, for example, if all the securities in the Fund's
portfolio were replaced once in a period of one year. A
portfolio turnover rate approximating 100% involves
correspondingly greater brokerage commission expenses than
would a lower rate, which must be borne by the Fund and its
shareholders. The annual portfolio turnover rate of
securities for the fiscal years ended in 1995 and 1996 were
92% and 108%, respectively.
11
<PAGE>
Investment Restrictions
The following restrictions, which supplement those
set forth in the Fund's Prospectus, may not be changed
without shareholder approval, which means the affirmative
vote of the holders of (i) 67% or more or the shares
represented at a meeting at which more than 50% of the
outstanding shares are represented, or (ii) more than 50% of
the outstanding shares, whichever is less. The Fund may
not:
(1) Make loans except through (i) the purchase of debt
obligations in accordance with its investment objectives
and policies; (ii) the lending of portfolio securities;
or (iii) the use of repurchase agreements; or
(iv) certain call loans upon collateral security;
however, the Fund does not intend to make such call
loans;
(2) Participate on a joint or joint and several basis
in any securities trading account;
(3) Invest in companies for the purpose of exercising
control;
(4) Issue any senior security within the meaning of the
1940 Act;
(5) Make short sales of securities or maintain a short
position, unless at all times when a short position is
open it owns an equal amount of such securities or
securities convertible into or exchangeable for, without
payment of any further consideration, securities of the
same issue as, and equal in amount to, the securities
sold short ("short sales-against-the-box"), and unless
not more than 10% of the Fund's net assets (taken at
market value) is held as collateral for such sales at
any one time (it is the Fund's present intention to make
such sales only for the purpose of deferring realization
of gain or loss for Federal income tax purposes);
(6) Purchase a security if, as a result (unless the
security is acquired pursuant to a plan of
reorganization or an offer of exchange), 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 one or more closed-end investment
companies;
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<PAGE>
(7) (i) Purchase or sell real estate, except that it
may purchase and sell securities of companies which deal
in real estate or interests therein; (ii) purchase or
sell commodities or commodity contracts (except
currencies, forward and futures contracts on currencies
and related options forward contracts or contracts for
the future acquisition or delivery of (including futures
contracts on) securities and securities indices and
related options; (iii) invest in interests in oil, gas,
or other mineral exploration or development programs;
(iv) purchase securities on margin, except for such
short-term credits as may be necessary for the clearance
of transactions; and (v) act as an underwriter of
securities, except that the Fund may acquire restricted
securities under circumstances in which, if such
securities were sold, the Fund might be deemed to be an
underwriter for purposes of the Securities Act.
Whenever any investment policy or restriction states a
minimum or maximum percentage of the Fund's assets which may be
invested in any security or other asset, it is intended that such
minimum or maximum percentage limitation be determined
immediately after and as a result of the Fund's acquisition of
such security or other asset. Accordingly, any later increase or
decrease in percentage beyond the specified limitations resulting
from a change in values or net assets will not be considered a
violation of any such maximum.
_______________________________________________________________
MANAGEMENT OF THE FUND
_______________________________________________________________
Adviser
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision of the Fund's Board of Directors (see "Management of
the Fund" in the Prospectus).
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). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundation and endowment funds. As of June 30, 1997, the Adviser
13
<PAGE>
was an investment manager of employee benefit fund assets for 29
of the FORTUNE 100 companies. As of that date, the Adviser and
its subsidiaries employed approximately 1,500 employees who
operated out of domestic offices and the offices of subsidiaries
in Bahrain, Bangalore, Chennai, Istanbul, London, Madrid, Mumbai,
Paris, Singapore, Tokyo and Toronto and affiliate offices located
in Vienna, Warsaw, Hong Kong, Sao Paulo and Moscow. The 54
registered investment companies comprising more than 116 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"). ECI is a holding company
controlled by AXA-UAP, a French insurance holding company which
at September 30, 1997, beneficially owned approximately 59% of
the outstanding voting shares of ECI. As of June 30, 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 Adviser.
AXA-UAP is a 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, as of
September 30, 1997 more than 25% of the voting power of AXA-UAP
was controlled directly and indirectly by FINAXA, a French
holding company. As of September 30, 1997 more than 25% of the
voting power of FINAXA was controlled directly and indirectly by
four French mutual insurance companies (the "Mutuelles AXA"), one
of which, AXA Assurances I.A.R.D. Mutuelle, itself controlled
directly and indirectly more than 25% of the voting power of
FINAXA. Acting as a group, the Mutuelles AXA control AXA-UAP and
FINAXA.
Under the Advisory Agreement, the Adviser furnishes
advice and recommendations with respect to the Fund's portfolio
14
<PAGE>
of securities and investments and provides persons satisfactory
to the Board of Directors to act as officers and employees of the
Fund. Such officers and employees, as well as certain Directors
of the Fund may be employees of the Adviser or its affiliates.
The Adviser is, under the Advisory Agreement,
responsible for the following expenses incurred by the Fund:
(i) the compensation of any of the Fund's directors, officers and
employees who devote less than all of their time to its affairs
and who devote part of their time to the affairs of the Adviser
or its affiliates, (ii) expenses of computing the net asset value
of the Fund's shares to the extent such computation is required
under applicable Federal securities laws, (iii) expenses of
office rental, and (iv) clerical and bookkeeping expenses.
The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or by other subsidiaries of Equitable. In such event,
the services will be provided to the Fund at cost and the
payments therefor specifically approved by the Fund's Board of
Directors.
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser a monthly fee at an
annualized rate of .75 of 1% of the average daily value of the
Fund's net assets. The advisory fees for the fiscal years of the
Fund ended October 31, 1994, October 31, 1995 and October 31,
1996 amounted to $614,732, $433,843, and $396,063,
respectively.
The Advisory Agreement became effective on July 22,
1992. The Advisory Agreement was approved by the unanimous vote,
cast in person, of the Fund's Directors, including the Directors
who are not parties to the Advisory Agreement or interested
persons as defined in the 1940 Act of any such party, at a
meeting called for that purpose and held on September 10, 1991.
At a meeting held on June 11, 1992, a majority of the outstanding
voting securities of the Fund approved the Advisory Agreement.
The Advisory Agreement continues in effect for
successive twelve-month periods (computed from each November 1),
provided that such continuance is specifically approved at least
annually by the Fund's Directors or by a majority vote of the
holders of the outstanding voting securities of the Fund, and, in
either case, by a majority of the Directors who are not parties
to the Advisory Agreement or interested persons as defined in the
1940 Act of any such party. Most recently, the continuance of
the Advisory Agreement until October 31, 1998 was approved by a
15
<PAGE>
vote, cast in person, of the Directors, including a majority of
the Directors who are not parties to the Advisory Agreement or
interested persons of any such party, at a meeting called for
that purpose and held on September 9, 1997.
The Advisory Agreement is terminable without penalty on
60 days' written notice 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, or by the Adviser on 60 days' written notice,
and will automatically terminate in the event of its assignment.
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the
Adviser, or of reckless disregard of its obligations thereunder,
the Adviser shall not be liable for any action or failure to act
in accordance with its duties thereunder.
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The
Adviser may, from time to time, make recommendations which result
in the purchase or sale of a particular security by its other
clients simultaneously with the Fund. If transactions on behalf
of more than one client during the same period increase the
demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price or quantity.
It is the policy of the Adviser to allocate advisory
recommendations and the placing of orders in a manner which is
deemed equitable by the Adviser to the accounts involved,
including the Fund. When two or more of the clients of the
Adviser (including the Fund) are purchasing or selling the same
security on a given day from the same broker-dealer, such
transactions may be averaged as to price.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to the following registered investment
companies: ACM Institutional Reserves, 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 Environment 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
16
<PAGE>
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.
Directors and Officers
The Directors and principal officers of the Fund, their
ages and their primary 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 such person is 1345 Avenue of the Americas,
New York, New York 10105.
Directors
JOHN D. CARIFA,* 52, Chairman of the Board and President
of the Fund, is the President and Chief Operating Officer and a
Director of Alliance Capital Management Corporation ("ACMC"),
with which he has been associated since prior to 1992.
RUTH BLOCK, 66, was formerly an Executive Vice President
and Chief Insurance Officer of The Equitable Life Assurance
Society of the United States. She is a Director of Ecolab
Incorporated (specialty chemicals) and Amoco Corporation (oil and
gas). Her address is P.O. Box 4653, Stamford, Connecticut 06903.
DAVID H. DIEVLER, 68, He was formerly Chairman of the
Board and President of the Fund and a Senior Vice President of
ACMC with which he had been associated since prior to 1992. He
is currently an independent consultant. His address is P.O. Box
167, Spring Lake, New Jersey 07762.
____________________
* An "interested person" of the Fund as defined in the 1940
Act.
17
<PAGE>
JOHN H. DOBKIN, 55, has been President of Historic
Hudson Valley (historic preservation) since prior to 1992.
Previously, he was Director of the National Academy of Design.
His address is Historic Hudson Valley, 150 White Plains Rd.,
Tarrytown, New York 10591.
WILLIAM H. FOULK, JR., 65, is an Investment Adviser and
an Independent Consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1992. His address is
Suite 100, 2 Greenwich Plaza, Greenwich, Connecticut 06830.
DR. JAMES M. HESTER, 73, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide Corporation
with which he has been associated since prior to 1992. He was
formerly President of New York University, The New York Botanical
Garden and Rector of the United Nations University. His address
is 45 East 89th Street, New York, New York 10128.
CLIFFORD L. MICHEL, 58, is a partner of the law firm of
Cahill Gordon & Reindel with which he has been associated since
prior to 1992. He is President, Chief Executive Officer and
Director of Wenonah Development Company (investment holding
company) and a Director of Placer Dome, Inc. (mining). His
address is 80 Pine Street, New York, NY 10005.
DONALD J. ROBINSON, 63, was formerly a senior partner at
the law firm of Orrick, Herrington & Sutcliffe and is currently
of counsel to that firm. His address is 666 Fifth Avenue, 19th
Floor, New York, New York 10103.
Officers
JOHN D. CARIFA, Chairman and President, see biography
above.
ANDREW M. ARAN, 40, Senior Vice President, is a Senior
Vice President of ACMC with which he has been associated since
prior to 1992.
KATHLEEN A. CORBET, 37, Senior Vice President, has been
a Senior Vice President of ACMC since July 1993. Previously, she
held various responsibilities as head of Equitable Capital
Management Corporation's Fixed Income Management Department,
Private Placement Secondary Trading and Fund Management since
prior to 1992.
WAYNE D. LYSKI, 56, Senior Vice President, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1992.
18
<PAGE>
THOMAS M. PERKINS, 52, Senior Vice President, is a
Senior Vice President of ACMC with which he has been associated
since prior to 1992.
CORINNE MOLOF HILL, 33, Vice President, is a Vice
President of ACMC with which she has been associated since prior
to 1992.
VITA M. PIKE, 38, Vice President, is a Vice President of
ACMC with which she has been associated since prior to 1992.
EDMUND P. BERGAN, JR., 47, Secretary, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
("AFD") with which he has been associated since prior to 1992.
ANDREW L. GANGOLF, 43, Assistant Secretary, has been a
Vice President and Assistant General Counsel of AFD since
December 1994. Prior thereto he was a Vice President and
Assistant Secretary of Delaware Management Company, Inc. since
October 1992 and a Vice President and Counsel to Equitable 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, Vice
President and Associate General Counsel of Prudential Securities
since prior to 1992.
EMILIE D. WRAPP, 41, Assistant Secretary, is a Vice
President and Special Counsel of AFD, with which she has been
associated since prior to 1992.
MARK D. GERSTEN, 47, Treasurer and Chief Financial
Officer, is a Senior Vice President of Alliance Fund Services,
Inc. ("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 prior to
1992.
JOSEPH J. MANTINEO, 38, Assistant Controller, is a Vice
President of AFS with which he has been associated since prior to
1992.
PHYLLIS CLARKE, 37, Assistant Controller, is an
Accounting Manager of Mutual Funds for AFS since prior to 1992.
19
<PAGE>
JUAN J. RODRIGUEZ, 40, Assistant Controller, is an
Assistant Vice President of AFS with which he has been associated
since prior to 1992.
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
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 fund in the Alliance
Fund Complex provides compensation in the form of pension or
retirement benefits to any of its directors or trustees. Each of
the Directors is a director or trustee of one or more other
registered investment companies in the Alliance Fund Complex.
Total Number Total Number
of Funds in Investment
the Alliance Portfolios
Total Complex, within the
Compensation Including the Fund, Including
From the Fund, as to the Fund, as
Aggregate Alliance Fund which the to which the
Compensation Complex, Director is a Director is a
Name of Director from the Including the Director or Director or
of the Fund Fund Fund Trustee Trustee
________________ ____________ ______________ _____________ ______________
John D. Carifa $0 $0 52 114
Ruth Block $3,346 $157,500 38 76
David H. Dievler $3,326 $182,000 45 79
John H. Dobkin $3,549 $121,250 31 52
William H. Foulk, Jr. $3,576 $144,250 34 70
Dr. James M. Hester $3,353 $148,500 39 73
Clifford L. Michel $3,353 $146,068 39 88
Donald J. Robinson $367 $137,250 42 102
As of October 3, 1997, the Directors and officers of the
Fund as a group owned 6.5% of the Advisor Class shares of the
Fund and less than 1% of the shares of any other class of shares
of the Fund.
20
<PAGE>
________________________________________________________________
EXPENSES OF THE FUND
________________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with AFD, 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 service fees to defray
expenses associated with the distribution of its Class A shares,
Class B shares and Class C shares in accordance with a plan of
distribution included in the Agreement which has been duly
adopted and approved in accordance with Rule 12b-1 adopted by the
Securities and Exchange 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 charges and
distribution services fees on the Class B shares and the 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 distribution services fee
provide 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 May 3, 1993 and was
amended as of March 22, 1994 to permit the distribution of two
additional classes of shares, Class B and Class C shares. The
Agreement was amended as of June 4, 1996 to permit the
distribution of Advisor Class shares.
21
<PAGE>
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.
During the Fund's fiscal year ended October 31, 1996,
with respect to Class A shares, the Fund paid distribution
services fees for expenditures under the Agreement in the
aggregate amount of $4,820, which constituted approximately .30
of 1% of the average daily net assets attributable to the Class A
shares during the period and the Adviser made payments from its
own resources, as described above, aggregating $103,024. Of the
$107,844 paid by the Fund and the Adviser under the Agreement,
$20,068 was spent on advertising, $1,886 on printing and mailing
of prospectuses for persons other than current shareholders,
$40,229 for compensation to broker-dealers and other financial
intermediaries (including, $32,415 to the Fund's Principal
Underwriter), $1,156 for compensation to sales personnel and
$39,685 was spent on printing of sales literature, travel,
entertainment, due diligence and other promotional expenses.
During the Fund's fiscal year ended October 31, 1996,
with respect to Class B shares, the Fund paid distribution
services fees for expenditures under the Agreement in the
aggregate amount of $47,291, which constituted approximately 1%
of the average daily net assets attributable to the Class B
shares during the period and the Adviser made payments from its
own resources, as described above, aggregating $283,508. Of the
$330,799 paid by the Fund and the Adviser under the Agreement,
$40,180 was spent on advertising, $4,192 on printing and mailing
of prospectuses for persons other than current shareholders,
$144,257 for compensation to broker-dealers and other financial
intermediaries (including, $65,325 to the Fund's Principal
Underwriter), $2,172 for compensation to sales personnel, $85,739
was spent on printing of sales literature, travel, entertainment,
due diligence and other promotional expenses, and $6,968 for
interest on Class B shares financing.
During the Fund's fiscal year ended October 31, 1996,
with respect to Class C shares, the Fund paid distribution
services fees for expenditures under the Agreement in the
aggregate amount of $464,732, which constituted approximately 1%
of the average daily net assets attributable to the Class C
shares during the period and the Adviser made payments from its
own resources, as described above, aggregating $613,692. Of the
$1,078,424 paid by the Fund and the Adviser under the Agreement,
$29,836 was spent on advertising, $3,148 on printing and mailing
of prospectuses for persons other than current shareholders,
$518,095 for compensation to broker-dealers and other financial
22
<PAGE>
intermediaries (including, $48,983 to the Fund's Principal
Underwriter), $2,041 for compensation to sales personnel and
$60,572 was spent on printing of sales literature, travel,
entertainment, due diligence and other promotional expenses.
The Agreement will continue in effect for successive
twelve-month periods (computed from each November 1), provided,
however, that such continuance is specifically approved at least
annually by the Directors of the Fund or by vote of the holders
of a majority of the outstanding voting securities (as defined in
the 1940 Act) of that class, and, in either case, by a majority
of the Directors of the Fund who are not parties to the Agreement
or interested persons, as defined in the 1940 Act, of any such
party (other than as directors of the Fund) and who have no
direct or indirect financial interest in the operation of the
Rule 12b-1 Plan or any agreement related thereto. Most recently,
continuance of the Agreement until October 31, 1998 was approved
by a vote, cast in person, of the Directors including a majority
of the Directors who are not "interested persons", as defined in
the 1940 Act, at their Regular Meeting held on September 9, 1997.
In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class, and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
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 the Fund 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.
23
<PAGE>
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each of the Class A shares, Class B shares,
Class C shares and Advisor Class shares of the Fund, plus
reimbursement for out-of-pocket expenses. The transfer agency
fee with respect to the Class B shares and Class C shares is
higher than the transfer agency fee with respect to the Class A
and Advisor Class shares. For the fiscal year ended October 31,
1996, the Fund paid Alliance Fund Services, Inc. $75,821 for
transfer agency services.
_______________________________________________________________
PURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How To Buy Shares."
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,
24
<PAGE>
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
CB Commercial Real Estate Group, Inc. Generally, a fee-based
program must charge an asset-based or other similar fee and must
invest at least $250,000 in Advisor Class shares of the Fund in
order to be approved by the Principal Underwriter for investment
in Advisor Class shares.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares made through such financial
representative. Such financial representative may also impose
requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed
by the Fund, including requirements as to the minimum initial and
subsequent investment amounts. Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares.
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under "--
Class A Shares". On each Fund business day on which a purchase
or redemption order is received by the Fund and trading in the
types of securities in which the Fund invests might materially
affect the value of Fund shares, the per share net asset value is
computed in accordance with the Fund's Articles of Incorporation
and By-Laws as of the next close of regular trading on the New
York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern
time) by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any day on which the Exchange is open for
trading.
25
<PAGE>
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
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 is responsible
for transmitting such orders by 5:00 p.m. If the selected
dealer, agent or financial representative, as applicable, 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
26
<PAGE>
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 paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
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, 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, 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
27
<PAGE>
bear such a fee, (iii) Class B and Class C shares bear higher
transfer agency costs than that borne by Class A and Advisor
Class shares; (iv) each of Class A, Class B and Class C 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 Advisor Class
shareholders and the Class A, the Class B and the 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.
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 amount of 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
____________________
** Advisor Class shares are sold only to investors described
above in this section under "--General."
28
<PAGE>
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
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 would have to hold his or her investment
approximately seven years for the Class C distribution services
fee to exceed the initial sales charge plus the accumulated
distribution services fee of Class A shares. In this example, an
investor intending to maintain his or her investment for a longer
period might consider purchasing Class A shares. This example
does not take into account the time value of money, which further
reduces the impact of the Class C distribution services fees on
the investment, fluctuations in net asset value or the effect of
different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
During the Fund's fiscal years ended in 1996, 1995 and
1994, the aggregate amounts of underwriting commission payable
with respect to shares of the Fund were $40,262, $5,756 and
$45,959, respectively. Of those amounts, the Principal
Underwriter received the amounts of $1,756, $290 and $2,637,
respectively, representing that portion of the sales charge paid
on shares of the Fund sold during the year which was not
29
<PAGE>
reallowed to selected dealers (and was, accordingly, retained by
the Principal Underwriter). During the Fund's fiscal years ended
in 1996, 1995 and 1994, the Principal Underwriter received
contingent deferred sales charges of $-0-, $-0- and $-0-,
respectively, on Class A shares, $4,000, $7,453 and $1,427,
respectively, on Class B shares, and $-0-, $-0- and $-0-,
respectively, on Class C shares.
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
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.
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
30
<PAGE>
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 and
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 or 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 or (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "--
Class B Shares-- Conversion Feature" and "--Conversion of Advisor
Class Shares to Class A Shares." The Fund receives the entire
net asset value of its Class A shares sold to investors. The
Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above. In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter. A selected
dealer who receives reallowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities
Act.
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
31
<PAGE>
at a price based upon the net asset value of Class A shares of
the Fund on April 30, 1997.
Net Asset Value per Class A
Share at April 30, 1997 $11.64
Per Share Sales Charge - 4.25%
of offering price (4.44% of
net asset value per share) $ .52
Class A Per Share Offering Price
to the Public $12.16
======
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
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:
32
<PAGE>
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 Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance 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.
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.
33
<PAGE>
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
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,
34
<PAGE>
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 the Statement of Intention; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to
invest a total of $60,000 during the following 13 months in
shares of the Fund or any other Alliance Mutual Fund, to qualify
for the 3.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
the rate of the sales charge applicable to the actual amount of
the aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
35
<PAGE>
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 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.
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
36
<PAGE>
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 and full-time
employees of selected dealers or agents; or the
spouse, sibling, direct ancestor or direct
descendant (collectively "relatives") of any such
person; or any trust, individual retirement account
or retirement plan account for the benefit of any
such person or relative; or the estate of any such
person or relative if such shares are purchased for
investment purposes (such shares may not be resold
except to the Fund);
(iii) the Adviser, the Principal Underwriter, 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; and
37
<PAGE>
(vii) employer-sponsored qualified pension or profit-
sharing plans (including Section 401(k) plans),
custodial accounts maintained pursuant to
Section 403(b)(7) retirement plans and individual
retirement accounts (including individual
retirement accounts to which simplified employee
pension ("SEP") contributions are made), if such
plans or accounts are established or administered
under programs sponsored by administrators or other
persons that have been approved by the Principal
Underwriter.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
the Class B shares are paid to the Principal Underwriter and are
used by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services
fee enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
To illustrate, assume that an investor purchased 100
Class B shares at $10 per share (at a cost of $1,000) and in the
second year after purchase, the net asset value per share is $12
and, during such time, the investor has acquired 10 additional
Class B shares upon dividend reinvestment. If at such time the
38
<PAGE>
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 %
of Dollar Amount
Years Since Purchase Subject to Charge
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
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
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services--Systematic Withdrawal Plan" below).
39
<PAGE>
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee
enables the Fund to sell Class C shares without either an initial
or contingent deferred sales charge, as long as the shares are
held for one year or more. Class C shares do not convert to any
40
<PAGE>
other class of shares of the Fund and incur higher distribution
services fees and transfer agency costs than Class A shares and
Advisor Class shares, and will thus have a higher expense ratio
and pay correspondingly lower dividends than Class A shares and
Advisor Class shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, as described above
under "--Class B Shares." In determining the contingent deferred
sales charge applicable to a redemption of Class C shares, it
will be assumed that the redemption is, first, of any shares that
are not subject to a contingent deferred sales charge (for
example, because the shares have been held beyond the period
during which the charge applies or were acquired upon the
reinvestment of dividends or distributions) and, second, of
shares held longest during the time they are subject to the sales
charge.
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares and Advisor Class shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts, employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--General," and by
investment advisory clients of, and by certain other persons
associated with, the Adviser and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan, or to be associated with the
41
<PAGE>
investment adviser or financial intermediary 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.
42
<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 shares, Class B shares 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 stock
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 (the "Exchange Act").
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<PAGE>
To redeem shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Fund. The
signature or signatures on the assignment form must be guaranteed
in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
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.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
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is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
_______________________________________________________________
SHAREHOLDER SERVICES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set
forth below are applicable to Class A, Class B, Class C and
Advisor Class shares unless otherwise indicated. If you are an
Advisor Class shareholder through an account established under a
fee-based program your fee-based program may impose requirements
with respect to the purchase, sale or exchange of Advisor Class
shares of the Fund that are different from those described
herein. A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing electronic funds transfer
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives
the proceeds from the investor's bank. In electronic form,
drafts can be made on or about a date each month selected by the
shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus. Current shareholders should
contact Alliance Fund Services, Inc. at the address or telephone
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<PAGE>
numbers shown on the cover of this Statement of Additional
Information to establish an automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Adviser).
In addition, (i) present officers and full-time employees of the
Adviser, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
employees of the Adviser, the Principal Underwriter, 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.
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
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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
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
48
<PAGE>
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.
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.
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If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan investing through
the Alliance Premier Retirement Program 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.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on the shareholder's Class A, Class B,
Class C or Advisor Class Fund shares be automatically reinvested,
in any amount, without the payment of any sales or service
charges, in shares of the same class of such other Alliance
Mutual Fund(s). Further information can be obtained by contacting
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
50
<PAGE>
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 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.
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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.
_______________________________________________________________
NET ASSET VALUE
_______________________________________________________________
The net asset value of each share of the Fund's Common
Stock on which the subscription and redemption prices are based
is determined by the market value of the securities and other
assets owned by the Fund less its liabilities, computed in
accordance with the Articles of Incorporation and By-Laws of the
Fund on each Fund business day as of the next close of trading on
the Exchange following receipt of a purchase or redemption order
(and on such other days as the Board of Directors of the Fund
deems necessary in order to comply with Rule 22c-1 under the 1940
Act). The net asset value of a share is the quotient obtained by
dividing the value, as of such closing, of the net assets of the
Fund (i.e., the value of the assets of the Fund less its
liabilities, including expenses payable or accrued but excluding
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capital stock and surplus) by the total number of shares of
Common Stock then outstanding at such closing.
For purposes of this computation, readily marketable
portfolio securities, including open short positions, listed on
the Exchange are valued at the last sale price reflected on the
consolidated tape at the close of the Exchange on the business
day as of which such value is being determined. If there has
been no sale on such day, the securities are valued at the mean
of the closing bid and asked prices on such day. If no bid or
asked prices are quoted on such day, then the security is valued
by such method as the Board of Directors of the Fund shall
determine in good faith to reflect its fair market value.
Securities not listed on the Exchange but listed on other
national securities exchanges or admitted to trading on the
National Association of Securities Dealers Automated Quotations,
Inc. ("NASDAQ") National List ("List") are valued in like manner.
Portfolio securities traded on more than one national
securities exchange are valued at the last sale price on the
business day as of which such value is being determined as
reflected on the tape at the close of the exchange representing
the principal market for such securities. Securities traded only
in the over-the-counter market, excluding those admitted to
trading on the List, are valued at the mean of the current bid
and asked prices as reported by NASDAQ or, in the case of
securities not quoted by NASDAQ, the National Quotation Bureau or
such other comparable sources as the Board of Directors of the
Fund deem appropriate to reflect their fair market value. Call
options written or purchased by the Fund are valued at the last
sale price and put options purchased by the Fund are valued at
the last sale price. Short-term obligations with less than 60
days remaining until maturity are stated at amortized cost which
approximates market value. All other assets of the Fund,
including restricted securities, are valued in such manner as the
Board of Directors of the Fund in good faith deem appropriate to
reflect their fair market value.
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.
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_______________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_______________________________________________________________
General
The Fund intends for each taxable year to qualify as a
"regulated investment company" under the Code. Investors should
consult their own counsel for a complete understanding of the
requirements the Fund must meet to qualify for such treatment.
The information set forth in the Prospectus and the following
discussion relate solely to federal income taxes on dividends and
distributions by the Fund and assumes that the Fund qualifies as
a regulated investment company. Investors should consult their
own counsel for further details and for the application of state
and local tax laws to his or her particular situation.
Each 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 reinvested in
additional full or fractional shares of the same class of common
stock 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 dividend or distribution. Election to receive
dividends and distributions in cash or full or fractional shares
is made at the time the 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. It
is the present policy of the Fund to distribute to shareholders
all net investment income quarterly and to distribute net
realized capital gains, if any, annually. The amount of any such
distributions must necessarily depend upon the realization by the
Fund of income and capital gains from investments. 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 and on the same day and will be in the same amount, except
that the higher distribution services fees applicable to Class B
and Class C shares, and any incremental transfer agency costs
relating to Class B shares, will be borne exclusively by the
class to which they relate.
Dividends of net ordinary income and distributions of
net short-term capital gains are taxable to shareholders as
ordinary income. The dividends-received deduction for
corporations should also be applicable to the Fund's dividends of
net investment income and distributions of net realized short-
term capital gains. The amount of such dividends and
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distributions eligible for the dividends-received deduction is
limited to the amount of dividends from domestic corporations
received by the Fund during the fiscal year. Under provisions of
the tax law, a corporation's dividends-received deduction will be
disallowed unless the corporation holds shares in the Fund 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
transactions is not counted. Furthermore, provisions of the tax
law disallow the dividends-received deduction 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"). Except as noted below, distributions of net
capital gains will be treated in the hands of shareholders as
mid-term gains to the extent designated by the Fund as deriving
from net gains from assets held for more than one year but not
more than 18 months, and the balance will be treated as adjusted
net capital gains. Gains derived from assets sold before May 7,
1997 and held for more than 18 months will be treated as mid-term
gains. Gains derived from assets sold after May 6, 1997 and
before July 29, 1997 and held for more than one year will be
treated as 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. Capital gains distributions are not
eligible for the dividends received deduction referred to above.
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 and distributions are taxable in the manner
described above regardless of whether they are paid to the
shareholder in cash or are reinvested in additional shares of the
Fund's common stock.
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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 gains differs depending on whether
the shares were held at the time of the sale or redemption for
more than 18 months, or for more than one year but not more than
18 months. If a shareholder has held shares in the Fund for six
months or less and during that period has received a distribution
of net capital gains, 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.
Foreign Tax Credits
Income received by the Fund may also be subject to
foreign income taxes, including withholding taxes. 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 United States 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 United States 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. A shareholder's foreign tax credit with
respect to a dividend received from the Fund will be disallowed
unless the shareholder holds shares in the Fund on the ex-
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dividend date and for at least 15 other days during the 30-day
period beginning 15 days prior to the ex-dividend date. 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 country and (ii) the portion of
dividends that represents income derived from sources within each
such country.
The federal income tax status of each year's
distributions by the Fund will be reported to shareholders and to
the Internal Revenue Service. The foregoing is only a general
description of the treatment of foreign taxes under the United
States federal income tax laws. Because the availability of a
foreign tax credit or deduction will depend on the particular
circumstances of each shareholder, potential investors are
advised to consult their own tax advisers.
The foregoing discussion relates only to U.S. federal
income tax law as it affects shareholders who are U.S. citizens
or residents or U.S. corporations. The effects of federal income
tax law on shareholders who are non-resident aliens or foreign
corporations may be substantially different. Foreign investors
should consult their counsel for further information as to the
U.S. tax consequences of receipt of income from the Fund.
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
57
<PAGE>
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."
Pursuant to the Taxpayer Relief Act of 1997, the Fund could elect
for taxable years beginning after 1997 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 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.
Currency Fluctuations-"Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, or from the disposition of a forward contract
denominated in a foreign currency which are attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also
are treated as ordinary 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
58
<PAGE>
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
distribution will be treated as a gain from the sale of shares.
Options Futures and Forward Contracts. Certain listed
options, regulated futures contracts, and forward foreign
currency contracts are considered "section 1256 contracts" for
federal income tax purposes. Section 1256 contracts held by the
Fund at the end of each taxable year will be "marked to market"
and treated for federal income tax purposes as though sold for
fair market value on the last business day of such taxable year.
Gain or loss realized by the Fund on section 1256 contracts other
than forward foreign currency contracts will be considered 60%
long-term and 40% short-term capital gain or loss. Gain or loss
realized by the Fund on forward foreign currency contracts
generally will be treated as section 988 gain or loss and will
therefore be characterized as ordinary income or loss and will
increase or decrease the amount of the Fund's net investment
income available to be distributed to shareholders as ordinary
income, as described above. The Fund can elect to exempt its
section 1256 contracts which are part of a "mixed straddle" (as
described below) from the application of section 1256.
The Treasury Department has the authority to issue
regulations that would permit or require the Fund either to
integrate a foreign currency hedging transaction with the
investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a
manner that is consistent with the hedged investment. The
regulations issued under this authority generally should not
apply to the type of hedging transactions in which the Fund
intends to engage.
With respect to equity options or options traded over-
the-counter or on certain foreign exchanges, 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
59
<PAGE>
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 shall be determined by
subtracting the amount paid, if any, for or with respect to the
option (including any amount paid by the Fund upon termination of
an option written by the Fund) from the amount received, if any,
for or with respect to the option (including any amount received
by the Fund upon termination of an option held by the Fund). In
general, if the Fund exercises such an option on a foreign
currency, or such an option that the Fund has written is
exercised, gain or loss on the option will be recognized in the
same manner as if the Fund had sold the option (or paid another
person to assume the Fund's obligation to make delivery under the
option) on the date on which the option is exercised, for the
fair market value of the option. The foregoing rules will also
apply to other put and call options which have as their
underlying property foreign currency and which are traded over-
the-counter or on certain foreign exchanges to the extent gain or
loss with respect to such options is attributable to fluctuations
in foreign currency exchange rates.
Tax Straddles. Any option, futures contract, forward
foreign currency contract, or other position entered into or held
by the Fund in conjunction with any other position held by the
Fund may constitute a "straddle" for federal income tax purposes.
A straddle of which at least one, but not all, the positions are
section 1256 contracts may constitute a "mixed straddle". In
general, straddles are subject to certain rules that may affect
the character and timing of the Fund's gains and losses with
respect to straddle positions by requiring, among other things,
that (i) loss realized on disposition of one position of a
straddle not be recognized to the extent that the Fund has
unrealized gains with respect to the other position in such
straddle; (ii) the Fund's holding period in straddle positions be
suspended while the straddle exists (possibly resulting in gain
being treated as short- term capital gain rather than long-term
capital gain); (iii) losses recognized with respect to certain
straddle positions which are part of a mixed straddle and which
are non-section 1256 positions be treated as 60% long-term and
40% short-term capital loss; (iv) losses recognized with respect
to certain straddle positions which would otherwise constitute
short-term capital losses be treated as long-term capital losses;
and (v) the deduction of interest and carrying charges
60
<PAGE>
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.
_______________________________________________________________
PORTFOLIO TRANSACTIONS
_______________________________________________________________
Subject to the general supervision of the Board of
Directors of the Fund, the Adviser is responsible for the
investment decisions and the placing of orders for portfolio
transactions for the Fund. The Adviser determines the broker to
be used in each specific transaction with the objective of
negotiating a combination of the most favorable commission and
the best price obtainable on each transaction (generally defined
as best execution). When consistent with the objective of
obtaining best execution, brokerage may be directed to persons or
firms supplying investment information to the Adviser. There may
be occasions where the transaction cost charged by a broker may
be greater than that which another broker may charge if the Fund
determines in good faith that the amount of such transaction cost
is reasonable in relation to the value of the brokerage, research
and statistical services provided by the executing broker.
Neither the Fund nor the Adviser has entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research services
they provide. To the extent that such persons or firms supply
investment information to the Adviser for use in rendering
investment advice to the Fund, such information may be supplied
at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the
Fund. While it is impossible to place an actual dollar value on
such investment information, its receipt by the Adviser probably
does not reduce the overall expenses of the Adviser to any
material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e)(3) of the Exchange Act and is
designed to augment the Adviser's own internal research and
investment strategy capabilities. Research services furnished by
brokers through which the Fund effects securities transactions
61
<PAGE>
are used by the Adviser in carrying out its investment management
responsibilities with respect to all its client accounts.
The Fund may deal in some instances in securities which
are not listed on a national stock exchange but are traded in the
over-the-counter market. The Fund may also purchase listed
securities through the third market, i.e., from a dealer which is
not a member of the exchange on which a security is listed. Where
transactions are executed in the over-the-counter market or third
market, the Fund will seek to deal with the primary market
makers; but when necessary in order to obtain the best price and
execution, it will utilize the services of others. In all cases,
the Fund will attempt to negotiate best execution.
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 commission. 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. With respect to
orders placed with DLJ for execution on a national securities
exchange, commissions received must conform to Section
17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder, which
permit an affiliated person of a registered investment company
(such as the Fund), or any affiliated person of such person, to
receive a brokerage commission from such registered investment
company provided that such commission is reasonable and fair
compared to the commissions received by other brokers in
62
<PAGE>
connection with comparable transactions involving similar
securities during a comparable period of time.
During the fiscal years ended October 31, 1996, 1995 and
1994 the Fund incurred brokerage commissions amounting in the
aggregate to $33,301, $31,374 and $68,426, 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-, $70 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, -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
portfolio securities of the Fund aggregating $25,903,563 with
associated brokerage commissions of approximately $33,301 were
allocated to persons or firms supplying research services to the
Fund or the Adviser.
_______________________________________________________________
GENERAL INFORMATION
_______________________________________________________________
Capitalization
The Fund was originally organized under the name
Alliance Multi-Market Income and Growth Trust, Inc. as a Maryland
corporation on August 2, 1991 and, effective March 22, 1994,
changed its name to "Alliance Income Builder Fund, Inc." The
authorized capital stock of the Fund currently consists of
2,000,000,000 shares of Class A Common Stock, 2,000,000,000
shares of Class B Common Stock and 2,000,000,000 shares of
Class C Common Stock and 2,000,000,000 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
63
<PAGE>
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 Advisory Agreement and changes in investment policy, shares
of each portfolio would vote as a separate series. 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.
At October 3, 1997 there were 4,561,950 shares of common
stock of the Fund outstanding, including 184,341 Class A shares,
680,306 Class B shares, 3,691,016 Class C shares and 6,287
Advisor Class shares. To the knowledge of the Fund, the
following persons owned of record or beneficially 5% or more of
the outstanding shares of the Fund as of October 3, 1997:
No. of
Shares % of
Name and Address Of Class Class
Class A
Lillian Eakin
256 Sequoia Avenue
San Francisco, CA
94080-1345 9,640 5.23%
Merlyn W. Gingras
1050 West Elm Street
Chippewa Falls, WI
54729-1602 9,830 5.33%
Marie Platt C/F
Jens Christian Platt
12705 Broken Saddle
Knoxville, TN
37922-1329 11,292 6.13%
McCuistion Family Trust
U/W Jack H. McCuistion
4 Bent Tree Court
Lufkin, TX
75901-7702 17,614 9.56%
64
<PAGE>
Smith Barney Inc.
