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This is filed pursuant to Rule 497(c).
File Nos. 33-45328 and 811-06554.
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The Alliance Bond Funds
The Alliance Bond Funds provide a broad selection of investment alternatives to
investors seeking high current income.
Prospectus and Application
March 1, 2000
Investment Grade Funds
> Alliance U.S. Government Portfolio
> Alliance Limited Maturity Government Fund
> Alliance Mortgage Securities Income Fund
> Alliance Quality Bond Portfolio
Corporate Bond Funds
> Alliance Corporate Bond Portfolio
> Alliance High Yield Fund
Multi-Sector Fund
> Alliance Global Strategic Income Trust
Global Bond Funds
> Alliance North American Government Income Trust
> Alliance Global Dollar Government Fund
> Alliance Multi-Market Strategy Trust
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
Alliance Capital [LOGO](R)
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Investment Products Offered
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> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
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Table Of Contents
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Page
RISK/RETURN SUMMARY ........................................................ 3
Investment Grade Funds ..................................................... 4
Corporate Bond Funds ....................................................... 8
Multi-Sector Fund .......................................................... 10
Global Bond Funds .......................................................... 11
Summary of Principal Risks ................................................. 14
Principal Risks by Fund .................................................... 16
FEES AND EXPENSES OF THE FUNDS ............................................. 17
GLOSSARY ................................................................... 19
DESCRIPTION OF THE FUNDS ................................................... 20
Investment Objectives and Principal Policies ............................... 20
Description of Additional Investment Practices ............................. 27
Additional Risk Considerations ............................................. 37
MANAGEMENT OF THE FUNDS .................................................... 40
PURCHASE AND SALE OF SHARES ................................................ 43
How The Funds Value Their Shares ........................................... 43
How To Buy Shares .......................................................... 43
How To Exchange Shares ..................................................... 43
How To Sell Shares ......................................................... 43
DIVIDENDS, DISTRIBUTIONS AND TAXES ......................................... 44
DISTRIBUTION ARRANGEMENTS .................................................. 45
GENERAL INFORMATION ........................................................ 46
FINANCIAL HIGHLIGHTS ....................................................... 47
APPENDIX A: BOND RATINGS ................................................... 54
APPENDIX B: GENERAL INFORMATION ABOUT
CANADA, MEXICO AND ARGENTINA ............................................. 57
The Funds' investment adviser is Alliance Capital Management L.P., a global
investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Alliance Bond
Funds. You will find additional information about each Fund, including a
detailed description of the risks of an investment in each Fund, after this
Summary.
The Risk/Return Summary describes the Funds' objectives, principal investment
strategies, principal risks and fees. Each Fund's Summary page includes a short
discussion of some of the principal risks of investing in that Fund. A further
discussion of these and other risks is on pages 14 - 16.
More detailed descriptions of the Funds, including the risks associated with
investing in the Funds, can be found further back in this Prospectus. Please be
sure to read this additional information BEFORE you invest. Each of the Funds
may at times use certain types of investment derivatives such as options,
futures, forwards, and swaps. The use of these techniques involves special risks
that are discussed in this Prospectus.
The Risk/Return Summary includes a table for each Fund showing its average
annual returns and a bar chart showing its annual returns. The table and the bar
chart provide an indication of the historical risk of an investment in each Fund
by showing:
o how the Fund's average annual returns for one, five, and 10 years (or over
the life of the Fund if the Fund is less than 10 years old) compare to
those of a broad based securities market index; and
o changes in the Fund's performance from year to year over 10 years (or over
the life of the Fund if the Fund is less than 10 years old).
A Fund's past performance, of course, does not necessarily indicate how it will
perform in the future. As with all investments, you may lose money by investing
in the Funds.
3
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INVESTMENT GRADE FUNDS
The Investment Grade Funds offer a selection of alternatives to investors
seeking high current income consistent with the preservation of capital through
investments primarily in investment grade (rated Baa or BBB or above)
securities.
Alliance U.S. Government Portfolio
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OBJECTIVE:
The Fund's investment objective is a high level of current income that is
consistent with Alliance's determination of prudent investment risk.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in U.S. Government securities, including
mortgage-related securities, repurchase agreements and forward contracts
relating to U.S. Government securities. The Fund also may invest in non-U.S.
Government mortgage-related and asset-backed securities and in high grade debt
securities secured by mortgages on commercial real estate or residential rental
properties. The average weighted maturity of the Fund's investments varies
between one year or less and 30 years.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, and market risk. Because the Fund may invest in mortgage-related
and asset-backed securities, it is subject to the risk that mortgage loans or
other obligations will be prepaid when interest rates decline, forcing the Fund
to reinvest in securities with lower interest rates. For this and other reasons,
mortgage-related and asset-backed securities may have significantly greater
price and yield volatility than traditional debt securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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1 Year 5 Years 10 Years
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Class A -7.32% 5.03% 5.91%
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Class B -6.52% 5.15% 5.95%
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Class C -4.72% 5.18% 5.69%
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Lehman Brothers
Government
Bond Index -2.23% 7.44% 7.48%
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The average annual total returns in the performance table are for the periods
ended December 31, 1999 and reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(9/30/91) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 4.97% and 3.73%, respectively. Index returns
for the comparable periods (which date from month-end following applicable Class
inception date) were 6.86% and 5.85%, respectively.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
Calendar Year End
90 91 92 93 94 95 96 97 98 99
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7.86 15.74 6.03 9.72 -4.38 16.58 0.34 8.55 8.60 -3.21
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 6.12%, 3rd quarter, 1991; and Worst quarter was down -3.41%,
1st quarter, 1994.