388 Greenwich Street
New York, NY 10013-2375 9,510 5.16%
Merrill Lynch
For the Sole Benefit of
Its Customers
Attn: Fund Administration
4800 Deer Lake Dr., East
3rd Floor
Jacksonville, Florida
32246-6486 11,380 6.17%
Class B
Merrill Lynch
For the Sole Benefit of
Its Customers
4800 Deer Lake Dr., East
3rd Floor
Jacksonville, Florida
32246-6486 105,979 15.58%
Class C
Merrill Lynch
For the Sole Benefit of
Its Customers
4800 Deer Lake Drive East
3rd Floor
Jacksonville, FL
32246-6484 1,965,700 53.26%
Advisor Class
Alliance Plans Div./F.T.C.
C/F Gonzalo N. Aran IRA
122 Tunison Road
New Brunswick, NJ 08901-1653 844 13.43%
Alliance Plans Div./F.T.C.
C/F Andrew Aran
102 Morley Drive
Wyckoff, NJ 07481-3335 410 6.53%
Valesca E. Brewer
109 Roxbury Road
Garden City, NY 11530-2623 4,945 78.65%
65
<PAGE>
Custodian
Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, acts 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 of common stock offered hereby are passed upon by Seward &
Kissel, New York, New York. Seward & Kissel has relied upon the
opinion of Venable, Baetjer and Howard, LLP, Baltimore, Maryland,
for matters relating to Maryland law.
Independent Auditors
Ernst & Young LLP, New York, New York, have 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 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
66
<PAGE>
and the maximum sales charge applicable to purchases of Fund
shares is assumed to have been paid.
The average annual total returns for Class A and Class B
shares for the one-year period ended April 30, 1997 were 11.99%
and 12.22%, respectively; and for the period March 25, 1994
(commencement of distribution) through April 30, 1997 were 10.87%
and 11.41%, respectively. The average annual total return for
Class C shares for the one-year period ended April 30, 1997, the
five-year period ended April 30, 1997 and for the period from
October 25, 1991 (commencement of operations) through April 30,
1997 were 15.17%, 8.59% and 8.39%, respectively. The average
annual total return for Advisor Class Shares for the period from
November 1, 1996 (commencement of distribution) through April 30,
1997 was 8.48%.
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 its
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 by independent
organizations such as Lipper Analytical Services, Inc.
("Lipper"), 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 or magazines such as The New York Times, The Wall
Street Journal, Barrons, Business Week, Changing Times, Forbes,
Investor's Daily, Money Magazine, or other media on behalf of the
Fund. The Fund has been ranked by Lipper in the category known
as "specialty and miscellaneous funds."
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or other financial adviser or to Alliance
Fund Services, Inc. at the address or telephone numbers shown on
the front cover of this Statement of Additional Information. This
Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the
Fund with the Commission under the Securities Act. Copies of the
Registration Statement may be obtained at a reasonable charge
67
<PAGE>
from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
68
<PAGE>
______________________________________________________________
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
______________________________________________________________
69
<PAGE>
ALLIANCE INCOME BUILDER FUND
SEMI-ANNUAL REPORT
APRIL 30, 1997
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON & PREFERRED STOCKS-45.0%
COMMON STOCKS-40.4%
CONSUMER PRODUCTS & SERVICES-10.2%
BROADCASTING & CABLE-0.6%
Comcast Corp. Cl. A. 10,120 $ 159,390
Vodafone Group Plc. (ADR) 4,000 177,000
------------
336,390
DRUGS, HOSPITALS, SUPPLIES &
MEDICAL SERVICES-4.5%
Health Care Property Investors, Inc. 14,000 463,750
Merck & Co., Inc. 9,000 814,500
Pfizer, Inc. 4,500 432,000
Schering-Plough Corp. 4,500 360,000
Smithkline Beecham Plc. (ADR) 4,000 322,500
------------
2,392,750
ENTERTAINMENT & LEISURE-1.7%
Carnival Corp. Cl. A. 8,000 295,000
Eastman Kodak Co. 4,000 334,000
Walt Disney Co. 3,500 287,000
------------
916,000
FOODS, BEVERAGES & TOBACCO-0.6%
McDonald's Corp. 5,500 294,937
HOUSEHOLD PRODUCTS-0.6%
Crown Cork & Seal, Inc. 5,500 301,125
MULTI-INDUSTRY-0.5%
Canadian Pacific, Ltd. 10,000 243,750
REALTY-0.2%
Storage USA, Inc. 3,000 112,875
RETAILING-1.2%
Dayton Hudson Corp. 5,000 225,000
Gap, Inc. 5,000 159,375
May Department Stores Co. 4,800 222,000
------------
606,375
OTHER-0.3%
Newell Co. 5,000 175,000
------------
5,379,202
CONSUMER STAPLES-7.2%
COSMETICS-1.6%
Avon Products, Inc. 4,000 246,500
Gillette Co. 7,000 595,000
------------
841,500
FOODS, BEVERAGES & TOBACCO-4.6%
American Brands, Inc. 8,000 430,000
Anheuser Busch, Inc. 7,000 300,125
Campbell Soup Co. 7,500 383,437
Heinz (H.J.) Co. 7,000 290,500
Philip Morris Cos., Inc. 18,300 720,562
Sara Lee Corp. 8,000 336,000
------------
2,460,624
HOUSEHOLD PRODUCTS-1.0%
Proctor & Gamble Co. 4,200 528,150
------------
3,830,274
FINANCIAL SERVICES-7.1%
BANKING & FINANCE-2.2%
BankAmerica Corp. 3,000 350,625
Chase Manhattan Corp. 3,500 324,188
Dean Witter Discover & Co. 9,000 344,250
First Union Corp. 2,000 168,000
------------
1,187,063
4
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
Company Shares U.S. $ Value
- -------------------------------------------------------------------------
BROKERAGE & MONEY MANAGEMENT-1.0%
Legg Mason, Inc. 5,192 $ 246,620
Merrill Lynch & Co., Inc. 3,000 285,750
------------
532,370
INSURANCE-2.3%
American International Group, Inc. 2,500 321,250
Progressive Corp. 4,000 304,500
Travelers Group, Inc. 10,166 562,942
------------
1,188,692
REALTY-1.0%
Bay Apartment Communities 5,000 167,500
JP Realty, Inc. 8,000 203,000
Weingarten Realty Investors, Inc. 4,000 170,500
------------
541,000
OTHER-0.6%
American Express Co. 4,500 296,438
------------
3,745,563
CAPITAL GOODS-6.8%
ELECTRICAL EQUIPMENT-2.9%
Emerson Electric Co. 8,000 406,000
General Electric Co. 9,000 997,875
Houston Industries, Inc. 5,000 100,000
------------
1,503,875
MACHINERY-0.8%
Allied Signal, Inc. 6,000 433,500
TECHNOLOGY-3.1%
Boeing Co. 3,000 295,875
Hewlett Packard Co. 4,000 210,000
Intel Corp. 5,700 872,813
Texas Instruments, Inc. 3,000 267,750
------------
1,646,438
------------
3,583,813
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
ENERGY-4.4%
OIL & GAS-4.4%
Chevron Corp. 10,000 $ 685,000
Exxon Corp. 8,000 453,000
Royal Dutch Petroleum Co. 3,000 540,750
Shell Transport & Trading Co. (ADR) 6,000 638,250
------------
2,317,000
BASIC INDUSTRIES-1.8%
CHEMICAL-1.8%
Du Pont (Ei) De Nemours 3,000 318,375
Monsanto Co. 9,000 384,750
Morton International, Inc. 6,000 251,250
------------
954,375
UTILITIES-1.8%
TELECOMMUNICATION-1.8%
Frontier Corp. 7,000 111,125
GTE Corp. 10,715 491,551
Southern New England
Telecommunications, Inc. Cl. A. 6,000 219,000
U.S. West Communications Group 3,000 105,375
------------
927,051
TRANSPORTATION-0.8%
Union Pacific Corp. 7,000 446,250
INDUSTRIAL-0.3%
WMX Technologies, Inc. 6,000 176,250
Total Common Stocks
(cost $14,593,686) 21,359,778
PREFERRED STOCKS-4.6%
CONSUMER PRODUCTS & SERVICES-1.8%
Cablevision pfd., 11.13% 285 26,398
Granite Broadcast pfd., 4.47% 1,021 935,491
------------
961,889
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
INSURANCE-2.6%
Penncorp Financial Group cv. pfd., 3.50% 4,000 $ 320,000
SI Financing Trust I pfd., 9.5% 40,000 1,040,000
------------
1,360,000
REALTY-0.2%
Excel Realty Trust pfd., 2.13% 5,200 132,600
Total Preferred Stocks
(cost $2,456,463) 2,454,489
Total Common & Preferred Stocks
(cost $17,050,149) 23,814,267
CORPORATE DEBT OBLIGATIONS-45.1%
BANKING & FINANCE-11.6%
Amersco, Inc.
10.00%, 3/15/04 1,000 990,000
Amerus Capital I Ser. A.
8.85%, 2/01/27 1,000 989,400
Arkwright CSN Trust
9.625%, 8/15/26 (a) 1,000 1,085,961
FBOP Capital Trust
10.20%, 2/06/27 (a) 1,000 987,722
First USA Capital Trust
9.33%, 1/15/27 (a) 1,000 1,097,500
Renaissance Capital Trust
8.54%, 3/01/27 (a) 1,000 971,120
------------
6,121,703
CONSUMER PRODUCTS & SERVICES-5.7%
Globalstar LP
11.38%, 2/15/04 (a) $ 1,000 990,000
Optel, Inc.
13.00%, 2/15/05 (a) 1,000 955,000
Time Warner, Inc.
9.15%, 2/01/23 1,000 1,074,199
------------
3,019,199
INDUSTRIAL-10.9%
Anchor Glass Corp.
11.25%, 4/01/05 (a) 1,000 1,025,000
Arvin Capital
9.50%, 2/01/27 1,000 973,500
Caliber Systems, Inc.
7.80%, 8/01/06 1,000 1,016,862
Dyncorp, Inc.
9.50%, 3/01/07 (a) 1,000 977,500
Magna International, Inc.
5.00%, 10/15/02 200 218,500
Termoemcali Funding Corp.
10.13%, 12/15/14 (a) 1,000 1,041,250
USX Corp.
8.50%, 3/01/23 500 520,971
------------
5,773,583
Total Corporate Debt Obligations
(cost $14,837,105) 14,914,485
YANKEE BONDS-16.9%
Acindar Industries
11.25%, 2/15/04 1,000 1,017,500
Mc-Cuernavaca Trust
9.25%, 7/25/01 (a) 1,518 1,320,296
OPP Petroquica
11.00%, 10/29/04 1,000 998,750
Pepsi-Gemex, S.A.
9.75%, 3/30/04 (a) 1,000 1,000,000
Ras Laffan Liquid Natural Gas
8.29%, 3/15/14 (a) 1,000 1,016,584
Reliance Industries, Ltd.
10.38%, 6/24/16 (a) 1,500 1,605,360
RBS Participacoes, S.A.
11.00%, 4/01/07 (a) 1,000 1,010,000
RSL Communications, Ltd.
12.25%, 11/15/06 (a) 1,000 1,007,500
Total Yankee Bonds
(cost $9,060,586) 8,975,990
6
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
GOVERNMENT
OBLIGATIONS-3.9%
Republic of Argentina
11.38%, 1/30/17 $ 1,000 $ 1,062,250
Republic of Panama
7.88%, 2/13/02 (a) 1,000 977,125
Total Government Obligations
(cost $2,000,237) 2,039,375
CONVERTIBLE BONDS-2.8%
Hasbro, Inc.
6.00%, 11/15/98 250 320,313
IRT Property Co.
7.30%, 8/15/03 200 201,750
Liberty Property
8.00%, 7/01/01 200 242,250
Nextel Communications
Zero coupon, 8/15/04 1,000 730,000
Total Convertible Bonds
(cost $1,435,644) 1,494,313
TIME DEPOSIT-2.1%
Bank Of Tokyo
5.69%, 5/01/97
(cost $1,100,000) 1,100 1,100,000
TOTAL INVESTMENTS-98.9%
(cost $45,483,721) 52,338,430
Other assets less liabilities-1.1% 582,273
NET ASSETS-100% $52,920,703
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30, 1997,
these securities amounted to $17,067,918 or 32.3% of net assets.
Glossary:
ADR - American depository receipt
See notes to financial statements
7
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997 (UNAUDITED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $45,483,721) $ 52,338,430
Cash 162,931
Receivable for investment securities sold 1,204,922
Interest and dividends receivable 590,740
Receivable for capital stock sold 32,209
Other assets 2,311
Total assets 54,331,543
LIABILITIES
Payable for investment securities purchased 1,100,000
Payable for capital stock redeemed 48,192
Distribution fee payable 41,411
Advisory fee payable 31,910
Accrued expenses 189,327
Total liabilities 1,410,840
NET ASSETS $ 52,920,703
COMPOSITION OF NET ASSETS
Capital stock, at par $ 4,566
Additional paid-in capital 44,089,064
Undistributed net investment income 313,419
Accumulated net realized gain on investments 1,658,944
Net unrealized appreciation of investments 6,854,710
$ 52,920,703
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($1,942,608 /
166,909 shares of capital stock issued and outstanding) $11.64
Sales charge--4.25% of public offering price .52
Maximum offering price $12.16
CLASS B SHARES
Net asset value and offering price per share ($7,328,461 /
630,694 shares of capital stock issued and outstanding) $11.62
CLASS C SHARES
Net asset value and offering price per share ($43,576,832 /
3,762,147 shares of capital stock issued and outstanding) $11.58
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($72,802 / 6,256 shares of capital stock
issued and outstanding) $11.64
See notes to financial statements.
8
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1997 (UNAUDITED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $1,326,687
Dividends (net of foreign taxes withheld of $2,637) 398,588 $1,725,275
EXPENSES
Advisory fee 198,139
Distribution fee - Class A 2,833
Distribution fee - Class B 33,541
Distribution fee - Class C 220,869
Custodian 84,511
Administrative 69,787
Registration 57,477
Audit and legal 48,065
Transfer agency 39,869
Directors' fees 13,500
Printing 12,963
Miscellaneous 3,307
Total expenses 784,861
Net investment income 940,414
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 1,702,999
Net change in unrealized appreciation of investments 1,426,251
Net gain on investments 3,129,250
NET INCREASE IN NET ASSETS FROM OPERATIONS $4,069,664
See notes to financial statements.
9
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1997 OCT. 31,
(UNAUDITED) 1996
-------------- ------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 940,414 $ 2,199,994
Net realized gain on investments 1,702,999 3,052,921
Net change in unrealized appreciation
of investments 1,426,251 1,674,306
Net increase in net assets from operations 4,069,664 6,927,221
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (41,376) (76,978)
Class B (125,355) (201,924)
Class C (837,227) (2,021,377)
Advisor Class (1,676) -0-
Net realized gain on investments
Class A (100,177) (14,802)
Class B (327,329) (42,369)
Class C (2,292,629) (508,039)
Advisor Class (3,688) -0-
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 308,062 (6,063,958)
Total increase (decrease) 648,269 (2,002,226)
NET ASSETS
Beginning of year 52,272,434 54,274,660
End of period (including undistributed
net investment income of $313,419 and
$378,639 respectively) $52,920,703 $52,272,434
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 (UNAUDITED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Income Builder Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, open-end management
investment company. The Fund offers Class A, Class B, Class C and Advisor Class
shares. Class A shares are sold with a front-end sales charge of up to 4.25%
for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000
or more, Class A shares redeemed within one year of purchase will be subject to
a contingent deferred sales charge of 1%. Class B shares are currently sold
with a contingent deferred sales charge which declines from 4.00% to zero
depending on the period of time the shares are held. Class B shares will
automatically convert to Class A shares eight years after the end of the
calendar month of purchase. Class C shares purchased on or after July 1, 1996
are subject to a contingent deferred sales charge of 1.00% on redemptions made
within the first year after purchase. Advisor Class shares are sold without an
initial or contingent deferred sales charge and are not subject to an ongoing
distribution expense. Advisor Class shares are offered solely to investors
participating in certain fee based programs and retirement plans. All four
classes of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. The Fund commenced its public offering of Advisor Class
shares on October 2, 1996. The following is a summary of significant accounting
policies followed by the Fund.
1. SECURITY VALUATION
Investments are stated at value. Portfolio securities traded on a national
securities exchange are valued at the last sale price, or if no sale occurred,
the mean of the bid and asked price at the regular close of the New York Stock
Exchange. Investments for which market quotations are readily available are
valued at the closing price on day of valuation, which are obtained through
market makers. 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. 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.
2. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Dividend income is recorded on the
ex-dividend date. 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.
4. 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
capital, at the end of the year to reflect the final investment results for
that year.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P., (the "Adviser") an advisory fee at an annual rate of
.75 of 1% of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
Pursuant to the advisory agreement, the Fund may reimburse the Adviser for
certain legal and accounting services provided to the Fund by the Adviser.
For the six months ended April 30, 1997, the Fund reimbursed the Advisor for
$69,787 of such expenses.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $19,659 for the six months ended April 30, 1997.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $376 from the sale of Class A shares and $6,123 and
$195 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B and Class C shares, respectively, for the six months
ended April 30, 1997. Brokerage commissions paid on securities transactions for
the six months ended April 30, 1997 amounted to $11,582, none of which was paid
to affiliated brokers.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the average daily net assets attributable to Class A
shares and 1% of the average daily net assets attributable to the Class B and
Class C shares. (There is no distribution fee on the Advisor Class shares.)
Such fee is accrued daily and paid monthly. The Agreement provides that the
Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amount of
$981,960 and $1,840,917 for Class B and Class C shares respectively. Such costs
may be recovered from the Fund in future periods so long as the Agreement is in
effect. In accordance with the Agreement, there is no provision for recovery of
unreimbursed distribution costs incurred by the Distributor beyond the current
fiscal year for Class A shares. The Agreement also provides that the Adviser
may use its own resources to finance the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term and U.S.
government obligations) aggregated $42,131,643 and $43,193,241 respectively,
for the six months ended April 30, 1997. There were purchases of $998,125 and
sales of $999,453 of U.S. government and government agency obligations for the
six months ended April 30, 1997.
At April 30, 1997, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation of investments was $7,468,381, and gross unrealized
depreciation of investments was $613,672 resulting in net unrealized
appreciation of $6,854,709.
12
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 8,000,000,000 shares of $0.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class. Each class consists of 2,000,000,000 authorized shares. Transactions in
capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30,1997 OCT. 31, APRIL 30,1997 OCT. 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 24,064 71,054 $ 275,858 $ 780,984
Shares issued in
reinvestment of
dividends and
distributions 9,403 6,505 106,324 70,930
Shares converted
from Class B 1,230 3,979 14,910 44,062
Shares redeemed (45,520) (34,458) (521,499) (385,149)
Net increase(decrease) (10,823) 47,080 $ (124,407) $ 510,827
CLASS B
Shares sold 153,605 186,705 $ 1,780,594 $ 2,057,991
Shares issued in
reinvestment of
dividends and
distributions 28,612 14,453 323,530 157,642
Shares converted
to Class A (1,230) (3,979) (14,910) (44,062)
Shares redeemed (50,169) (49,596) (579,859) (546,791)
Net increase 130,818 147,583 $ 1,509,355 $ 1,624,780
CLASS C
Shares sold 145,091 151,540 $ 1,645,761 $ 1,653,774
Shares issued in
reinvestment of
dividends and
distributions 112,775 90,197 1,270,426 980,210
Shares redeemed (352,810) (985,774) (4,066,701) (10,833,549)
Net decrease (94,944) (744,037) $(1,150,514) $ (8,199,565)
NOVEMBER 1,1996* NOVEMBER 1,1996*
TO TO
APRIL 30,1997 APRIL 30, 1997
(UNAUDITED) (UNAUDITED)
------------- --------------
ADVISOR CLASS
Shares sold 6,165 $ 72,601
Shares issued in
reinvestment of
dividends and
distributions 91 1,027
Net increase 6,256 $ 73,628
* Commencement of distribution.
13
FINANCIAL HIGHLIGHTS ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
SIX MONTHS MARCH 25,
ENDED 1994(A)
APRIL 30, YEAR ENDED OCTOBER 31, TO
1997 ------------------------ OCTOBER 31,
(UNAUDITED) 1996 1995 1994
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.57 $10.70 $9.69 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .24(b) .56(b) .93(b) .96
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .69 .98 .59 (1.02)
Net increase (decrease) in net asset
value from operations .93 1.54 1.52 (.06)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.25) (.55) (.51) (.04)
Tax return of capital -0- -0- -0- (.01)
Distributions from net realized gains (.61) (.12) -0- (.20)
Total dividends and distributions (.86) (.67) (.51) (.25)
Net asset value, end of period $11.64 $11.57 $10.70 $ 9.69
TOTAL RETURN
Total investment return based on net
asset value(c) 8.31% 14.82% 16.22% (.54)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,943 $2,056 $1,398 $600
Ratio of expenses to average net assets 2.30%(d) 2.20% 2.38% 2.52%(d)
Ratio of net investment income to
average net assets 4.22%(d) 4.92% 5.44% 6.11%(d)
Portfolio turnover rate 169% 108% 92% 126%
Average commission rate paid (e) $.0519 $.0600 -- --
</TABLE>
See footnote summary on page 17.
14
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------
SIX MONTHS MARCH 25,
ENDED 1994(A)
APRIL 30, YEAR ENDED OCTOBER 31, TO
1997 ------------------------ OCTOBER 31,
(UNAUDITED) 1996 1995 1994
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.55 $10.70 $ 9.68 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .20(b) .47(b) .63(b) .88
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .70 .98 .83 (.98)
Net increase (decrease) in net asset
value from operations .90 1.45 1.46 (.10)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.22) (.48) (.44) (.05)
Tax return of capital -0- -0- -0- (.01)
Distributions from net realized gains (.61) (.12) -0- (.16)
Total dividends and distributions (.83) (.60) (.44) (.22)
Net asset value, end of period $11.62 $11.55 $10.70 $ 9.68
TOTAL RETURN
Total investment return based on net
asset value(c) 8.01% 13.92% 15.55% (.99)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $7,328 $5,775 $3,769 $1,998
Ratio of expenses to average net assets 3.01%(d) 2.92% 3.09% 3.09%(d)
Ratio of net investment income to
average net assets 3.53%(d) 4.19% 4.73% 5.07%(d)
Portfolio turnover rate 169% 108% 92% 126%
Average commission rate paid (e) $.0519 $.0600 -- --
</TABLE>
See footnote summary on page 17.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------------------
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 period $11.52 $10.67 $9.66 $10.47 $ 9.80 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .21(b) .46(b) .40(b) .50 .52 .55
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .68 .99 1.05 (.85) .51 (.28)
Net increase (decrease) in net asset
value from operations .89 1.45 1.45 (.35) 1.03 .27
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.22) (.48) (.44) (.09) (.36) (.47)
Tax return of capital -0- -0- -0- (.02) -0- -0-
Distributions from net realized gains (.61) (.12) -0- (.35) -0- -0-
Total dividends and distributions (.83) (.60) (.44) (.46) (.36) (.47)
Net asset value, end of period $11.58 $11.52 $10.67 $ 9.66 $10.47 $ 9.80
TOTAL RETURN
Total investment return based on net
asset value(c) 7.94% 13.96% 15.47% (3.44)% 10.65% 2.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $43,577 $44,441 $49,107 $64,027 $106,034 $152,617
Ratio of expenses to average net assets 3.00%(d) 2.93% 3.02% 2.67% 2.32% 2.33%
Ratio of net investment income to
average net assets 3.53%(d) 4.13% 4.81% 3.82% 6.85% 5.47%
Portfolio turnover rate 169% 108% 92% 126% 101% 108%
Average commission rate paid (e) $.0519 $.0600 -- -- -- --
</TABLE>
See footnote summary on page 17.
16
ALLIANCE INCOME BUILDER FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
------------------
NOVEMBER 1,1996(A)
TO
APRIL 30, 1997
(UNAUDITED)
------------------
Net asset value, beginning of period $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .25(b)
Net realized and unrealized gain on investments
and foreign currency transactions 2.27
Net increase in net asset value from operations 2.52
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.27)
Distributions from net realized gains (.61)
Total dividends and distributions (.88)
Net asset value, end of period $11.64
TOTAL RETURN
Total investment return based on net asset value(c) 8.48%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $73
Ratio of expenses to average net assets 2.07%(d)
Ratio of net investment income to average net assets 4.56%(d)
Portfolio turnover rate 169%
Average commission rate paid $.0519
(a) Commencement of distribution.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(d) Annualized.
(e) 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 US dollars using the prevailing exchange
rate on the date of the transaction.
17
<PAGE>
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996 ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON & PREFERRED STOCKS-46.6%
COMMON STOCKS-36.0%
FINANCIAL SERVICES-8.9%
BANKING & FINANCE-1.7%
BankAmerica Corp. 3,000 $ 274,500
Chase Manhattan Corp. 3,200 274,400
Dean Witter Discover & Co. 2,000 117,750
First Union Corp. 3,000 218,250
------------
884,900
BROKERAGE & MONEY MANAGEMENT-1.0%
Legg Mason, Inc. 9,192 296,442
Merrill Lynch & Co., Inc. 3,000 210,750
------------
507,192
INSURANCE-2.7%
American International Group, Inc. 5,000 543,125
Progressive Corp. 4,000 275,000
Travelers Group, Inc. 10,500 569,625
------------
1,387,750
MORTGAGE BANKING-0.7%
Federal National Mortgage Assn. 9,000 352,125
REALTY-2.1%
Bay Apartment Communities 5,000 150,000
Duke Realty Investments 10,000 345,000
JP Realty, Inc. 7,000 159,250
Patriot American Hospitality 2,000 70,250
Security Capital Industry Trust 5,000 90,625
Spieker Properties, Inc. 2,500 76,875
Weingarten Realty Investors, Inc. 6,000 230,250
------------
1,122,250
OTHER-0.7%
American Express Co. 8,000 376,000
------------
4,630,217
CONSUMER STAPLES-6.7%
COSMETICS-1.5%
Avon Products, Inc. 4,000 217,000
Gillette Co. 8,000 598,000
------------
815,000
FOODS, BEVERAGES & TOBACCO-4.3%
American Brands, Inc. 8,000 382,000
Anheuser Busch, Inc. 6,000 231,000
Campbell Soup Co. 4,000 320,000
Heinz (H.J.) Co. 7,000 248,500
Philip Morris Cos., Inc. 8,000 741,000
Sara Lee Corp. 10,000 355,000
------------
2,277,500
HOUSEHOLD PRODUCTS-0.9%
Procter & Gamble Co. 4,500 445,500
------------
3,538,000
CAPITAL GOODS-6.3%
ELECTRICAL EQUIPMENT-2.4%
Emerson Electric Co. 5,000 445,000
General Electric Co. 8,500 822,375
------------
1,267,375
ELECTRICAL UTILITY-0.8%
Cinergy Corp. 9,000 298,125
Houston Industries, Inc. 5,000 114,375
------------
412,500
MACHINERY-0.8%
Allied Signal, Inc. 6,000 393,000
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
TECHNOLOGY-2.3%
Electronic Data Systems Corp. 6,446 $ 290,070
Intel Corp. 7,000 769,125
Texas Instruments, Inc. 3,000 144,375
------------
1,203,570
------------
3,276,445
CONSUMER PRODUCTS & SERVICES-6.3%
BROADCASTING & CABLE-0.7%
Comcast Corp. Cl. A. 10,120 149,270
Vodafone Group Plc. (ADR) 6,000 231,750
------------
381,020
DRUGS, HOSPITALS, SUPPLIES & MEDICAL
SERVICES-3.8%
Health Care Property Investors, Inc. 14,000 491,750
Merck & Co., Inc. 10,000 741,250
Pfizer, Inc. 3,500 289,625
Schering-Plough Corp. 4,500 288,000
Smithkline Beecham Plc. (ADR) 3,000 187,875
------------
1,998,500
ENTERTAINMENT & LEISURE-0.5%
Eastman Kodak Co. 3,000 239,250
MULTI-INDUSTRY-0.6%
Canadian Pacific, Ltd. 12,000 303,000
RETAILING-0.4%
May Department Stores Co. 4,800 227,400
OTHER-0.4%
Newell Co. 8,000 227,000
------------
3,376,170
BASIC INDUSTRIES-2.0%
CHEMICAL-2.0%
Du Pont (Ei) De Nemours 4,000 371,000
Monsanto Co. 10,500 416,063
Morton International, Inc. 7,000 275,625
------------
1,062,688
ENERGY-2.1%
OIL & GAS-2.1%
Chevron Corp. 6,000 394,500
Exxon Corp. 6,000 531,750
Shell Transport & Trading Co. (ADR) 2,000 196,000
------------
1,122,250
UTILITIES-1.5%
TELECOMMUNICATION-1.5%
GTE Corp. 10,715 451,369
Southern New England Telecommunications,
Inc. Cl. A. 6,000 223,500
U.S. West Communications Group 3,000 91,125
------------
765,994
TRANSPORTATION-0.6%
Union Pacific Corp. 5,500 308,688
INDUSTRIAL-0.4%
WMX Technologies, Inc. 6,700 230,312
Total Common Stocks (cost $12,366,216) 18,310,764
PREFERRED STOCKS-11.6%
BANKING & FINANCE-9.5%
Central Hispano Financial Services B,
pfd., 9.43% 52,000 1,397,500
Credit Lyonnais Capital SCA, pfd.,
9.50% (ADR) (a) 40,000 970,000
Penncorp Financial Group
cv. pfd., 3.50% 6,000 486,000
SI Financing Trust I
pfd., 9.50% 80,000 2,070,000
------------
4,923,500
6
ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
INDUSTRIAL-2.1%
Time Warner Inc. Series K.
pfd., 10.25% (a) 1,048 $ 1,114,810
Total Preferred Stocks (cost $5,718,117) 6,038,310
Total Common & Preferred Stocks
(cost $18,599,969) 24,349,074
CORPORATE DEBT OBLIGATIONS-45.8%
BANKING & FINANCE-15.6%
Arkwright CSN TR 9.625%, 8/15/26 (a) $ 1,000 1,087,410
Contifinancial 8.375%, 8/15/03 1,000 1,020,190
Firstbank Puerto Rico 7.625%, 12/15/05 1,500 1,500,000
Homeside, Inc. 11.25%, 5/15/03 (a) 500 546,875
John Hancock 7.375%, 2/15/24 (a) 1,000 969,960
Saul (B.F.) Real Estate Investment Trust
Series B 11.625%, 4/01/02 2,000 2,150,000
Structured Asset Securities 7.75%, 02/25/28(a) 1,000 891,250
------------
8,165,685
CONSUMER PRODUCTS & SERVICES-11.7%
Home Holdings, Inc. 8.625%, 12/15/03 2,000 690,000
K-Mart Corp. 8.25%, 1/01/22 2,500 2,012,500
M.D.C. Holdings, Inc. 6.64%, 4/01/98 2,540 2,349,500
New York Life Insurance 7.50%, 12/15/23 (a) 1,130 1,085,331
------------
6,137,331
INDUSTRIAL-13.7%
Eli Lilly & Co. 7.125%, 6/01/25 1,000 993,783
Financiera Energy 9.375%, 6/15/06 1,000 1,018,940
Freeport-McMoran Res. 7.00%, 2/15/08 500 485,223
Millicom International Cellular
13.50%, 06/01/06 (a) 1,000 570,000
Reliance Industries, Ltd. 10.38%, 06/24/16 (a) 1,500 1,602,900
Tele-Communications, Inc. 9.25%, 1/15/23 1,000 945,504
USX Corp. 8.50%, 3/01/23 500 529,289
Viacom, Inc. 7.75%, 6/01/05 1,000 974,045
------------
7,119,684
YANKEE BONDS-3.8%
Mc-Cuernavaca Trust 9.25%, 7/25/01 (a) 1,626 1,455,084
United Mexican States 11.50%, 05/15/26 500 497,250
------------
1,952,334
TECHNOLOGY-1.0%
Sprint Spectrum Lp. 11.00%, 8/15/06 500 510,000
Total Corporate Debt Obligations
(cost $24,260,217) 23,885,034
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
CONVERTIBLE BONDS-1.6%
Hasbro, Inc. 6.00%, 11/15/98 $ 250 $ 332,812
Liberty Property 8.00%, 07/01/01 200 216,000
Magna International, Inc. 5.00%, 10/15/02 300 330,000
Total Convertible Bonds (cost $824,275) 878,812
COMMERCIAL PAPER-5.0%
American Express Co. 5.30%, 11/01/96 1,744 1,744,000
Ford Motor Credit Co. 5.37%, 11/04/96 914 913,591
Total Commercial Paper
(amortized cost $2,657,591) 2,657,591
TOTAL INVESTMENTS-99.0%
(cost $46,342,052) 51,770,511
Other assets less liabilities-1.0% 501,923
NET ASSETS-100% $52,272,434
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31, 1996,
these securities amounted to $10,293,620 or 19.69% of net assets.
Glossary of terms:
ADR - American Depository Receipt
See notes to financial statements
8
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996 ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $46,342,052) $51,770,511
Cash 297,456
Interest and dividends receivable 609,957
Receivable for investment securities sold 218,243
Receivable for capital stock sold 59,733
Deferred organization expenses 657
Total assets 52,956,557
LIABILITIES
Payable for investment securities purchased 298,200
Payable for capital stock redeemed 145,457
Distribution fee payable 42,790
Advisory fee payable 33,005
Accrued expenses 164,671
Total liabilities 684,123
NET ASSETS $52,272,434
COMPOSITION OF NET ASSETS
Capital stock, at par $ 4,535
Additional paid-in capital 43,781,033
Undistributed net investment income 378,639
Accumulated net realized gain on investments 2,679,768
Net unrealized appreciation of investments 5,428,459
$52,272,434
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($2,055,819/
177,732 shares of capital stock issued and outstanding) $11.57
Sales charge--4.25% of public offering price .51
Maximum offering price $12.08
CLASS B SHARES
Net asset value and offering price per share ($5,775,117/
499,876 shares of capital stock issued and outstanding) $11.55
CLASS C SHARES
Net asset value and offering price per share ($44,441,498/
3,857,091 shares of capital stock issued and outstanding) $11.52
See notes to financial statements.
9
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1996 ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Interest (net of foreign taxes withheld of $7,049) $2,801,601
Dividends 931,628 $3,733,229
EXPENSES
Advisory fee 396,063
Distribution fee - Class A 4,820
Distribution fee - Class B 47,291
Distribution fee - Class C 464,732
Custodian 160,901
Administrative 142,656
Audit and legal 99,914
Transfer agency 75,821
Registration 40,925
Printing 38,878
Amortization of organization expenses 32,850
Directors' fees 23,392
Miscellaneous 4,992
Total expenses 1,533,235
Net investment income 2,199,994
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 3,052,921
Net change in unrealized appreciation of investments 1,674,306
Net gain on investments 4,727,227
NET INCREASE IN NET ASSETS FROM OPERATIONS $6,927,221
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,199,994 $ 2,787,918
Net realized gain on investments 3,052,921 496,977
Net change in unrealized appreciation of
investments 1,674,306 4,570,602
Net increase in net assets from operations 6,927,221 7,855,497
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (76,978) (58,469)
Class B (201,924) (129,550)
Class C (2,021,377) (2,380,051)
Net realized gain on investments
Class A (14,802) -0-
Class B (42,369) -0-
Class C (508,039) -0-
CAPITAL STOCK TRANSACTIONS
Net decrease (6,063,958) (17,637,805)
Total decrease (2,002,226) (12,350,378)
NET ASSETS
Beginning of year 54,274,660 66,625,038
End of year (including undistributed net
investment income of $378,639 and $498,395,
respectively) $52,272,434 $54,274,660
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996 ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Income Builder Fund (the "Fund"), is registered under the Investment
Company Act of 1940, as a non-diversified, open-end management investment
company. The Fund offers Class A, Class B, Class C and Advisor Class shares.
Distribution of Advisor Class shares commenced on October 2, 1996. Class A
shares are sold with a front-end sales charge of 4.25%. Class B shares are sold
with a contingent deferred sales charge which declines from 4.00% to zero
depending on the period of time the shares are held. Class B shares will
automatically convert to Class A shares eight years after the end of the
calendar month of purchase. Class C shares purchased on or after July 1, 1996
are subject to a contingent deferred sales charge of 1.00% on redemptions made
within the first year after purchase. Advisor Class shares are sold without an
initial or contingent deferred sales charge. All four classes of shares have
identical voting, dividend, liquidation and other rights and the same terms and
conditions, except that each class bears different distribution expenses and
has exclusive voting rights with respect to its distribution plan. Distribution
of Advisor Class shares commenced on October 1, 1996. The following is a
summary of significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Investments are stated at value. Portfolio securities traded on a national
securities exchange are valued at the last sale price, or if no sale occurred,
the mean of the bid and asked price at the regular close of the New York Stock
Exchange. Investments for which market quotations are readily available are
valued at the closing price on day of valuation, which are obtained through
market makers. 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. 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.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $165,000 have been deferred and were
amortized on a straight-line basis through October, 1996.
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Dividend income is recorded on the
ex-dividend date. 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 NET ASSETS
As of October 31, 1996, the Fund reclassified certain components of net assets.
The reclassifications resulted in a net increase to additional paid in capital
of 45,845, and a net decrease to undistributed net investment income and
accumulated capital gains of $19,471 and $26,374, respectively. These
reclassifications were the result of permanent book to tax differences. Net
assets were not affected by the reclassifications.
12
ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P., (the "Adviser"), an advisory fee at an annual rate of
.75 of 1% of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly.
Pursuant to the advisory agreement, the Fund paid $142,656 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the year ended October 31, 1996.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $75,821 for the year ended October 31, 1996.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $1,756 from the sale of Class A shares and $4,000 in
contingent deferred sales charges imposed upon redemptions by shareholders of
Class B shares for the year ended October 31, 1996.
Brokerage commissions paid on securities transactions for the year ended
October 31, 1996 amounted to $33,301, none of which was paid to affiliated
brokers.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the average daily net assets attributable to Class A
shares and 1% of the average daily net assets attributable to the Class B and
Class C shares. There is no distribution fee on the Advisor Class shares. Such
a fee is accrued daily and paid monthly. The Agreement provides that the
Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amount of
$748,972 and $1,789,259 for Class B and Class C shares respectively. Such costs
may be recovered from the Fund in future periods so long as the Agreement is in
effect. In accordance with the Agreement, there is no provision for recovery of
unreimbursed distribution costs incurred by the Distributor beyond the current
fiscal year for Class A shares. The Agreement also provides that the Adviser
may use its own resources to finance the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term and U.S.
Government obligations) aggregated $46,913,003 and $53,264,672 respectively,
for the year ended October 31, 1996. There were purchases of $7,421,986 and
sales of $9,432,305 of U.S. Government and government agency obligations for
the year ended October 31, 1996.
At October 31, 1996, the cost of investments for federal income tax purposes
was $46,347,252. Accordingly, gross unrealized appreciation of investments was
$6,639,044, and gross unrealized depreciation of investments was $1,215,785
resulting in net unrealized appreciation of $5,423,259.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 8,000,000,000 shares of $0.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class. Each class consists of 2,000,000,000 authorized shares. There were no
transactions for the Advisor Class shares. Transactions in capital stock were
as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 1995 1996 1995
------------ ------------ -------------- --------------
Shares sold 71,054 76,113 $ 780,984 $ 727,101
Shares issued in
reinvestment of
dividends and
distributions 6,505 4,962 70,930 49,223
Shares converted
from Class B 3,979 -0- 44,062 -0-
Shares redeemed (34,458) (12,379) (385,149) (124,785)
Net increase 47,080 68,696 $ 510,827 $ 651,539
CLASS B
Shares sold 186,705 196,028 $ 2,057,991 $ 1,941,263
Shares issued in
reinvestment of
dividends and
distributions 14,453 9,101 157,642 90,325
Shares converted
to Class A (3,979) -0- (44,062) -0-
Shares redeemed (49,596) (59,179) (546,791) (592,437)
Net increase 147,583 145,950 $ 1,624,780 $ 1,439,151
CLASS C
Shares sold 151,540 184,418 $ 1,653,774 $ 1,804,787
Shares issued in
reinvestment of
dividends and
distributions 90,197 121,055 980,210 1,170,782
Shares redeemed (985,774) (2,329,518) (10,833,549) (22,704,064)
Net decrease (744,037) (2,024,045) $ (8,199,565) $(19,728,495)
14
FINANCIAL HIGHLIGHTS ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
-----------------------------------
MARCH 25,
1994(a)
YEAR ENDED OCTOBER 31, TO
----------------------- OCTOBER 31,
1996 1995 1994
----------- ---------- -----------
Net asset value, beginning of period $10.70 $9.69 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .56(b) .93(b) .96
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .98 .59 (1.02)
Net increase (decrease) in net asset
value from operations 1.54 1.52 (.06)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.55) (.51) (.04)
Tax return of capital -0- -0- (.01)
Distributions from net realized gains (.12) -0- (.20)
Total dividends and distributions (.67) (.51) (.25)
Net asset value, end of period $11.57 $10.70 $9.69
TOTAL RETURN
Total investment return based on net
asset value(c) 14.82% 16.22% (.54)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $2,056 $1,398 $600
Ratio of expenses to average net assets 2.20% 2.38% 2.52%(d)
Ratio of net investment income to
average net assets 4.92% 5.44% 6.11%(d)
Portfolio turnover rate 108% 92% 126%
Average commission rate paid (e) $.0600 -- --
See footnote summary on page 17.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
-----------------------------------
MARCH 25,
1994(a)
YEAR ENDED OCTOBER 31, TO
----------------------- OCTOBER 31,
1996 1995 1994
----------- ---------- -----------
Net asset value, beginning of period $10.70 $ 9.68 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .47(b) .63(b) .88
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .98 .83 (.98)
Net increase (decrease) in net asset
value from operations 1.45 1.46 (.10)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.48) (.44) (.05)
Tax return of capital -0- -0- (.01)
Distributions from net realized gains (.12) -0- (.16)
Total dividends and distributions (.60) (.44) (.22)
Net asset value, end of period $11.55 $10.70 $ 9.68
TOTAL RETURN
Total investment return based on net
asset value(c) 13.92% 15.55% (.99)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $5,775 $3,769 $1,998
Ratio of expenses to average net assets 2.92% 3.09% 3.09%(d)
Ratio of net investment income to
average net assets 4.19% 4.73% 5.07%(d)
Portfolio turnover rate 108% 92% 126%
Average commission rate paid (e) $.0600 -- --
See footnote summary on page 17.
16
ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.67 $ 9.66 $10.47 $ 9.80 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .46(b) .40(b) .50 .52 .55
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .99 1.05 (.85) .51 (.28)
Net increase (decrease) in net asset
value from operations 1.45 1.45 (.35) 1.03 .27
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.48) (.44) (.09) (.36) (.47)
Tax return of capital -0- -0- (.02) -0- -0-
Distributions from net realized gains (.12) -0- (.35) -0- -0-
Total dividends and distributions (.60) (.44) (.46) (.36) (.47)
Net asset value, end of year $11.52 $10.67 $ 9.66 $10.47 $ 9.80
TOTAL RETURN
Total investment return based on net
asset value(c) 13.96% 15.47% (3.44)% 10.65% 2.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $44,441 $49,107 $64,027 $106,034 $152,617
Ratio of expenses to average net assets 2.93% 3.02% 2.67% 2.32% 2.33%
Ratio of net investment income to
average net assets 4.13% 4.81% 3.82% 6.85% 5.47%
Portfolio turnover rate 108% 92% 126% 101% 108%
Average commission rate paid (e) $.0600 -- -- -- --
</TABLE>
(a) Commencement of distribution.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(d) Annualized.
(e) 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.
17
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE INCOME BUILDER FUND, INC.
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE INCOME BUILDER FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance Income Builder 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 each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable 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 Income Builder 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.
ERNST & YOUNG LLP
New York, New York
December 12, 1996
18
<PAGE>
_______________________________________________________________
APPENDIX A: DESCRIPTION OF OBLIGATIONS ISSUED OR
GUARANTEED BY U.S. GOVERNMENT AGENCIES OR INSTRUMENTALITIES
_______________________________________________________________
Federal Farm Credit System Notes and Bonds -- are bonds
issued by a cooperatively owned nationwide system of banks and
associations supervised by the Farm Credit Administration, an
independent agency of the U.S. Government. These bonds are not
guaranteed by the U.S. Government.
Maritime Administration Bonds -- are bonds issued and
provided by the Department of Transportation of the U.S.
Government and are guaranteed by the U.S. Government.
FHA Debentures -- are debentures issued by the Federal
Housing Administration of the U.S. Government and are guaranteed
by the U.S. Government.
GNMA Certificates are mortgage-backed securities which
represent a partial ownership interest in a pool of mortgage
loans issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations. Each mortgage loan
included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration.
FHLMC Bonds -- are bonds issued and guaranteed by the
Federal Home Loan Mortgage Corporation.
FNMA Bonds -- are bonds issued and guaranteed by the
Federal National Mortgage Association.
Federal Home Loan Bank Notes and Bonds -- are notes and
bonds issued by the Federal Home Loan Bank System and are not
guaranteed by the U.S. Government.
Student Loan Marketing Association ("Sallie Mae") Notes
and Bonds -- are notes and bonds issued by the Student Loan
Marketing Association.
Although this list includes a description of the primary
types of U.S. Government agency or instrumentality obligations in
which the Fund intends to invest, the Fund may invest in
obligations of U.S. Government agencies or instrumentalities
other than those listed above.
A-1
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________________________________________________________________
APPENDIX B: BOND AND COMMERCIAL PAPER RATINGS
________________________________________________________________
Standard & Poor's Bond Ratings
A Standard & Poor's municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to
a specific obligation. Debt rated "AAA" has the highest rating
assigned by Standard & Poor's. Capacity to pay interest and
repay principal is extremely strong. Debt rated "AA" has a very
strong capacity to pay interest and to repay principal and
differs from the highest rated issues only in small degree. Debt
rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
a debt of a higher rated category. Debt rated "BBB" is regarded
as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest
and to repay principal for debt in this category than for higher
rated categories.
Debt rated "BB", "B", "CCC" or "CC" is regarded, on
balance, as predominately speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of
the obligation. "BB" indicates the lowest degree of speculation
and "CC" the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to
adverse conditions. The rating "C" is reserved for income bonds
on which no interest is being paid. Debt rated "D" is in default
and payments of interest and/or repayment of principal are in
arrears.
The ratings from "AAA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within
the major rating categories.
Moody's Bond Ratings
Excerpts from Moody's description of its municipal bond
ratings: Aaa - judged to be the best quality, carry the smallest
degree of investment risk; Aa - judged to be of high quality by
all standards; A - possess many favorable investment attributes
and are to be considered as higher medium grade obligations; Baa
- - considered as medium grade obligations, i.e., they are neither
highly protected nor poorly secured and have speculative
characteristics as well; Ba, B, Caa, Ca, C - protection of
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interest and principal payments is questionable; Ba indicates
some speculative elements while Ca represents a high degree of
speculation and C represents the lowest rated class of bonds;
Caa, Ca and C bonds may be in default. Moody's applies numerical
modifiers 1, 2 and 3 in each generic rating classification from
Aa to B in its corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks at the
lower end of its generic rating category.
Duff & Phelps Long-Term Rating Scale
AAA: Highest credit quality. The risk factors are
negligible.
AA+, AA, AA-: High credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A+, A, A-: Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of
economic stress.
BBB+, BBB, BBB-: Below average protection factors but
still considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
BB+, BB, BB-: Below investment grade but deemed likely
to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or
company fortunes. Overall quality may move up or down frequently
within this category.
B+, B, B-: Below investment grade and possessing risk
that obligations will not be met when due. Financial protection
factors will fluctuate widely according to economic cycles,
industry conditions and/or company fortunes. Potential exists for
frequent changes in the rating within this category or into a
higher or lower rating grade.
CCC: Well below investment grade securities.
Considerable uncertainty exists as to timely payment of
principal, interest or preferred dividends. Protection factors
are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company
developments.
DD: Defaulted debt obligations. Issuer failed to meet
scheduled principal and/or interest payments.
B-2
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Fitch Investors Service Bond Ratings
AAA. Securities of this rating are regarded as strictly
high-grade, broadly marketable, suitable for investment by
trustees and fiduciary institutions, and liable to but slight
market fluctuation other that through changes in the money rate.
The factor last named is of importance varying with the length of
maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public
utility fields, though some industrial obligations have this
rating. The prime feature of an AAA rating is showing of
earnings several times or many times interest requirements with
such stability of applicable earnings that safety is beyond
reasonable question whatever changes occur in conditions. Other
features may enter in, such as a wide margin of protection
through collateral security or direct lien on specific property
as in the case of high class equipment certificates or bonds that
are first mortgages on valuable real estate. Sinking funds or
voluntary reduction of the debt by call or purchase are often
factors, while guarantee or assumption by parties other than the
original debtor may also influence the rating.
AA. Securities in this group are of safety virtually
beyond question, and as a class are readily salable while many
are highly active. Their merits are not greatly unlike those of
the AAA class, but a security so rated may be of junior though
strong lien-- in many cases directly following an AAA security--
or the margin of safety is less strikingly broad. The issue may
be the obligation of a small company, strongly secured but
influenced as to ratings by the lesser financial power of the
enterprise and more local type of market.
A. A securities are strong investments and in many
cases of highly active market, but are not so heavily protected
as the two upper classes or possibly are of similar security but
less quickly salable. As a class they are more sensitive in
standing and market to material changes in current earnings of
the company. With favoring conditions such securities are likely
to work into a high rating, but in occasional instances changes
cause the rating to be lowered.
BBB. BBB rated bonds are considered to be investment
grade and of satisfactory quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to weaken this ability than bonds with
higher ratings.
B-3
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Fitch Commercial Paper and
Certificate of Deposit Ratings
Fitch Commercial Paper Ratings are assigned at the
request of an issuer to debt obligations with an original
maturity not in excess of 270 days. The ratings reflect Fitch
current appraisal of the degree of assurance of timely payment of
such debt. Fitch compensated for this service by an annual fee
paid by the issuer under a contractual agreement which specifies
among other things that ratings may be changed or withdrawn at
any time if, in Fitch's sole judgment, changing circumstances
warrant such action.
Fitch Certificate of Deposit Ratings are assigned at the
request of the issuer to deposits with maturities of up to three
years. Ratings apply to uninsured principal and interest and
reflect only those credit characteristics inherent in
certificates of deposit. Such ratings should be considered only
in the context of ratings assigned to certificates of deposit and
not to ratings which may be assigned to non-deposit liabilities.
Ratings for CDs with maturities over 3 years will be assigned
bond rating symbols. For definitions refer to page 1 of the
Rating Register.
Fitch commercial paper ratings are grouped into four
categories, two of which are defined below:
Fitch-1 (Highest Grade) Commercial paper assigned this
rating is regarded as having the strongest degree of assurance
for timely payment.
Fitch-2 (Very Good Grade) issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than the strongest issues.
Fitch Investment Note Ratings
Fitch investment Note Ratings are grouped into four
categories with the indicated symbols. The ratings on notes with
maturities generally up to three years reflect Fitch's current
appraisal of the degree of assurance of timely payment, whatever
the source.
FIN-1 -- Notes assigned this rating are regarded as
having the strongest degree of assurance for timely payment.
FIN-2 -- Notes assigned this rating reflect a degree of
assurance for timely payment only slightly less in degree than
the highest category.
B-4
<PAGE>
A plus symbol may be used in the three highest
categories to indicate relative standing. The Note Ratings will
usually correspond with Bond Ratings, although certain security
enhancements or market access may mean that notes will not track
bond.
Further Rating Distinctions
While ratings provide an assessment of the obligor's
capacity to pay debt service, it should be noted that the
definition of obligor expands as layers of security are added. If
municipal securities are guaranteed by third parties then the
"underlying" issuers as well as the "primary" issuer will be
evaluated during the rating process. In some cases, depending on
the scope of the guaranty, such as bond insurance, bank letters
of credit or collateral, the credit enhancement will provide the
sole basis for the rating given.
Minimum Rating(s) Requirements
For minimum rating(s) requirements for the Fund's
securities, please refer to "Description of the Fund" in the
Prospectus.
B-5
<PAGE>
_______________________________________________________________
APPENDIX C: OPTIONS
_______________________________________________________________
Options
The Fund will only write "covered" put and call options,
unless such options are written for cross-hedging purposes. The
manner in which such options will be deemed "covered" is
described in the Prospectus under the heading "Investment
Objective and Policies -- Investment Practices -- Options."
The writer of an option may have no control over when
the underlying securities must be sold, in the case of a call
option, or purchased, in the case of a put option, since with
regard to certain options, the writer may be assigned an exercise
notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains
the amount of the premium. This amount, of course, may, in the
case of a covered call option, be offset by a decline in the
market value of the underlying security during the option period.
If a call option is exercised, the writer experiences a profit or
loss from the sale of the underlying security. If a put option
is exercised, the writer must fulfill the obligation to purchase
the underlying security at the exercise price, which will usually
exceed the then market value of the underlying security.
The writer of a listed option that wishes to terminate
its obligation may effect a "closing purchase transaction." This
is accomplished by buying an option of the same series as the
option previously written. The effect of the purchase is that
the writer's position will be cancelled by the clearing
corporation. However, a writer may not effect a closing purchase
transaction after being notified of the exercise of an option.
Likewise, an investor who is the holder of a listed option may
liquidate its position by effecting a "closing sale transaction."
This is accomplished by selling an option of the same series as
the option previously purchased. There is no guarantee that
either a closing purchase or a closing sale transaction can be
effected.
Effecting a closing transaction in the case of a written
call option will permit the Fund to write another call option on
the underlying security with either a different exercise price or
expiration date or both, or in the case of a written put option
will permit the Fund to write another put option to the extent
that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other Fund
C-1
<PAGE>
investments. If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale
of the security.
The Fund will realize a profit from a closing
transaction if the price of the transaction is less than the
premium received from writing the option or is more than the
premium paid to purchase the option; the Fund will realize a loss
from a closing transaction if the price of the transaction is
more than the premium received from writing the option or is less
than the premium paid to purchase the option. Because increases
in the market price of a call option will generally reflect
increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to
be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
An option position may be closed out only where there
exists a secondary market for an option of the same series. If a
secondary market does not exist, it might not be possible to
effect closing transactions in particular options with the result
that the Fund would have to exercise the options in order to
realize any profit. If the Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able
to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. Reasons for the
absence of a liquid secondary market include the following:
(i) there may be insufficient trading interest in certain
options, (ii) restrictions may be imposed by a national
securities exchange ("Exchange") on opening transactions or
closing transactions or both, (iii) trading halts, suspensions or
other restrictions may be imposed with respect to particular
classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances may interrupt normal
operations on an Exchange, (v) the facilities of an Exchange or
the Options Clearing Corporation may not at all times be adequate
to handle current trading volume, or (vi) one or more Exchanges
could, for economic or other reasons, decide or be compelled at
some future date to discontinue the trading of options (or a
particular class or series of options), in which event the
secondary market on that Exchange (or in that class or series of
options) would cease to exist, although outstanding options on
that Exchange that had been issued by the Options Clearing
Corporation as a result of trades on that Exchange would continue
to be exercisable in accordance with their terms.
The Fund may write options in connection with buy-and-
write transactions; that is, the Fund may purchase a security and
then write a call option against that security. The exercise
price of the call the Fund determines to write will depend upon
C-2
<PAGE>
the expected price movement of the underlying security. The
exercise price of a call option may be below ("in-the-money"),
equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option
is written. Buy-and-write transactions using in-the-money call
options may be used when it is expected that the price of the
underlying security will remain flat or decline moderately during
the option period. Buy-and-write transactions using at-the-money
call options may be used when it is expected that the price of
the underlying security will remain fixed or advance moderately
during the option period. Buy-and-write transactions using out-
of-the-money call options may be used when it is expected that
the premiums received from writing the call option plus the
appreciation in the market price of the underlying security up to
the exercise price will be greater than the appreciation in the
price of the underlying security alone. If the call options are
exercised in such transactions, the Fund's maximum gain will be
the premium received by it for writing the option, adjusted
upwards or downwards by the difference between the Fund's
purchase price of the security and the exercise price. If the
options are not exercised and the price of the underlying
security declines, the amount of such decline will be offset in
part, or entirely, by the premium received.
The writing of covered put options is similar in terms
of risk/return characteristics to buy-and-write transactions. If
the market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless
and the Fund's gain will be limited to the premium received. If
the market price of the underlying security declines or otherwise
is below the exercise price, the Fund may elect to close the
position or take delivery of the security at the exercise price
and the Fund's return will be the premium received from the put
option minus the amount by which the market price of the security
is below the exercise price. Out-of-the-money, at-the-money, and
in-the-money put options may be used by the Fund in the same
market environments that call options are used in equivalent buy-
and-write transactions.
The Fund may purchase put options to hedge against a
decline in the value of its portfolio. By using put options in
this way, the Fund will reduce any profit it might otherwise have
realized in the underlying security by the amount of the premium
paid for the put option and by transaction costs.
The Fund may purchase call options to hedge against an
increase in the price of securities that the Fund anticipates
purchasing in the future. The premium paid for the call option
plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise of the option, and, unless the
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<PAGE>
price of the underlying security rises sufficiently, the option
may expire worthless to the Fund.
C-4
<PAGE>
_______________________________________________________________
APPENDIX D: FUTURES CONTRACTS, OPTIONS ON FUTURES
CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES
________________________________________________________________
Futures Contracts
The Fund may enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial or stock indices
including any index of U.S. Government Securities, Foreign
Government Securities, corporate debt securities or common
stocks. U.S. futures contracts have been designed by exchanges
which have been designated "contracts markets" by the Commodity
Futures Trading Commission ("CFTC"), and must be executed through
a futures commission merchant, or brokerage firm, which is a
member of the relevant contract market. Futures contracts trade
on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange.
At the same time a futures contract is purchased or
sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial
deposit would be approximately 1 1/2% to 5% of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or
increase in the contract's value.
At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different price or
interest rate from that specified in the contract. In some (but
not many) cases, securities called for by a futures contract may
not have been issued when the contract was written.
Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
D-1
<PAGE>
contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.
Interest Rate Futures
The purpose of the acquisition or sale of a futures
contract, in the case of a portfolio, such as the portfolio of
the Fund, which holds or intends to acquire fixed-income
securities, is to attempt to protect the Fund from fluctuations
in interest or foreign exchange rates without actually buying or
selling fixed-income securities or foreign currency. For
example, if interest rates were expected to increase, the Fund
might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as
selling an equivalent value of the debt securities owned by the
Fund. If interest rates did increase, the value of the debt
securities in the portfolio would decline, but the value of the
futures contracts to the Fund would increase at approximately the
same rate, thereby keeping the net asset value of the Fund from
declining as much as it otherwise would have. The Fund could
accomplish similar results by selling debt securities and
investing in bonds with short maturities when interest rates are
expected to increase. However, since the futures market is more
liquid than the cash market, the use of futures contracts as an
investment technique allows the Fund to maintain a defensive
position without having to sell its portfolio securities.
Similarly, when it is expected that interest rates may
decline, futures contracts may be purchased to attempt to hedge
against anticipated purchases of debt securities at higher
prices. Since the fluctuations in the value of futures contracts
should be similar to those of debt securities, the Fund could
take advantage of the anticipated rise in the value of debt
securities without actually buying them until the market had
stabilized. At that time, the futures contracts could be
liquidated and the Fund could then buy debt securities on the
cash market. To the extent the Fund enters into futures
contracts for this purpose, the assets in the segregated account
maintained to cover the Fund's obligations with respect to such
futures contracts will consist of cash, cash equivalents or high-
grade liquid debt securities from its portfolio in an amount
equal to the difference between the fluctuating market value of
such futures contracts and the aggregate value of the initial and
variation margin payments made by the Fund with respect to such
futures contracts.
The ordinary spreads between prices in the cash and
futures markets, due to differences in the nature of those
markets, are subject to distortions. First, all participants in
the futures market are subject to initial deposit and variation
margin requirements. Rather than meeting additional variation
D-2
<PAGE>
margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the
liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of
speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the
securities market. Therefore, increased participation by
speculators in the futures market may cause temporary price
distortions. Due to the possibility of distortion, a correct
forecast of general interest rate trends by the Adviser may still
not result in a successful transaction.
In addition, futures contracts entail risks. Although
the Fund believes that use of such contracts will benefit the
Fund, if the Adviser's investment judgment about the general
direction of interest rates is incorrect, the Fund's overall
performance would be poorer than if it had not entered into any
such contract. For example, if the Fund has hedged against the
possibility of an increase in interest rates which would
adversely affect the price of debt securities held in its
portfolio and interest rates decrease instead, the Fund will lose
part or all of the benefit of the increased value of its debt
securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to
sell debt securities from its portfolio to meet daily variation
margin requirements. Such sales of bonds may be, but will not
necessarily be, at increased prices which reflect the rising
market. The Fund may have to sell securities at a time when it
may be disadvantageous to do so.
Stock Index Futures
The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several
risks in connection with the use of stock index futures by the
Fund as a hedging device. One risk arises because of the
imperfect correlation between movements in the price of the stock
index futures and movements in the price of the securities which
are the subject of the hedge. The price of the stock index
futures may move more than or less than the price of the
securities being hedged. If the price of the stock index futures
moves less than the price of the securities which are the subject
of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had
not hedged at all. If the price of the securities being hedged
D-3
<PAGE>
has moved in a favorable direction, this advantage will be
partially offset by the loss on the index future. If the price
of the future moves more than the price of the stock, the Fund
will experience either a loss or gain on the future which will
not be completely offset by movements in the price of the
securities which are subject to the hedge. To compensate for the
imperfect correlation of movements in the price of securities
being hedged and movements in the price of the stock index
futures, the Fund may buy or sell stock index futures contracts
in a greater dollar amount than the dollar amount of securities
being hedged if the volatility over a particular time period of
the prices of such securities has been greater than the
volatility over such time period of the index, or if otherwise
deemed to be appropriate by the Adviser. Conversely, the Fund
may buy or sell fewer stock index futures contracts if the
volatility over a particular time period of the prices of the
securities being hedged is less than the volatility over such
time period of the stock index, or it is otherwise deemed to be
appropriate by the Adviser. It is also possible that, where the
Fund has sold futures to hedge its portfolio against a decline in
the market, the market may advance and the value of securities
held in the Fund may decline. If this occurred, the Fund would
lose money on the futures and also experience a decline in value
in its portfolio securities. However, over time the value of a
diversified portfolio should tend to move in the same direction
as the market indices upon which the futures are based, although
there may be deviations arising from differences between the
composition of the Fund and the stocks comprising the index.
Where futures are purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest
its cash (or cash equivalents) in stocks (or options) in an
orderly fashion, it is possible that the market may decline
instead. If the Fund then concludes not to invest in stock or
options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss
on the futures contract that is not offset by a reduction in the
price of securities purchased.
In addition the possibility that there may be an
imperfect correlation, or no correlation at all, between
movements in the stock index futures and the portion of the
portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to
certain market distortions. Rather than meeting additional
margin deposit requirements, investors may close futures
contracts through offsetting transactions which could distort the
normal relationship between the index and futures markets.
Secondly, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased
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<PAGE>
participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect
correlation between the movements in the stock index and
movements in the price of stock index futures, a correct forecast
of general market trends by the investment adviser may still not
result in a successful hedging transaction over a short time
frame.
Positions in stock index futures may be closed out only
on an exchange or board of trade which provides a secondary
market for such futures. Although the Fund intends to purchase
or sell futures only on exchanges or boards of trade where there
appear to be active secondary markets, there is no assurance that
a liquid secondary market on any exchange or board of trade will
exist for any particular contract or at any particular time. In
such event, it may not be possible to close a futures investment
position, and in the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts have
been used to hedge portfolio securities, such securities will not
be sold until the futures contract can be terminated. In such
circumstances, an increase in the price of the securities, if
any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee
that the price of the securities will in fact correlate with the
price movements in the futures contract and thus provide an
offset on a futures contract.
The Adviser intends to purchase and sell futures
contracts on the stock index for which it can obtain the best
price with due consideration to liquidity.
Options on Futures Contracts
The Fund intends to purchase and write options on
futures contracts for hedging purposes. The Fund is not a
commodity pool and all transactions in futures contracts and
options on futures contracts engaged in by the Fund must
constitute bona fide hedging or other permissible transactions in
accordance with the rules and regulations promulgated by the
CFTC. The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an
individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which
it is based or the price of the underlying debt securities, it
may or may not be less risky than ownership of the futures
contract or underlying debt securities. As with the purchase of
futures contracts, when the Fund is not fully invested it may
purchase a call option on a futures contract to hedge against
adverse market conditions.
D-5
<PAGE>
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon exercise
of the futures contract or securities comprising an index. If
the futures price at expiration of the option is below the
exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any decline
that may have occurred in the Fund's portfolio holdings. The
writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or
foreign currency which is deliverable upon exercise of the
futures contract or securities comprising an index. If the
futures price at expiration of the option is higher than the
exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any
increase in the price of securities which the Fund intends to
purchase. If a put or call option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by
the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its portfolio
securities and changes in the value of its futures positions, the
Fund's losses from existing options on futures may to some extent
be reduced or increased by changes in the value of portfolio
securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, the Fund may
purchase a put option on a futures contract to hedge the Fund's
portfolio against the risk of rising interest rates.
The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs. In addition to the correlation
risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.
Options on Foreign Currencies
The Fund may purchase and write options on foreign
currencies for hedging purposes in a manner similar to that in
which futures contracts on foreign currencies, or forward
contracts, will be utilized. For example, a decline in the
dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities,
even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of
portfolio securities, the Fund may purchase put options on the
foreign currency. If the value of the currency does decline, the
Fund will have the right to sell such currency for a fixed amount
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in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have
resulted.
Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to the Fund deriving from
purchases of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Fund could sustain
losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The Fund may write options on foreign currencies for the
same types of hedging purposes. For example, where the Fund
anticipates a decline in the dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange
rates it could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution
in value of portfolio securities will be offset by the amount of
the premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction.
If this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at
a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund
also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements
in exchange rates.
The Fund intends to write covered call options on
foreign currencies. A call option written on a foreign currency
by the Fund is "covered" if the Fund owns the underlying foreign
currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash
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consideration (or for additional cash consideration held in a
segregated account by its Custodian) upon conversation or
exchange of other foreign currency held in its portfolio. A call
option is also covered if the Fund has a call on the same foreign
currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less
than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government Securities and
other high-grade liquid debt securities in a segregated account
with its Custodian.
The Fund also intends to write call options on foreign
currencies for cross-hedging purposes. An option that is cross-
hedged is not covered, but is designed to provide a hedge against
a decline in the U.S. dollar value of a security which the Fund
owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the
exchange rate. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
Custodian, cash or U.S. Government Securities or other high-
grade liquid debt securities in an amount not less than the value
of the underlying foreign currency in U.S. dollars marked to
market daily.
Additional Risks of Options on Futures Contracts,
Forward Contracts and Options on Foreign Currencies
Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts
are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the
Commission. To the contrary, such instruments are traded through
financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to Commission regulation.
Similarly, options on securities may be traded over-the-counter.
In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be
available. For example, there are no daily price fluctuation
limits, and adverse market movements could therefore continue to
an unlimited extent over a period of time. Although the
purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could
be lost. Moreover, the option writer and a trader of forward
contracts could lose amounts substantially in excess of their
initial investments, due to the margin and collateral
requirements associated with such positions.
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Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the
Commission, as are other securities traded on such exchanges. As
a result, many of the protections provided to traders on
organized exchanges will be available with respect to such
transactions. In particular, all foreign currency option
positions entered into on a national securities exchange are
cleared and guaranteed by the Options Clearing Corporation
("OCC"), thereby reducing the risk of counterparty default.
Further, a liquid secondary market in options traded on a
national securities exchange may be more readily available than
in the over-the-counter market, potentially permitting the Fund
to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign
currency options, however, is subject to the risks of the
availability of a liquid secondary market described above, as
well as the risks regarding adverse market movements, margining
of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects
of other political and economic events. In addition, exchange-
traded options on foreign currencies involve certain risks not
presented by the over-the-counter market. For example, exercise
and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency
option exercise, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies
may be traded on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other
complex foreign political and economic factors, (ii) lesser
availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during nonbusiness
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
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PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements
Included in the Prospectus:
Financial Highlights.
Included in the Statement of Additional Information:
Portfolio of Investments - October 31, 1996.
Statement of Assets and Liabilities - October 31,
1996.
Statement of Operations - for the fiscal year
ended October 31, 1996.
Statement of Changes in Net Assets - for the
fiscal years ended October 31, 1996 and
October 31, 1995.
Notes to Financial Statements - for the fiscal
years ended October 31, 1996 and October 31,
1995.
Financial Highlights - for the fiscal years ended
October 31, 1996, October 31, 1995,
October 31, 1994, October 31, 1993 and
October 31, 1992 for Class C shares and the
fiscal years ended October 31, 1996 and
October 31, 1995 and the period March 25, 1994
(commencement of distribution) to October 31,
1994 for Class A shares and Class B shares.
Report of Independent Auditors.
Portfolio of Investments - April 30, 1997
(unaudited).
Statement of Assets and Liabilities - April 30,
1997 (unaudited).
Statement of Operations - for the six months ended
April 30, 1997 (unaudited).
Statement of Changes in Net Assets - for the
fiscal year ended October 31, 1996 and the six
months ended April 30, 1997 (unaudited).
Notes to Financial Statements - April 30, 1997
(unaudited).
Financial Highlights - for Class A and Class B
shares for the six months ended April 30, 1997
(unaudited) and the years ended October 31,
1996 and October 31, 1995 and the period
March 25, 1994 (commencement of distribution)
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to October 31, 1994; for Class C shares for
the six months ended April 30, 1997
(unaudited) and the fiscal years ended
October 31, 1996, October 31, 1995,
October 31, 1994, October 31, 1993 and
October 31, 1992 and for Advisor Class shares
for the period November 1, 1996 (commencement
of distribution) to April 30, 1997
(unaudited).
Included in Part C of the Registration Statement:
All other schedules are either inapplicable or the
required information is contained in the financial
statements.
(b) Exhibits
(1)(a) Articles of Incorporation of the Registrant -
filed herewith.
(1)(b) Articles of Amendment to the Articles of
Incorporation dated March 21, 1994 of the
Registrant - filed herewith.
(1)(c) Articles Supplementary of the Registrant -
Incorporated by reference to Exhibit (1)(b) to
Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form
N-1A, filed with the Securities and Exchange
Commission on February 3, 1997.
(2) Amended By-Laws of the Registrant - filed
herewith.
(3) Not applicable.
(4)(a) Specimen of Stock Certificate for Class A
shares - Incorporated by reference to
Exhibit 4(a) to the Registrant's Registration
Statement on Form N-1A, filed with the
Securities and Exchange Commission on July 1,
1994.
(b) Specimen of Stock Certificate for Class B
shares - Incorporated by reference to
Exhibit 4(b) to the Registrant's Registration
Statement on Form N-1A, filed with the
Securities and Exchange Commission on July 1,
1994.
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(c) Specimen of Stock Certificate for Class C
shares - Incorporated by reference to
Exhibit 4(c) to the Registrant's Registration
Statement on Form N-1A filed with the
Securities and Exchange Commission on July 1,
1994.
(5) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. - filed
herewith.
(6)(a) Amended and Restated Distribution Services
Agreement between the Registrant and Alliance
Fund Distributors, Inc. - filed herewith.
(b) Amendment to Distribution Services Agreement
between the Registrant and Alliance Fund
Distributors, Inc. - Incorporated by reference
to Exhibit (6)(b) to Post- Effective Amendment
No. 17 to Registrant's Registration Statement
on Form N-1A, filed with the Securities and
Exchange Commission on February 3, 1997.
(c) Selected Dealer Agreement between Alliance
Fund Distributors, Inc. and selected dealers
offering shares of Registrant - filed
herewith.
(d) Selected Agent Agreement between Alliance Fund
Distributors, Inc. and selected agents making
available shares of Registrant - filed
herewith.
(7) Not applicable.
(8) Custodian Contract between the Registrant and
Brown Brothers Harriman & Co. - filed
herewith.
(9) Transfer Agency Agreement between the
Registrant and Alliance Fund Services, Inc. -
filed herewith.
(10)(a) Opinion of Seward & Kissel - filed
herewith.
(b) Opinion and Consent of Venable, Baetjer and
Howard - filed herewith.
(11) Consent of Independent Auditors - filed
herewith.
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(12) Not applicable.
(13) Investment representation letter of Alliance
Capital Management L.P. as initial purchaser
of 10,000 shares of common stock of the
Registrant - filed herewith.
(14) Not applicable.
(15) Rule 12b-1 Plan - Incorporated by reference to
Exhibit 6(a) filed herewith.
(16) Schedule for computation of performance
quotations - filed herewith.
(17) Financial Data Schedule - Incorporated by
reference to the (i) Financial Data Schedule
contained in the Registrant's most recent
Semi-Annual Report on Form N-SAR with respect
to a fiscal year ended and (ii) Financial Data
Schedule contained in any more recent such
report of the Registrant with respect to a
six-month period ended.
(18)(a) Rule 18f-3 Plan - Incorporated by reference to
Exhibit 18 to Post-Effective Amendment No. 12
of Registration Statement on Form N-1A, filed
with the Securities and Exchange Commission on
January 31, 1996.
(18)(b) Amended and Restated Rule 18f-3 Plan -
Incorporated by reference to Exhibit 18(b) to
Post- Effective Amendment No. 17 to
Registrant's Registration Statement on Form
N-1A filed with the Securities and Exchange
Commission on February 3, 1997.
Other Exhibits: - Powers of Attorney of Ms. Block and
Messrs. Carifa, Dievler, Dobkin, Foulk, Hester, Michel
and Robinson - Incorporated by reference to Other
Exhibit to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A filed
with the Securities and Exchange Commission on
February 3, 1997.
ITEM 25. Persons Controlled by or under Common Control with
Registrant.
None.
ITEM 26. Number of Holders of Securities.
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Number of Record Holders
Title of Class (as of October 3, 1997)
Class A 138
Class B 478
Class C 1,452
Advisor Class 5
ITEM 27. Indemnification
It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum
extent permitted by Section 2-418 of the General
Corporation Law of the State of Maryland and as set
forth in Article EIGHTH of Registrant's Articles of
Incorporation, filed as Exhibit 1 in response to
Item 24, Article VII and Article VIII of the
Registrant's By-Laws filed as Exhibit 2 in response to
Item 24 and Section 7 of the proposed Distribution
Services Agreement filed as Exhibit 6(a) in response to
Item 24, all as set forth below. The liability of the
Registrant's directors and officers is dealt with in
Article EIGHTH of Registrant's Articles of
Incorporation, and Article VII, Section 7 and Article
VIII, Section 1 through Section 6 of the Registrant's
By-Laws, as set forth below. The Adviser's liability
for any loss suffered by the Registrant or its
shareholders is set forth in Section 4 of the Advisory
Agreement filed as Exhibit 5 in response to Item 24, as
set forth below.
Section 2-418 of the Maryland General Corporation Law reads as
follows:
"2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS.--(a) In this section the
following words have the meaning indicated.
(1) "Director" means any person who is or was a
director of a corporation and any person who, while
a director of a corporation, is or was serving at
the request of the corporation as a director,
officer, partner, trustee, employee, or agent of
another foreign or domestic corporation,
partnership, joint venture, trust, other
enterprise, or employee benefit plan.
(2) "Corporation" includes any domestic or foreign
predecessor entity of a corporation in a merger,
consolidation, or other transaction in which the
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predecessor's existence ceased upon consummation of
the transaction.
(3) "Expenses" include attorney's fees.
(4) "Official capacity" means the following:
(i) When used with respect to a director, the
office of director in the corporation; and
(ii) When used with respect to a person other
than a director as contemplated in subsection (j),
the elective or appointive office in the
corporation held by the officer, or the employment
or agency relationship undertaken by the employee
or agent in behalf of the corporation.
(iii) "Official capacity" does not include
service for any other foreign or domestic
corporation or any partnership, joint venture,
trust, other enterprise, or employee benefit plan.
(5) "Party" includes a person who was, is, or is
threatened to be made a named defendant or
respondent in a proceeding.
(6) "Proceeding" means any threatened, pending or
completed action, suit or proceeding, whether
civil, criminal, administrative, or investigative.
(b)(1) A corporation may indemnify any director
made a party to any proceeding by reason of service
in that capacity unless it is established that:
(i) The act or omission of the director was
material to the matter giving rise to the
proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and
deliberate dishonesty; or
(ii) The director actually received an
improper personal benefit in money, property, or
services; or
(iii) In the case of any criminal proceeding,
the director had reasonable cause to believe that
the act or omission was unlawful.
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<PAGE>
(2)(i) Indemnification may be against judgments,
penalties, fines, settlements, and reasonable
expenses actually incurred by the director in
connection with the proceeding.
(ii) However, if the proceeding was one by or
in the right of the corporation, indemnification
may not be made in respect of any proceeding in
which the director shall have been adjudged to be
liable to the corporation.
(3)(i) The termination of any proceeding by
judgment, order or settlement does not create a
presumption that the director did not meet the
requisite standard of conduct set forth in this
subsection.