4
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Alliance Limited Maturity Government Fund
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OBJECTIVE:
The Fund's investment objective is the highest level of current income
consistent with low volatility of net asset value.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in U.S. Government securities, including
mortgage-related securities and repurchase agreements relating to U.S.
Government securities. The Fund takes advantage of a wide range of maturities of
debt securities and adjusts the dollar-weighted average maturity of its
portfolio from time to time, depending on Alliance's assessment of relative
yields on securities of different maturities and the expected effect of changes
in interest rates on the market value of the Fund's portfolio. At all times,
however, each of the Fund's securities has either a remaining maturity of not
more than 10 years or a duration not exceeding that of a ten-year Treasury note.
The Fund also may invest up to 35% of its total assets in:
o high-quality asset-backed securities, including mortgage-related
securities that are not U.S. Government securities;
o treasury securities issued by private issuers;
o certificates of deposit, bankers' acceptances, and interest-bearing
savings deposits of banks with assets of more than $1 billion;
o higher quality commercial paper or, if unrated, commercial paper issued by
companies that have high-quality debt issues outstanding; and
o high-quality debt securities of corporate issuers.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, leveraging risk, liquidity risk and market risk. Because the Fund
may invest in mortgage-related and asset-backed securities, it is subject to the
risk that mortgage loans or other obligations will be prepaid when interest
rates decline, forcing the Fund to reinvest in securities with lower interest
rates. For this and other reasons, mortgage-related and asset-backed securities
may have significantly greater price and yield volatility than traditional debt
securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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Since
1 Year 5 Years Inception
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Class A -5.11% 3.82% 3.75%
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Class B -4.57% 3.94% 3.59%
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Class C -2.69% 3.95% 3.60%
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Lehman Brothers
Government
Bond Index -2.23% 7.44% 6.53%
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The average annual total returns in the performance table are for the periods
ended December 31, 1999 and reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period. Since Inception returns are from inception
of Class A and Class B shares (6/1/92). Since Inception index return is from
month-end of inception of Class A and Class B shares.
Performance information for periods prior to the inception of Class C shares
(5/3/93) is the performance of the Fund's Class A shares adjusted to reflect the
higher expense ratio of Class C shares. The average annual total return for
Class C shares since its actual inception date was 3.29%. The index return for
the comparable period (which dates from month-end following the Class C
inception date) was 5.85%.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
Calendar Year End
90 91 92 93 94 95 96 97 98 99
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n/a n/a n/a 6.21 0.26 7.08 4.01 7.03 6.70 -0.93
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 4.21%, 3rd quarter, 1998; and Worst quarter was down -1.06%,
2nd quarter, 1999.
5
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Alliance Mortgage Securities Income Fund
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OBJECTIVE:
The Fund's investment objective is a high level of current income to the extent
consistent with prudent investment risk.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in a diversified portfolio of mortgage-related
securities, including collateralized mortgage obligations or CMOs. The Fund
normally invests all of its assets in securities that are rated at least BBB- by
S&P or, if unrated, are of comparable quality. The average weighted maturity of
the Fund's portfolio of debt securities is expected to vary between two and ten
years.
The Fund also may invest up to 35% of its total assets in:
o U.S. Government securities;
o qualifying bank deposits;
o prime commercial paper or, if unrated, commercial paper issued by
companies that have high-quality debt issues outstanding;
o high-grade debt securities secured by mortgages on commercial real estate
or residential rental properties; and
o high-grade asset-backed securities.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, leveraging risk, derivatives risk, and market risk. Because the
Fund may invest in mortgage-related securities, it is subject to the risk that
mortgage loans will be prepaid when interest rates decline, forcing the Fund to
reinvest in securities with lower interest rates. For this and other reasons,
mortgage-related securities may have significantly greater price and yield
volatility than traditional debt securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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1 Year 5 Years 10 Years
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Class A -3.50% 5.88% 6.62%
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Class B -2.81% 6.01% 6.59%
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Class C -0.81% 6.03% 6.34%
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Lehman Brothers
Mortgage-Backed
Securities Index 1.86% 7.98% 7.78%
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The average annual total returns in the performance table are for the periods
ended December 31, 1999 and reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(1/30/92) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 4.99% and 4.05%, respectively. Index returns
for the comparable periods (which date from month-end following applicable Class
inception date) were 6.69% and 6.16%, respectively.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
Calendar Year End
90 91 92 93 94 95 96 97 98 99
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10.95 15.44 7.73 10.14 -6.14 15.35 4.23 8.40 5.82 0.79
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 5.90%, 4th quarter, 1990; and Worst quarter was down -4.30%,
1st quarter, 1994.