(ii) The termination of any proceeding by
conviction, or a plea of nolo contendere or its
equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption
that the director did not meet that standard of
conduct.
(c) A director may not be indemnified under
subsection (b) of this section in respect of any
proceeding charging improper personal benefit to
the director, whether or not involving action in
the director's official capacity, in which the
director was adjudged to be liable on the basis
that personal benefit was improperly received.
(d) Unless limited by the charter:
(1) A director who has been successful, on the
merits or otherwise, in the defense of any
proceeding referred to in subsection (b) of this
section shall be indemnified against reasonable
expenses incurred by the director in connection
with the proceeding.
(2) A court of appropriate jurisdiction upon
application of a director and such notice as the
court shall require, may order indemnification in
the following circumstances:
(i) If it determines a director is entitled
to reimbursement under paragraph (1) of this
subsection, the court shall order indemnification,
in which case the director shall be entitled to
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<PAGE>
recover the expenses of securing such
reimbursement; or
(ii) If it determines that the director is
fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether
or not the director has met the standards of
conduct set forth in subsection (b) of this section
or has been adjudged liable under the circumstances
described in subsection (c) of this section, the
court may order such indemnification as the court
shall deem proper. However, indemnification with
respect to any proceeding by or in the right of the
corporation or in which liability shall have been
adjudged in the circumstances described in
subsection (c) shall be limited to expenses.
(3) A court of appropriate jurisdiction may be the
same court in which the proceeding involving the
director's liability took place.
(e)(1) Indemnification under subsection (b) of
this section may not be made by the corporation
unless authorized for a specific proceeding after a
determination has been made that indemnification of
the director is permissible in the circumstances
because the director has met the standard of
conduct set forth in subsection (b) of this
section.
(2) Such determination shall be made:
(i) By the board of directors by a majority
vote of a quorum consisting of directors not, at
the time, parties to the proceeding, or, if such a
quorum cannot be obtained, then by a majority vote
of a committee of the board consisting solely of
two or more directors not, at the time, parties to
such proceeding and who were duly designated to act
in the matter by a majority vote of the full board
in which the designated directors who are parties
may participate;
(ii) By special legal counsel selected by the
board or a committee of the board by vote as set
forth in subparagraph (i) of this paragraph, or, if
the requisite quorum of the full board cannot be
obtained therefor and the committee cannot be
established, by a majority vote of the full board
in which directors who are parties may participate;
or
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(iii) By the stockholders.
(3) Authorization of indemnification and
determination as to reasonableness of expenses
shall be made in the same manner as the
determination that indemnification is permissible.
However, if the determination that indemnification
is permissible is made by special legal counsel,
authorization of indemnification and determination
as to reasonableness of expenses shall be made in
the manner specified in subparagraph (ii) of
paragraph (2) of this subsection for selection of
such counsel.
(4) Shares held by directors who are parties to
the proceeding may not be voted on the subject
matter under this subsection.
(f)(1) Reasonable expenses incurred by a director
who is a party to a proceeding may be paid or
reimbursed by the corporation in advance of the
final disposition of the proceeding, upon receipt
by the corporation of:
(i) A written affirmation by the director of
the director's good faith belief that the standard
of conduct necessary for indemnification by the
corporation as authorized in this section has been
met; and
(ii) A written undertaking by or on behalf of
the director to repay the amount if it shall
ultimately be determined that the standard of
conduct has not been met.
(2) The undertaking required by subparagraph (ii)
of paragraph (1) of this subsection shall be an
unlimited general obligation of the director but
need not be secured and may be accepted without
reference to financial ability to make the
repayment.
(3) Payments under this subsection shall be made
as provided by the charter, bylaws, or contract or
as specified in subsection (e) of this section.
(g) The indemnification and advancement of
expenses provided or authorized by this section may
not be deemed exclusive of any other rights, by
indemnification or otherwise, to which a director
may be entitled under the charter, the bylaws, a
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<PAGE>
resolution of stockholders or directors, an
agreement or otherwise, both as to action in an
official capacity and as to action in another
capacity while holding such office.
(h) This section does not limit the corporation's
power to pay or reimburse expenses incurred by a
director in connection with an appearance as a
witness in a proceeding at a time when the director
has not been made a named defendant or respondent
in the proceeding.
(i) For purposes of this section:
(1) The corporation shall be deemed to have
requested a director to serve an employee benefit
plan where the performance of the director's duties
to the corporation also imposes duties on, or
otherwise involves services by, the director to the
plan or participants or beneficiaries of the plan:
(2) Excise taxes assessed on a director with
respect to an employee benefit plan pursuant to
applicable law shall be deemed fines; and
(3) Action taken or omitted by the director with
respect to an employee benefit plan in the
performance of the director's duties for a purpose
reasonably believed by the director to be in the
interest of the participants and beneficiaries of
the plan shall be deemed to be for a purpose which
is not opposed to the best interests of the
corporation.
(j) Unless limited by the charter:
(1) An officer of the corporation shall be
indemnified as and to the extent provided in
subsection (d) of this section for a director and
shall be entitled, to the same extent as a
director, to seek indemnification pursuant to the
provisions of subsection (d);
(2) A corporation may indemnify and advance
expenses to an officer, employee, or agent of the
corporation to the same extent that it may
indemnify directors under this section; and
(3) A corporation, in addition, may indemnify and
advance expenses to an officer, employee, or agent
who is not a director to such further extent,
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<PAGE>
consistent with law, as may be provided by its
charter, bylaws, general or specific action of its
board of directors or contract.
(k)(1) A corporation may purchase and maintain
insurance on behalf of any person who is or was a
director, officer, employee, or agent of the
corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was
serving at the request, of the corporation as a
director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation,
partnership, joint venture, trust, other
enterprise, or employee benefit plan against any
liability asserted against and incurred by such
person in any such capacity or arising out of such
person's position, whether or not the corporation
would have the power to indemnify against liability
under the provisions of this section.
(2) A corporation may provide similar protection,
including a trust fund, letter of credit, or surety
bond, not inconsistent with this section.
(3) The insurance or similar protection may be
provided by a subsidiary or an affiliate of the
corporation.
(l) Any indemnification of, or advance of expenses
to, a director in accordance with this section, if
arising out of a proceeding by or in the right of
the corporation, shall be reported in writing to
the stockholders with the notice of the next
stockholders' meeting or prior to the meeting."
Article EIGHTH of the Registrant's Articles of Incorporation reads
as follows:
"(1) To the full extent that limitations on the
liability of directors and officers are permitted
by the Maryland General Corporation Law, no
director or officer of the Corporation shall have
any liability to the Corporation or its
stockholders for damages. This limitation on
liability applies to events occurring at the time a
person serves as a director or officer of the
Corporation whether or not such person is a
director or officer at the time of any proceeding
in which liability is asserted.
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<PAGE>
"(2) The Corporation shall indemnify and advance
expenses to its currently acting and its former
directors to the full extent that indemnification
of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify
and advance expenses to its officers to the same
extent as its directors and to such further extent
as is consistent with law. The Board of Directors
may by By-Law, resolution or agreement make further
provisions for indemnification of directors,
officers, employees and agents to the full extent
permitted by the Maryland General Corporation Law.
"(3) No provision of this Article shall be
effective to protect or purport to protect any
director or officer of the Corporation against any
liability to the Corporation or its stockholders to
which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the
conduct of his office.
"(4) References to the Maryland General Corporation
Law in this Article are to that law as from time to
time amended. No amendment to the Charter of the
Corporation shall affect any right of any person
under this Article based on any event, omission or
proceeding prior to the amendment."
The Advisory Agreement between the Registrant and
Alliance Capital Management L.P. provides that Alliance
Capital Management L.P. will not be liable under such
agreement for any mistake of judgment or in any event
whatsoever except for lack of good faith; and that
nothing therein shall be deemed to protect, or purport
to protect, Alliance Capital Management L.P. against any
liability to Registrant or its security- holders to
which it would otherwise be subject by reason of wilful
misfeasance, bad faith or gross negligence in the
performance of its duties thereunder, or by reason of
reckless disregard of its duties and obligations
thereunder.
The Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc. provides
that the Registrant will indemnify, defend and hold
Alliance Fund Distributors, Inc., and any person who
controls it within the meaning of Section 15 of the
Investment Company Act of 1940, free and harmless from
and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or
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defending such claims, demands or liabilities or any
reasonable counsel fees incurred in connection
therewith) which Alliance Fund Distributors, Inc. or any
controlling person may incur under the Investment
Company Act, or under common law or otherwise arising
out of or based upon any alleged untrue statement of a
material fact contained in Registrant's Registration
Statement, Prospectus or Statement of Additional
Information or arising out of or based upon any alleged
omission to state a material fact required to be stated
in any one of the foregoing or necessary to make the
statements in any one of the foregoing not misleading;
and that nothing therein shall be so construed to
protect Alliance Fund Distributors, Inc. against any
liability to the Registrant or its security holders to
which Alliance Fund Distributors, Inc. would otherwise
be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties
thereunder, or by reason of the reckless disregard of
its obligations or duties thereunder.
The foregoing summaries are qualified by the entire text
of Registrant's Articles of Incorporation, the proposed
Advisory Agreement between Registrant and Alliance
Capital Management L.P. and the proposed Distribution
Services Agreement between Registrant and Alliance Fund
Distributors, Inc. which are filed as Exhibits 1, 5 and
6(a), respectively, in response to Item 24 and each of
which are incorporated by reference herein.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "Securities Act") may be
permitted to directors, officer and controlling persons
of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that, in
the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or
controlling person in connection with the securities
being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such
indemnification by it is against public policy as
C-13
<PAGE>
expressed in the Securities Act and will be governed by
the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the directors who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
directors"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or
(3) a majority of a quorum of disinterested, non-party
directors of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.
Article VII, Section 7 of the Registrant's By-laws reads as
follows:
"Section 7. Insurance Against Certain Liabilities. The
Corporation shall not bear the cost of insurance that
protects or purports to protect directors and officers
of the Corporation against any liabilities to the
Corporation or its securityholders to which any such
director or officer would otherwise be subject by reason
of willful malfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct
of his office."
C-14
<PAGE>
ARTICLE VIII, Section 1 through Section 6 of the Registrant's By-
laws reads as follows:
"Section 1. Indemnification of Directors and Officers.
The Corporation shall indemnify its directors to the
full extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The
Corporation shall indemnify its officers to the same
extent as its directors and to such further extent as is
consistent with law. The Corporation shall indemnify
its directors and officers who while serving as
directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or
employee benefit plan to the full extent consistent with
law. The indemnification and other rights provided by
this Article shall continue as to a person who has
ceased to be a director or officer and shall inure to
the benefit of the heirs, executors and administrators
of such a person. This Article shall not protect any
such person against any liability to the Corporation or
any stockholder thereof to which such person would
otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office ("disabling
conduct").
"Section 2. Advances. Any current or former director
or officer of the Corporation seeking indemnification
within the scope of this Article shall be entitled to
advances from the Corporation for payment of the
reasonable expenses incurred by him in connection with
the matter as to which he is seeking indemnification in
the manner and to the full extent permissible under the
Maryland General Corporation Law. The person seeking
indemnification shall provide to the Corporation a
written affirmation of his good faith belief that the
standard of conduct necessary for indemnification by the
Corporation has been met and a written undertaking to
repay any such advance if it should ultimately be
determined that the standard of conduct has not been
met. In addition, at least one of the following
additional conditions shall be met: (a) the person
seeking indemnification shall provide a security in form
and amount acceptable to the Corporation for his
undertaking; (b) the Corporation is insured against
losses arising by reason of the advance; or (c) a
majority of a quorum of directors of the Corporation who
are neither "interested persons" as defined in
Section 2(a)(19) of the Investment Company Act of 1940,
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<PAGE>
as amended, nor parties to the proceeding
("disinterested non-party directors"), or independent
legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available
to the Corporation at the time the advance is proposed
to be made, that there is reason to believe that the
person seeking indemnification will ultimately be found
to be entitled to indemnification.
"Section 3. Procedure. At the request of any person
claiming indemnification under this Article, the Board
of Directors shall determine, or cause to be determined,
in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this
Article have been met. Indemnification shall be made
only following: (a) a final decision on the merits by a
court or other body before whom the proceeding was
brought that the person to be indemnified was not liable
by reason of disabling conduct or (b) in the absence of
such a decision, a reasonable determination, based upon
a review of the facts, that the person to be indemnified
was not liable by reason of disabling conduct by (i) the
vote of a majority of a quorum of disinterested non-
party directors or (ii) an independent legal counsel in
a written opinion.
"Section 4. Indemnification of Employees and Agents.
Employees and agents who are not officers or directors
of the Corporation may be indemnified, and reasonable
expenses may be advanced to such employees or agents, as
may be provided by action of the Board of Directors or
by contract, subject to any limitations imposed by the
Investment Company Act of 1940.
"Section 5. Other Rights. The Board of Directors may
make further provision consistent with law for
indemnification and advance of expenses to directors,
officers, employees and agents by resolution, agreement
or otherwise. The indemnification provided by this
Article shall not be deemed exclusive of any other
right, with respect to indemnification or otherwise, to
which those seeking indemnification may be entitled
under any insurance or other agreement or resolution of
stockholders or disinterested directors or otherwise.
The rights provided to any person by this Article shall
be enforceable against the Corporation by such person
who shall be presumed to have relied upon it in serving
or continuing to serve as a director, officer, employee,
or agent as provided above.
C-16
<PAGE>
"Section 6. Amendments. References in this Article are
to the Maryland General Corporation Law and to the
Investment Company Act of 1940 as from time to time
amended. No amendment of these By-laws shall effect any
right of any person under this Article based on any
event, omission or proceeding prior to the amendment."
The Registrant will participate in a Joint directors and
officers liability insurance policy issued by the ICI
Mutual Insurance Company. Coverage under this policy
has been extended to directors, trustees and officers
of the investment companies managed by Alliance Capital
Management L.P. Under this policy, outside trustees and
directors would be covered up to the limits specified
for any claim against them for acts committed in their
capacities as trustee or director. A pro rata share of
the premium for this coverage is charged to each
investment company and to the Adviser.
ITEM 28. Business and Other Connections of Investment Adviser.
The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Fund" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by
reference herein.
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference herein.
ITEM 29. Principal Underwriters
(a) Alliance Fund Distributors, Inc. is the Registrant's
Principal Underwriter in connection with the sale of
shares of the Registrant. Alliance Fund Distributors,
Inc. also acts as Principal Underwriter or Distributor
for the following investment companies:
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
C-17
<PAGE>
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment 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 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, Inc. 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.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of Alliance
Fund Distributors, Inc., the principal place of business
of which is 1345 Avenue of the Americas, New York, New
York, 10105.
Positions
Position and Offices and Offices
Name With Underwriter With Registrant
Michael J. Laughlin Chairman
Robert L. Errico President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel and
Secretary
James S. Comforti Senior Vice President
C-18
<PAGE>
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President,
Managing Director
Byron M. Davis Senior Vice President
Anne S. Drennan Senior Vice President &
Treasurer
Mark J. Dunbar Senior Vice President
Bradley F. Hanson Senior Vice President
Geoffrey L. Hyde Senior Vice President
Robert H. Joseph, Jr. Senior Vice President &
Chief Financial Officer
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Ryne A. Nishimi Senior Vice President
Antonios G. Senior Vice President
Poleondakis
Robert E. Powers Senior Vice President
Richard K. Sacculo Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Jamie A. Atkinson Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
C-19
<PAGE>
Casimir F. Bolanowski Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
John R. Carl Vice President
William W. Vice President
Collins, Jr.
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Sohaila S. Farsheed Vice President
William C. Fisher Vice President
Gerard J. Friscia Vice President &
Controller
Andrew L. Gangolf Vice President Assistant
and Assistant General Secretary
Counsel
Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Jospeh W. Gibson Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Daniel M. Hazard Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Scott Hutton Vice President
Thomas K. Intoccia Vice President
Larry P. Johns Vice President
C-20
<PAGE>
Richard D. Keppler Vice President
Gwenn M. Kessler Vice President
Donna M. Lamback Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. Vice President
MacDonald
Michael F. Mahoney Vice President
Lori E. Master Vice President
Shawn P. McClain Vice President
Maura A. McGrath Vice President
Thomas F. Monnerat Vice President
Joanna D. Murray Vice President
Jeanette M. Nardella Vice President
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Robert T. Pigozzi Vice President
James J. Posch Vice President
Domenick Pugliese Vice President and Assistant
Assistant General Secretary
Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Karen C. Satterberg Vice President
Robert C. Schultz Vice President
Raymond S. Sclafani Vice President
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<PAGE>
Richard J. Sidell Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
William C. White Vice President
Emilie D. Wrapp Vice President and Assistant
Special Counsel Secretary
Charles M. Barrett Vice President
Robert F. Brendli Vice President
Maria L. Carreras Assistant Vice President
John P. Chase Assistant Vice President
Russell R. Corby Assistant Vice President
John W. Cronin Assistant Vice President
Ralph A. DiMeglio Assistant Vice President
Faith C. Dunn Assistant Vice President
John C. Endahl Assistant Vice President
John E. English Assistant Vice President
Duff C. Ferguson Assistant Vice President
John Grambone Assistant Vice President
Brian S. Hanigan Assistant Vice President
James J. Hill Assistant Vice President
Edward W. Kelly Assistant Vice President
Michael Laino Assistant Vice President
Nicholas J. Lapi Assistant Vice President
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<PAGE>
Patrick Look Assistant Vice President &
Assistant Treasurer
Richard F. Meier Assistant Vice President
Catherine N. Peterson Assistant Vice President
Carol H. Rappa Assistant Vice President
Clara Sierra Assistant Vice President
Vincent T. Strangio Assistant Vice President
Wesley S. Williams Assistant Vice President
Christopher J. Zingaro Assistant Vice President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 30. Location of Accounts and Records.
The majority of the accounts, books and other documents required
to be maintained by Section 31(a) of the Investment Company Act of
1940 and the rules thereunder are maintained as follows:
Journals, ledgers, securities records and other original records
are maintained principally at the offices of Alliance Fund
Services, Inc., 500 Plaza Drive, Secaucus, New Jersey, 07094-1520
and at the offices of Brown Brothers Harriman & Co., the
Registrant's Custodian, 40 Water Street, Boston, MA 02109. All
other records so required to be maintained are maintained at the
offices of Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York, 10105.
ITEM 31. Management Services.
Not applicable.
ITEM 32. Undertakings
(c) The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the Registrant's
latest report to shareholders, upon request and without charge.
The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of any
Director of the Fund in accordance with Section 16 of the
Investment Company Act of 1940.
C-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and the State of New York, on
the 27th day of October, 1997.
ALLIANCE INCOME BUILDER FUND, INC.
By: /s/ John D. Carifa
______________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration Statement has
been signed below by the following persons in the capacities and
on the date indicated.
Signature Title Date
1. Principal Executive
Officer:
/s/ John D. Carifa Chairman and October 27, 1997
_____________________ President
John D. Carifa
2. Principal Financial
and Accounting Officer:
/s/ Mark D. Gersten Treasurer and October 27, 1997
_____________________ Chief Financial
Mark D. Gersten Officer
C-24
<PAGE>
3. All of the Directors:
Ruth Block
David H. Dievler
John H. Dobkin
John D. Carifa
William H. Foulk, Jr.
James H. Hester
Clifford L. Michel
Donald J. Robinson
By /s/ Edmund P. Bergan, Jr. October 27, 1997
__________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
C-25
<PAGE>
INDEX TO EXHIBITS
(1)(a) Articles of Incorporation
(1)(b) Articles of Amendment
(2) Amended By-Laws
(5) Advisory Agreement
(6)(a) Amended and Restated Distribution Services
Agreement
(6)(c) Selected Dealer Agreement
(6)(d) Selected Agent Agreement
(8) Custodian Contract
(9) Transfer Agency Agreement
(10)(a) Opinion of Seward & Kissel
(10)(b) Opinion of Venable, Baetjer & Howard LLP
(11) Consent of Independent Auditors
(13) Investment Representation Letter of Alliance
Capital Management L.P.
(16) Schedule for Computation of Performance Quotations
C-26
00250107.AQ7
<PAGE>
ARTICLES OF INCORPORATION
OF
ALLIANCE MULTI-MARKET INCOME AND GROWTH TRUST, INC.
FIRST: (1) The name of the incorporator is Lisa A.
Klar.
(2) The incorporator's post office address is
One Battery Park Plaza, New York, New York 10004.
(3) The incorporator is over eighteen years
of age.
(4) The incorporator is forming the
corporation named in these Articles of Incorporation under the
general laws of the State of Maryland.
SECOND: The name of the corporation (hereinafter
called the "Corporation") is Alliance Multi-Market Income and
Growth Trust, Inc.
THIRD: (1) The purpose for which the Corporation is
formed is to conduct, operate and carry on the business of an
investment company.
(2) The Corporation may engage in any other
business and shall have all powers conferred upon or permitted to
corporations by the Maryland General Corporation Law.
FOURTH: The post office address of the principal
office of the Corporation within the State of Maryland is 32
South Street, Baltimore, Maryland 21202 in care of The
<PAGE>
Corporation Trust, Incorporated; and the resident agent of the
Corporation in the State of Maryland is The Corporation Trust,
Incorporated, 32 South Street, Baltimore, Maryland 21202.
FIFTH: (1) The total number of shares of stock of
all classes which the Corporation shall have authority to issue
is six billion (6,000,000,000), all of which shall be Common
Stock having a par value of one-tenth of one cent ($.001) per
share and an aggregate par value of six million dollars
($6,000,000). Such shares and the holders thereof shall be
subject to the following provisions:
(a) Each holder of Common Stock may require
the Corporation to redeem all or any part of the Common Stock
owned by that holder, upon request to the Corporation or its
designated agent, at the net asset value of the shares of Common
Stock next determined following receipt of the request in a form
approved by the Corporation and accompanied by surrender of the
certificate or certificates for the shares, if any, less the
amount of any applicable redemption charge or deferred sales
charge imposed by the Board of Directors (to the extent
consistent with applicable law). The Board of Directors may
establish procedures for redemption of Common Stock.
(b) (i) The term "Minimum Amount" when used
herein shall mean two hundred dollars ($200) unless otherwise
fixed by the Board of Directors from time to time, provided that
the Minimum Amount may not in any event exceed twenty-five
2
<PAGE>
thousand dollars ($25,000). The Board of Directors may establish
differing Minimum Amounts for categories of holders of Common
Stock based on such criteria as the Board of Directors may deem
appropriate.
(ii) If the net asset value of the shares
of Common Stock held by a stockholder shall be less than the
Minimum Amount then in effect with respect to the category of
holders in which the stockholder is included, the Corporation may
redeem all of those shares, upon notice given to the holder in
accordance with paragraph (iii) of this subsection (b), to the
extent that the Corporation may lawfully effect such redemption
under the laws of the State of Maryland.
(iii) The notice referred to in paragraph
(ii) of this subsection (b) shall be in writing personally
delivered or deposited in the mail, at least thirty days (or such
other number of days as may be specified from time to time by the
Board of Directors) prior to such redemption. If mailed, the
notice shall be addressed to the stockholder at his post office
address as shown on the books of the Corporation, and sent by
first class mail, postage prepaid. The price for shares acquired
by the Corporation pursuant to this subsection (b) shall be an
amount equal to the net asset value of such shares.
(c) Payment by the Corporation for shares of
Common Stock surrendered to it for redemption shall be made by
the Corporation within seven business days of such surrender out
3
<PAGE>
of the funds legally available therefor, provided that the
Corporation may suspend the right of the stockholders to redeem
shares of Common Stock and may postpone the right of those
holders to receive payment for any shares when permitted or
required to do so by applicable statutes or regulations. Payment
of the aggregate price of shares surrendered for redemption may
be made in cash or, at the option of the Corporation, wholly or
partly in such portfolio securities of the Corporation as the
Corporation shall select.
(d) Shares of Common Stock shall be entitled
to dividends or distributions, in cash, in property or in shares
of Common Stock, as may be declared from time to time by the
Board of Directors, acting in its sole discretion, out of the
assets lawfully available therefor. The Board of Directors may
provide that dividends shall be payable only with respect to
those shares of Common Stock that have been held of record
continuously by the stockholder for a specified period, not to
exceed 72 hours, prior to the record date of the dividend.
(e) On each matter submitted to a vote of the
stockholders, each holder of Common Stock shall be entitled to
one vote for each share standing in his name on the books of the
Corporation.
(f) The Board of Directors is authorized to
classify or to reclassify, from time to time, any unissued shares
of stock of the Corporation, whether now or hereafter authorized,
4
<PAGE>
by setting, changing or eliminating the preferences, conversion
or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms and conditions of or rights to
require redemption of the stock.
(g) The Corporation may issue shares of
Common Stock in fractional denominations to the same extent as
its whole shares, and shares in fractional denominations shall be
shares of stock having proportionately to the respective
fractions represented thereby all the rights of whole shares,
including without limitation, the right to vote, the right to
receive dividends and distributions, and the right to participate
upon liquidation of the Corporation, but excluding the right to
receive a stock certificate representing fractional shares.
(h) For the purpose of allowing the net asset
value per share of the Common Stock to remain constant, the
Corporation shall be entitled to declare and pay or credit as
dividends daily the net income (which may include or give effect
to realized and unrealized gains and losses, as determined in
accordance with the Corporation's accounting and portfolio
valuation policies) of the Corporation. If the amount so
determined for any day is negative, the Corporation shall be
entitled, without the payment of monetary compensation but in
consideration of the interest of the Corporation and its
stockholders in maintaining a constant net asset value per share
of the Common Stock, to redeem pro rata from all the holders of
5
<PAGE>
record of shares of Common Stock at the time of such redemption
(in proportion to their respective holdings thereof) sufficient
outstanding shares of Common Stock, or fractions thereof, as
shall permit the net asset value per share of the Common Stock to
remain constant.
(2) No stockholder shall be entitled to any
preemptive right other than as the Board of Directors may
establish.
SIXTH: The number of directors of the Corporation
shall be one. The number of directors of the Corporation may be
changed pursuant to the By-Laws of the Corporation. The name of
the person who shall act as director of the Corporation until the
first annual meeting or until his successor is duly chosen and
qualified is David H. Dievler.
SEVENTH: The following provisions are inserted for the
purpose of defining, limiting and regulating the powers of the
Corporation and of the Board of Directors and stockholders.
(a) In addition to its other powers
explicitly or implicitly granted under these Articles of
Incorporation, by law or otherwise, the Board of Directors of the
Corporation:
(i) is expressly authorized to make,
alter, amend or repeal the By-Laws of the Corporation;
(ii) may from time to time determine
whether, to what extent, at what times and places, and under what
6
<PAGE>
conditions and regulations the accounts and books of the
Corporation, or any of them, shall be open to the inspection of
the stockholders, and no stockholder shall have any right to
inspect any account, book or document of the Corporation except
as conferred by statute or as authorized by the Board of
Directors of the Corporation;
(iii) is empowered to authorize, without
stockholder approval, the issuance and sale from time to time of
shares of stock of the Corporation whether now or hereafter
authorized; and
(iv) is authorized to adopt procedures
for determination of and to maintain constant the net asset value
of shares of any class of the Corporation's stock.
(b) Notwithstanding any provision of the
Maryland General Corporation Law requiring a greater proportion
than a majority of the votes of the Corporation's stock entitled
to be cast in order to take or authorize any action, any such
action may be taken or authorized upon the concurrence of a
majority of the aggregate number of votes entitled to be cast
thereon subject to any applicable requirements of the Investment
Company Act of 1940, as from time to time in effect, or rules or
orders of the Securities and Exchange Commission or any successor
thereto.
(c) The presence in person or by proxy of the
holders of shares entitled to cast one-third of the votes
7
<PAGE>
entitled to be cast shall constitute a quorum at any meeting of
the stockholders, except with respect to any matter which, under
applicable statutes or regulatory requirements, requires approval
by a separate vote of one or more classes of stock, in which case
the presence in person or by proxy of the holders of shares
entitled to cast one-third of the votes entitled to be cast by
each class entitled to vote as a class on the matter shall
constitute a quorum.
(d) Any determination made in good faith by
or pursuant to the direction of the Board of Directors, as to the
amount of the assets, debts, obligations, or liabilities of the
Corporation, as to the amount of any reserves or charges set up
and the propriety thereof, as to the time of or purpose for
creating such reserves or charges, as to the use, alteration or
cancellation of any reserves or charges (whether or not any debt,
obligation, or liability for which such reserves or charges shall
have been created shall be then or thereafter required to be paid
or discharged), as to the value of or the method of valuing any
investment owned or held by the Corporation, as to market value
or fair value of any investment or fair value of any other asset
of the Corporation, as to the allocation of any asset of the
Corporation to a particular class or classes of the Corporation's
stock, as to the charging of any liability of the Corporation to
a particular class or classes of the Corporation's stock, as to
the number of shares of the Corporation outstanding, as to the
8
<PAGE>
estimated expense to the Corporation in connection with purchases
of its shares, as to the ability to liquidate investments in an
orderly fashion, or as to any other matters relating to the
issue, sale, redemption or other acquisition or disposition of
investments or shares of the Corporation, shall be final and
conclusive and shall be binding upon the Corporation and all
holders of its shares, past, present and future, and shares of
the Corporation are issued and sold on the condition and
understanding that any and all such determinations shall be
binding as aforesaid.
EIGHTH: (1) To the full extent that limitations on
the liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer of the
Corporation shall have any liability to the Corporation or its
stockholders for damages. This limitation on liability applies
to events occurring at the time a person serves as a director or
officer of the Corporation whether or not that person is a
director or officer at the time of any proceeding in which
liability is asserted.
(2) The Corporation shall indemnify and
advance expenses to its currently acting and its former directors
to the full extent that indemnification of directors is permitted
by the Maryland General Corporation Law. The Corporation shall
indemnify and advance expenses to its officers to the same extent
as its directors and may do so to such further extent as is
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<PAGE>
consistent with Maryland General Corporation Law. The Board of
Directors may by By-Law, resolution or agreement make further
provision for indemnification of directors, officers, employees
and agents to the full extent permitted by the Maryland General
Corporation Law.
(3) No provision of this Article shall be
effective to protect or purport to protect any director or
officer of the Corporation against any liability to the
Corporation or its stockholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office.
(4) References to the Maryland General
Corporation Law in this Article are to that law as from time to
time amended. No amendment to the charter of the Corporation
shall affect any right of any person under this Article based on
any event, omission or proceeding prior to the amendment.
NINTH: The Corporation reserves the right to amend,
alter, change or repeal any provision contained in these Articles
of Incorporation or in any amendment hereto in the manner now or
hereafter prescribed by the laws of the State of Maryland,
including any amendment which alters the contract rights, as
expressly set forth in these Articles of Incorporation, of any
outstanding stock, and all rights conferred upon stockholders
herein are granted subject to this reservation.
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<PAGE>
IN WITNESS WHEREOF, the undersigned, being the
incorporator of the Corporation, has adopted and signed these
Articles of Incorporation and does hereby acknowledge that the
adoption and signing are her act.
/s/ Lisa A. Klar
________________________
Lisa A. Klar
Dated: August 2, 1991
11
00250107.AB5
<PAGE>
ALLIANCE MULTI-MARKET INCOME AND GROWTH TRUST, INC.
ARTICLES OF AMENDMENT
(Changing its Name to Alliance Income Builder Fund, Inc.)
Alliance Multi-Market Income and Growth Trust, Inc., a
Maryland corporation having its principal place of business in
Maryland in Baltimore City, Maryland (hereinafter called the
"Corporation"), certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by
striking out Article SECOND of the Articles of Incorporation
and inserting in lieu thereof the following:
SECOND: The name of the corporation (hereinafter called
the "Corporation") is Alliance Income Builder Fund, Inc.
SECOND: The charter of the Corporation is hereby further
amended (i) by deleting Article FIFTH, paragraph (l)(e),
relating to voting, therefrom, (ii) by relettering Article
FIFTH paragraphs (l)(a) through (d) as paragraphs (l)(k)
through (n), respectively, and paragraphs (l)(f) through (h)
as paragraphs (l)(o) through (q), respectively, (iii) by
changing the cross-references in present paragraphs
(l)(b)(ii) and (iii) of Article FIFTH from "this subsection
(b)" to "this subsection (1)" and (iv) by revising the
introductory paragraph in subsection (1) and inserting new
paragraphs (l)(a)-(j) in Article FIFTH as follows:
FIFTH (1) The total number of shares of stock of all
classes which the Corporation shall have authority to
issue is six billion (6,000,000,000), all of which shall
be Common Stock having a par value of one-tenth of one
cent ($.001) per share and an aggregate par value of six
million dollars ($6,000,000). The Common Stock that the
Corporation shall have authority to issue shall be
classified initially as two billion (2,000,000,000)
shares of Class A Common Stock, two billion
(2,000,000,000) shares of Class B Common Stock, and two
billion (2,000,000,000) shares of Class C Common Stock.
As used in the charter of the Corporation, the term
"Common Stock" without further designation shall refer
to all classes of Common Stock of the Corporation.
Subject to the power of the Board of Directors set forth
in Article FIFTH paragraph (l)(o) to reclassify unissued
shares, the shares of each class of stock of the
Corporation shall have the following preferences,
conversion and other rights, voting powers,
<PAGE>
restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption:
(a) The income of the Corporation and those
expenses of the Corporation that are not
attributable to any particular class of Common
Stock shall be allocated among the classes in
accordance with the number of shares outstanding of
each such class or as otherwise determined by the
Board of Directors.
(b) The liabilities and expenses of the
classes shall otherwise be determined separately
from those of each other and, accordingly, the net
asset values, the dividends and distributions
payable to holders, and the amounts distributable
in the event of liquidation of the Corporation to
holders of shares of the Corporation's stock may
vary from class to class. Except for these
differences and certain other differences set forth
in this Article Fifth, the classes shall have the
same preferences, conversion and other rights,
voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions
of redemption.
(c) The dividends and distributions of
investment income and capital gains with respect to
the classes shall be in such amounts as may be
declared from time to time by the Board of
Directors, and such dividends and distributions may
vary among the classes to reflect differing
allocations of the expenses of the Corporation
among the classes and any resultant differences
among the net asset values per share of the
classes, to such extent and for such purposes as
the Board of Directors may deem appropriate. The
allocation of investment income, capital gains,
expenses and liabilities of the Corporation among
the classes shall be determined by the Board of
Directors in a manner that is consistent with the
order dated January 8, 1990 (Investment Company Act
of 1940 Release No. 17295) issued by the Securities
and Exchange Commission in connection with the
application for exemption filed by Alliance Capital
Management L.P., et al., and any existing or future
amendment to such order or any rule or
interpretation under the Investment Company Act of
1940, as amended, that modifies or supersedes such
order.
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(d) Except as hereinafter provided, on each
matter submitted to a vote of the stockholders,
each holder of a share of stock shall be entitled
to one vote for each share standing in his name on
the books of the Corporation irrespective of the
class thereof. All holders of shares of stock shall
vote as a single class except as may otherwise be
required by law pursuant to any applicable order,
rule or interpretation issued by the Securities and
Exchange Commission, or otherwise, or except with
respect to any matter which affects only one or
more classes of stock, in which case only the
holders of shares of the class or classes affected
shall be entitled to vote.
(e) The proceeds of the redemption of a share
(including a fractional share) of Class B Common
Stock and Class C Common Stock shall be reduced by
the amount of any contingent deferred sales charge
payable on such redemption pursuant to the terms of
issuance of such share.
(f) (i) Each share of the Class B Common
Stock, other than shares described in paragraph
(l)(f)(ii), shall be converted automatically, and
without any action or choice on the part of the
holder thereof, into shares of the Class A Common
Stock on the Conversion Date. The term "Conversion
Date" when used herein shall mean either (x) the
date that is the first Corporation business day in
the month following the month in which the eighth
anniversary date of the date of issuance of the
share falls, or (y) any such other date as may be
determined by the Board of Directors and set forth
in the Corporation's prospectus, as such prospectus
may be amended from time to time; provided that any
such date determined by the Board of Directors
shall be a date that will occur prior to the date
set forth in clause (x) and any other date
theretofore determined by the Board of Directors
pursuant to this clause (y). For the purpose of
calculating the holding period required for
conversion, the date of issuance of a share of
Class B Common Stock shall mean (x) in the case of
a share of Class B Common Stock obtained by the
holder thereof through a subscription to the
Corporation, the date of the issuance of such share
of Class B Common Stock, or (y) in the case of a
share of Class B Common Stock obtained by the
holder thereof through an exchange, or through a
series of exchanges, from another eligible
3
<PAGE>
investment company, the date of issuance of the
share of the Class B Common Stock of the eligible
investment company to which the holder originally
subscribed. For this purpose an "eligible
investment company" shall be an investment company
designated for that purpose in the Corporation's
prospectus, as such prospectus may be amended from
time to time.
(ii) Each share of Class B Common Stock
(x) purchased through the automatic
reinvestment of a dividend or distribution
with respect to the Class B Common Stock or
(y) issued pursuant to an exchange privilege
granted by the Corporation in an exchange or
series of exchanges for shares originally
purchased through the automatic reinvestment
of a dividend or distribution with respect to
shares of capital stock of an eligible
investment company shall be segregated in a
separate sub-account on the stock records of
the Corporation for each of the holders
thereof. On any Conversion Date, a number of
the shares held in the sub-account of the
holder of the share or shares being converted,
calculated in accordance with the next
following sentence, shall be converted
automatically, and without any action or
choice on the part of the holder, into shares
of the Class A Common Stock. The number of
shares in the holder's sub-account so
converted shall bear the same ratio to the
total number of shares maintained in the sub-
account on the Conversion Date (immediately
prior to conversion) as the number of shares
of the holder converted on the Conversion Date
pursuant to paragraph (l)(f)(i) hereof bears
to the total number of shares on the
Conversion Date (immediately prior to
conversion) of the Class B Common Stock of the
holder after subtracting the shares then
maintained in the holder's sub-account.
(g) The number of shares of the Class A
Common Stock into which a share of the Class B
Common Stock is converted pursuant to paragraphs
(l)(f)(i) and (ii) hereof shall equal the number
(including for this purpose fractions of a share)
obtained by dividing the net asset value per share
of the Class B Common Stock for purposes of sales
and redemption thereof on the Conversion Date by
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<PAGE>
the net asset value per share of the Class A Common
Stock for purposes of sales and redemption thereof
on the Conversion Date.