6
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Alliance Quality Bond Portfolio
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OBJECTIVE:
The Fund's investment objective is high current income consistent with
preservation of capital by investing in investment grade fixed-income
securities.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund invests in readily marketable securities that do not involve undue risk
of capital. The Fund normally invests all of its assets in securities that are
rated at least BBB- by S&P or, if unrated, are of comparable quality. The Fund
has the flexibility to invest in long- and short-term fixed-income securities
depending on Alliance's assessment of prospective cyclical interest rate
changes.
The Fund also may:
o use derivatives strategies;
o invest in convertible debt securities, preferred stock and dividend-paying
stocks;
o invest in U.S. Government obligations; and
o invest in foreign fixed-income securities.
The principal risks of investing in the Fund are interest rate risk, credit
risk, derivatives risk and market risk. To the extent the Fund invests in
foreign securities, it has foreign risk and currency risk.
BAR CHART AND PERFORMANCE TABLE
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
7
<PAGE>
CORPORATE BOND FUNDS
The Corporate Bond Funds offer a selection of alternatives to investors seeking
to maximize current income through investments in corporate bonds.
Alliance Corporate Bond Portfolio
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OBJECTIVE:
The Fund's investment objective is primarily to maximize income over the long
term to the extent consistent with providing reasonable safety in the value of
each shareholder's investment, and secondarily to increase its capital through
appreciation of its investments in order to preserve and, if possible, increase
the purchasing power of each shareholder's investment.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in corporate bonds. The Fund may invest up to 50% of
its total assets in foreign debt securities, primarily corporate debt securities
and sovereign debt obligations. All of the Fund's investments, whether foreign
or domestic, will be U.S. Dollar denominated. The Fund also may invest in
income-producing equity securities. While the Fund invests primarily (currently
65%) in investment grade debt securities, it also may invest a significant
amount of its total assets in lower-rated debt securities. The average weighted
maturity of the Fund's investments varies between one year or less and 30 years.
The Fund pursues a more aggressive investment strategy than other corporate bond
funds. The Fund's investments tend to have a relatively long average weighted
maturity and duration. The Fund emphasizes both foreign corporate and sovereign
debt obligations, as well as corporate bonds that are expected to benefit from
improvements in their issuers' credit fundamentals.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, and market risk. Because the Fund emphasizes investments with a
relatively long average maturity and duration, its returns may be more volatile
than other corporate bond funds. To the extent the Fund invests in lower-rated
securities, your investment is subject to more credit risk than an investment in
a fund that invests solely in higher-rated securities. The Fund's investments in
foreign debt obligations have foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A -2.43% 8.96% 9.51%
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Class B -1.56% 9.17% 9.45%
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Class C 0.24% 9.17% 9.23%
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Lehman Brothers
Aggregate Bond
Index -0.82% 7.73% 7.70%
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The average annual total returns in the performance table are for the periods
ended December 31, 1999 and reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period.
Performance information for periods prior to the inception of Class B shares
(1/8/93) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C shares since
their actual inception dates were 8.34% and 6.91%, respectively. Index returns
for the comparable periods (which date from month-end following applicable class
inception date) were 6.21% and 6.05%, respectively.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
Calendar Year End
90 91 92 93 94 95 96 97 98 99
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5.54 18.05 13.07 31.09 -12.75 27.98 10.02 11.81 -0.03 1.94
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 15.61%, 2nd quarter, 1995; and Worst quarter was down
- -8.43%, 1st quarter, 1994.
8
<PAGE>
Alliance High Yield Fund
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OBJECTIVE:
The Fund's investment objective is to achieve a high total return by maximizing
current income and, to the extent consistent with that objective, capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund primarily invests in high yield, below investment grade debt
securities, commonly known as "junk bonds." The Fund seeks to maximize current
income by taking advantage of market developments, yield disparities, and
variations in the creditworthiness of issuers.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, and market risk. Because the Fund invests in lower-rated
securities, it has significantly more risk than other types of bond funds and
its returns will be more volatile. The Fund's investments in foreign securities
have foreign risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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Since
1 Year Inception
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Class A -5.95% 5.30%
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Class B -6.10% 5.66%
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Class C -3.47% 6.26%
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First Boston
High Yield Index 3.28% 5.13%
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The average annual total returns in the performance table are for the periods
ended December 31, 1999 and reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period. Since Inception returns are from inception
of Class A, Class B and Class C shares (4/22/97). Since Inception index return
is from month-end of inception of Class A, Class B and Class C shares.
BAR CHART
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The annual return in the bar chart is for the Fund's Class A shares and does not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
Calendar Year End
90 91 92 93 94 95 96 97 98 99
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n/a n/a n/a n/a n/a n/a n/a n/a -1.96 -1.79
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 6.29%, 1st quarter, 1998; and Worst quarter was down -9.63%,
3rd quarter, 1998.
9
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MULTI-SECTOR FUND
The Multi-Sector Fund offers investors seeking high current income the
alternative of investing in a variety of traditional and non-traditional fixed
income sectors based on Alliance's evaluation of changes in major economic and
credit cycles around the world.