(h) On the Conversion Date, the shares of the
Class B Common Stock converted into shares of the
Class A Common Stock will cease to accrue dividends
and will no longer be deemed outstanding and the
rights of the holders thereof (except the right to
receive (x) the number of shares of Class A Common
Stock into which the shares of Class B Common Stock
have been converted and (y) declared but unpaid
dividends to the Conversion Date and (z) the right
to vote converting shares of the Class B Common
Stock held as of any record date occurring before
the Conversion Date and theretofore set with
respect to any meeting held after the Conversion
Date) will cease. Certificates representing shares
of the Class A Common Stock resulting from the
conversion need not be issued until certificates
representing shares of the Class B Common Stock
converted, if issued, have been received by the
Corporation or its agent duly endorsed for
transfer.
(i) The automatic conversion of the Class B
Common Stock into Class A Common Stock as set forth
in paragraphs (l)(f)(i) and (ii) of this Article
FIFTH shall be suspended at any time that the Board
of Directors determines (i) that there is not
available a reasonably satisfactory opinion of
counsel to the effect that (x) the assessment of
the higher distribution services fee and transfer
agency costs with respect to the Class B Common
Stock does not result in the Corporation's
dividends or distributions constituting a
"preferential dividend" under the Internal Revenue
Code of 1986, as amended, and (y) the conversion of
the Class B Common Stock does not constitute a
taxable event under federal income tax law, or (ii)
any other condition to conversion set forth in the
Corporation's prospectus, as such prospectus may be
amended from time to time, is not satisfied.
(j) The automatic conversion of the Class B
Common Stock into Class A Common Stock as set forth
in paragraphs (l)(f)(i) and (ii) of this Article
FIFTH may also be suspended by action of the Board
of Directors at any time that the Board of
Directors determines such suspension to be
appropriate in order to comply with, or satisfy the
5
<PAGE>
requirements of the Investment Company Act of 1940,
as amended, and in effect from time to time, or any
rule, regulation or order issued thereunder
relating to voting by the holders of the Class B
Common Stock on any plan with respect to the Class
A Common Stock proposed under Rule 12b-1 of the
Investment Company Act of 1940, as amended, and in
effect from time to time, and in connection with,
or in lieu of, any such suspension, the Board of
Directors may provide holders of the Class B Common
Stock with alternative conversion or exchange
rights into other classes of stock of the
Corporation in a manner consistent with the law,
rule, regulation or order giving rise to the
possible suspension of the conversion right.
THIRD: The charter of the Corporation is hereby further
amended by amending Article FIFTH, paragraph (l)(a),
relettered pursuant to Article SECOND of these Articles of
Amendment as Article FIFTH paragraph (l)(k), to read:
(k) Each holder of Common Stock may require
the Corporation to redeem all or any part of the
Common Stock owned by that holder, upon request to
the Corporation or its designated agent, at the net
asset value of the shares of Common Stock of the
relevant class next determined following receipt of
the request in a form approved by the Corporation
and accompanied by surrender of the certificate or
certificates for the shares, if any, less the
amount of any applicable redemption charge or
deferred sales charge imposed by the Board of
Directors (to the extent consistent with applicable
law). The Board of Directors may establish
procedures for redemption of Common Stock.
FOURTH: Each share (including for this purpose a fraction of
a share) of Common Stock issued and outstanding prior to
these Articles of Amendment becoming effective, shall, at
such effective time, be reclassified automatically, and
without any action or choice on the part of the holder, into
a share (or the same fraction of a share) of Class C Common
Stock. Outstanding certificates representing issued and
outstanding shares of Common Stock immediately prior to these
Articles of Amendment becoming effective shall, upon these
Articles of Amendment becoming effective, be deemed to
represent the same number of shares of Class C Common Stock.
Certificates representing shares of the Class C Common Stock
resulting from the aforesaid reclassification need not be
issued until certificates representing the shares of Common
Stock so reclassified, if issued, have been received by the
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<PAGE>
Corporation or its agent duly endorsed for transfer. The
Class A Common Stock, Class B Common Stock, and Class C
Common Stock shall have the preferences, conversion and other
rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of
redemption as set forth in the charter of the Corporation as
herein amended.
FIFTH: The amendment of the charter of the Corporation as
herein set forth has been duly advised by the Board of
Directors and approved by the stockholders in the manner
required by law and the charter of the Corporation.
SIXTH: These Articles of Amendment shall be effective
on March 22, 1994.
The undersigned Chairman of the Board of the Corporation
acknowledges these Articles of Amendment to be the corporate act
of the Corporation and states that to the best of his knowledge,
information and belief, the matters and facts set forth in these
Articles with respect to the authorization and approval of the
amendment of the Corporation's charter are true in all material
respects, and that this statement is made under the penalties of
perjury.
IN WITNESS WHEREOF, Alliance Multi-Market Income and Growth
Trust, Inc., has caused these Articles of Amendment to be
executed in its name and on its behalf by its Chairman of the
Board, David H. Dievler, and witnessed by its Assistant
Secretary, Robert J. Grosso, on the of 21st day of March, 1994.
ALLIANCE MULTI-MARKET INCOME AND
GROWTH TRUST, INC.
By: /s/ David H. Dievler
_________________________
David H. Dievler,
Chairman of the Board
WITNESS:
/s/ Robert J. Grosso
__________________________________________
Robert J. Grosso, Assistant Secretary
7
00250107.AI0
<PAGE>
Exhibit 2
BY-LAWS
OF
ALLIANCE MULTI-MARKET INCOME AND GROWTH TRUST, INC.
________________
ARTICLE I
Offices
Section 1. Principal Office in Maryland. The
Corporation shall have a principal office in the City of
Baltimore, State of Maryland.
Section 2. Other Offices. The Corporation may have
offices also at such other places within and without the State of
Maryland as the Board of Directors may from time to time
determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting. Meetings of stockholders
shall be held at such place, either within the State of Maryland
or at such other place within the United States, as shall be
fixed from time to time by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of
stockholders shall be held on a date fixed from time to time by
the Board of Directors not less than two hundred ten days nor
more than two hundred forty days following the end of the fiscal
year of the Corporation, for the election of directors and the
<PAGE>
transaction of any other business within the powers of the
Corporation; provided, however, that the Corporation shall not be
required to hold an annual meeting in any year in which the
election of directors is not required to be acted on by the
stockholders under the Investment Company Act of 1940.
Section 3. Notice of Annual Meeting. Written or
printed notice of the annual meeting, stating the place, date and
hour thereof, shall be given to each stockholder entitled to vote
thereat and each other stockholder entitled to notice thereof not
less than ten nor more than ninety days before the date of the
meeting.
Section 4. Special Meetings. Special meetings of
stockholders may be called by the chairman, the president or by
the Board of Directors and shall be called by the secretary upon
the written request of holders of shares entitled to cast not
less than twenty-five percent of all the votes entitled to be
cast at such meeting. Such request shall state the purpose or
purposes of such meeting and the matters proposed to be acted on
thereat. In the case of such request for a special meeting, upon
payment by such stockholders to the Corporation of the estimated
reasonable cost of preparing and mailing a notice of such
meeting, the secretary shall give the notice of such meeting.
The secretary shall not be required to call a special meeting to
consider any matter which is substantially the same as a matter
acted upon at any special meeting of stockholders held within the
2
<PAGE>
preceding twelve months unless requested to do so by holders of
shares entitled to cast not less than a majority of all votes
entitled to be cast at such meeting. Notwithstanding the
foregoing, to the extent required by the Investment Company Act
of 1940, special meetings of stockholders for the purpose of
voting upon the question of removal of any director or directors
of the Corporation shall be called by the secretary upon the
written request of holders of shares entitled to cast not less
than ten percent of all the votes entitled to be cast at such
meeting.
Section 5. Notice of Special Meeting. Written or
printed notice of a special meeting of stockholders, stating the
place, date, hour and purpose thereof, shall be given by the
secretary to each stockholder entitled to vote thereat and each
other stockholder entitled to notice thereof not less than ten
nor more than ninety days before the date fixed for the meeting.
Section 6. Business of Special Meetings. Business
transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice thereof.
Section 7. Quorum. The holders of shares entitled to
cast one-third of the votes entitled to be cast thereat, present
in person or represented by proxy, shall constitute a quorum at
all meetings of the stockholders for the transaction of business,
except with respect to any matter which, under applicable
statutes or regulatory requirements, requires approval by a
3
<PAGE>
separate vote of one or more classes of stock, in which case the
presence in person or by proxy of the holders of one-third of the
shares of stock of each class required to vote as a class on the
matter shall constitute a quorum.
Section 8. Voting. When a quorum is present at any
meeting, the affirmative vote of a majority of the votes cast,
or, with respect to any matter requiring a class vote, the
affirmative vote of a majority of the votes cast of each class
entitled to vote as a class on the matter, shall decide any
question brought before such meeting (except that directors may
be elected by the affirmative vote of a plurality of the votes
cast), unless the question is one upon which by express provision
of the Investment Company Act of 1940, as from time to time in
effect, or other statutes or rules or orders of the Securities
and Exchange Commission or any successor thereto or of the
Articles of Incorporation a different vote is required, in which
case such express provision shall govern and control the decision
of such question.
Section 9. Proxies. Each stockholder shall at every
meeting of stockholders be entitled to one vote in person or by
proxy for each share of the stock having voting power held by
such stockholder, but no proxy shall be voted after eleven months
from its date, unless otherwise provided in the proxy.
Section 10. Record Date. In order that the Corporation
may determine the stockholders entitled to notice of or to vote
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<PAGE>
at any meeting of stockholders or any adjournment thereof, to
express consent to corporate action in writing without a meeting,
or to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may
fix, in advance, a record date which shall be not more than
ninety days and, in the case of a meeting of stockholders, not
less than ten days prior to the date on which the particular
action requiring such determination of stockholders is to be
taken. In lieu of fixing a record date, the Board of Directors
may provide that the stock transfer books shall be closed for a
stated period, but not to exceed, in any case, twenty days. If
the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least
ten days immediately preceding such meeting. If no record date
is fixed and the stock transfer books are not closed for the
determination of stockholders: (1) The record date for the
determination of stockholders entitled to notice of, or to vote
at, a meeting of stockholders shall be at the close of business
on the day on which notice of the meeting of stockholders is
mailed or the day thirty days before the meeting, whichever is
the closer date to the meeting; and (2) The record date for the
determination of stockholders entitled to receive payment of a
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<PAGE>
dividend or an allotment of any rights shall be at the close of
business on the day on which the resolution of the Board of
Directors, declaring the dividend or allotment of rights, is
adopted, provided that the payment or allotment date shall not be
more than sixty days after the date of the adoption of such
resolution.
Section 11. Inspectors of Election. The directors, in
advance of any meeting, may, but need not, appoint one or more
inspectors to act at the meeting or any adjournment thereof. If
an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an
inspector fails to appear or act, the vacancy may be filled by
appointment made by the directors in advance of the meeting or at
the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best
of his ability. The inspectors, if any, shall determine the
number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate
all votes, ballots or consents, determine the result, and do such
6
<PAGE>
acts as are proper to conduct the election or vote with fairness
to all stockholders. On request of the person presiding at the
meeting or any stockholder, the inspector or inspectors, if any,
shall make a report in writing of any challenge, question or
matter determined by him or them and execute a certificate of any
fact found by him or them.
Section 12. Informal Action by Stockholders. Except to
the extent prohibited by the Investment Company Act of 1940, as
from time to time in effect, or rules or orders of the Securities
and Exchange Commission or any successor thereto, any action
required or permitted to be taken at any meeting of stockholders
may be taken without a meeting if a consent in writing, setting
forth such action, is signed by all the stockholders entitled to
vote on the subject matter thereof and any other stockholders
entitled to notice of a meeting of stockholders (but not to vote
thereat) have waived in writing any rights which they may have to
dissent from such action, and such consent and waiver are filed
with the records of the Corporation.
ARTICLE III
Board of Directors
Section 1. Number of Directors. The number of
directors constituting the entire Board of Directors (which
initially was fixed at one in the Corporation's Articles of
Incorporation) may be increased or decreased from time to time by
the vote of a majority of the entire Board of Directors within
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<PAGE>
the limits permitted by law but at no time may be more than
twenty, but the tenure of office of a director in office at the
time of any decrease in the number of directors shall not be
affected as a result thereof. The directors shall be elected to
hold offices at the annual meeting of stockholders, except as
provided in Section 2 of this Article, and each director shall
hold office until the next annual meeting of stockholders or
until his successor is elected and qualified. Any director may
resign at any time upon written notice to the Corporation. Any
director may be removed, either with or without cause, at any
meeting of stockholders duly called and at which a quorum is
present by the affirmative vote of the majority of the votes
entitled to be cast thereon, and the vacancy in the Board of
Directors caused by such removal may be filled by the
stockholders at the time of such removal. Directors need not be
stockholders.
Section 2. Vacancies and Newly-Created Directorships.
Any vacancy occurring in the Board of Directors for any cause
other than by reason of an increase in the number of directors
may be filled by a majority of the remaining members of the Board
of Directors although such majority is less than a quorum. Any
vacancy occurring by reason of an increase in the number of
directors may be filled by a majority of the entire Board of
Directors. A director elected by the Board of Directors to fill
a vacancy shall be elected to hold office until the next annual
8
<PAGE>
meeting of stockholders or until his successor is elected and
qualifies.
Section 3. Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the
Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by
statute or by the Articles of Incorporation or by these By-Laws
conferred upon or reserved to the stockholders.
Section 4. Meetings. The Board of Directors of the
Corporation or any committee thereof may hold meetings, both
regular and special, either within or without the State of
Maryland. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time
to time be determined by the Board of Directors. Special
meetings of the Board of Directors may be called by the chairman,
the president or by two or more directors. Notice of special
meetings of the Board of Directors shall be given by the
secretary to each director at least three days before the meeting
if by mail or at least 24 hours before the meeting if given in
person or by telephone or by telegraph. The notice need not
specify the business to be transacted.
Section 5. Quorum and Voting. During such times when
the Board of Directors shall consist of more than one director, a
quorum for the transaction of business at meetings of the Board
of Directors shall consist of two of the directors in office at
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<PAGE>
the time but in no event shall a quorum consist of less than one-
third of the entire Board of Directors. The action of a majority
of the directors present at a meeting at which a quorum is
present shall be the action of the Board of Directors. If a
quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 6. Committees. The Board of Directors may
appoint from among its members an executive committee and other
committees of the Board of Directors, each committee to be
composed of two or more of the directors of the Corporation. The
Board of Directors may delegate to such committees any of the
powers of the Board of Directors except those which may not by
law be delegated to a committee. Such committee or committees
shall have the name or names as may be determined from time to
time by resolution adopted by the Board of Directors. Unless the
Board of Directors designates one or more directors as alternate
members of any committee, who may replace an absent or
disqualified member at any meeting of the committee, the members
of any such committee present at any meeting and not disqualified
from voting may, whether or not they constitute a quorum, appoint
another member of the Board of Directors to act at the meeting in
the place of any absent or disqualified member of such committee.
At meetings of any such committee, a majority of the members or
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<PAGE>
alternate members of such committee shall constitute a quorum for
the transaction of business and the act of a majority of the
members or alternate members present at any meeting at which a
quorum is present shall be the act of the committee.
Section 7. Minutes of Committee Meetings. The
committees shall keep regular minutes of their proceedings.
Section 8. Informal Action by Board of Directors and
Committees. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent thereto is signed
by all members of the Board of Directors or of such committee, as
the case may be, and such written consent is filed with the
minutes of proceedings of the Board of Directors or committee,
provided, however, that such written consent shall not constitute
approval of any matter which pursuant to the Investment Company
Act of 1940 and the rules thereunder requires the approval of
directors by vote cast in person at a meeting.
Section 9. Meetings by Conference Telephone. The
members of the Board of Directors or any committee thereof may
participate in a meeting of the Board of Directors or committee
by means of a conference telephone or similar communications
equipment by means of which all persons participating in the
meeting can hear each other at the same time and such
participation shall constitute presence in person at such
meeting, provided, however, that such participation shall not
11
<PAGE>
constitute presence in person with respect to matters which
pursuant to the Investment Company Act of 1940 and the rules
thereunder require the approval of directors by vote cast in
person at a meeting.
Section 10. Fees and Expenses. The directors may be
paid their expenses of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors, a stated salary as director or
such other compensation as the Board of Directors may approve.
No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be
allowed like reimbursement and compensation for attending
committee meetings.
ARTICLE IV
Notices
Section 1. General. Notices to directors and
stockholders mailed to them at their post office addresses
appearing on the books of the Corporation shall be deemed to be
given at the time when deposited in the United States mail.
Section 2. Waiver of Notice. Whenever any notice is
required to be given under the provisions of the statutes, of the
Articles of Incorporation or of these By-Laws, a waiver thereof
in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be
12
<PAGE>
deemed the equivalent of notice and such waiver shall be filed
with the records of the meeting. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting
except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction
of any business because the meeting is not lawfully called or
convened.
ARTICLE V
Officers
Section 1. General. The officers of the Corporation
shall be chosen by the Board of Directors at its first meeting
after each annual meeting of stockholders and shall be a chairman
of the Board of Directors, a president, a secretary and a
treasurer. The Board of Directors may choose also such vice
presidents and additional officers or assistant officers as it
may deem advisable. Any number of offices, except the offices of
president and vice president and chairman and vice president, may
be held by the same person. No officer shall execute,
acknowledge or verify any instrument in more than one capacity if
such instrument is required by law to be executed, acknowledged
or verified by two or more officers.
Section 2. Other Officers and Agents. The Board of
Directors may appoint such other officers and agents as it
desires who shall hold their offices for such terms and shall
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<PAGE>
exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
Section 3. Tenure of Officers. The officers of the
Corporation shall hold office at the pleasure of the Board of
Directors. Each officer shall hold his office until his
successor is elected and qualifies or until his earlier
resignation or removal. Any officer may resign at any time upon
written notice to the Corporation. Any officer elected or
appointed by the Board of Directors may be removed at any time by
the Board of Directors when, in its judgment, the best interests
of the Corporation will be served thereby. Any vacancy occurring
in any office of the Corporation by death, resignation, removal
or otherwise shall be filled by the Board of Directors.
Section 4. Chairman of the Board of Directors. The
chairman of the Board of Directors shall preside at all meetings
of the stockholders and of the Board of Directors. He shall be
the chief executive officer and shall have general and active
management of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried
into effect. He shall be ex officio a member of all committees
designated by the Board of Directors except as otherwise
determined by the Board of Directors. He shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of
the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and
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<PAGE>
execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
Section 5. President. The president shall act under
the direction of the chairman and in the absence or disability of
the chairman shall perform the duties and exercise the powers of
the chairman. He shall perform such other duties and have such
other powers as the chairman or the Board of Directors may from
time to time prescribe. He shall execute on behalf of the
Corporation, and may affix the seal or cause the seal to be
affixed to, all instruments requiring such execution except to
the extent that signing and execution thereof shall be expressly
delegated by the Board of Directors to some other officer or
agent of the Corporation.
Section 6. Vice Presidents. The vice presidents shall
act under the direction of the chairman and in the absence or
disability of the president shall perform the duties and exercise
the powers of the president. They shall perform such other
duties and have such other powers as the chairman or the Board of
Directors may from time to time prescribe. The Board of
Directors may designate one or more executive vice presidents or
may otherwise specify the order of seniority of the vice
presidents and, in that event, the duties and powers of the
president shall descend to the vice presidents in the specified
order of seniority.
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<PAGE>
Section 7. Secretary. The secretary shall act under
the direction of the chairman. Subject to the direction of the
chairman he shall attend all meetings of the Board of Directors
and all meetings of stockholders and record the proceedings in a
book to be kept for that purpose and shall perform like duties
for the committees designated by the Board of Directors when
required. He shall give, or cause to be given, notice of all
meetings of stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be
prescribed by the chairman or the Board of Directors. He shall
keep in safe custody the seal of the Corporation and shall affix
the seal or cause it to be affixed to any instrument requiring
it.
Section 8. Assistant Secretaries. The assistant
secretaries in the order of their seniority, unless otherwise
determined by the chairman or the Board of Directors, shall, in
the absence or disability of the secretary, perform the duties
and exercise the powers of the secretary. They shall perform
such other duties and have such other powers as the chairman or
the Board of Directors may from time to time prescribe.
Section 9. Treasurer. The treasurer shall act under
the direction of the chairman. Subject to the direction of the
chairman he shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the Corporation and shall
16
<PAGE>
deposit all moneys and other valuable effects in the name and to
the credit of the Corporation in such depositories as may be
designated by the Board of Directors. He shall disburse the
funds of the Corporation as may be ordered by the chairman or the
Board of Directors, taking proper vouchers for such
disbursements, and shall render to the chairman and the Board of
Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as
treasurer and of the financial condition of the Corporation.
Section 10. Assistant Treasurers. The assistant
treasurers in the order of their seniority, unless otherwise
determined by the chairman or the Board of Directors, shall, in
the absence or disability of the treasurer, perform the duties
and exercise the powers of the treasurer. They shall perform
such other duties and have such other powers as the chairman or
the Board of Directors may from time to time prescribe.
ARTICLE VI
Certificates of Stock
Section 1. General. Every holder of stock of the
Corporation who has made full payment of the consideration for
such stock shall be entitled upon request to have a certificate,
signed by, or in the name of the Corporation by, the chairman,
the president or a vice president and countersigned by the
treasurer or an assistant treasurer or the secretary or an
assistant secretary of the Corporation, certifying the number
17
<PAGE>
and, if additional shares of stock should be authorized, the
class of whole shares of stock owned by him in the Corporation.
Section 2. Fractional Share Interests. The Corporation
may issue fractions of a share of stock. Fractional shares of
stock shall have proportionately to the respective fractions
represented thereby all the rights of whole shares, including the
right to vote, the right to receive dividends and distributions
and the right to participate upon liquidation of the Corporation,
excluding, however, the right to receive a stock certificate
representing such fractional shares.
Section 3. Signatures on Certificates. Any of or all
the signatures on a certificate may be a facsimile. In case any
officer who has signed or whose facsimile signature has been
placed upon a certificate shall cease to be such officer before
such certificate is issued, it may be issued with the same effect
as if he were such officer at the date of issue. The seal of the
Corporation or a facsimile thereof may, but need not, be affixed
to certificates of stock.
Section 4. Lost, Stolen or Destroyed Certificates. The
Board of Directors may direct a new certificate or certificates
to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of any affidavit of that
fact by the person claiming the certificate or certificates to be
lost, stolen or destroyed. When authorizing such issue of a new
18
<PAGE>
certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate
or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with
respect to the certificate or certificates alleged to have been
lost, stolen or destroyed.
Section 5. Transfer of Shares. Upon request by the
registered owner of shares, and if a certificate has been issued
to represent such shares upon surrender to the Corporation or a
transfer agent of the Corporation of a certificate for shares of
stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the
duty of the Corporation, if it is satisfied that all provisions
of the Articles of Incorporation, of the By-Laws and of the law
regarding the transfer of shares have been duly complied with, to
record the transaction upon its books, issue a new certificate to
the person entitled thereto upon request for such certificate,
and cancel the old certificate, if any.
Section 6. Registered Owners. The Corporation shall be
entitled to recognize the person registered on its books as the
owner of shares to be the exclusive owner for all purposes
including voting and dividends, and the Corporation shall not be
bound to recognize any equitable or other claim to or interest in
19
<PAGE>
such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as
otherwise provided by the laws of Maryland.
ARTICLE VII
Miscellaneous
Section 1. Reserves. There may be set aside out of any
funds of the Corporation available for dividends such sum or sums
as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet
contingencies, or for such other purpose as the Board of
Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may modify or abolish any
such reserve.
Section 2. Dividends. Dividends upon the stock of the
Corporation may, subject to the provisions of the Articles of
Incorporation and of applicable law, be declared by the Board of
Directors at any time. Dividends may be paid in cash, in
property or in shares of the Corporation's stock, subject to the
provisions of the Articles of Incorporation and of applicable
law.
Section 3. Capital Gains Distributions. The amount and
number of capital gains distributions paid to the stockholders
during each fiscal year shall be determined by the Board of
Directors. Each such payment shall be accompanied by a statement
as to the source of such payment, to the extent required by law.
20
<PAGE>
Section 4. Checks. All checks or demands for money and
notes of the Corporation shall be signed by such officer or
officers or such other person or persons as the Board of
Directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the
Corporation shall be fixed by resolution of the Board of
Directors.
Section 6. Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its
organization and the words "Corporate Seal, Maryland." The seal
may be used by causing it or a facsimile thereof to be impressed
or affixed or in another manner reproduced.
Section 7. Insurance Against Certain Liabilities. The
Corporation shall not bear the cost of insurance that protects or
purports to protect directors and officers of the Corporation
against any liabilities to the Corporation or its securityholders
to which any such director or officer would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office.
ARTICLE VIII
Indemnification
Section 1. Indemnification of Directors and Officers.
The Corporation shall indemnify its directors to the full extent
that indemnification of directors is permitted by the Maryland
21
<PAGE>
General Corporation Law. The Corporation shall indemnify its
officers to the same extent as its directors and to such further
extent as is consistent with law. The Corporation shall
indemnify its directors and officers who while serving as
directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint
venture, trust, other enterprise or employee benefit plan to the
full extent consistent with law. The indemnification and other
rights provided by this Article shall continue as to a person who
has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a
person. This Article shall not protect any such person against
any liability to the Corporation or any stockholder thereof to
which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office ("disabling
conduct").
Section 2. Advances. Any current or former director or
officer of the Corporation seeking indemnification within the
scope of this Article shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by
him in connection with the matter as to which he is seeking
indemnification in the manner and to the full extent permissible
under the Maryland General Corporation Law. The person seeking
22
<PAGE>
indemnification shall provide to the Corporation a written
affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Corporation has been met and
a written undertaking to repay any such advance if it should
ultimately be determined that the standard of conduct has not
been met. In addition, at least one of the following additional
conditions shall be met: (a) the person seeking indemnification
shall provide a security in form and amount acceptable to the
Corporation for his undertaking; (b) the Corporation is insured
against losses arising by reason of the advance; or (c) a
majority of a quorum of directors of the Corporation who are
neither "interested persons" as defined in Section 2(a)(19) of
the Investment Company Act of 1940, as amended, nor parties to
the proceeding ("disinterested non-party directors"), or
independent legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available to the
Corporation at the time the advance is proposed to be made, that
there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to
indemnification.
Section 3. Procedure. At the request of any person
claiming indemnification under this Article, the Board of
Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, whether the
standards required by this Article have been met.
23
<PAGE>
Indemnification shall be made only following: (a) a final
decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not
liable by reason of disabling conduct or (b) in the absence of
such a decision, a reasonable determination, based upon a review
of the facts, that the person to be indemnified was not liable by
reason of disabling conduct by (i) the vote of a majority of a
quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
Section 4. Indemnification of Employees and Agents.
Employees and agents who are not officers or directors of the
Corporation may be indemnified, and reasonable expenses may be
advanced to such employees or agents, as may be provided by
action of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940.
Section 5. Other Rights. The Board of Directors may
make further provision consistent with law for indemnification
and advance of expenses to directors, officers, employees and
agents by resolution, agreement or otherwise. The
indemnification provided by this Article shall not be deemed
exclusive of any other right, with respect to indemnification or
otherwise, to which those seeking indemnification may be entitled
under any insurance or other agreement or resolution of
stockholders or disinterested directors or otherwise. The rights
provided to any person by this Article shall be enforceable
24
<PAGE>
against the Corporation by such person who shall be presumed to
have relied upon it in serving or continuing to serve as a
director, officer, employee, or agent as provided above.
Section 6. Amendments. References in this Article are
to the Maryland General Corporation Law and to the Investment
Company Act of 1940 as from time to time amended. No amendment
of these By-laws shall effect any right of any person under this
Article based on any event, omission or proceeding prior to the
amendment.
ARTICLE IX
Amendments
The Board of Directors shall have the power to make,
alter and repeal by-laws of the Corporation.
25
00250107.AR4
<PAGE>
Exhibit 5
ADVISORY AGREEMENT
ALLIANCE MULTI-MARKET INCOME AND GROWTH TRUST, INC.
1345 Avenue of the Americas
New York, New York 10105
July 22, 1992
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
We, the undersigned Alliance Multi-Market Income and
Growth Trust, Inc., herewith confirm our agreement with you as
follows:
1. We are an open-end, non-diversified management
investment company registered under the Investment Company Act of
1940 (the "Act"). We are currently authorized to issue separate
classes of shares and our Directors are authorized to reclassify
and issue any unissued shares to any number of additional classes
or series (Portfolios) each having its own investment objective,
policies and restrictions, all as more fully described in the
prospectus and the statement of additional information
constituting parts of the Registration Statement filed on our
behalf under the Securities Act of 1933 and the Act. We propose
to engage in the business of investing and reinvesting our assets
of each of our Portfolios in securities ("the portfolio assets")
of the type and in accordance with the limitations specified in
<PAGE>
our Articles of Incorporation, By-Laws, Registration Statement
filed with the Securities and Exchange Commission under the
Securities Act of 1933 and the Act, and any representations made
in our prospectus and statement of additional information, all in
such manner and to such extent as may from time to time be
authorized by our Board of Directors. We enclose copies of the
documents listed above and will from time to time furnish you
with any amendments thereof.
2. (a) We hereby employ you to manage the investment
and reinvestment of the portfolio assets as above specified and,
without limiting the generality of the foregoing, to provide
management and other services specified below.
(b) You will make decisions with respect to all
purchases and sales of the portfolio assets. To carry out such
decisions, you are hereby authorized, as our agent and
attorney-in-fact, for our account and at our risk and in our
name, to place orders for the investment and reinvestment of the
portfolio assets. In all purchases, sales and other transactions
in the portfolio assets you are authorized to exercise full
discretion and act for us in the same manner and with the same
force and effect as we might or could do with respect to such
purchases, sales or other transactions, as well as with respect
to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions.
2
<PAGE>
(c) You will report to our Board of Directors at
each meeting thereof all changes in the portfolio assets since
the prior report, and will also keep us in touch with important
developments affecting the portfolio assets and on your own
initiative will furnish us from time to time with such
information as you may believe appropriate for this purpose,
whether concerning the individual issuers whose securities are
included in the portfolio assets, the industries in which they
engage, or the conditions prevailing in the economy generally.
You will also furnish us with such statistical and analytical
information with respect to the portfolio assets as you may
believe appropriate or as we reasonably may request. In making
such purchases and sales of the portfolio assets, you will bear
in mind the policies set from time to time by our Board of
Directors as well as the limitations imposed by our Articles of
Incorporation and in our Registration Statement under the Act and
the Securities Act of 1933, the limitations in the Act and of the
Internal Revenue Code of 1986, as amended, in respect of
regulated investment companies and the investment objective,
policies and restrictions for each of our portfolios.
(d) It is understood that you will from time to
time employ or associate with yourselves such persons as you
believe to be particularly fitted to assist you in the execution
of your duties hereunder, the cost of performance of such duties
to be borne and paid by you. No obligation may be incurred on
3
<PAGE>
our behalf in any such respect. During the continuance of this
agreement at our request you will provide us persons satisfactory
to our Board of Directors to serve as our officers. You or your
affiliates will also provide persons, who may be our officers, to
render such clerical, accounting and other services to us as we
may from time to time request of you. Such personnel may be
employees of you or your affiliates. We will pay to you or your
affiliates the cost of such personnel for rendering such
services to us, provided that all time devoted to the investment
or reinvestment of the portfolio assets shall be for your
account. Nothing contained herein shall be construed to restrict
our right to hire our own employees or to contract for services
to be performed by third parties. Furthermore, you or your
affiliates shall furnish us without charge with such management
supervision and assistance and such office facilities as you may
believe appropriate or as we may reasonably request subject to
the requirements of any regulatory authority to which you may be
subject. You or your affiliates shall also be responsible for
the payment of any expenses incurred in promoting the sale of our
shares (other than the portion of the promotional expenses to be
borne by us in accordance with an effective plan pursuant to Rule
12b-1 under the Act and the costs of printing our prospectuses
and other reports to stockholders and fees related to
registration with the Securities and Exchange Commission and with
state regulatory authorities).
4
<PAGE>
3. It is further agreed that you shall be responsible
for the portion of the net expenses of each of our portfolios
(except interest, taxes, brokerage, fees paid in accordance with
an effective plan pursuant to Rule 12b-1 under the Act,
expenditures which are capitalized in accordance with generally
accepted accounting principles and extraordinary expenses, all to
the extent permitted by applicable state law and regulation)
incurred by us during each of our fiscal years or portion thereof
that this agreement is in effect between us which, as to a
portfolio, in any such year exceeds the limits applicable to such
portfolio under the laws or regulations of any state in which our
shares are qualified for sale (reduced pro rata for any portion
of less than a year). We hereby confirm that, subject to the
foregoing, we shall be responsible and hereby assume the
obligation for payment of all our other expenses, including:
(a) payment of the fee payable to you under paragraph 5 hereof;
(b) custody, transfer, and dividend disbursing expenses; (c) fees
of directors who are not your affiliated persons; (d) legal and
auditing expenses; (e) clerical, accounting and other office
costs; (f) the cost of personnel providing services to us, as
provided in subparagraph (d) of paragraph 2 above; (g) costs of
printing our prospectuses and stockholder reports; (h) cost of
maintenance of corporate existence; (i) interest charges, taxes,
brokerage fees and commissions; (j) costs of stationery and
supplies; (k) expenses and fees related to registration and
5
<PAGE>
filing with the Securities and Exchange Commission and with state
regulatory authorities; and (l) such promotional expenses as may
be contemplated by an effective plan pursuant to Rule 12b-1 under
the Act provided, however, that our payment of such promotional
expenses shall be in the amounts, and in accordance with the
procedures, set forth in such plan.
4. We shall expect of you, and you will give us the
benefit of, your best judgment and efforts in rendering these
services to us, and we agree as an inducement to your undertaking
these services that you shall not be liable hereunder for any
mistake of judgment or in any event whatsoever, except for lack
of good faith, provided that nothing herein shall be deemed to
protect, or purport to protect, you against any liability to us
or to our security holders to which you would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties
hereunder.
5. In consideration of the foregoing we will pay you a
fee a monthly fee at an annualized rate of .75 of 1% of our
average daily value net assets. Such fee shall be payable in
arrears on the last day of each calendar month for services
performed hereunder during such month. If our initial
Registration Statement is declared effective by the Securities
and Exchange Commission after the beginning of a month or this
6
<PAGE>
agreement terminates prior to the end of a month, such fee shall
be prorated according to the proportion which such portion of the
month bears to the full month.
6. This agreement shall become effective on the date
hereof and shall remain in effect until October 31, 1993 and may
be continued for successive twelve-month periods (computed from
each November 1) with respect to each portfolio provided that
such continuance is specifically approved at least annually by
our Board of Directors or by majority vote of the holders of the
outstanding voting securities of such portfolio (as defined in
the Act), and, in either case, by a majority of the Board of
Directors who are not interested persons, as defined in the Act,
of any party to this agreement (other than as Directors of our
corporation), provided further, however, that if the continuation
of this agreement is not approved as to a portfolio, you may
continue to render to such portfolio the services described
herein in the manner and to the extent permitted by the Act and
the rules and regulations thereunder. Upon the effectiveness of
this agreement, it shall supersede all previous agreements
between us covering the subject matter hereof. This agreement
may be terminated with respect to any portfolio at any time,
without the payment of any penalty, by vote of a majority of the
outstanding voting securities (as so defined) of such portfolio,
or by a vote of the Board of Directors on sixty days' written
7
<PAGE>
notice to you, or by you with respect to any portfolio on sixty
days' written notice to us.
7. This agreement may not be transferred, assigned,
sold or in any manner hypothecated or pledged by you and this
agreement shall terminate automatically in the event of any such
transfer, assignment, sale, hypothecation or pledge by you. The
terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing
law and any interpretation thereof contained in rules or
regulations promulgated by the Securities and Exchange Commission
thereunder.
8. (a) Except to the extent necessary to perform your
obligations hereunder, nothing herein shall be deemed to limit or
restrict your right, or the right of any of your employees, or
any of the officers or directors of the Alliance Capital
Management Corporation, general partner, who may also be a
Director, officer or employee of ours, or persons otherwise
affiliated with us (within the meaning of the Act) to engage in
any other business or to devote time and attention to the
management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind
to any other trust, corporation, firm, individual or association.
(b) You will notify us of any change in the general
partners of your partnership within a reasonable time after such
change.
8
<PAGE>
9. If you cease to act as our investment adviser, or,
in any event, if you so request in writing, we agree to take all
necessary action to change our name to a name not including the
word "Alliance". You may from time to time make available
without charge to us for our use such marks or symbols owned by
you, including marks or symbols containing the name "Alliance" or
any variation thereof, as you may consider appropriate. Any such
marks or symbols so made available will remain your property and
you shall have the right, upon notice in writing, to require us
to cease the use of such mark or symbol at any time.
10. This Agreement shall be construed in accordance
with the laws of the State of New York, provided, however, that
nothing herein shall be construed as being inconsistent with the
Act.
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
ALLIANCE MULTI-MARKET INCOME AND
GROWTH TRUST, INC.
By /s/ David H. Dievler
____________________________
Name: David H. Dievler
Title: Chairman
9
<PAGE>
Agreed to and accepted
as of the date first set forth above
ALLIANCE CAPITAL MANAGEMENT L.P.
By ALLIANCE CAPITAL MANAGEMENT CORPORATION,
its general partner
By /s/ John D. Carifa
_________________________
Name: John D. Carifa
Title: Executive Vice President
10
00250107.AR3
<PAGE>
Exhibit 6(a)
AMENDED AND RESTATED DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made as of the April 30, 1993, as amended and
restated as of October 1, 1994 between ALLIANCE INCOME BUILDER
FUND, INC., a Maryland Corporation (the "Fund"), and ALLIANCE
FUND DISTRIBUTORS, INC., a Delaware corporation (the
"Underwriter").
WITNESSETH
WHEREAS, the Fund is registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"),
as a diversified, open-end investment company and it is in the
interest of the Fund to offer its shares for sale continuously;
WHEREAS, the Underwriter is a securities firm engaged in
the business of selling shares of companies either directly to
purchasers or through other securities dealers;
WHEREAS, the Fund and the Underwriter wish to enter into
an amended and restated agreement with each other with respect to
the continuous offering of the Fund's shares in order to promote
the growth of the Fund and facilitate the distribution of its
shares;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Underwriter. The Fund
hereby appoints the Underwriter as the principal underwriter and
distributor of the Fund to sell to the public shares of its
Class A Common Stock (the "Class A shares"), its Class B Common
Stock (the "Class B shares") and its Class C Common Stock (the
"Class C shares") (the Class A shares, the Class B shares and
Class C shares being collectively referred to herein as the
"shares") and hereby agrees during the term of this Agreement to
sell shares to the Underwriter upon the terms and conditions
herein set forth.