Alliance Global Strategic Income Trust
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OBJECTIVE:
The Fund's investment objective is primarily a high level of current income and,
secondarily, capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund primarily invests in debt securities of U.S. and non-U.S. companies,
U.S. Government and foreign governments, and supranational entities. The Fund's
foreign investments are generally denominated in foreign currencies. The Fund,
however, generally seeks to hedge currency risk. The Fund normally invests at
least 65% of its total assets in debt securities of companies located in at
least three countries, one of which may be the United States. The Fund limits
its investments in any one foreign country to 25% of its total assets.
The Fund invests at least 65% of its total assets in investment grade
securities, but also may invest up to 35% of its total assets in lower-rated
securities. The average weighted maturity of the Fund's investments varies
between five and 30 years.
The Fund may use significant borrowings and reverse repurchase agreements and
dollar rolls for leverage. The Fund also may:
o use derivatives strategies;
o invest in structured securities;
o invest in Eurodollar instruments and foreign currencies;
o invest in asset-backed and mortgage-related securities;
o enter into repurchase agreements; and
o invest in floating, variable, and inverse floating rate securities.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, market risk, and leveraging risk. The Fund's investments in foreign
issuers have foreign risk and currency risk. To the extent the Fund invests in
lower-rated securities, your investment is subject to more risk than an
investment in a fund that invests primarily in higher-rated securities. The
Fund's use of derivatives strategies has derivatives risk. In addition, the Fund
is "non-diversified," meaning that it invests more of its assets in a smaller
number of issuers than many other funds. Changes in the value of a single
security may have a more significant effect, either negative or positive, on the
Fund's net asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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Since
1 Year Inception
- --------------------------------------------------------------------------------
Class A 3.05% 10.20%
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Class B 3.00% 10.47%
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Class C 5.93% 10.65%
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Lehman Brothers
Aggregate Bond Index -0.82% 5.13%
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The average annual total returns in the performance table are for the periods
ended December 31, 1999 and reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period. Since Inception returns are from inception
of Class A shares (1/9/96). Since Inception index return is from month-end of
inception of Class A shares.
Performance information for periods prior to the inception of Class B shares and
Class C shares (3/21/96) is the performance of the Fund's Class A shares
adjusted to reflect the higher expense ratio of Class B and Class C shares. The
average annual total returns for Class B and Class C shares since their actual
inception dates were 10.57% and 10.76%, respectively. The index return for the
comparable period (which date from month-end following applicable Class
inception date) was 6.06%.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
Calendar Year End
90 91 92 93 94 95 96 97 98 99
- --------------------------------------------------------------------------------
n/a n/a n/a n/a n/a n/a n/a 14.96 1.99 7.47
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 6.86%, 2nd quarter, 1997; and Worst quarter was down -5.68%,
3rd quarter, 1998.
10
<PAGE>
GLOBAL BOND FUNDS
The Global Bond Funds offer a selection of alternatives to investors seeking a
high level of current income through investments primarily in foreign government
securities.
Alliance North American Government Income Trust
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OBJECTIVE:
The Fund's investment objective is the highest level of current income,
consistent with what Alliance considers to be prudent investment risk, that is
available from a portfolio of debt securities issued or guaranteed by the
governments of the United States, Canada, or Mexico, their political
subdivisions (including Canadian Provinces but excluding states of the United
States), agencies, instrumentalities or authorities.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund primarily invests in debt securities issued or guaranteed by: (i) the
federal governments of the United States, Canada, and Mexico; (ii)
government-related entities in the United States, Canada, and Mexico; and (iii)
the provincial governments of Canada and Mexico. The Fund also invests
significantly in debt securities issued by Argentine government entities. The
Fund also may invest in debt securities of other Central and South American
countries. These investments are investment grade securities generally
denominated in each country's currency, but at least 25% of the Fund's assets
are in U.S. Dollar-denominated securities. The average weighted maturity of the
Fund's portfolio is expected to vary between one year or less and 30 years.
The Fund may use significant borrowings for leverage. The Fund also may:
o use derivative strategies; and
o invest in variable, floating, and inverse floating rate instruments.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, market risk and leveraging risk. The Fund's investments in debt
securities of Canada, Mexico, and Argentina have foreign risk and currency risk.
Your investment also has the risk that market changes or other events affecting
these countries, including potential instability and unpredictable economic
conditions, may have a more significant effect on the Fund's net asset value. In
addition, the Fund is "non-diversified," meaning that it invests more of its
assets in a smaller number of issuers than many other funds. Changes in the
value of a single security may have a more significant effect, either negative
or positive, on the Fund's net asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year 5 Years Inception
- --------------------------------------------------------------------------------
Class A 3.23% 15.54% 7.89%
- --------------------------------------------------------------------------------
Class B 4.10% 15.52% 7.60%
- --------------------------------------------------------------------------------
Class C 6.15% 15.56% 7.62%
- --------------------------------------------------------------------------------
Lehman Brothers
Aggregate Bond
Index -0.82% 7.73% 6.94%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1999 and reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period. Since Inception returns are from inception
of Class A and Class B shares (3/27/92). Since Inception index return is from
month-end of inception of Class A and Class B shares.
Performance information for periods prior to the inception of Class C shares
(5/3/93) is the performance of the Fund's Class A shares adjusted to reflect the
higher expense ratio of Class C shares. The average annual total return for
Class C shares since its inception date was 7.11%. The index return for the
comparable period (which dates from month-end following the Class C inception
date) was 6.05%.
BAR CHART
- --------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
Calendar Year End
90 91 92 93 94 95 96 97 98 99
- --------------------------------------------------------------------------------
n/a n/a n/a 18.64 -30.24 31.01 24.20 14.98 6.530 7.87
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 17.23%, 2nd quarter, 1995; and Worst quarter was down
- -23.19%, 4th quarter, 1994.
11
<PAGE>
Alliance Global Dollar Government Fund
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is a high level of current income and,
secondarily, capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in sovereign debt obligations, although it may invest
up to 35% of its total assets in U.S. and non-U.S. corporate debt securities.
The Fund invests substantially all of its assets in lower-rated securities or
unrated securities of equivalent quality. The Fund's investments in sovereign
debt obligations and corporate debt securities are U.S. Dollar-denominated.
The Fund's non-U.S. investments emphasize emerging markets and developing
countries. The Fund limits its investments in the sovereign debt obligations of
any one country to less than 25% of its total assets, although the Fund may
invest up to 30% of its total assets in the sovereign debt obligations of and
corporate fixed-income securities of issuers in each of Argentina, Brazil,
Mexico, Morocco, the Philippines, Russia and Venezuela. The Fund expects that it
will not invest more than 10% of its total assets in any other single foreign
country.
The average weighted maturity of the Fund's investments ranges from nine years
to longer than 25 years, depending upon the type of securities.
The Fund may use significant borrowings and reverse repurchase agreements and
dollar rolls for leverage. The Fund also may use derivatives strategies; invest
in structured securities; invest in fixed and floating rate loans to sovereign
debt issuers; enter into repurchase agreements; and invest in variable,
floating, and inverse floating rate securities.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, market risk, derivatives risk and leveraging risk. Because the Fund
invests in lower-rated securities, it has significantly more risk than other
types of bond funds and its returns will be more volatile. The Fund's
investments in foreign securities have foreign risk and country or geographic
risk. Because the Fund invests in emerging markets and in developing countries,
the Fund's returns will be significantly more volatile and may differ
substantially from returns in the U.S. bond markets generally. Your investment
also has the risk that market changes or other factors affecting emerging
markets and developing countries, including political instability and
unpredictable economic conditions, may have a significant effect on the Fund's
net asset value. In addition, the Fund is "non-diversified," meaning that it
invests more of its assets in a smaller number of issuers than many other funds.
Changes in the value of a single security may have a more significant effect,
either negative or positive, on the Fund's net asset value.
The table and bar chart provide an indication of the historical risk of an
instrument in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year 5 Years Inception
- --------------------------------------------------------------------------------
Class A 21.36% 12.52% 7.91%
- --------------------------------------------------------------------------------
Class B 22.78% 12.59% 7.86%
- --------------------------------------------------------------------------------
Class C 24.96% 12.68% 7.91%
- --------------------------------------------------------------------------------
J.P. Morgan
Emerging
Markets Bond
Index 21.56% 16.54% 11.65%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1999 and reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period. Since Inception returns are from inception
of Class A, Class B and Class C shares (2/25/94). Since Inception index return
is from month-end of inception of Class A, Class B and Class C shares.
BAR CHART
- --------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
Calendar Year End
90 91 92 93 94 95 96 97 98 99
- --------------------------------------------------------------------------------
n/a n/a n/a n/a n/a 25.47 39.44 9.01 -22.05 26.34
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 26.16%, 2nd quarter, 1995; and Worst quarter was down
- -28.68%, 3rd quarter, 1998.
12
<PAGE>
Alliance Multi-Market Strategy Trust
- --------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is the highest level of current income that is
available, consistent with what Alliance considers to be prudent investment
risk, from a portfolio of high-quality debt securities having remaining
maturities of not more than five years.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in high-quality debt securities having remaining maturities of
not more than five years, with a high proportion of investments in money market
instruments. The Fund seeks investment opportunities in foreign, as well as
domestic, securities markets. Normally, at least 70% of the Fund's debt
securities will be denominated in foreign currencies. The Fund limits its
investments in a single currency other than the U.S. Dollar to 25% of its net
assets, except for the Euro in which the Fund may invest up to 50% of its net
assets.
The Fund concentrates at least 25% of its total assets in debt instruments
issued by domestic and foreign banking companies. The Fund may use significant
borrowings for leverage. The Fund also may:
o use derivatives strategies;
o invest in prime commercial paper or unrated paper of equivalent quality;
o enter into repurchase agreements; and
o invest in variable, floating, and inverse floating rate securities.