SECTION 2. Exclusive Nature of Duties. The Underwriter
shall be the exclusive representative of the Fund to act as
principal underwriter and distributor except that the rights
given under this Agreement to the Underwriter shall not apply to
shares issued in connection with (a) the merger or consolidation
of any other investment company with the Fund, (b) the Fund's
acquisition by purchase or otherwise of all or substantially all
of the assets or stock of any other investment company or (c) the
reinvestment in shares by the Fund's shareholders of dividends or
other distributions.
<PAGE>
SECTION 3. Purchase of Shares from the Fund.
(a) The Underwriter shall have the right to buy from
the Fund the shares needed to fill unconditional orders for
shares of the Fund placed with the Underwriter by investors or
securities dealers, depository institutions or other financial
intermediaries acting as agent for their customers. The price
which the Underwriter shall pay for the shares so purchased from
the Fund shall be the net asset value, so determined as set forth
in Section 3(d) hereof, used in determining the public offering
price on which such orders are based.
(b) The shares are to be resold by the Underwriter to
investors at a public offering price, as set forth in
Section 3(c) hereof, or to securities dealers, depository
institutions or other financial intermediaries acting as agent
for their customers having agreements with the Underwriter upon
the terms and conditions set forth in Section 8 hereof.
(c) The public offering price of the shares, i.e., the
price per share at which the Underwriter or selected dealers or
selected agents (each as defined in Section 8(a) below) may sell
shares to the public, shall be the public offering price
determined in accordance with the then current Prospectus and
Statement of Additional Information of the Fund (the "Prospectus"
and "Statement of Additional Information") under the Securities
Act of 1933, as amended (the "Securities Act"), relating to such
shares, but not to exceed the net asset value at which the
Underwriter is to purchase such shares, plus, in the case of
Class A Shares, a front-end sales charge equal to a specified
percentage or percentages of the public offering price of the
Class A shares as set forth in the Prospectus. Class A shares
may be sold without such a sales charge to certain classes of
persons as from time to time set forth in the Prospectus and
Statement of Additional Information. All payments to the Fund
hereunder shall be made in the manner set forth in Section 3(f)
hereof.
(d) The net asset value of shares of the Fund shall be
determined by the Fund, or any agent of the Fund, as of the close
of regular trading on the New York Stock Exchange on each Fund
business day in accordance with the method set forth in the
Prospectus and Statement of Additional Information and guidelines
established by the Directors of the Fund.
(e) The Fund reserves the right to suspend the offering
of its shares at any time in the absolute discretion of its
Directors.
(f) The Fund, or any agent of the Fund designated in
writing to the Underwriter by the Fund, shall be promptly advised
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<PAGE>
by the Underwriter of all purchase orders for shares received by
the Underwriter. Any order may be rejected by the Fund;
provided, however, that the Fund will not arbitrarily or without
reasonable cause refuse to accept or confirm orders for the
purchase of shares. The Fund (or its agent) will confirm orders
upon their receipt, will make appropriate book entries and upon
receipt by the Fund (or its agent) of payment thereof, will
deliver deposit receipts or certificates for such shares pursuant
to the instructions of the Underwriter. Payment shall be made to
the Fund in New York Clearing House funds. The Underwriter
agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
SECTION 4. Repurchase or Redemption of
Shares by the Fund.
(a) Any of the outstanding shares may be tendered for
redemption at any time, and the Fund agrees to redeem or
repurchase the shares so tendered in accordance with its
obligations as set forth in ARTICLE FIFTH of its Articles of
Incorporation and in accordance with the applicable provisions
set forth in the Prospectus and Statement of Additional
Information. The price to be paid to redeem or repurchase the
shares shall be equal to the net asset value calculated in
accordance with the provisions of Section 3(d) hereof less in the
case of Class B shares, a deferred sales charge equal to a
specified percentage or percentages of the net asset value of the
Class B shares or their cost, whichever is less. Class B shares
that have been outstanding for a specified period of time may be
redeemed without payment of a deferred sales charge as from time
to time set forth in the Prospectus. All payments by the Fund
hereunder shall be made in the manner set forth below. The
redemption or repurchase by the Fund of any of the Class A shares
purchased by or through the Underwriter will not affect the sales
charge secured by the Underwriter or any selected dealer or
compensation paid to any selected agent (unless such selected
dealer or selected agent has otherwise agreed with the
Underwriter), in the course of the original sale, regardless of
the length of the time period between purchase by an investor and
his tendering for redemption or repurchase.
The Fund (or its agent) shall pay the total amount of
the redemption price and, except as may be otherwise required by
the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD") and any interpretations
thereof ("NASD" rules and interpretations"), the deferred sales
charges, if any, as defined in the above paragraph, pursuant to
the instructions of the Underwriter in New York Clearing House
funds on or before the seventh business day subsequent to its
having received the notice of redemption in proper form.
3
<PAGE>
(b) Redemption of shares or payment may be suspended at
times when the New York Stock Exchange is closed, when trading
thereon is closed, when trading thereon is restricted, when an
emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or during any other period when the Securities
and Exchange Commission, by order, so permits.
SECTION 5. Plan of Distribution.
(a) It is understood that Sections 5, 12, and 16 hereof
together constitute a plan of distribution (the "Plan") within
the meaning of Rule 12b-1 adopted by the Securities and Exchange
Commission under the Investment Company Act
("Rule 12b-1").
(b) Except as required by NASD rules and
interpretations, the Fund will pay to the Underwriter each month
a distribution services fee with respect to each portfolio of the
fund ("Portfolio") that will not exceed, on an annualized basis,
.30 of 1% of the aggregate average daily net assets of the Fund
attributable to Class A shares, 1.00% of the aggregate average
daily net assets of the Fund attributable to the Class B shares
and 1.00% of the aggregate average daily net assets of the Fund
attributable to the Class C shares. With respect to each
Portfolio, the distribution services fee will be used in its
entirety by the Underwriter to make payments (i) to compensate
broker-dealers or other persons for providing distribution
assistance, (ii) to otherwise promote the sale of shares of each
Portfolio, including payment for the preparation, printing and
distribution of prospectuses and sales literature or other
promotional activities, and (iii) to compensate broker-dealers,
depository institutions and other financial intermediaries
for providing administrative, accounting and other services with
respect to each Portfolio's shareholders. A portion of the
distribution services fee that will not exceed, on an annualized
basis, .25% of the aggregate average daily net assets of the Fund
attributable to each of the Class A shares, Class B shares and
Class C shares will constitute a service fee that will be used by
the Underwriter for personal service and/or the maintenance of
shareholder accounts within the meaning of NASD rules and
interpretations.
(c) Alliance Capital Management L.P., the Fund's
investment adviser (the "Adviser") may make payments from time to
time from its own resources for the purposes described in
Section 5(b) hereof.
(d) Payments to broker-dealers, depository institutions
and other financial intermediaries for the purposes set forth in
4
<PAGE>
Section 5(b) are subject to the terms and conditions of the
written agreements between the Underwriter and each broker-
dealer, depository institution or other financial intermediary.
Such agreements will be in a form satisfactory to the Directors
of the Fund.
(e) The Treasurer of the Fund will prepare and furnish
to the Fund's Directors, and the Directors will review, at least
quarterly, a written report complying with the requirements of
Rule 12b-1 setting forth all amounts expended hereunder and the
purposes for which such expenditures were made.
(f) The Fund is not obligated to pay any distribution
expense in excess of the distribution services fee described
above in Section 5(b) hereof. Any expenses of distribution of
the Fund's Class A shares accrued by the Underwriter in one
fiscal year of the Fund may not be paid from distribution
services fees received from the Fund in respect of Class A shares
in another fiscal year. Any expenses of distribution of the
Fund's Class B shares or Class C shares accrued by the
Underwriter in one fiscal year of the Fund may be carried forward
and paid from distribution services fees received from the Fund
in respect of such class of shares in another fiscal year. No
portion of the distribution services fees received from the Fund
in respect of Class A shares may be used to pay any interest
expense, carrying charges or other financing costs or allocation
of overhead of the Underwriter. The distribution services fees
received from the Fund in respect of Class B shares and Class C
shares may be used to pay interest expenses, carrying charges and
other financing costs or allocation of overhead of the
Underwriter to the extent permitted by Securities and Exchange
Commission rules, regulations or Securities and Exchange
Commission staff no-action or interpretative positions in effect
from time to time. In the event this Agreement is terminated by
either party or is not continued with respect to a class as
provided in Section 12 below: (i) no distribution services fees
(other than current amounts accrued but not yet paid) will be
owed by the Fund to the Underwriter with respect to that class,
and (ii) the Fund will not be obligated to pay the Underwriter
for any amounts expended hereunder not previously reimbursed by
the Fund from distribution services fees in respect of shares of
such class or recovered through deferred sales sharges described
in Section 4(a) above. The distribution services fee of a
particular class may not be used to subsidize the sale of shares
of any other class.
SECTION 6. Duties of the Fund.
(a) The Fund shall furnish to the Underwriter copies of
all information, financial statements and other papers that the
Underwriter may reasonably request for use in connection with the
5
<PAGE>
distribution of shares of the Fund, and this shall include one
certified copy, upon request by the Underwriter, of all financial
statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Underwriter
such number of copies of the Prospectus as the Underwriter shall
reasonably request.
(b) The Fund shall take, from time to time, but subject
to the necessary approval of its shareholders, all necessary
action to fix the number of authorized shares and such steps as
may be necessary to register the same under the Securities Act,
to the end that there will be available for sale such number of
shares as the Underwriter reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify and
maintain the qualification of an appropriate number of its shares
under the securities laws of such states as the Underwriter and
the Fund may approve. Any such qualification may be withheld,
terminated or withdrawn by the Fund at any time in its
discretion. As provided in Section 9(b) hereof, the expense of
qualification and maintenance of qualification shall be borne by
the Fund. The Underwriter shall furnish such information and
other material relating to its affairs and activities as may be
required by the Fund in connection with such qualification.
(d) The Fund will furnish, in reasonable quantities
upon request by the Underwriter, copies of annual and interim
reports of the Fund.
SECTION 7. Duties of the Underwriter.
(a) The Underwriter shall devote reasonable time and
effort to effect sales of shares of the Fund, but shall not be
obligated to sell any specific number of shares. The services of
the Underwriter to the Fund hereunder are not to be deemed
exclusive and nothing in this Agreement contained shall prevent
the Underwriter from entering into like arrangements with other
investment companies so long as the performance of its
obligations hereunder is not impaired thereby.
(b) In selling shares of the Fund, the Underwriter
shall use its best efforts in all respects duly to conform with
the requirements of all Federal and state laws relating to the
sale of such securities. Neither the Underwriter, any selected
dealer, any selected agent nor any other person is authorized by
the Fund to give any information or to make any representations,
other than those contained in the Fund's Registration Statement
(the "Registration Statement"), as amended from time to time,
under the Securities Act and the Investment Company Act or the
Fund's Prospectus and Statement of Additional Information, or any
sales literature specifically approved in writing by the Fund.
6
<PAGE>
(c) The Underwriter shall adopt and follow procedures,
as approved by the officers of the Fund, for the confirmation of
sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales,
and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the NASD, as such
requirements may from time to time exist.
SECTION 8. Selected Dealer Agreements.
(a) The Underwriter shall have the right to enter into
selected dealer agreements with securities dealers of its choice
("selected dealers") and selected agent agreements with
depository institutions and other financial intermediaries of its
choice ("selected agents") for the sale of shares and fix therein
the portion of the sales charge that may be allocated to the
selected dealers and selected agents; provided, that the Fund
shall approve the forms of agreements with selected dealers and
selected agents and the selected dealer and selected agent
compensation set forth therein and shall evidence such approval
by filing said forms and amendments thereto as exhibits to its
then currently effective Registration Statement. Shares sold to
selected dealers shall be for resale by such dealers only at the
public offering price(s) set forth in the Prospectus and
Statement of Additional Information.
(b) Within the United States, the Underwriter shall
offer and sell shares only to such selected dealers as are
members in good standing of the NASD.
SECTION 9. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the
Fund, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of its
Registration Statement and Prospectus and Statement of Additional
Information, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy
materials to shareholders (including but not limited to the
expense of setting in type any such registration statements,
prospectuses, annual or interim reports or proxy materials).
(b) The Fund shall bear the cost of expenses of
qualification of shares for sale, and, if necessary or advisable
in connection therewith, of qualifying the Fund as an issuer or
as a broker or dealer, in such states of the United States or
other jurisdiction as shall be selected by the Fund and the
Underwriter pursuant to Section 6(c) hereof and the cost and
expenses payable to each such state for continuing qualification
therein until the Fund decides to discontinue such qualification
pursuant to Section 6(c) hereof.
7
<PAGE>
SECTION 10. Indemnification.
(a) The Fund agrees to indemnify, defend and hold the
Underwriter, and any person who controls the Underwriter within
the meaning of Section 15 of the Securities Act, free and
harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Underwriter or
any such controlling person may incur, under the Securities Act,
or under common law or otherwise, arising out of or based upon
any alleged untrue statement of a material fact contained in the
Fund's Registration Statement, Prospectus or Statement of
Additional Information in effect from time to time under the
Securities Act or arising out of or based upon any alleged
omission to state a material fact required to be stated in any
one thereof or necessary to make the statements in any one
thereof not misleading; provided, however, that in no event shall
anything herein contained be so construed as to protect the
Underwriter against any liability to the Fund or its security
holders to which the Underwriter would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of the Underwriter's
reckless disregard of its obligations and duties under this
Agreement. The Fund's agreement to indemnify the Underwriter and
any such controlling person as aforesaid is expressly conditioned
upon the Fund's being notified of the commencement of any action
brought against the Underwriter or any such controlling person,
such notification to be given by letter or by telegram addressed
to the Fund at its principal office in New York, New York, and
sent to the Fund by the person against whom such action is
brought within ten days after the summons or other first legal
process shall have been served. The failure to so notify the
Fund of the commencement of any such action shall not relieve the
Fund from any liability which it may have to the person against
whom such action is brought by reason of any such alleged untrue
statement or omission otherwise than on account of the indemnity
agreement contained in this Section 10. The Fund will be
entitled to assume the defense of any suit brought to enforce any
such claim, and to retain counsel of good standing chosen by the
Fund and approved by the Underwriter. In the event the Fund does
not elect to assume the defense of any such suit and retain
counsel of good standing approved by the Underwriter, the
defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but
in case the Fund does not elect to assume the defense of any such
suit, or in case the Underwriter does not approve of counsel
chosen by the Fund, the Fund will reimburse the Underwriter or
the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any counsel
retained by the Underwriter or such persons. The indemnification
8
<PAGE>
agreement contained in this Section 10 shall remain operative and
in full force and effect regardless of any investigation made by
or on behalf of the Underwriter or any controlling person and
shall survive the sale of any of the Fund's shares made pursuant
to subscriptions obtained by the Underwriter. This agreement of
indemnity will inure exclusively to the benefit of the
Underwriter, to the benefit of its successors and assigns, and to
the benefit of any controlling persons and their successors and
assigns. The Fund agrees promptly to notify the Underwriter of
the commencement of any litigation or proceeding against the Fund
in connection with the issue and sale of any of its shares.
(b) The Underwriter agrees to indemnify, defend and
hold the Fund, its several officers and directors, and any person
who controls the Fund within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of
investigating or defending such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the
Fund, its officers or directors, or any such controlling person
may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability, or expense
incurred by the Fund, its officers, directors or such controlling
person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Underwriter
to the Fund for use in its Registration Statement, Prospectus or
Statement of Additional Information in effect from time to time
under the Securities Act, or shall arise out of or be based upon
any alleged omission to state a material fact in connection with
such information required to be stated in the Registration
Statement, Prospectus or Statement of Additional Information or
necessary to make such information not misleading. The
Underwriter's agreement to indemnify the Fund, its officers and
directors, and any such controlling person as aforesaid is
expressly conditioned upon the Underwriter being notified of the
commencement of any action brought against the Fund, its officers
or directors or any such controlling person, such notification to
be given by letter or telegram addressed to the Underwriter at
its principal office in New York, and sent to the Underwriter by
the person against whom such action is brought, within ten days
after the summons or other first legal process shall have been
served. The Underwriter shall have a right to control the
defense of such action, with counsel of its own choosing,
satisfactory to the Fund, if such action is based solely upon
such alleged misstatement or omission on its part, and in any
other event the Underwriter and the Fund, and their officers and
directors or such controlling person, shall each have the right
to participate in the defense or preparation of the defense of
any such action. The failure so to notify the Underwriter of the
commencement of any such action shall not relieve the Underwriter
9
<PAGE>
from any liability which it may have to the Fund, to its officers
and directors, or to such controlling person by reason of any
such untrue statement or omission on the part of the Underwriter
otherwise than on account of the indemnity agreement contained in
this Section 10.
SECTION 11. Notification by the Fund.
The Fund agrees to advise the Underwriter immediately:
(a) of any request by the Securities and Exchange
Commission for amendments to the Fund's Registration Statement,
Prospectus or Statement of Additional Information or for
additional information,
(b) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the
effectiveness of the Fund's Registration Statement, Prospectus or
Statement of Additional Information or the initiation of any
proceeding for that purpose,
(c) of the happening of any material event which makes
untrue any statement made in the Fund's Registration Statement,
Prospectus or Statement of Additional Information or which
requires the making of a change in any one thereof in order to
make the statements therein not misleading, and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendments to the Fund's
Registration Statement, Prospectus or Statement of Additional
Information which may from time to time be filed with the
Securities and Exchange Commission under the Securities Act.
SECTION 12. Term of Agreement.
(a) This Agreement shall become effective on the date
hereof and shall continue in effect until October 31, 1995, and
thereafter for successive twelve-month periods (computed from
each November 1) with respect to each class; 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
Investment Company Act) of that class, and, in either case, by a
majority of the Directors of the Fund who are not parties to this
Agreement or interested persons, as defined in the Investment
Company 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 Plan or any agreement related thereto;
provided further, however, that if the continuation of this
Agreement is not approved as to a class or a Portfolio, the
Underwriter may continue to render to such class or Portfolio the
10
<PAGE>
services described herein in the manner and to the extent
permitted by the Act and the rules and regulations thereunder.
Upon effectiveness of this Agreement, it shall supersede all
previous agreements between the parties hereto covering the
subject matter hereof. This Agreement may be terminated (i) by
the Fund with respect to any class or Portfolio at any time,
without the payment of any penalty, by the vote of a majority of
the outstanding voting securities (as so defined) of such class
or Portfolio, or by a vote of a majority of the outstanding
voting securities (as so defined) of such class or Portfolio, or
by a vote of a majority of the Directors of the Fund who are not
interested persons, as defined in the Investment Company Act, of
the Fund (other than as directors of the fund) and have no direct
and indirect financial interest in the operation of the Plan or
any agreement related thereto, in any such event on sixty days'
written notice to the Underwriter; provided, however, that no
such notice shall be required if such termination is stated by
the Fund to relate only to Sections 5 and 16 hereof (in which
event Sections 5 and 16 shall be deemed to have been severed
herefrom and all other provisions of this Agreement shall
continue in full force and effect), or (ii) by the Underwriter
with respect to any Portfolio on sixty days' written notice to
the Fund.
(b) This Agreement may be amended at any time with the
approval of the Directors of the Fund, provided that (i) any
material amendments of the terms hereof will become effective
only upon approval as provided in the first proviso of
Section 12(a) hereof, and (ii) any amendment to increase
materially the amount to be expended for distribution services
fees pursuant to Section 5(b) hereof will be effective only upon
the additional approval by a vote of a majority of the
outstanding voting securities as defined in the Investment
Company Act of the class or Portfolio affected.
SECTION 13. No Assignment. This agreement may not be
transferred, assigned, sold or in any manner hypothecated or
pledged by either party hereto and this agreement shall terminate
automatically in the event of any such transfer, assignment,
sale, hypothecation or pledge. The terms "transfer",
"assignment", and "sale" as used in this paragraph shall have the
meanings ascribed thereto by governing law and any interpretation
thereof contained in rules or regulations promulgated by the
Securities and Exchange Commission thereunder.
SECTION 14. Notices. Any notice required or permitted
to be given hereunder by either party to the other shall be
deemed sufficiently given if sent by registered mail, postage
prepaid, addressed by the party giving such notice to the other
party at the last address furnished by such other party to the
party given notice, and unless and until changed pursuant to the
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<PAGE>
foregoing provisions hereof addressed to the Fund or the
Underwriter.
SECTION 15. Governing Law. The provisions of this
Agreement shall be, to the extent applicable, construed and
interpreted in accordance with the laws of the State of New York.
SECTION 16. Disinterested Directors of the Fund. While
the Agreement is in effect, the selection and nomination of the
Directors who are not "interested persons" of the Fund (as
defined in the Investment Company Act) will be committed to the
discretion of such disinterested Directors.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement.
ALLIANCE INCOME BUILDER FUND, INC.
By /s/ David H. Dievler
_______________________________
David H. Dievler
Chairman and President
ALLIANCE FUND DISTRIBUTORS, INC.
By /s/ Robert L. Errico
_______________________________
Robert L. Errico
President
Accepted as to
Sections 5, 12 and 16
as of September 9, 1991,
as amended and restated
as of October 1, 1994:
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
General Partner
By /s/ John D. Carifa
_________________________
John D. Carifa
President and Chief
Operating Officer
12
00250107.AR5
<PAGE>
EXHIBIT 6(C)
ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
(800) 221-5672
(LOGO)
___________, 199
Selected Dealer Agreement
For Broker/Dealers
(other than Bank Subsidiaries)
Dear Sirs:
As the principal underwriter of shares of certain
registered investment companies presently or hereafter managed by
Alliance Capital Management L.P., shares of which companies are
distributed by us pursuant to our Distribution Services
Agreements with such companies (the "Funds"), we invite you to
participate as principal in the distribution of shares of any and
all of the Funds upon the following terms and conditions:
1. You are to offer and sell such shares only at the
public offering prices which shall be currently in effect, in
accordance with the terms of the then current prospectuses and
statements of additional information of the Funds. You agree to
act only as principal in such transactions and shall not have
authority to act as agent for the Funds, for us, or for any other
dealer in any respect. All orders are subject to acceptance by
us and become effective only upon confirmation by us.
2. On each purchase of shares by you from us, the
total sales charges and discount to selected dealer, if any,
shall be as stated in each Fund's then current prospectus.
Such sales charges and discount to selected dealers are
subject to reductions under a variety of circumstances as
described in each Fund's then current prospectus and statement of
additional information. To obtain these reductions, we must be
notified when the sale takes place which would qualify for the
reduced charge.
There is no sales charge or discount to selected dealers
on the reinvestment of dividends.
3. As a selected dealer, you are hereby authorized
(i) to place orders directly with the Funds for their shares to
be resold by us to you subject to the applicable terms and
<PAGE>
conditions governing the placement of orders by us set forth in
the Distribution Services Agreement between each Fund and us and
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information and (ii) to tender shares directly to the Funds or
their agent for redemption subject to the applicable terms and
conditions set forth in the Distribution Services Agreement.
4. Repurchases of shares will be made at the net asset
value of such shares in accordance with the then current
prospectuses and statements of additional information of the
Funds.
5. You represent that you are a member of the National
Association of Securities Dealers, Inc. and that you agree to
abide by the Rules of Fair Practice of such Association.
6. This Agreement is in all respects subject to
Rule 26 of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. which shall control any provisions to
the contrary in this Agreement.
7. You agree:
(a) To purchase shares only from us or only from your
customers.
(b) To purchase shares from us only for the purpose of
covering purchase orders already received or for your own bona
fide investment.
(c) That you will not purchase any shares from your
customers at prices lower than the redemption or repurchase
prices then quoted by the Fund. You shall, however, be permitted
to sell shares for the account of their record owners to the
Funds at the repurchase prices currently established for such
shares and may charge the owner a fair commission for handing the
transaction.
(d) That you will not withhold placing customers'
orders for shares so as to profit yourself as a result of such
withholding.
(e) That if any shares confirmed to you hereunder are
redeemed or repurchased by any of the Funds within seven business
days after such confirmation of your original order, you shall
forthwith refund to us the full discount allowed to you on such
sales. We shall notify you of such redemption or repurchase
within ten days from the date of delivery of the request therefor
or certificates to us or such Fund. Termination or cancellation
2
<PAGE>
of this Agreement shall not relieve you or us from the
requirements of this subparagraph.
8. We shall not accept from you any conditional orders
for shares. Delivery of certificates for shares purchased shall
be made by the Funds only against receipt of the purchase price,
subject to deduction for the discount reallowed to you and our
portion of the sales charge on such sales. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case you will be responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid), or, at our option, we
may sell the shares ordered back to the Funds (in which case we
may hold you responsible for any loss, including loss of profit
suffered by us resulting from your failure to make payment as
aforesaid).
9. You will not offer or sell any of the shares except
under circumstances that will result in compliance with the
applicable Federal and State securities laws and in connection
with sales and offers to sell shares you will furnish to each
person to whom any such sale or offer is made a copy of the
applicable then current prospectus. We shall be under no
liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing herein
contained, however, shall be deemed to be a condition,
stipulation or provision binding any persons acquiring any
security to waive compliance with any provision of the Securities
Act of 1933, or of the Rules and Regulations of the Securities
and Exchange Commission, or to relieve the parties hereto from
any liability arising under the Securities Act of 1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act")
in consideration of your furnishing distribution services
hereunder with respect to each such Fund. We have no obligation
to make any such payments and you waive any such payment until we
receive monies therefor from the Fund. Any such payments made
pursuant to this Section 10 shall be subject to the following
terms and conditions:
(a) Any such payments shall be in such amounts as we
may from time to time advise you in writing but in any event not
in excess of the amounts permitted by the plan in effect with
respect to each particular Fund. Any such payments shall be in
addition to the selling concession, if any, allowed to you
pursuant to this Agreement.
3
<PAGE>
(b) The provisions of this Section 10 relate to the
plan adopted by a particular Fund pursuant to Rule 12b-1. In
accordance with Rule 12b-1, any person authorized to direct the
disposition of monies paid or payable by a Fund pursuant to this
Section 10 shall provide the Fund's Board of Directors, and the
Directors shall review, at least quarterly, a written report of
the amounts so expended and the purposes for which such
expenditures were made.
(c) The provisions of this Section 10 applicable to
each Fund shall remain in effect for not more than a year and
thereafter for successive annual periods only so long as such
continuance is specifically approved at least annually in
conformity with Rule 12b-1 and the Act. The provisions of this
Section 10 shall automatically terminate with respect to a
particular Plan in the event of the assignment (as defined by the
Act) of this Agreement, in the event such Plan terminates or is
not continued or in the event this Agreement terminates or ceases
to remain in effect. In addition, the provisions of this
Section 10 may be terminated at any time, without penalty, by
either party with respect to any particular Plan on not more than
60 days' nor less than 30 days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party.
11. No person is authorized to make any representations
concerning shares of the Funds except those contained in the
current prospectus, statement of additional information, and
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supply prospectuses
and statements of additional information, reasonable quantities
of reports to shareholders, supplemental sales literature, sales
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with the applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree not to use other advertising or sales material
relating to the Funds, unless approved in writing by us in
advance of such use. Any printed information furnished by us
other than the then current prospectus and statement of
additional information for each Fund, periodic reports and proxy
solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall
have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
12. With respect to Funds offering both shares subject
to a front-end sales charge ("Class A shares") and shares subject
to a contingent deferred sales charge ("Class B shares"), you
shall conform to such written compliance standards as we have
provided you in the past or may from time to time provide to you
in the future.
4
<PAGE>
13. We, our affiliates and the Funds shall not be
liable for any loss, expense, damages, costs or other claim
arising out of any redemption or exchange pursuant to telephone
instructions from any person or our refusal to execute such
instructions for any reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given on the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a
telegraph office for transmission to the other party at his or
its address as shown below. This Agreement may be amended by us
at any time and your placing of an order after the effective date
of any such amendment shall constitute your acceptance thereof.
15. This Agreement shall be construed in accordance
with the laws of the State of New York and shall be binding upon
both parties thereto when signed by us and accepted by you in the
space provided below.
Very truly yours,
ALLIANCE FUND DISTRIBUTORS, INC.
By:___________________________
(Authorized Signature)
Bank or Firm Name _______________________________________________
Address _________________________________________________________
City _____________________ State ____________ Zip Code __________
ACCEPTED BY (signature) _____________________ Title _____________
Name (print) ________________________________ Title _____________
Date _____________________ 199__ Phone # ________________________
Please return two signed copies of this Agreement (one
of which will be signed above by us and thereafter returned to
you) in the accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
5
<PAGE>
Text of Amendment to
Selected Dealer and Agent Agreements
Pursuant to Section 14 of the Selected Dealer Agreement
or Selected Agent Agreement ("Agreement") between your
organization and Alliance Fund Distributors, Inc. ("AFD"), AFD
hereby amends the Agreement to add at the end of Section 14 the
following sentence:
In the event of the termination of the provisions of
Section 10 of this Agreement by reason of any assignment
(as defined in the Act) in connection with the issuance
by The Equitable Life Assurance Society of the United
States ("Equitable") of debt obligations to AXA and/or
the exchange of such obligations for capital stock of a
holding company owning all of the stock of Equitable,
this Agreement shall be deemed to have been amended,
effective immediately following such assignment, to
insert in the place of such former Section 10 a new
Section 10 identical thereto in all respects.
July 13, 1992
6
00250107.AR2
<PAGE>
EXHIBIT 6(D)
ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
(800) 221-5672
(LOGO)
___________, 199
Selected Agent Agreement
For Depository Institutions and Their Subsidiaries
Dear Sirs:
As the principal underwriter of shares of certain
registered investment companies presently or hereafter managed by
Alliance Capital Management L.P., shares of which companies are
distributed by us pursuant to our Distribution Services
Agreements with such companies (the "Funds"), we invite you,
acting as agent for your customers, to make available to your
customers shares of any or all of the Funds upon the following
terms and conditions:
1. The customers in question will be for all purposes
your customers. We shall execute transactions in shares of the
Funds for each of your customers only upon your authorization, it
being understood in all cases that (a) you are acting as the
agent for the customer; (b) each transaction is initiated solely
upon the order of the customer; (c) each transaction is for the
account of the customer and not for your account; (d) the
transactions are without recourse against you by the customer;
(e) except as we otherwise agree, each transaction is effected on
a fully disclosed basis; (f) as between you and the customer, the
customer will have full beneficial ownership of the shares;
(g) you shall provide no investment advice and exercise no
investment discretion regarding the purchase, sale, or redemption
of the shares; and (h) you shall make appropriate disclosure to
your customers that any Fund's shares are not endorsed by you, do
not constitute your obligation and are not entitled to federal
deposit insurance.
2. You are to sell shares of the Funds only at the
public offering prices which shall be currently in effect, in
accordance with the terms of the then current prospectuses and
statements of additional information of the Funds. You agree to
act only as agent for your customers in such transactions and
shall not have authority to act as agent for the Funds or for us
<PAGE>
in any respect. All orders are subject to acceptance by us and
become effective only upon confirmation by us.
3. On each purchase of shares of a Fund authorized by
you, the total sales charge and commission, if any, shall be as
stated in the Fund's then current prospectus. Such sales charges
and commissions are subject to reductions under a variety of
circumstances as described in each Fund's then current prospectus
and statement of additional information. To obtain such a
reduction, you must provide us with such information as we may
request to establish that a particular transaction qualifies for
the reduction. There is no sales charge or commission to
selected agents on the reinvestment of dividends.
4. As a selected agent, you are hereby authorized
(i) to place orders directly with the Funds for their shares to
be resold by us through you subject to the applicable terms and
conditions governing the placement of orders by us set forth in
the Distribution Services Agreement between each Fund and us and
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information, and (ii) to tender shares directly to the Funds or
their agent for redemption or repurchase subject to the
applicable terms and conditions set forth in the Distribution
Services Agreement.
5. Redemptions and repurchases of shares will be made
at the net asset value of such shares in accordance with the then
current prospectuses and statements of additional information of
the Funds.
6. You represent that you are either:
(a) a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"),
duly authorized to engage in the transactions to be performed
hereunder and not required to register as a broker-dealer
pursuant to the 1934 Act; or
(b) a bank (as so defined) or an affiliate of a bank,
in either case registered as a broker-dealer pursuant to the 1934
Act and a member of the National Association of Securities
Dealers, Inc., and that you agree to abide by the rules and
regulations of the National Association of Securities Dealers,
Inc.
7. You agree:
(a) to order shares of the Funds only from us and to
act as agent only for your customers;
2
<PAGE>
(b) to order shares from us only for the purpose of
covering purchase orders already received;
(c) that you will not purchase any shares from your
customers at prices lower than the redemption or repurchase
prices then quoted by the Funds, provided, however, that you
shall be permitted to sell shares for the accounts of their
record owners to the Funds at the repurchase prices currently
established for such shares and may charge the owner a fair
commission for handling the transaction;
(d) that you will not withhold placing customers'
orders for shares so as to profit yourself as a result of such
withholding; and
(e) that if any shares confirmed through you hereunder
are redeemed or repurchased by any of the Funds within seven
business days after such confirmation of your original order, you
shall forthwith refund to us the full commission reallowed to you
on such sales. We shall notify you of such redemption or
repurchase within ten days from the date of delivery of the
request therefor or certificates to us or such Fund. Termination
or cancellation of this Agreement shall not relieve you or us
from the requirements of this subparagraph.
8. We shall not accept from you any conditional orders
for shares. Delivery of certificates for shares purchased shall
be made by the Funds only against receipt of the purchase price,
subject to deduction for the commission reallowed to you and our
portion of the sales charge on such sale. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case you will be responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid).
9. You will not accept orders for shares of any of the
Funds except under circumstances that will result in compliance
with the applicable Federal and State securities laws and banking
laws, and in connection with sales of shares to your customers
you will furnish, unless we agree otherwise, to each customer who
has ordered shares a copy of the applicable then current
prospectus. We shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by us
herein. Nothing herein contained, however, shall be deemed to be
a condition, stipulation or provision binding any persons
acquiring any security to waive compliance with any provision of
the Securities Act of 1933 or of the rules and regulations of the
Securities and Exchange Commission, or to relieve the parties
3
<PAGE>
hereto from any liability arising under the Securities Act of
1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act"),
to compensate you for providing administrative and accounting
services with respect to the shareholder accounts of your
customers in such Funds. We have no obligation to make any such
payments and you waive any such payment until we receive monies
therefor from the Fund. Any such payments made pursuant to this
Section 10 shall be subject to the following terms and
conditions:
(a) Any such payments shall be in such amounts as we
may from time to time advise you in writing but in any event not
in excess of the amounts permitted by the plan in effect with
respect to each particular Fund.
(b) The provisions of this Section 10 relate to the
plan adopted by a particular Fund pursuant to Rule 12b-1. In
accordance with Rule 12b-1, any person authorized to direct the
disposition of monies paid or payable by a Fund pursuant to this
Section 10 shall provide the Fund's Board of Directors, and the
Directors shall review, at lest quarterly, a written report of
the amounts so expended and the purposes for which such
expenditures were made.
(c) The provisions of this Section 10 applicable to
each Fund remain in effect for not more than a year and
thereafter for successive annual periods only so long as such
continuance is specifically approved at least annually in
conformity with Rule 12b-1 and the Act. The provisions of this
Section 10 shall automatically terminate with respect to a
particular Plan in the event of the assignment (as defined by the
Act) of this Agreement, in the event such Plan terminates or is
not continued or in the event this Agreement terminates or ceases
to remain in effect. In addition, the provisions of this
Section 10 may be terminated at any time, without penalty, by
either party with respect to any particular Plan on not more than
60 days' nor less than 30 days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party.
11. No person is authorized to make any representation
concerning shares of the Funds except those contained in the
current prospectus, statement of additional information, and
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supply prospectuses
and statements of additional information, reasonable quantities
of reports to shareholders, supplemental sales literature, sales
4
<PAGE>
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree not to use other advertising or sales material
relating to the Funds except in compliance with all laws and
regulations applicable to you and unless approved in writing by
us in advance of such use. Any printed information furnished by
us other than the then current prospectus and statement of
additional information for each Fund, periodic reports and proxy
solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall
have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
12. With respect to Funds offering both shares subject
to a front-end sales charge ("Class A shares") and shares subject
to a contingent deferred sales charge ("Class B shares"), you
shall conform to such written compliance standards as we have
provided you in the past or may from time to time provide to you
in the future.
13. We, our affiliates and the Funds shall not be
liable for any loss, expense, damages, costs or other claim
arising out of any redemption or exchange pursuant to telephone
instructions from any person or our refusal to execute such
instructions for any reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given as of the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a
telegraph office for transmission to the other party at his or
its address as shown below. This Agreement may be amended by us
at any time and your placing of an order after the effective date
of any such amendment shall constitute your acceptance thereof.
If you are a bank or an affiliate of a bank, this Agreement will
automatically terminate if you cease to be, or the bank of which
you are an affiliate ceases to be, a bank as defined in the 1934
Act.
5
<PAGE>
15. This Agreement shall be construed in accordance
with the laws of the State of New York and shall be binding upon
both parties hereto when signed by us and accepted by you in the
space provided below.
Very truly yours,
ALLIANCE FUND DISTRIBUTORS, INC.
By:_______________________________
(Authorized Signature)
Bank or Firm Name _______________________________________________
Address _________________________________________________________
City _____________________ State ____________ Zip Code __________
ACCEPTED BY (signature) _____________________ Title _____________
Name (print) ________________________________ Title _____________
Date _____________________ 199__ Phone # ________________________
Please return two signed copies of this Agreement (one
of which will be signed by us and thereafter returned to you) in
the accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
6
<PAGE>
Text of Amendment to
Selected Dealer and Agent Agreements
Pursuant to Section 14 of the Selected Dealer Agreement or
Selected Agent Agreement ("Agreement") between your
organization and Alliance Fund Distributors, Inc. ("AFD"),
AFD hereby amends the Agreement to add at the end of
Section 14 the following sentence:
In the event of the termination of the provisions of
Section 10 of this Agreement by reason of any assignment
(as defined in the Act) in connection with the issuance
by The Equitable Life Assurance Society of the United
States ("Equitable") of debt obligations to AXA and/or
the exchange of such obligations for capital stock of a
holding company owning all of the stock of Equitable,
this Agreement shall be deemed to have been amended,
effective immediately following such assignment, to
insert in the place of such former Section 10 a new
Section 10 identical thereto in all respects.
July 13, 1992
7
00250107.AR1
<PAGE>
EXHIBIT 8
CUSTODIAN AGREEMENT
AGREEMENT made this 9th of September, 1991 between
ALLIANCE MULTI-MARKET INCOME AND GROWTH TRUST, INC. (the "Fund")
and Brown Brothers Harriman & Co. (the "Custodian").