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, market risk, and leveraging risk. The Fund's investments in debt
securities denominated in foreign currencies have foreign risk and currency
risk. In addition, the Fund is "non-diversified" meaning that it invests more of
its assets in a smaller number of issuers than many other funds. Changes in the
value of a single security may have a more significant effect, either negative
or positive, on the Fund's net asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
Since
1 Year 5 Years Inception
- --------------------------------------------------------------------------------
Class A -1.74% 6.50% 3.36%
- --------------------------------------------------------------------------------
Class B -1.04% 6.54% 3.08%
- --------------------------------------------------------------------------------
Class C 0.86% 6.55% 3.08%
- --------------------------------------------------------------------------------
Merrill Lynch
1-3 Year
Government
Bond Index 3.12% 6.52% 6.10%
- --------------------------------------------------------------------------------
The average annual total returns in the performance table are for the periods
ended December 31, 1999 and reflect imposition of the maximum front-end or
contingent deferred sales charges and conversion of Class B shares to Class A
shares after the applicable period. Since Inception returns are from inception
of Class A and Class B shares (5/29/91). Since Inception index return is from
month-end of inception of Class A and Class B shares.
Performance information for periods prior to the inception of Class C shares
(5/3/93) is the performance of the Fund's Class A shares adjusted to reflect the
higher expense ratio of Class C shares. The average annual total return for
Class C shares since its actual inception date was 3.62%. The index return for
the comparable period (which dates from month-end following the Class C
inception date) was 5.44%.
BAR CHART
- --------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown.
[The following table was depicted as a bar chart in the printed material.]
Calendar Year End
90 91 92 93 94 95 96 97 98 99
- --------------------------------------------------------------------------------
n/a n/a -2.49 10.91 -12.77 6.00 16.19 6.71 6.17 2.58
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
Best quarter was up 5.46%, 2nd quarter, 1995; and Worst quarter was down -8.18%,
4th quarter, 1994.
13
<PAGE>
SUMMARY OF PRINCIPAL RISKS
The value of your investment in a Fund will change with changes in the values of
that Fund's investments. Many factors can affect those values. In this Summary,
we describe the principal risks that may affect a Fund's portfolio as a whole.
These risks and the Funds subject to the risks appear in a chart at the end of
this section. All Funds could be subject to additional principal risks because
the types of investments made by each Fund can change over time. This Prospectus
has additional descriptions of the types of investments that appear in bold type
in the discussions under "Description of Additional Investment Practices" or
"Additional Risk Considerations." These sections also include more information
about the Funds, their investments, and related risks.
INTEREST RATE RISK
This is the risk that changes in interest rates will affect the value of a
Fund's investments in debt securities, such as bonds, notes and asset-backed
securities, or other income-producing securities. Debt securities are
obligations of the issuer to make payments of principal and/or interest on
future dates. All of the Funds have interest rate risk. Increases in interest
rates may cause the value of a Fund's investments to decline.
Even Funds such as the Alliance U.S. Government, Alliance Limited Maturity
Government and Alliance Quality Bond that invest a substantial portion of their
assets in the highest quality debt securities, including U.S. Government
securities, are subject to interest rate risk. Interest rate risk generally is
greater for those Funds that invest a significant portion of their assets in
lower-rated securities or comparable unrated securities such as Alliance
Corporate Bond, Alliance High Yield, Alliance Global Strategic Income and
Alliance Global Dollar Government.
Interest rate risk is generally greater for Funds that invest in debt securities
with longer maturities, such as Alliance Corporate Bond, Alliance Global
Strategic Income, Alliance North American Government Income and Alliance Global
Dollar Government. This risk is compounded for the Funds that invest a
substantial portion of their assets in mortgage-related or other asset-backed
securities, such as Alliance U.S. Government, Alliance Mortgage Securities
Income, and Alliance Quality Bond. The value of these securities is affected
more by changes in interest rates because when interest rates rise, the
maturities of these types of securities tend to lengthen and the value of the
securities decreases more significantly. In addition, these types of securities
are subject to prepayment when interest rates fall, which generally results in
lower returns because the Funds must reinvest their assets in debt securities
with lower interest rates. Increased interest rate risk also is likely for
Alliance Quality Bond, Alliance Corporate Bond, Alliance Global Strategic Income
and Alliance Global Dollar Government, which invest in debt securities paying no
current interest, such as zero coupon, principal-only, and interest-only
securities, or paying non-cash interest in the form of other debt securities
(payment-in-kind securities).
CREDIT RISK
This is the risk that the issuer or the guarantor of a debt security, or the
counterparty to a derivatives contract, will be unable or unwilling to make
timely payments of interest or principal or to otherwise honor its obligations.
The degree of risk for a particular security may be reflected in its credit
rating. Credit risk is greater for Funds such as Alliance Mortgage Securities
Income, Alliance Corporate Bond, Alliance High Yield, Alliance Global Strategic
Income and Alliance Global Dollar Government that invest in lower-rated
securities. These debt securities and similar unrated securities (commonly known
as "junk bonds") have speculative elements or are predominantly speculative
credit risks.
Funds such as Alliance High Yield and Alliance Global Dollar Government may be
subject to greater credit risk because they invest in debt securities issued in
connection with corporate restructurings by highly leveraged issuers and in debt
securities that are not current in the payment of interest or principal or are
in default. Funds such as Alliance Quality Bond, Alliance North American
Government Income, Alliance Global Dollar Government and Alliance Multi-Market
Strategy that invest in foreign securities also are subject to increased credit
risk because of the difficulties of requiring foreign entities, including
issuers of sovereign debt obligations, to honor their contractual commitments,
and because a number of foreign governments and other issuers are already in
default.
MARKET RISK
This is the risk that the value of a Fund's investments will fluctuate as the
bond markets fluctuate and that prices overall will decline over shorter or
longer-term periods. All of the Funds are subject to this risk.
FOREIGN RISK
This is the risk of investments in issuers located in foreign countries. All
Alliance Funds that invest in foreign securities are subject to this risk,
including Alliance Limited Maturity Government, Alliance Quality Bond, Alliance
Corporate Bond, Alliance High Yield, Alliance Global Strategic Income, Alliance
North American Government Income, Alliance Global Dollar Government and Alliance
Multi-Market Strategy. These Funds' investments in foreign securities may
experience more rapid and extreme changes in value than investments in
securities of U.S. companies. The securities markets of many foreign countries
are relatively small, with a limited number of companies representing a small
number of securities. In addition, foreign companies usually are not subject to
the same
14
<PAGE>
degree of regulation as U.S. companies. Reporting, accounting, and auditing
standards of foreign countries differ, in some cases significantly, from U.S.
standards. Nationalization, expropriation or confiscatory taxation, currency
blockage, political changes, or diplomatic developments could adversely affect a
Fund's investments in a foreign country. In the event of a nationalization,
expropriation, or other confiscation, a Fund could lose its entire investment.
Political, social, and economic changes in a particular country could result in
increased risks for Alliance Global Strategic Income and Alliance Global Dollar
Government, which invest a substantial portion of their assets in sovereign debt
obligations, including Brady Bonds. The investments in emerging market countries
of Alliance North American Government Income and Alliance Global Dollar
Government are likely to involve significant risks. These countries, such as
Mexico, Argentina, Brazil, Morocco, the Philippines, Russia, and Venezuela, have
a history of political and economic instability.
COUNTRY OR GEOGRAPHIC RISK
This is the risk of investments in issuers located in a particular country or
geographic region. Market changes or other factors affecting that country or
region, including political instability and unpredictable economic conditions,
may have a particularly significant effect on a Fund's net asset value. The
Funds particularly subject to this risk are Alliance North American Government
Income and Alliance Multi-Market Strategy.
CURRENCY RISK
This is the risk that fluctuations in the exchange rates between the U.S. Dollar
and foreign currencies may negatively affect the value of a Fund's investments.
Funds such as Alliance Limited Maturity Government, Alliance Quality Bond,
Alliance High Yield, Alliance Global Strategic Income, Alliance North American
Government Income and Alliance Multi-Market Strategy that invest in securities
denominated in, and/or companies receiving revenues in, foreign currencies are
subject to currency risk.
DIVERSIFICATION RISK
Most analysts believe that overall risk can be reduced through diversification,
while concentration of investments in a small number of securities increases
risk. Alliance Global Strategic Income, Alliance North American Government
Income, Alliance Global Dollar Government and Alliance Multi-Market Strategy are
not "diversified." This means that they can invest more of their assets in a
relatively small number of issuers with greater concentration of risk. Factors
affecting these issuers can have a more significant effect on the Fund's net
asset value. Similarly, a Fund that concentrates its investments in a particular
industry, such as Alliance Multi-Market Strategy, which invests at least 25% of
its assets in the banking industry, could have increased risks because factors
affecting that industry could have a more significant effect on the value of the
Fund's investments.
LEVERAGING RISK
When a Fund borrows money or otherwise leverages its portfolio, the value of an
investment in that Fund will be more volatile and all other risks will tend to
be compounded. Each Fund may create leverage by using reverse repurchase
agreements, inverse floating rate instruments or derivatives, or by borrowing
money.
DERIVATIVES RISK
All Funds may use derivatives, which are financial contracts whose value depends
on, or is derived from, the value of an underlying asset, reference rate, or
index. Alliance will sometimes use derivatives as part of a strategy designed to
reduce other risks. Generally, however, the Funds use derivatives as direct
investments to earn income, enhance yield and broaden Fund diversification,
which entail greater risk than if used solely for hedging purposes. In addition
to other risks such as the credit risk of the counterparty, derivatives involve
the risk of difficulties in pricing and valuation and the risk that changes in
the value of the derivative may not correlate perfectly with relevant underlying
assets, rates, or indices. Funds that invest in structured securities, such as
Alliance Corporate Bond, Alliance Global Strategic Income and Alliance Global
Dollar Government, could have increased derivatives risk.
LIQUIDITY RISK
Liquidity risk exists when particular investments are difficult to purchase or
sell, possibly preventing a Fund from selling out of these illiquid securities
at an advantageous price. All of the Funds are subject to liquidity risk because
derivatives and securities involving substantial interest rate and credit risk
tend to involve greater liquidity risk. In addition, liquidity risk tends to
increase to the extent a Fund invests in debt securities whose sale may be
restricted by law or by contract.