WITNESSETH: That in consideration of the mutual
covenants and agreements herein contained, the parties hereto
agree as follows:
1. The Fund hereby employs and appoints the Custodian
as a custodian for the term and subject to the provisions of this
Agreement. The Custodian shall not be under any duty or
obligation to require the Fund to deliver to it any securities or
funds owned by the Fund and shall have no responsibility or
liability for or on account of securities or funds not so
delivered. The Fund will deposit with the Custodian copies of
the Articles of Incorporation and By-Laws (or comparable
documents) of the Fund and all amendments thereto, and copies of
such votes and other proceedings of the Fund as may be necessary
for or convenient to the Custodian in the performance of its
duties.
2. Except for securities and funds held by
subcustodians appointed pursuant to the provisions of Section 3
hereof, the Custodian shall have and perform the following powers
and duties:
<PAGE>
A. Safekeeping - To keep safely the securities of the
Fund that have been delivered to the Custodian and from time to
time to receive delivery of securities for safekeeping.
B. Manner of Holding Securities - To hold securities
of the Fund (1) by physical possession of the share certificates
or other instruments representing such securities in registered
or bearer form, or (2) in book-entry form by a Securities System
(as said term is defined in Section 2U).
C. Registered Name; Nominee - To hold registered
securities of the Fund (1) in the name or any nominee name of
the Custodian or the Fund, or in the name or any nominee name of
any agent appointed pursuant to Section 6E, or (2) in street
certificate form, so-called, and in any case with or without any
indication of fiduciary capacity.
D. Purchases - Upon receipt of Proper Instructions, as
defined in Section X on Page 15, insofar as funds are available
for the purpose, to pay for and receive securities purchased for
the account of the Fund, payment being made only upon receipt of
the securities (1) by the Custodian, or (2) by a clearing
corporation of a national securities exchange of which the
Custodian is a member, or (3) by a Securities System. However,
(i) in the case of repurchase agreements entered into by the
Fund, the Custodian (as well as an Agent) may release funds to a
Securities System or to a Subcustodian prior to the receipt of
advice from the Securities System or Subcustodian that the
2
<PAGE>
securities underlying such repurchase agreement have been
transferred by book entry into the Account (as defined in
Section 2U) of the Custodian (or such Agent) maintained with such
Securities System or Subcustodian, so long as such payment
instructions to the Securities System or Subcustodian include a
requirement that delivery is only against payment for securities,
(ii) in the case of foreign exchange contracts, options, time
deposits, call account deposits, currency deposits and other
deposits, contracts or options pursuant to Sections 2J, 2L, 2M
and 2N, the Custodian may make payment therefor without receiving
an instrument evidencing said deposit, contract or option so long
as such payment instructions detail specific securities to be
acquired, and (iii) in the case of securities in which payment
for the security and receipt of the instrument evidencing the
security are under generally accepted trade practice or the terms
of the instrument representing the security expected to take
place in different locations or through separate parties, such as
commercial paper which is indexed to foreign currency exchange
rates, derivatives and similar securities, the Custodian may make
payment for such securities prior to delivery thereof in
accordance with such generally accepted trade practice or the
terms of the instrument representing such security.
E. Exchanges - Upon receipt of proper instructions to
exchange securities held by it for the account of the Fund for
other securities in connection with any reorganization,
3
<PAGE>
recapitalization, split-up of shares, change of par value,
conversion or other event, and to deposit any such securities in
accordance with the terms of any reorganization or protective
plan. Without such instructions, the Custodian may surrender
securities in temporary form for definitive securities, may
surrender securities for transfer into a name or nominee name as
permitted in Section 2C, and may surrender securities for a
different number of certificates or instruments representing the
same number of shares or same principal amount of indebtedness,
provided the securities to be issued are to be delivered to the
Custodian and further provided custodian shall at the time of
surrendering securities or instruments receive a receipt or other
evidence of ownership thereof.
F. Sales of Securities - Upon receipt of proper
instructions, to make delivery of securities which have been sold
for the account of the Fund, but only against payment therefor
(1) in cash, by a certified check, bank cashier's check, bank
credit, or bank wire transfer, or (2) by credit to the account of
the Custodian with a clearing corporation of a national
securities exchange of which the Custodian is a member, or (3) by
credit to the account of the Custodian or an Agent of the
Custodian with a Securities System; provided, however, that
(i) in the case of delivery of physical certificates or
instruments representing securities, the Custodian may make
delivery to the broker buying the securities, against receipt
4
<PAGE>
therefor, for examination in accordance with "street delivery"
custom, provided that the payment therefor is to be made to the
Custodian (which payment may be made by a broker's check) or that
such securities are to be returned to the Custodian, and (ii) in
the case of securities referred to in clause (iii) of the last
sentence of Section 2D, the Custodian may make settlement,
including with respect to the form of payment, in accordance with
generally accepted trade practice relating to such securities or
the terms of the instrument representing said security.
G. Depositary Receipts - Upon receipt of proper
instructions, to instruct a subcustodian appointed pursuant-to
Section 3 hereof (a "Subcustodian") or an agent of the Custodian
appointed pursuant to Section 6E hereof (an "Agent") to surrender
securities to the depositary used by an issuer of American
Depositary Receipts or International Depositary Receipts
(hereinafter collectively referred to as "ADRs") for such
securities against a written receipt therefor adequately
describing such securities and written evidence satisfactory to
the Subcustodian or Agent that the depositary has acknowledged
receipt of instructions to issue with respect to such securities
ADRs in the name of the Custodian, or a nominee of the Custodian,
for delivery to the Custodian in Boston, Massachusetts, or at
such other place as the Custodian may from time to time
designate.
5
<PAGE>
Upon receipt of proper instructions, to surrender ADRs
to the issuer thereof against a written receipt therefor
adequately describing the ADRs surrendered and written evidence
satisfactory to the Custodian that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depositary to
deliver the securities underlying such ADRs to a Subcustodian or
an Agent.
H. Exercise of Rights; Tender Offers - Upon timely
receipt of proper instructions, to deliver to the issuer or
trustee thereof, or to the agent of either, warrants, puts,
calls, rights or similar securities for the purpose of being
exercised or sold, provided that the new securities and cash, if
any, acquired by such action are to be delivered to the
Custodian, and, upon receipt of proper instructions, to deposit
securities upon invitations for tenders of securities, provided
that the consideration is to be paid or delivered or the tendered
securities are to be returned to the Custodian.
I. Stock Dividends, Rights, Etc. - To receive and
collect all stock dividends, rights and other items of like
nature; and to deal with the same pursuant to proper instructions
relative thereto.
J. Options - Upon receipt of proper instructions, to
receive and retain confirmations or other documents evidencing
the purchase of writing of an option on a security or securities
index by the Fund; to deposit and maintain in a segregated
6
<PAGE>
account, either physically or by book-entry in a Securities
System, securities subject to a covered call option written by
the Fund; and to release and/or transfer such securities or other
assets only in accordance with a notice or other communication
evidencing the expiration, termination or exercise of such
covered option furnished by The Options Clearing Corporation, the
securities or options exchange on which such covered option is
traded or such other organization as may be responsible for
handling such options transactions.
K. Borrowings - Upon receipt of proper instructions to
deliver securities of the Fund to lenders or their agents as
collateral for borrowings effected by the Fund, provided that
such borrowed money is payable to or upon the Custodian's order
as Custodian for the Fund.
L. Demand Deposit Bank Accounts - To open and operate
an account or accounts in the name of the Fund on the Custodian's
books subject only to draft or order by the Custodian. All funds
received by the Custodian from or for the account of the Fund
shall be deposited in said account(s). The responsibilities of
the Custodian to the Fund for deposits accepted on the
Custodian's books shall be that of a U.S. bank for a similar
deposit.
If and when authorized by proper instructions, the
Custodian may open and operate an additional account(s) in such
other banks or trust companies as may be designated by the Fund
7
<PAGE>
in such instructions (any such bank or trust company so
designated by the Fund being referred to hereafter as a "Banking
Institution"), provided that such account(s) shall be in the name
of the Custodian for account of the Fund and subject only to the
Custodian's draft or order. Such accounts may be opened with
Banking Institutions in the United States and in other countries
and may be denominated in either U.S. Dollars or other currencies
as the Fund may determine. All such deposits shall be deemed to
be portfolio securities of the Fund and accordingly the
responsibility of the Custodian therefore shall be the same as
and no greater than the Custodian's responsibility in respect of
other portfolio securities of the Fund.
M. Interest Bearing Call or Time Deposits - To place
interest bearing fixed term and call deposits with such banks and
in such amounts as the Fund may authorize pursuant to proper
instructions. Such deposits may be placed with the Custodian or
with Subcustodians or other Banking Institutions as the Fund may
determine. Deposits may be denominated in U.S. Dollars or other
currencies and need not be evidenced by the issuance or delivery
of a certificate to the Custodian, provided that the Custodian
shall include in its records with respect to the assets of the
Fund, appropriate notation as to the amount and currency of each
such deposit, the accepting Banking Institution, and other
appropriate details. Such deposits, other than those placed with
the Custodian, shall be deemed portfolio securities of the Fund
8
<PAGE>
and the responsibilities of the Custodian therefor shall be the
same as those for demand deposit bank accounts placed with other
banks, as described in Section L of this agreement. The
responsibility of the Custodian for such deposits accepted on the
Custodian's books shall be that of a U.S. bank for a similar
deposit.
N. Foreign Exchange Transactions and Futures
Contracts. Pursuant to proper instructions, to enter into
foreign exchange contracts or options to purchase and sell
foreign currencies for spot and future delivery on behalf and for
the account of the Fund. Such transactions may be undertaken by
the Custodian with such Banking Institutions, including the
Custodian and Subcustodian(s) as principals, as approved and
authorized by the Fund. Foreign exchange contracts and options
other than those executed with the Custodian, shall be deemed to
be portfolio securities of the Fund and the responsibilities of
the Custodian therefor shall be the same as those for demand
deposit bank accounts placed with other banks as described in
Section 2-L of this agreement. Upon receipt of proper
instructions, to receive and retain confirmations evidencing the
purchase or sale of a futures contract or an option on a futures
contract by the Fund; to deposit and maintain in a segregated
account, for the benefit of any futures commission merchant or to
pay to such futures commission merchant, assets designated by the
fund as initial, maintenance or variation "margin" deposits
9
<PAGE>
intended to secure the Fund's performance of its obligations
under any futures contracts purchased or sold or any options on
futures contracts written by the Fund, in accordance with the
provisions of any agreement or agreements among any of the Fund,
the Custodian and such futures commission merchant, designated to
comply with the rules of the Commodity Futures Trading Commission
and/or any contract market, or any similar organization or
organizations, regarding such margin deposits; and to release
and/or transfer assets in such margin accounts only in accordance
with any such agreements or rules.
O. Stock Loans. Upon receipt of proper instructions,
to deliver securities of the Fund, in connection with loans of
securities by the Fund, to the borrower thereof upon the receipt
of the cash collateral, if any, for such borrowing. In the event
U.S. Government securities are to be used as collateral, the
Custodian will not release the securities to be loaned until it
has received confirmation that such collateral has been delivered
to the Custodian. The Custodian and Fund understand that the
timing of receipt of such confirmation will normally require that
the delivery of securities to be loaned will be made one day
after receipt of the U.S. Government collateral.
P. Collections. To collect, receive and deposit in
said account or accounts all income, payments of principal and
other payments with respect to the securities held hereunder, and
in connection therewith to deliver the certificates or other
10
<PAGE>
instruments representing the securities to the issuer thereof or
its agent when securities are called, redeemed, retired or
otherwise become payable; provided, that the payment is to be
made in such form and manner and at such time, which may be after
delivery by the Custodian of the instrument representing the
security, as is in accordance with the terms of the instrument
representing the security, or such proper instructions as the
Custodian may receive, or governmental regulations, the rules of
Securities Systems or other U.S. securities depositories and
clearing agencies or, with respect to securities referred to in
clause (iii) of the last sentence of Section 2D, in accordance
with generally accepted trade practice; (ii) to execute ownership
and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund or in connection
with transfer of securities, and (iii) pursuant to proper
instructions to take such other actions with respect to
collection or receipt of funds or transfer of securities which
involve an investment decision.
Q. Dividends, Distributions and Redemptions. Upon
receipt of proper instructions from the Fund, or upon receipt of
instructions from the Fund's shareholder servicing agent or agent
with comparable duties (the "Shareholder Servicing Agent") (given
by such person or persons and in such manner on behalf of the
Shareholder Servicing Agent as the Fund shall have authorized),
11
<PAGE>
the Custodian shall release funds or securities to the
Shareholder Servicing Agent or otherwise apply funds or
securities, insofar as available, for the payment of dividends or
other distributions to Fund shareholders. Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from
the Shareholder Servicing Agent (given by such person or persons
and in such manner on behalf of the Shareholder Servicing Agent
as the Fund shall have authorized), the Custodian shall release
funds or securities, insofar as available, to the Shareholder
Servicing Agent or as such Agent shall otherwise instruct for
payment to Fund shareholders who have delivered to such Agent a
request for repurchase or redemption of their shares of capital
stock of the Fund.
R. Proxies, Notices, Etc. - Promptly to deliver or
mail to the Fund all forms of proxies and all notices of meetings
and any other notices or announcements affecting or relating to
securities owned by the Fund that are received by the Custodian,
and upon receipt of proper instructions, to execute and deliver
or cause its nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor its
nominee shall vote upon any of such securities or execute any
proxy to vote thereon or give any consent or take any other
action with respect thereto (except as otherwise herein provided)
unless ordered to do so by proper instructions.
12
<PAGE>
S. Nondiscretionary Details - Without the necessity of
express authorization from the Fund, (1) to attend to all
nondiscretionary details in connection with the sale, exchange,
substitution, purchase, transfer or other dealings with
securities, funds or other-property of the Portfolio held by the
Custodian except as otherwise directed from time to time by the
Directors of the Fund, and (2) to make payments to itself or
others for minor expenses of handling securities or other similar
items relating to the Custodian's duties under this Agreement,
provided that all such payments shall be accounted for to the
Fund.
T. Bills - Upon receipt of proper instructions to pay
or cause to be paid, insofar as funds are available for the
purpose, bills, statements, or other obligations of the Fund.
U. Deposit of Fund Assets in Securities Systems - The
Custodian may deposit and/or maintain securities owned by the
Fund in (i) The Depository Trust Company, (ii) any book-entry
system as provided in Subpart O of Treasury Circular No. 300, 31
CFR 306, Subpart B of 31 CFR Part 350, or the book-entry
regulations of federal agencies substantially in the form of
Subpart O, or (iii) any other domestic clearing agency registered
with the Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934 which acts as a securities
depository and whose use the Fund has previously approved in
writing (each of the foregoing being referred to in this
13
<PAGE>
Agreement as a "Securities System"). Utilization of a Securities
System shall be in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may deposit and/or maintain Fund
securities, either directly or through one or more Agents
appointed by the Custodian (provided that any such agent shall be
qualified to act as a custodian of the Fund pursuant to the
Investment Company Act of 1940 and the rules and regulations
thereunder), in a Securities System provided that such securities
are represented in an account ("Account") of the Custodian or
such Agent in the Securities System which shall not include any
assets of the Custodian or Agent other than assets held as a
fiduciary, custodian, or otherwise for customers;
2) The records of the Custodian with respect to
securities of the Fund which are maintained in a Securities
System shall identify by book-entry those securities belonging to
the Fund;
3) The Custodian shall pay for securities
purchased for the account of the Fund upon (i) receipt of advice
from the Securities System that such securities have been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such payment and transfer
for the account of the Fund. The Custodian shall Transfer
securities sold for the account of the Fund upon (i) receipt of
14
<PAGE>
advice from the Securities System that payment for such
securities has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Fund. Copies of
all advices from the Securities System of transfers of securities
for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian or an Agent as referred
to above, and be provided to the Fund at its request. The
Custodian shall furnish the Fund confirmation of each transfer to
or from the account of the Fund in the form of a written advice
or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund on the next
business day;
4) The Custodian shall provide the Fund with any
report obtained by the Custodian or any Agent as referred to
above on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the Securities System; and the Custodian and such
Agents shall send to the Fund such reports on their own systems
of internal accounting control as the Fund may reasonably request
from time to time.
5) At the written request of the Fund, the
Custodian will terminate the use of any such Securities System on
behalf of the Fund as promptly as practicable.
15
<PAGE>
V. Other Transfers - Upon receipt of Proper
Instructions, to deliver securities, funds and other property of
the Fund to a Subcustodian or another custodian of the Fund; and,
upon receipt of proper instructions, to make such other
disposition of securities, funds or other property of the Fund in
a manner other than or for purposes other than as enumerated
elsewhere in this Agreement, provided that the instructions
relating to such disposition shall include a statement of the
purpose for which the delivery is to be made, the amount of
securities to be delivered and the name of the person or persons
to whom delivery is to be made.
W. Investment Limitations - In performing its duties
generally, and more particularly in connection with the purchase,
sale and exchange of securities made by or for the Fund, the
Custodian may assume unless and until notified in writing to the
contrary that proper instructions received by it are not in
conflict with or in any way contrary to any provisions of the
Fund's Articles of Incorporation or By-Laws (or comparable
documents) or votes or proceedings of the shareholders or
Directors of the Fund. The Custodian shall in no event be liable
to the Fund and shall be indemnified by the Fund for any
violation which occurs in the course of carrying out instructions
given by the Fund of any investment limitations to which the Fund
is subject or other limitations with respect to the Fund's powers
16
<PAGE>
to make expenditures, encumber securities, borrow or take similar
actions affecting its portfolio.
X. Proper Instructions - Proper instructions shall
mean a tested telex from the Fund or a written request,
direction, instruction or certification signed or initialed on
behalf of the Fund by one or more person or persons as the Board
of Directors of the Fund shall have from time to time authorized,
provided, however, that no such instructions directing the
delivery of securities or the payment of funds to an authorized
signatory of the Fund shall be signed by such person. Those
persons authorized to give proper instructions may be identified
by the Board of Directors by name, title or position and will
include at least one officer empowered by the Board to name other
individuals who are authorized to give proper instructions on
behalf of the Fund. Telephonic or other oral instructions given
by any one of the above persons will be considered proper
instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with
respect to the transaction involved. Oral instructions will be
confirmed by tested telex or in writing in the manner set forth
above but the lack of such confirmation shall in no way affect
any action taken by the Custodian in reliance upon such oral
instructions. The Fund authorizes the Custodian to tape record
any and all telephonic or other oral instructions given to the
Custodian by or on behalf of the Fund (including any of its
17
<PAGE>
officers, Directors, employees or agents) and will deliver to the
Custodian a similar authorization from any investment manager or
adviser or person or entity with similar responsibilities which
is authorized to give proper instructions on behalf of the Fund
to the Custodian. Proper instructions may relate to specific
transactions or to types or classes of transactions, and may be
in the form of standing instructions.
Proper instructions may include communications effected
directly between electro-mechanical or electronic devices or
systems, in addition to tested telex, provided that the Fund and
the Custodian agree to the use of such device or system.
3. Securities, funds and other property of the Fund
may be held by subcustodians appointed pursuant to the provisions
of this Section 3 (a "Subcustodian"). The Custodian may, at any
time and from time to time, appoint any bank or trust company
(meeting the requirements of a custodian or a foreign custodian
under the Investment Company Act of 1940 and the rules and
regulations thereunder) to act as a Subcustodian for the Fund,
provided that the Fund shall have approved in writing (l) any
such bank or trust company and the subcustodian agreement to be
entered into between such bank or trust company and the
Custodian, and (2) if the subcustodian is a bank organized under
the laws of a country other than the United States, the holding
of securities, cash and other property of the Fund in the country
in which it is proposed to utilize the services of such
18
<PAGE>
subcustodian. Upon such approval by the Fund, the Custodian is
authorized on behalf of the Fund to notify each Subcustodian of
its appointment as such. The Custodian may, at any time in its
discretion, remove any bank or trust company that has been
appointed as a Subcustodian but will promptly notify the Fund of
any such action.
Those Subcustodians, their offices or branches which the
Fund has approved to date are set forth on Appendix A hereto.
Such Appendix shall be amended from time to time as
Subcustodians, branches or offices are changed, added or deleted.
The Fund shall be responsible for informing the Custodian
sufficiently in advance of a proposed investment which is to be
held at a location not listed on Appendix A, in order that there
shall be sufficient time for the Fund to give the approval
required by the preceding paragraph and for the Custodian to put
the appropriate arrangements in place with such Subcustodian
pursuant to such subcustodian agreement.
Although the Fund does not intend to invest in a country
before the foregoing procedures have been completed, in the event
that an investment is made prior to approval, if practical, such
security shall be removed to an approved location or if not
practical such security shall be held by such agent as the
Custodian may appoint. In such event, the Custodian shall be
liable to the Fund for the actions of such agent if and only to
the extent the Custodian shall have recovered from such agent for
19
<PAGE>
any damages caused the Fund by such agent and provided that the
Custodian shall pursue its rights against such agent.
With respect to the securities and funds held by a
Subcustodian, either directly or indirectly, including demand and
interest bearing deposits, currencies or other deposits and
foreign exchange contracts as referred to in Sections 2K, 2L or
2M, the Custodian shall be liable to the Fund if and only to the
extent that such Subcustodian is liable to the Custodian;
provided, however, that the Custodian shall be liable to the Fund
for losses resulting from the bankruptcy or insolvency of a
Subcustodian if and only to the extent that such Subcustodian is
liable to the Custodian and the Custodian recovers from such
Subcustodian under the applicable subcustodian agreement. The
Custodian shall nevertheless be liable to the Fund for its own
negligence in transmitting any instructions received by it from
the Fund and for its own negligence in connection with the
delivery of any securities or funds held by it to any such
Subcustodian.
In the event that any Subcustodian appointed pursuant to
the provisions of this Section 3 fails to perform any of its
obligations under the terms and conditions of the applicable
subcustodian agreement, the Custodian shall use its best efforts
to cause such Suboustodians to perform such obligations. In the
event that the Custodian is unable to cause such Subcustodian to
perform fully its obligations thereunder, the Custodian shall
20
<PAGE>
forthwith upon the Fund's request terminate such Subcustodian
and, if necessary or desirable, appoint another subcustodian in
accordance with the provisions of this Section 3. At the
election of the Fund, it shall have the right to enforce, to the
extent permitted by the subcustodian agreement and applicable
law, the Custodian's rights against any such Subcustodian for
loss or damage caused the Fund by such Subcustodian.
At the written request of the Fund, the Custodian will
terminate any subcustodian appointed pursuant to the provisions
of this Section 3 in accordance with the termination provisions
under the applicable subcustodian agreement. The Custodian will
not amend any subcustodian agreement or agree to change or permit
any changes thereunder except upon the prior written approval of
the Fund.
In the event the Custodian receives a claim from a
Subcustodian under the indemnification provisions of any
subcustodian agreement, the Custodian shall promptly give written
notice to the Fund of such claim. No more than thirty days after
written notice to the Fund of the Custodian's intention to make
such payment, the Fund will reimburse the Custodian the amount of
such payment except in respect of any negligence or misconduct of
the Custodian.
4. The Custodian may assist generally in the
preparation of reports to Fund shareholders and others, audits of
accounts, and other ministerial matters of like nature.
21
<PAGE>
5. The Fund hereby also appoints the Custodian as its
financial agent. With respect to the appointment as financial
agent, the Custodian shall have and perform the following powers
and duties:
A. Records - To create, maintain and retain such
records relating to its activities and obligations under this
Agreement as are required under the Investment Company Act of
1940 and the rules and regulations thereunder (including
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder) and
under applicable Federal and State tax laws. All such records
will be the property of the Fund and in the event of termination
of this Agreement shall be delivered to the successor custodian,
and the Custodian agrees to cooperate with the Fund in execution
of documents and other action necessary or desirable in order to
substitute the successor custodian for the custodian under their
agreement.
B. Accounts - To keep books of account and render
statements, including interim monthly and complete quarterly
financial statements, or copies thereof, from time to time as
reasonably requested by proper instructions.
C. Access to Records - Subject to security
requirements of the Custodian applicable to its own
employees having access to similar records within the Custodian
and such regulations as may be reasonably imposed by the
Custodian, the books and records maintained by the Custodian
22
<PAGE>
pursuant to Sections 5A and 5B shall be open to inspection and
audit at reasonable times by officers of attorneys for and
auditors employed by, the Fund.
D. Calculation of Net Asset Value - To compute and
determine the net asset value per share of capital stock of the
Fund as of the close of business on the New York Stock Exchange
on each day on which such Exchange is open, unless otherwise
directed by proper instructions. Such computation and
determination shall be made in accordance with (1) the provisions
of the Fund's Articles of Incorporation or By Laws of the Fund,
as they may from time to time be amended and delivered to the
Custodian, (2) the votes of the Board of Directors of the Fund at
the time in force and applicable, as they may from time to time
be delivered to the Custodian, and (3) proper instructions from
such officers of the Fund or other persons as are from time to
time authorized by the Board of Directors of the Fund to give
instructions with respect to computation and determination of the
net asset value. On each day that the Custodian shall compute
the net asset value per share of the Fund, the Custodian shall
provide the Fund with written reports which permit the Fund to
verify that portfolio transactions have been recorded in
accordance with the Fund's instructions.
In computing the net asset value, the Custodian may rely
upon any information furnished by proper instructions, including
without limitation any information (1) as to accrual of
23
<PAGE>
liabilities of the Fund and as to liabilities of the Fund not
appearing on the books of account kept by the custodian, (2) as
to the existence, status and proper treatment of reserves, if
any, authorized by the fund, (3) as to the sources of quotations
to be used in computing the net asset value, including those
listed in Appendix B, (4) as to the fair value to be assigned to
any securities or other property for which price quotations are
not readily available, and (5) as to the sources of information
with respect to "corporate actions" affecting portfolio
securities of the fund, including those listed in Appendix B.
(Information as to "corporate actions" shall include information
as to dividends, distributions, stock splits, stock dividends,
rights offerings, conversions, exchanges, recapitalizations,
mergers, redemptions, calls, maturity dates and similar
transactions, including the ex and record dates and the amounts
or other terms thereof.)
In like manner, the Custodian shall compute and
determine the net asset value as of such other times as the Board
of Directors of the Fund from time to time may reasonably
request.
Notwithstanding any other provisions of this Agreement,
including Section 6C, the following provisions shall apply with
respect to the Custodian's foregoing responsibilities in this
Section 5D: The Custodian shall be held to the exercise of
reasonable care in computing and determining net asset value as
24
<PAGE>
provided in this Section 5D, but shall not be held accountable or
liable for any losses, damages or expenses the Fund or any
shareholder or former shareholder of the Fund may suffer or incur
arising from or based upon errors or delays in the determination
of such net asset value unless such error or delay was due to the
Custodian's negligence, gross negligence or reckless or willful
misconduct in determination of such net asset value. (The
parties hereto acknowledge, however, that the Custodian's causing
an error or delay in the determination of net asset value may,
but does not in and of itself, constitute negligence, gross
negligence or reckless or willful misconduct.) In no event shall
the Custodian be liable or responsible to the Fund, any present
or former shareholder of the fund or any other party for any
error or delay which continued or was undetected after the date
of an audit performed by the certified public accountants
employed by the Fund if, in the exercise of reasonable care in
accordance with generally accepted accounting standards, such
accountants should have become aware of such error or delay in
the course of performing such audit. The Custodian's liability
for any such negligence, gross negligence or reckless or willful
misconduct which results in an error in determination of such net
asset value shall be limited to the direct, out of pocket loss
the Fund, shareholder or former shareholder shall actually incur,
measured by the difference between the actual and the erroneously
computed net asset value, and any expenses the fund shall incur
25
<PAGE>
in connection with correcting the records of the Fund affected by
such error (including charges made by the Fund's registrar and
transfer agent for making such corrections) or communicating with
shareholders or former shareholders of the Fund affected by such
error.
Without limiting the foregoing, the Custodian shall not
be held accountable or liable to the Fund, any shareholder or
former shareholder thereof or any other person for any delays or
losses, damages or expenses any of them may suffer or incur
resulting from (1) the Custodian's failure to receive timely and
suitable notification concerning quotations or corporate actions
relating to or affecting portfolio securities of the fund or
(2) any errors in the computation of the net asset value based
upon or arising out of quotations or information as to corporate
actions if received by the Custodian either (i) from a source
which the Custodian was authorized pursuant to the second
paragraph of this Section 5D to rely upon, or (ii) from a source
which in the Custodian's reasonable judgment was as reliable a
source for such quotations or information as the sources
authorized pursuant to that paragraph. Nevertheless, the
Custodian will use its best judgment in determining whether to
verify through other sources any information it has received as
to quotations or corporate actions if the Custodian has reason to
believe that any such information might be incorrect. In the
event of any error or delay in the determination of such net
26
<PAGE>
asset value for which the Custodian may be liable, the Fund and
the Custodian will consult and make good faith efforts to reach
agreement on what actions should be taken in order to mitigate
any loss suffered by the Fund or its present or former
shareholders, in order that the custodian's exposure to liability
shall be reduced to the extent possible after taking into account
all relevant factors and alternatives. Such actions might
include the Fund or the custodian taking reasonable steps to
collect from any shareholder or former shareholder who has
received any overpayment upon redemption of shares such overpaid
amount or to collect from any shareholder who has underpaid upon
a purchase of shares the amount of such underpayment or to reduce
the number of shares issued to such shareholder. It is
understood that in attempting to reach agreement on the actions
to be taken or the amount of the loss which should appropriately
be borne by the Custodian, the Fund and the Custodian will
consider such relevant factors as the amount of the loss
involved, the Fund's desire to avoid loss of shareholder good
will, the fact that other persons or entitles could have been
reasonably expected to have detected the error sooner than the
time it was actually discovered, the appropriateness of limiting
or eliminating the benefit which shareholders or former
shareholders might have obtained by reason of the error, and the
possibility that other parties providing services to the Fund
might be induced to absorb a portion of the loss incurred.
27
<PAGE>
D. Disbursements - Upon receipt of proper
instructions, to pay or cause to be paid, insofar as funds are
available for the purpose, bills, statements and other
obligations of the Fund (including but not limited to interest
charges, taxes, management fees, compensation to Fund officers
and employees, and other operating expenses of the Fund).
6. A. The Custodian shall not be liable for any
action taken or omitted in reliance upon proper instructions
believed by it to be genuine or upon any other written notice,
request, direction, instruction, certificate or other instrument
believed by it to be genuine and signed by the proper party or
parties.
The Secretary or Assistant Secretary of the Fund shall
certify to the Custodian the names, signatures and scope of
authority of all persons authorized to give proper instructions
or any other such notice, request, direction, instruction,
certificate or instrument on behalf of the Fund, the names and
signatures of the officers of the Fund, the name and address of
the Shareholder Servicing Agent, and any resolutions, votes,
instructions or directions of the Fund's Board of Directors or
shareholders. Such certificate may be accepted and relied upon
by the Custodian as conclusive evidence of the facts set forth
therein and may be considered in full force and effect until
receipt of a similar certificate to the contrary. So long as and
to the extent that it is in the exercise of reasonable care, the
28
<PAGE>
Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received
by it or delivered by it pursuant to this Agreement.
The Custodian shall be entitled, at the expense of the
Fund, to receive and act upon advice of counsel (who may be
counsel for the Fund) on all matters, and the Custodian shall be
without liability for any action reasonably taken or omitted
pursuant to such advice.
B. With respect to the portfolio securities, cash and
other property of the Fund held by a Securities System, the
Custodian shall be liable to the Fund only for any loss or damage
to the Fund resulting from use of the Securities System if caused
by any negligence, misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their employees or from any
failure of the Custodian or any such agent to enforce effectively
such rights as it may have against the Securities System.
C. Except as may otherwise be set forth in this
Agreement with respect to particular matters, the Custodian shall
be held only to the exercise of reasonable care and diligence in
carrying out the provisions of this Agreement, provided that the
Custodian shall not thereby be required to take any action which
is in contravention of any applicable law. However, nothing
herein shall exempt the Custodian from liability due to its own
negligence or willful misconduct. The Fund agrees to indemnify
and hold harmless the Custodian and its nominees from all claims
29
<PAGE>
and liabilities (including counsel fees) incurred or assessed
against it or its nominees in connection with the performance of
this Agreement, except such as may arise from its or its
nominee's breach of the relevant standard of conduct set forth in
this Agreement. Without limiting the foregoing indemnification
obligation of the Fund, the Fund agrees to indemnify the
Custodian and its nominees against any liability the Custodian or
such nominee may incur by reason of taxes assessed to the
Custodian or such nominee or other costs, liability or expense
incurred by the Custodian or such nominee resulting directly or
indirectly from the fact that portfolio securities or other
property of the Fund is registered in the name of the Custodian
or such nominee.
In order that the indemnification provisions contained
in this Paragraph 6-C shall apply, however, it is understood that
if in any case the Fund may be asked to indemnify or hold the
Custodian harmless, the Fund shall be fully and promptly advised
of all pertinent facts concerning the situation in question, and
it is further understood that the Custodian will use all
reasonable care to identify and notify the Fund promptly
concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification
against the Fund. The Fund shall have the option to defend the
Custodian against any claim which may be the subject of this
indemnification, and in the event that the Fund so elects it will
30
<PAGE>
so notify the Custodian, and thereupon the Fund shall take over
complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which
it shall seek indemnification under this Paragraph 6-C. The
Custodian shall in no case confess any claim or make any
compromise in any case in which the Fund will be asked to
indemnify the Custodian except with the Fund's prior written
consent.
It is also understood that the Custodian shall not be
liable for any loss involving any securities, currencies,
deposits or other property of the Fund, whether maintained by it,
a Subcustodian, an agent of the Custodian or a Subcustodian, a
Securities System, or a Banking Institution, or a loss arising
from a foreign currency transaction or contract, resulting from a
Sovereign Risk. A "Sovereign Risk" shall mean nationalization,
expropriation, devaluation, revaluation, confiscation, seizure,
cancellation, destruction or similar action by any governmental
authority, de facto or de jure; or enactment, promulgation,
imposition or enforcement by any such governmental authority of
currency restrictions, exchange controls, taxes, levies or other
charges affecting the Fund's property; or acts of war, terrorism,
insurrection or revolution; or any other similar act or event
beyond the Custodian's control.
D. The Custodian shall be entitled to receive
reimbursement from the Fund on demand, in the manner provided in
31
<PAGE>
Section 7, for its cash disbursements, expenses and charges
(including the fees and expenses of any Subcustodian or any
Agent) in connection with this Agreement, but excluding salaries
and usual overhead expenses.
E. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company as its agent (an "Agent") to carry out such of the
provisions of this Agreement as the Custodian may from time to
time direct, provided, however, that the appointment of such
Agent (other than an Agent appointed pursuant to the third
paragraph of Section 3) shall not relieve the Custodian of any of
its responsibilities under this agreement.
F. Upon request, the Fund shall deliver to the
Custodian such proxies, powers of attorney or other instruments
as may be reasonable and necessary or desirable in connection
with the performance by the Custodian or any Subcustodian of
their respective obligations under this Agreement or any
applicable subcustodian agreement.
7. The Fund shall pay the Custodian a custody fee
based on such fee schedule as may from time to time be agreed
upon in writing by the Custodian and the Fund. Such fee,
together with all amounts for which the Custodian is to be
reimbursed in accordance with Section 6D, shall be billed to the
Fund in such a manner as to permit payment by a direct cash
payment to the Custodian.
32
<PAGE>
8. This Agreement shall continue in full force and
effect until terminated by either party by an instrument in
writing delivered or mailed, postage prepaid, to the other party,
such termination to take effect not sooner than seventy five (75)
days after the date of such delivery or mailing. In the event of
termination the Custodian shall be entitled to receive prior to
delivery of the securities, funds and other property held by it
and all accrued fees and unreimbursed expenses, the payment of
which is contemplated by Sections 6D and 7, upon receipt by the
Fund of a statement setting forth such fees and expenses.
In the event of the appointment of a successor
custodian, it is agreed that the funds and securities owned by
the Fund and held by the Custodian or any Subcustodian shall be
delivered to the successor custodian, and the Custodian agrees to
cooperate with the Fund in execution of documents and performance
of other actions necessary or desirable in order to substitute
the successor custodian for the Custodian under this Agreement.
9. This Agreement constitutes the entire understanding
and agreement of the parties hereto with respect to the subject
matter hereof. No provision of this Agreement may be amended or
terminated except by a statement in writing signed by the party
against which enforcement of the amendment or termination is
sought.
In connection with the operation of this Agreement, the
Custodian and the Fund may agree in writing from time to time on
33
<PAGE>
such provisions interpretative of or in addition to the
provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. No
interpretative or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Agreement.
10. This instrument is executed and delivered in The
Commonwealth of Massachusetts and shall be governed by and
construed according to the laws of said Commonwealth.
11. Notices and other writings delivered or mailed
postage prepaid to the Fund addressed to the Fund at 500 Plaza
Drive 3rd Floor, Secaucus, NJ 07094 or to such other address as
the Fund may have designated to the Custodian in writing, or to
the Custodian at 40 Water Street, Boston, Massachusetts 02109,
Attention: Manager, Securities Department, or to such other
address as the Custodian may have designated to the Fund in
writing, shall be deemed to have been properly delivered or given
hereunder to the respective addressee.
12. This Agreement shall be binding on and shall inure
to the benefit of the Fund and the Custodian and their respective
successors and assigns, provided that neither party hereto may
assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of the other party.
13. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original. This
34
<PAGE>
Agreement shall become effective when one or more counterparts
have been signed and delivered by each of the parties.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed in its name and behalf on the day and
year first above written.
ALLIANCE MULTI-MARKET INCOME BROWN BROTHERS HARRIMAN & CO.
AND GROWTH TRUST, INC.
By /s/ David H. Dievler per pro /s/ Susan C. Livingston
__________________________ _______________________
David H. Dievler Susan C. Livingston
35
00250107.AQ8
<PAGE>
Exhibit 9
ALLIANCE FUND SERVICES, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of September 9, 1991, between
Alliance Multi-Market Income and Growth Trust, Inc., a Maryland
corporation and an open-end investment company registered with
the Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940 (the "Investment Company Act"),
having its principal place of business at 1345 Avenue of the
Americas, New York, New York 10105 (the "Fund"), and ALLIANCE
FUND SERVICES, INC., a Delaware corporation registered with the
SEC as a transfer agent under the Securities Exchange Act of
1934, having its principal place of business at 500 Plaza Drive,
Secaucus, New Jersey 07094 ("Fund Services"), provides as
follows:
WHEREAS, Fund Services has agreed to act as transfer
agent to the Fund for the purpose of recording the transfer,
issuance and redemption of shares of each series of the common
stock of the Fund ("Shares or "Shares of a Series), transferring
the Shares, disbursing dividends and other distributions to
shareholders of the Fund, and performing such other services as
may be agreed to pursuant hereto;
NOW THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, the parties do hereby
agree as follows:
<PAGE>
SECTION 1. The Fund hereby appoints Fund Services as
its transfer agent, dividend disbursing agent and shareholder
servicing agent for the Shares, and Fund Services agrees to act
in such capacities upon the terms set forth in this Agreement.
Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings assigned to them in SECTION 30.
SECTION 2.
(a) The Fund shall provide Fund Services with copies of
the following documents:
(1) Specimens of all forms of certificates for
Shares;
(2) Specimens of all account application forms and
other documents relating to Shareholders' accounts;
(3) Copies of each Prospectus;
(4) Specimens of all documents relating to
withdrawal plans instituted by the Fund, as described in SECTION
16; and
(5) Specimens of all amendments to any of the
foregoing documents.
(b) The Fund shall furnish to Fund Services a supply of
blank Share Certificates for the Shares and, from time to time,
will renew such supply upon Fund Services' request. Blank Share
Certificates shall be signed manually or by facsimile signatures
of officers of the Fund authorized to sign by law or pursuant to
2
<PAGE>
the by-laws of the Fund and, if required by Fund Services, shall
bear the Fund's seal or a facsimile thereof.
SECTION 3. Fund Services shall make original issues of
Shares in accordance with SECTIONS 13 and 14 and the Prospectus
upon receipt of (i) Written Instructions requesting the issuance,
(ii) a certified copy of a resolution of the Fund's Board of
Directors or Trustees authorizing the issuance, (iii) necessary
funds for the payment of any original issue tax applicable to
such Shares, and (iv) an opinion of the Fund's counsel as to the
legality and validity of the issuance, which opinion may provide
that it is contingent upon the filing by the Fund of an
appropriate notice with the SEC, as required by Rule 24f-2 of the
Investment Company Act, as amended from time to time.
SECTION 4. Transfers of Shares shall be registered and,
subject to the provisions of SECTION 10 in the case of Shares
evidenced by Share Certificates, new Share Certificates shall be
issued by Fund Services upon surrender of outstanding Share
Certificates in the form deemed by Fund Services to be properly
endorsed for transfer, which form shall include (i) all necessary
endorsers' signatures guaranteed by a member firm of a national
securities exchange or a domestic commercial bank or through
other procedures mutually agreed to between the Fund and Fund
Services, (ii) such assurances as Fund Services may deem
necessary to evidence the genuineness and effectiveness of each
endorsement and (iii) satisfactory evidence of compliance with
3
<PAGE>
all applicable laws relating to the payment or collection of
taxes.
SECTION 5. Fund Services shall forward Share
Certificates in "non-negotiable" form by first-class or
registered mail, or by whatever means Fund Services deems equally
reliable and expeditious. While in transit to the addressee, all
deliveries of Share Certificates shall be insured by Fund
Services as it deems appropriate. Fund Services shall not mail
Share Certificates in "negotiable" form, unless requested in
writing by the Fund and fully indemnified by the Fund to Fund
Services' satisfaction.
SECTION 6. In registering transfers of Shares, Fund
Services may rely upon the Uniform Commercial Code as in effect
from time to time in the State in which the Fund is incorporated
or organized or, if appropriate, in the State of New Jersey;
provided, that Fund Services may rely in addition or
alternatively on any other statutes in effect in the State of New
Jersey or in the state under the laws of which the Fund is
incorporated or organized that, in the opinion of Fund Services'
counsel, protect Fund Services and the Fund from liability
arising from (i) not requiring complete documentation in
connection with an issuance or transfer, (ii) registering a
transfer without an adverse claim inquiry, (iii) delaying
registration for purposes of an adverse claim inquiry or
(iv) refusing registration in connection with an adverse claim.
4
<PAGE>
SECTION 7. Fund Services may issue new Share
Certificates in place of those lost, destroyed or stolen, upon
receiving indemnity satisfactory to Fund Services; and may issue
new Share Certificates in exchange for, and upon surrender of,
mutilated Share Certificates as Fund Services deems appropriate.
SECTION 8. Unless otherwise directed by the Fund, Fund
Services may issue or register Share Certificates reflecting the
signature, or facsimile thereof, of an officer who has died,
resigned or been removed by the Fund. The Fund shall file
promptly with Fund Services' approval, adoption or ratification
of such action as may be required by law or by Fund Services.
SECTION 9. Fund Services shall maintain customary stock
registry records for Shares of each Series noting the issuance,
transfer or redemption of Shares and the issuance and transfer of
Share Certificates. Fund Services may also maintain for Shares
of each Series an account entitled "Unissued Certificate
Account," in which Fund Services will record the Shares, and
fractions thereof, issued and outstanding from time to time for
which issuance of Share Certificates has not been requested.
Fund Services is authorized to keep records for Shares of each
Series containing the names and addresses of record of
Shareholders, and the number of Shares, and fractions thereof,
from time to time owned by them for which no Share Certificates
are outstanding. Each Shareholder will be assigned a single
account number for Shares of each Series, even though Shares for
5
<PAGE>
which Certificates have been issued will be accounted for
separately.
SECTION 10. Fund Services shall issue Share
Certificates for Shares only upon receipt of a written request
from a Shareholder and as authorized by the Fund. If Shares are
purchased or transferred without a request for the issuance of a
Share Certificate, Fund Services shall merely note on its stock
registry records the issuance or transfer of the Shares and
fractions thereof and credit or debit, as appropriate, the
Unissued Certificate Account and the respective Shareholders'
accounts with the Shares. Whenever Shares, and fractions
thereof, owned by Shareholders are surrendered for redemption,
Fund Services may process the transactions by making appropriate
entries in the stock transfer records, and debiting the Unissued
Certificate Account and the record of issued Shares outstanding;
it shall be unnecessary for Fund Services to reissue Share
Certificates in the name of the Fund.
SECTION 11. Fund Services shall also perform the usual
duties and function required of a stock transfer agent for a
corporation, including but not limited to (i) issuing Share
Certificates as treasury Shares, as directed by Written
Instructions, and (ii) transferring Share Certificates from one
Shareholder to another in the usual manner. Fund Services may
rely conclusively and act without further investigation upon any
list, instruction, certification, authorization, Share
6
<PAGE>
Certificate or other instrument or paper reasonably believed by
it in good faith to be genuine and unaltered, and to have been
signed, countersigned or executed or authorized by a
duly-authorized person or persons, or by the Fund, or upon the
advice of counsel for the Fund or for Fund Services. Fund
Services may record any transfer of Share Certificates which it
reasonably believes in good faith to have been duly authorized,
or may refuse to record any transfer of Share Certificates if, in
good faith, it reasonably deems such refusal necessary in order
to avoid any liability on the part of either the Fund or Fund
Services.
SECTION 12. Fund Services shall notify the Fund of any
request or demand for the inspection of the Fund's share
records. Fund Services shall abide by the Fund's instructions
for granting or denying the inspection; provided, however, Fund
Services may grant the inspection without such instructions if it
is advised by its counsel that failure to do so will result in
liability to Fund Services.
SECTION 13. Fund Services shall observe the following
procedures in handling funds received:
(a) Upon receipt at the office designated by the Fund
of any check or other order drawn or endorsed to the Fund or
otherwise identified as being for the account of the Fund, and,
in the case of a new account, accompanied by a new account
application or sufficient information to establish an account as
7
<PAGE>
provided in the Prospectus, Fund Services shall stamp the
transmittal document accompanying such check or other order with
the name of the Fund and the time and date of receipt and shall
forthwith deposit the proceeds thereof in the custodial account
of the Fund.
(b) In the event that any check or other order for the
purchase of Shares is returned unpaid for any reason, Fund
Services shall, in the absence of other instructions from the
Fund, advise the Fund of the returned check and prepare such
documents and information as may be necessary to cancel promptly
any Shares purchased on the basis of such returned check and any
accumulated income dividends and capital gains distributions paid
on such Shares.
(c) As soon as possible after 4:00 p.m., Eastern time
or at such other times as the Fund may specify in Written or Oral
Instructions for any Series (the "Valuation Time") on each
Business Day Fund Services shall obtain from the Fund's Adviser a
quotation (on which it may conclusively rely) of the net asset
value, determined as of the Valuation Time on that day. On each
Business Day Fund Services shall use the net asset value(s)
determined by the Fund's Adviser to compute the number of Shares
and fractional Shares to be purchased and the aggregate purchase
proceeds to be deposited with the Custodian. As necessary but no
more frequently than daily (unless a more frequent basis is
agreed to by Fund Services), Fund Services shall place a purchase
8
<PAGE>
order with the Custodian for the proper number of Shares and
fractional Shares to be purchased and promptly thereafter shall
send written confirmation of such purchase to the Custodian and
the Fund.
SECTION 14. Having made the calculations required by
SECTION 13, Fund Services shall thereupon pay the Custodian the
aggregate net asset value of the Shares purchased. The aggregate
number of Shares and fractional Shares purchased shall then be
issued daily and credited by Fund Services to the Unissued
Certificate Account. Fund Services shall also credit each
Shareholder's separate account with the number of Shares
purchased by such Shareholder. Fund Services shall mail written
confirmation of the purchase to each Shareholder or the
Shareholder's representative and to the Fund if requested. Each
confirmation shall indicate the prior Share balance, the new
Share balance, the Shares for which Share Certificates are
outstanding (if any), the amount invested and the price paid for
the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each
Business Day, as specified in accordance with SECTION 13, Fund
Services shall process all requests to redeem Shares and, with
respect to each Series, shall advise the Custodian of (i) the
total number of Shares available for redemption and (ii) the
number of Shares and fractional Shares requested to be redeemed.
Upon confirmation of the net asset value by the Fund's Adviser,
9
<PAGE>
Fund Services shall notify the Fund and the Custodian of the
redemption, apply the redemption proceeds in accordance with
SECTION 16 and the Prospectus, record the redemption in the stock
registry books, and debit the redeemed Shares from the Unissued
Certificates Account and the individual account of the
Shareholder.
In lieu of carrying out the redemption procedures
described in the preceding paragraph, Fund Services may, at the
request of the Fund, sell Shares to the Fund as repurchases from
Shareholders, provided that the sale price is not less than the
applicable redemption price. The redemption procedures shall
then be appropriately modified.
SECTION 16. Fund Services will carry out the following
procedures with respect to Share redemptions:
(a) As to each request received by the Fund from or on
behalf of a Shareholder for the redemption of Shares, and unless
the right of redemption has been suspended as contemplated by the
Prospectus, Fund Services shall, within seven days after receipt
of such redemption request, either (i) mail a check in the amount
of the proceeds of such redemption to the person designated by
the Shareholder or other person to receive such proceeds or,
(ii) in the event redemption proceeds are to be wired through the
Federal Reserve Wire System or by bank wire pursuant to
procedures described in the Prospectus, cause such proceeds to be
wired in Federal funds to the bank or trust company account
10
<PAGE>
designated by the Shareholder to receive such proceeds. Funds
Services shall also prepare and send a confirmation of such
redemption to the Shareholder. Redemptions in kind shall be made
only in accordance with such Written Instructions as Fund
Services may receive from the Fund. The requirements as to
instruments of transfer and other documentation, the
determination of the appropriate redemption price and the time of
payment shall be as provided in the Prospectus, subject to such
additional requirements consistent therewith as may be
established by mutual agreement between the Fund and Fund
Services. In the case of a request for redemption that does not
comply in all respects with the requirements for redemption, Fund
Services shall promptly so notify the Shareholder and shall
effect such redemption at the price in effect at the time of
receipt of documents complying with such requirements. Fund
Services shall notify the Fund's Custodian and the Fund on each
Business Day of the amount of cash required to meet payments made
pursuant to the provisions of this paragraph and thereupon the
Fund shall instruct the Custodian to make available to Fund
Services in timely fashion sufficient funds therefor.
(b) Procedures and standards for effecting and
accepting redemption orders from Shareholders by telephone or by
such checkwriting service as the Fund may institute may be
established by mutual agreement between Fund Services and the
Fund consistent with the Prospectus.
11
<PAGE>
(c) For purposes of redemption of Shares that have been
purchased by check within fifteen (15) days prior to receipt of
the redemption request, the Fund shall provide Fund Services with
Written Instructions concerning the time within which such
requests may be honored.
(d) Fund Services shall process withdrawal orders duly
executed by Shareholders in accordance with the terms of any
withdrawal plan instituted by the Fund and described in the
Prospectus. Payments upon such withdrawal orders and redemptions
of Shares held in withdrawal plan accounts in connection with
such payments shall be made at such times as the Fund may
determine in accordance with the Prospectus.
(e) The authority of Fund Services to perform its
responsibilities under SECTIONS 15 and 16 with respect to the
Shares of any Series shall be suspended if Fund Services receives
notice of the suspension of the determination of the net asset
value of the Series.
SECTION 17. Upon the declaration of each dividend and
each capital gains distribution by the Fund's Board of Directors
or Trustees, the Fund shall notify Fund Services of the date of
such declaration, the amount payable per Share, the record date
for determining the Shareholders entitled to payment, the payment
and the reinvestment date price.
SECTION 18. Upon being advised by the Fund of the
declaration of any income dividend or capital gains distribution
12
<PAGE>
on account of its Shares, Fund Services shall compute and prepare
for the Fund records crediting such distributions to
Shareholders. Fund Services shall, on or before the payment date
of any dividend or distribution, notify the Fund and the
Custodian of the estimated amount required to pay any portion of
a dividend or distribution which is payable in cash, and
thereupon the Fund shall, on or before the payment date of such
dividend or distribution, instruct the Custodian to make
available to Fund Services sufficient funds for the payment of
such cash amount. Fund Services will, on the designated payment
date, reinvest all dividends in additional shares and promptly
mail to each Shareholder at his address of record a statement
showing the number of full and fractional Shares (rounded to
three decimal places) then owned by the Shareholder and the net
asset value of such Shares; provided, however, that if a
Shareholder elects to receive dividends in cash, Fund Services
shall prepare a check in the appropriate amount and mail it to
the Shareholder at his address of record within five (5) business
days after the designated payment date, or transmit the
appropriate amount in Federal funds in accordance with the
Shareholder's agreement with the Fund.
SECTION 19. Fund Services shall prepare and maintain
for the Fund records showing for each Shareholder's account the
following:
13
<PAGE>
A. The name, address and tax identification number of
the Shareholder;
B. The number of Shares of each Series held by the
Shareholder;
C. Historical information including dividends paid and
date and price for all transactions;
D. Any stop or restraining order placed against such
account;
E. Information with respect to the withholding of any
portion of income dividends or capital gains distributions as are
required to be withheld under applicable law;
F. Any dividend or distribution reinvestment election,
withdrawal plan application, and correspondence relating to the
current maintenance of the account;
G. The certificate numbers and denominations of any
Share Certificates issued to the Shareholder; and
H. Any additional information required by Fund Services
to perform the services contemplated by this Agreement.
Fund Services agrees to make available upon request by
the Fund or the Fund's Adviser and to preserve for the periods
prescribed in Rule 31a-2 of the Investment Company Act any
records related to services provided under this Agreement and
required to be maintained by Rule 31a-1 of that Act, including:
(i) Copies of the daily transaction register for each
Business Day of the Fund;
14
<PAGE>
(ii) Copies of all dividend, distribution and
reinvestment blotters;
(iii) Schedules of the quantities of Shares of each
Series distributed in each state for purposes of any state's laws
or regulations as specified in Oral or Written Instructions given
to Fund Services from time to time by the Fund or its agents; and
(iv) Such other information, including Shareholder
lists, and statistical information as may be agreed upon from
time to time by the Fund and Fund Services.
SECTION 20. Fund Services shall maintain those records
necessary to enable the Fund to file, in a timely manner, form
N-SAR (Semi-Annual Report) or any successor report required by
the Investment Company Act or rules and regulations thereunder.
SECTION 21. Fund Services shall cooperate with the
Fund's independent public accountants and shall take reasonable
action to make all necessary information available to such
accountants for the performance of their duties.
SECTION 22. In addition to the services described
above, Fund Services will perform other services for the Fund as
may be mutually agreed upon in writing from time to time, which
may include preparing and filing Federal tax forms with the
Internal Revenue Service, and, subject to supervisory oversight
by the Fund's Adviser, mailing Federal tax information to
Shareholders, mailing semi-annual Shareholder reports, preparing
the annual list of Shareholders, mailing notices of Shareholders'
15
<PAGE>
meetings, proxies and proxy statements and tabulating proxies.
Fund Services shall answer the inquiries of certain Shareholders
related to their share accounts and other correspondence
requiring an answer from the Fund. Fund Services shall maintain
dated copies of written communications from Shareholders, and
replies thereto.
SECTION 23. Nothing contained in this Agreement is
intended to or shall require Fund Services, in any capacity
hereunder, to perform any functions or duties on any day other
than a Business Day. Functions or duties normally scheduled to
be performed on any day which is not a Business Day shall be
performed on, and as of, the next Business Day, unless otherwise
required by law.
SECTION 24. For the services rendered by Fund Services
as described above, the Fund shall pay to Fund Services an
annualized fee at a rate to be mutually agreed upon from time to
time. Such fee shall be prorated for the months in which this
Agreement becomes effective or is terminated. In addition, the
Fund shall pay, or Fund Services shall be reimbursed for, all
out-of-pocket expenses incurred in the performance of this
Agreement, including but not limited to the cost of stationery,
forms, supplies, blank checks, stock certificates, proxies and
proxy solicitation and tabulation costs, all forms and statements
used by Fund Services in communicating with Shareholders of the
Fund or especially prepared for use in connection with its
16
<PAGE>
services hereunder, specific software enhancements as requested
by the Fund, costs associated with maintaining withholding
accounts (including non-resident alien, Federal government and
state), postage, telephone, telegraph (or similar electronic
media) used in communicating with Shareholders or their
representatives, outside mailing services, microfiche/microfilm,
freight charges and off-site record storage. It is agreed in
this regard that Fund Services, prior to ordering any form in
such supply as it estimates will be adequate for more than two
years' use, shall obtain the written consent of the
Fund. All forms for which Fund Services has received
reimbursement from the Fund shall be the property of the Fund.
SECTION 25. Fund Services shall not be liable for any
taxes, assessments or governmental charges that may be levied or
assessed on any basis whatsoever in connection with the Fund or
any Shareholder, excluding taxes assessed against Fund Services
for compensation received by it hereunder.
SECTION 26.
(a) Fund Services shall at all times act in good faith
and with reasonable care in performing the services to be
provided by it under this Agreement, but shall not be liable for
any loss or damage unless such loss or damage is caused by the
negligence, bad faith or willful misconduct of Fund Services or
its employees or agents.
17
<PAGE>
(b) The Fund shall indemnify and hold Fund Services
harmless from all loss, cost, damage and expense, including
reasonable expenses for counsel, incurred by it resulting from
any claim, demand, action or suit in connection with the
performance of its duties hereunder, or as a result of acting
upon any instruction reasonably believed by it to have been
properly given by a duly authorized officer of the Fund, or upon
any information, data, records or documents provided to Fund
Services or its agents by computer tape, telex, CRT data entry or
other similar means authorized by the Fund; provided that this
indemnification shall not apply to actions or omissions of Fund
Services in cases of its own bad faith, willful misconduct or
negligence, and provided further that if in any case the Fund may
be asked to indemnify or hold Fund Services harmless pursuant to
this Section, the Fund shall have been fully and promptly advised
by Fund Services of all material facts concerning the situation
in question. The Fund shall have the option to defend Fund
Services against any claim which may be the subject of this
indemnification, and in the event that the Fund so elects it will
so notify Fund Services, and thereupon the Fund shall retain
competent counsel to undertake defense of the claim, and Fund
Services shall in such situations incur no further legal or other
expenses for which it may seek indemnification under this
paragraph. Fund Services shall in no case confess any claim or
make any compromise in any case in which the Fund may be asked to
18
<PAGE>
indemnify Fund Services except with the Fund's prior written
consent.
Without limiting the foregoing:
(i) Fund Services may rely upon the advice of the Fund
or counsel to the Fund or Fund Services, and upon statements of
accountants, brokers and other persons believed by Fund Services
in good faith to be expert in the matters upon which they are
consulted. Fund Services shall not be liable for any action
taken in good faith reliance upon such advice or statements;
(ii) Fund Services shall not be liable for any action
reasonably taken in good faith reliance upon any Written
Instructions or certified copy of any resolution of the Fund's
Board of Directors or Trustees, including a Written Instruction
authorizing Fund Services to make payment upon redemption of
Shares without a signature guarantee; provided, however, that
upon receipt of a Written Instruction countermanding a prior
Instruction that has not been fully executed by Fund Services,
Fund Services shall verify the content of the second Instruction
and honor it, to the extent possible. Fund Services may rely
upon the genuineness of any such document, or copy thereof,
reasonably believed by Fund Services in good faith to have been
validly executed;
(iii) Fund Services may rely, and shall be protected by
the Fund in acting, upon any signature, instruction, request,
letter of transmittal, certificate, opinion of counsel,
19
<PAGE>
statement, instrument, report, notice, consent, order, or other
paper or document reasonably believed by it in good faith to be
genuine and to have been signed or presented by the purchaser,
the Fund or other proper party or parties; and
(d) Fund Services may, with the consent of the Fund,
subcontract the performance of any portion of any service to be
provided hereunder, including with respect to any Shareholder or
group of Shareholders, to any agent of Fund Services and may
reimburse the agent for the services it performs at such rates as
Fund Services may determine; provided that no such reimbursement
will increase the amount payable by the Fund pursuant to this
Agreement; and provided further, that Fund Services shall remain
ultimately responsible as transfer agent to the Fund.
SECTION 27. The Fund shall deliver or cause to be
delivered over to Fund Services (i) an accurate list of
Shareholders, showing each Shareholder's address of record,
number of Shares of each Series owned and whether such Shares are
represented by outstanding Share Certificates or by
non-certificated Share accounts and (ii) all Shareholder records,
files, and other materials necessary or appropriate for proper
performance of the functions assumed by the under this Agreement
(collectively referred to as the "Materials"). The Fund shall
indemnify Fund Services and hold it harmless from any and all
expenses, damages, claims, suits, liabilities, actions, demands
and losses arising out of or in connection with any error,
20
<PAGE>
omission, inaccuracy or other deficiency of such Materials, or
out of the failure of the Fund to provide any portion of the
Materials or to provide any information in the Fund's possession
needed by Fund Services to knowledgeably perform its functions;
provided the Fund shall have no obligation to indemnify Fund
Services or hold it harmless with respect to any expenses,
damages, claims, suits, liabilities, actions, demands or losses
caused directly or indirectly by acts or omissions of Fund
Services or the Fund's Adviser.
SECTION 28. This Agreement may be amended from time to
time by a written supplemental agreement executed by the Fund and
Fund Services and without notice to or approval of the
Shareholders; provided this Agreement may not be amended in any
manner which would substantially increase the Fund's obligations
hereunder unless the amendment is first approved by the Fund's
Board of Directors or Trustees, including a majority of the
Directors or Trustees who are not a party to this Agreement or
interested persons of any such party, at a meeting called for
such purpose, and thereafter is approved by the Fund's
Shareholders if such approval is required under the Investment
Company Act or the rules and regulations thereunder. The parties
hereto may adopt procedures as may be appropriate or practical
under the circumstances, and Fund Services may conclusively rely
on the determination of the Fund that any procedure that has been
approved by the Fund does not conflict with or violate any
21
<PAGE>
requirement of its Articles of Incorporation or Declaration of
Trust, By-Laws or Prospectus, or any rule, regulation or
requirement of any regulatory body.
SECTION 29. The Fund shall file with Fund Services a
certified copy of each operative resolution of its Board of
Directors or Trustees authorizing the execution of Written
Instructions or the transmittal of Oral Instructions and setting
forth authentic signatures of all signatories authorized to sign
on behalf of the Fund and specifying the person or persons
authorized to give Oral Instructions on behalf of the Fund. Such
resolution shall constitute conclusive evidence of the authority
of the person or persons designated therein to act and shall be
considered in full force and effect, with Fund Services fully
protected in acting in reliance therein, until Fund Services
receives a certified copy of a replacement resolution adding or
deleting a person or persons authorized to give Written or Oral
Instructions. If the officer certifying the resolution is
authorized to give Oral Instructions, the certification shall
also be signed by a second officer of the Fund.
SECTION 30. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or supplement
hereto, shall have the meanings specified below, insofar as the
context will allow.
(a) Business Day: Any day on which the Fund is open
for business as described in the Prospectus.
22
<PAGE>
(b) Custodian: The term Custodian shall mean the
Fund's current custodian or any successor custodian acting as
such for the Fund.
(c) Fund's Adviser: The term Fund's Adviser shall mean
Alliance Capital Management L.P. or any successor thereto who
acts as the investment adviser or manager of the Fund.
(d) Oral Instructions: The term Oral Instructions
shall mean an authorization, instruction, approval, item or set
of data, or information of any kind transmitted to Fund Services
in person or by telephone, vocal telegram or other electronic
means, by a person or persons reasonably believed in good faith
by Fund Services to be a person or persons authorized by a
resolution of the Board of Directors or Trustees of the Fund to
give Oral Instructions on behalf of the Fund. Each Oral
Instruction shall specify whether it is applicable to the entire
Fund or a specific Series of the Fund.
(e) Prospectus: The term Prospectus shall mean a
prospectus and related statement of additional information
forming part of a currently effective registration statement
under the Investment Company Act and, as used with the respect to
Shares or Shares of a Series, shall mean the prospectuses and
related statements of additional information covering the Shares
or Shares of the Series.
(f) Securities: The term Securities shall mean bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and
23
<PAGE>
other securities and investments from time to time owned by the
Fund.
(g) Series: The term Series shall mean any series of
Shares of the common stock of the Fund that the Fund may
establish from time to time.
(h) Share Certificates: The term Share Certificates
shall mean the stock certificates or certificates representing
shares of beneficial interest for the Shares.
(i) Shareholders: The term Shareholders shall mean the
registered owners from time to time of the Shares, as reflected
on the stock registry records of the Fund.
(j) Written Instructions: The term Written
Instructions shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to
Fund Services in original writing containing original signatures,
or a copy of such document transmitted by telecopy, including
transmission of such signature, or other mechanical or
documentary means, at the request of a person or persons
reasonably believed in good faith by Fund Services to be a person
or persons authorized by a resolution of the Board of Directors
or Trustees of the Fund to give Written Instruction shall specify
whether it is applicable to the entire Fund or a specific Series
of the Fund.
SECTION 31. Fund Services shall not be liable for the
loss of all or part of any record maintained or preserved by it
24
<PAGE>
pursuant to this Agreement or for any delays or errors occurring
by reason of circumstances beyond its control, including but not
limited to acts of civil or military authorities, national
emergencies, fire, flood or catastrophe, acts of God,
insurrection, war, riot, or failure of transportation,
communication or power supply, except to the extent that Fund
Services shall have failed to use its best efforts to minimize
the likelihood of occurrence of such circumstances or to mitigate
any loss or damage to the Fund caused by such circumstances.
SECTION 32. The Fund may give Fund Services sixty (60)
days and Fund Services may give the Fund (90) days written notice
of the termination of this Agreement, such termination to take
effect at the time specified in the notice. Upon notice of
termination, the Fund shall use its best efforts to obtain a
successor transfer agent. If a successor transfer agent is not
appointed within ninety (90) days after the date of the notice of
termination, the Board of Directors or Trustees of the Fund
shall, by resolution, designate the Fund as its own transfer
agent. Upon receipt of written notice from the Fund of the
appointment of the successor transfer agent and upon receipt of
Oral or Written Instructions Fund Services shall, upon request of
the Fund and the successor transfer agent and upon payment of
Fund Services reasonable charges and disbursements, promptly
transfer to the successor transfer agent the original or copies
of all books and records maintained by Fund Services hereunder
25
<PAGE>
and cooperate with, and provide reasonable assistance to, the
successor transfer agent in the establishment of the books and
records necessary to carry out its responsibilities hereunder.
SECTION 33. Any notice or other communication required
by or permitted to be given in connection with this Agreement
shall be in writing, and shall be delivered in person or sent by
first-class mail, postage prepaid, to the respective parties.
Notice to the Fund shall be given as follows until
further notice:
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
Notice to Fund Services shall be given as follows until
further notice:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
SECTION 34. The Fund represents and warrants to Fund
Services that the execution and delivery of this Agreement by the
undersigned officer of the Fund has been duly and validly
authorized by resolution of the Fund's Board of Directors or
Trustees. Fund Services represents and warrants to the Fund that
the execution and delivery of this Agreement by the undersigned
26
<PAGE>
officer of Fund Services has also been duly and validly
authorized.
SECTION 35. This Agreement may be executed in more than
one counterpart, each of which shall be deemed to be an original,
and shall become effective on the last date of signature below
unless otherwise agreed by the parties. Unless sooner terminated
pursuant to SECTION 32, this Agreement will continue until
October 31, 1992 and will continue in effect thereafter for
successive 12 month periods only if such continuance is
specifically approved at least annually by the Board of Directors
or Trustees or by a vote of the stockholders of the Fund and in
either case by a majority of the Directors or Trustees who are
not parties to this Agreement or interested persons of any such
party, at a meeting called for the purpose of voting on this
Agreement.
SECTION 36. This Agreement shall extend to and shall
bind the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of Fund
Services or by Fund Services without the written consent of the
Fund, authorized or approved by a resolution of the Fund's Board
of Directors or Trustees. Notwithstanding the foregoing, either
party may assign this Agreement without the consent of the other
party so long as the assignee is an affiliate, parent or
27
<PAGE>
subsidiary of the assigning party and is qualified to act under
the Investment Company Act, as amended from time to time.
SECTION 37. This Agreement shall be governed by the
laws of the State of New Jersey.
WITNESS the following signatures:
ALLIANCE MULTI-MARKET INCOME AND
GROWTH TRUST, INC.
BY: /s/David H. Dievler
____________________________
David H. Dievler
TITLE: Chairman
ALLIANCE FUND SERVICES, INC.
BY: /s/Robert Errico
_____________________________
Robert Errico
TITLE: President
28
00250107.AR0
<PAGE>
[Seward & Kissel letterhead]
September 9, 1991
Alliance Multi-Market Income and Growth
Trust, Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
We have acted as counsel for Alliance Multi-Market Income
and Growth Trust, Inc., a Maryland corporation (the "Company"), in
connection with the organization of the Company, the registration
of the Company under the Investment Company Act of 1940, as
amended, and the registration of an indefinite number of shares of
its common stock, par value $.001 per share (the "Common Stock"),
under the Securities Act of 1933.
As counsel for the Company, we have participated in the
preparation of the Registration Statement on Form N-1A relating to
such shares and have examined and relied upon such corporate
records of the Company and such other documents and certificates
as to factual matters as we have deemed to be necessary to render
the opinion expressed herein.
Based on such examination, we are of the opinion that:
1. The Company is a duly organized and validly existing
corporation in good standing under the laws of the State of
Maryland.
2. The 10,000 shares of Common Stock of the Company at
the present time issued and outstanding have been validly and
legally issued and are fully paid and nonassessable shares of
Common Stock of the Company.
3. The shares of Common Stock of the Company to be
offered for sale pursuant to the Prospectus and Statement of
Additional Information contained in said Registration Statement
are, to the extent of the number of shares authorized to be issued
by the Company in its Articles of Incorporation, duly authorized
and unissued shares, and when such shares have been duly sold,
issued and paid for as contemplated in the Prospectus and
Statement of Additional Information, such shares will have been
validly and legally issued and will be fully paid and
<PAGE>
nonassessable shares of Common Stock of the Company under the laws
of the State of Maryland (assuming that the sale price of each
share is not less then the par value thereof).
As to matters of Maryland law contained in the foregoing
opinion we have relied on the opinion of Messrs. Venable, Baetjer
and Howard of Baltimore, Maryland, dated the date hereof, a copy
of which is attached hereto.
We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the
Registration Statement and to the reference of our firm under the
caption "Counsel" in the related Statement of Additional
Information included therein.
Very truly yours,
/s/ Seward & Kissel
2
00250107.AC2
<PAGE>
Exhibit 10(b)
VENABLE, BAETJER AND HOWARD
ATTORNEYS AT LAW
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
1800 MERCANTILE BANK & TRUST BUILDING
2 HOPKINS PLAZA
BALTIMORE, MARYLAND 21201-2978
(410) 244-7400
FAX (410) 244-7742
TELEX 898032
September 9, 1991
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
Re: Alliance Multi-Market Income and Growth Trust, Inc.
Ladies and Gentlemen:
We have acted as special Maryland counsel for Alliance
Multi-Market Income and Growth Trust, Inc., a Maryland corporation
(the "Fund"), in connection with the organization of the Fund and
the issuance of shares of its common stock (the "Common Stock").
As Maryland counsel for the Fund, we are familiar with
its Charter and Bylaws. We have examined the Prospectus and
Statement of Additional Information, included in the Fund's
Registration Statement on From N-1A, substantially in the form in
which it is to become effective and have examined and relied upon
such corporate records of the Fund and other documents and
certificates as to factual matters as we have deemed necessary to
render the opinion expressed herein. We have assumed without
independent verification the authenticity of all documents
submitted to us, the conformity with originals of all documents
submitted to us as copies and the genuineness of all signatures.
Based on such examination, we are of the opinion and so
advise you that:
(1) The Fund is duly organized and validly existing as a
corporation in good standing under the laws of the
State of Maryland.
(2) The 10,000 shares of presently issued and
outstanding Common Stock of the Fund have been
validly and legally issued and are full paid and
<PAGE>
nonassessable shares under the laws of the State of
Maryland.
(3) The shares of Common Stock of the Fund to be offered
for sale pursuant to the Registration Statement are
duly authorized and, when sold, issued and paid for
as contemplated by the Registration Statement, will
have been validly and legally issued and will be
full paid and nonassessable.
This letter expresses our opinion with respect to the
Maryland General Corporation Law governing matters such as due
organization and the authorization and issuance of stock, but it
does not extend to the securities or "Blue Sky" laws of Maryland,
to federal securities laws or to other laws.
You may rely upon the foregoing opinion in rendering your
opinion to the Fund that is to be filed as an exhibit to the
Registration Statement. We consent to the filing of this opinion
as an exhibit to the Registration Statement and to the reference
to us under the caption "Counsel" in the Prospectus. We do not
thereby admit that we are "experts" within the meaning of the
Securities Act of 1933 and the regulations thereunder.
Very truly yours,
/s/ Venable, Baetjer and Howard
_______________________________
Venable, Baetjer and Howard
2
00250107.AQ9
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights", "Conversion Feature - Description of
Class A Shares", "Shareholder Services - Statements and Reports"
and "General Information - Independent Auditors" and to the use
of our report dated December 12, 1996 included in this
Registration Statement (Form N-1A No. 33-42034) of Alliance
Income Builder Fund, Inc.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
October 28, 1997
00250107.AP6
<PAGE>
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
September 4, 1991
Alliance Multi-Market Income
and Growth Trust, Inc.
1345 Avenue of the Americas
New York, New York 10105
Gentlemen:
In connection with our purchase of 10,000 shares of
Common Stock of Alliance Multi-Market Income and Growth Trust,
Inc. (the "Corporation") for an aggregate cash consideration of
One Hundred Thousand Dollars ($100,000), this will confirm that we
are buying such shares for investment for our account only, and
not with a view to reselling or otherwise distributing them.
Very truly yours,
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management
Corporation,
its General Partner
By: /s/ David H. Dievler
______________________________
David H. Dievler
Senior Vice President
00250107.AB7
<PAGE>
EXHIBIT 16
ALLIANCE MULTI-MARKET INCOME AND GROWTH TRUST
COMPUTATION OF AVERAGE ANNUAL COMPOUNDED TOTAL RETURN
n
ERV = P(1+T)
Definitions:
P=Initial investment by shareholder
T=Average annual total return
ERV=Ending redeemable value of shareholder investment
n=Number of periods
Formula to solve for "T"
ERV
For year one T= --- -1
P
*For subsequent years T= nth root of ((ERV/P)-1)
To solve for ERV:
1. Take an initial shareholder investment of $1,000 on 6/30/90
at maximum offering price of $10.00. The result is 100
shares.
2. Assume that all dividends and distributions by the Fund are
reinvested on reinvest date for the creation of additional
shares. (1.917 shares created).
3. Add initial share balance to additional shares created due to
reinvestment and multiply by ending net asset value (7/31/90)
to obtain ending redeemable value (ERV).
(100+2.766 = 102.766 x $9.64 = $991)
(ERV)
991
T = ------ -1
1,000
<PAGE>
T = .991 -1
T = (0.009)
T = (0.9%)
____
T=Average annual total return
* For subsequent years repeat steps 1 through 3 for the required
periods and apply to formula shown above.
2
<PAGE>
EXHIBIT 16
ALLIANCE MULTI-MARKET INCOME AND GROWTH TRUST
COMPUTATION OF STANDARDIZED YIELD
a-b 6
Formula: Yield = 2 [(-----+1) -1]
cd
Where a= dividends and interest earned during the
period.
b= expenses accrued for the period (net of
reimbursements).
c= the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d= the maximum offering price per share on the
last day of the period.
(a)=Interest earned for 30 days or one month.
MORTGAGE BACKED SECURITIES
Current principal amount per debt obligation multiplied by coupon
rate divided by 360 multiplied by 30 minus losses due to payment
of principal ("paydowns"). No amortization of discounts or
premiums on mortgage backed securities.
NON-MORTGAGE BACKED SECURITIES
1. Determine the yield to maturity (YTM) per debt obligation as
follows:
(i) Using the market value per security at the end of the
period plus accrued interest;
(ii) Compute the YTM on each obligation by analyzing the
cash flow from the beginning of the period until
maturity or call date utilizing the Internal Rate of
Return function of Lotus 123.
2. Divide the YTM by 360 and multiply the quotient by the
market value of each obligation including accrued interest,
and multiply by 30 to derive a monthly income accrual.
(b)= Expenses accrued for the period (net of reimbursement).
(c)= The average daily numbers of shares outstanding during the
period that were entitled to receive dividends.
(d)= The maximum offering price per share on the last day of the
period.
3
<PAGE>
5,797,073 - 655,368 6
Example: Yield = 2 [(-------------------+1) -1]
74,730,965 x 9.81
5,141,705 6
2 [(-----------+1) -1]
733,110,767
6
2 [(1.00701354588) -1]
2 [(1.04282605894) -1]
2 [ .04282605894 ]
8.57%
4
00250107.AR7