MANAGEMENT RISK
Each Fund is subject to management risk because it is an actively managed
investment Fund. Alliance will apply its investment techniques and risk analyses
in making investment decisions for the Funds, but there can be no guarantee that
its decisions will produce the desired results. In some cases, derivative and
other investment techniques may be unavailable or Alliance may determine not to
use them, possibly even under market conditions where their use could benefit a
Fund.
15
<PAGE>
PRINCIPAL RISKS BY FUND
The following chart summarizes the Principal Risks of each Fund. Risks not
marked for a particular Fund may, however, still apply to some extent to that
Fund at various times.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Country or Diversi- Lev- Deriva- Liquid-
Interest Credit Market Foreign Geographic Currency fication eraging tives ity Manage-
Fund Rate Risk Risk Risk Risk Risk Risk Risk Risk Risk Risk ment Risk
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance U.S. Government o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Limited
Maturity Government o o o o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Mortgage
Securities Income o o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Quality Bond o o o o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Corporate Bond o o o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance High Yield o o o o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Global
Strategic Income o o o o o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance North American
Government Income o o o o o o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Global
Dollar Government o o o o o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Multi-Market
Strategy o o o o o o o o o o o
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
Fees and Expenses of the Funds
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Shares Class B Shares(a) Class B Shares(b) Class C Shares
-------------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) 4.25% None None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or
redemption proceeds, whichever is lower) None 3.0%* 4.0%** 1.0%***
Exchange Fee None None None None
</TABLE>
- --------------------------------------------------------------------------------
(a) For all Funds except Alliance High Yield Fund and Alliance Global
Strategic Income Trust.
(b) For Alliance High Yield Fund and Alliance Global Strategic Income Trust.
* Class B shares automatically convert to Class A shares after 6 years. The
CDSC decreases over time. For Class B shares the CDSC decreases 1.00%
annually to 0% after the 3rd year.
** Class B shares automatically convert to Class A shares after 8 years. The
CDSC decreases over time. For Class B shares the CDSC decreases 1.00%
annually to 0% after the 4th year.
*** For Class C shares the CDSC is 0% after the first year.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) and
EXAMPLES
The Examples are to help you compare the cost of investing in a Fund with the
cost of investing in other funds. They assume that you invest $10,000 in a Fund
for the time periods indicated and then redeem all of your shares at the end of
those periods. They also assume that your investment has a 5% return each year,
that the Fund's operating expenses stay the same, and that all dividends and
distributions are reinvested. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Operating Expenses Examples
- ----------------------------------------------------------- -----------------------------------------------------------------------
Alliance U.S. Government
Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
-------- -------- ------- -------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .56% .56% .56% After 1 Year $ 539 $ 490 $ 190 $ 290 $ 190
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 781 $ 688 $ 588 $ 588 $ 588
Interest Expense .09% .08% .09% After 5 Years $ 1,041 $ 1,011 $ 1,011 $ 1,011 $ 1,011
Other Expenses .22% .23% .22% After 10 Years $ 1,785 $ 1,840 $ 1,840 $ 2,190 $ 2,190
---- ---- ----
Total Fund Operating Expenses 1.17% 1.87% 1.87%
==== ==== ====
<CAPTION>
Alliance Limited Maturity
Government 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 .65% .65% .65% After 1 Year $ 665 $ 626 $ 326 $ 424 $ 324
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 1,165 $ 1,095 $ 995 $ 989 $ 989
Interest Expense .86% .89% .88% After 5 Years $ 1,689 $ 1,688 $ 1,688 $ 1,678 $ 1,678
Other Expenses .67% .69% .68% After 10 Years $ 3,121 $ 3,203 $ 3,203 $ 3,512 $ 3,512
---- ---- ----
Total Fund Operating Expenses 2.48% 3.23% 3.21%
==== ==== ====
<CAPTION>
Alliance Mortgage Securities
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 .53% .53% .53% After 1 Year $ 613 $ 562 $ 262 $ 367 $ 267
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 1,005 $ 905 $ 805 $ 820 $ 820
Interest Expense .77% .70% .77% After 5 Years $ 1,423 $ 1,375 $ 1,375 $ 1,400 $ 1,400
Other Expenses .33% .36% .34% After 10 Years $ 2,583 $ 2,617 $ 2,617 $ 2,973 $ 2,973
---- ---- ----
Total Fund Operating Expenses 1.93% 2.59% 2.64%
==== ==== ====
<CAPTION>
Alliance Quality Bond
Portfolio 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 .55% .55% .55% After 1 Year $ 521 $ 471 $ 171 $ 271 $ 171
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years@ $ 961 $ 872 $ 772 $ 772 $ 772
Other Expenses 1.30% 1.30% 1.30% After 5 Years@ $ 1,427 $ 1,400 $ 1,400 $ 1,400 $ 1,400
---- ---- ----
Total Fund Operating Expenses 2.15% 2.85% 2.85% After 10 Years@ $ 2,714 $ 2,770 $ 2,770 $ 3,092 $ 3,092
==== ==== ====
Waiver and/or Expense
Reimbursement +++ (1.17)% (1.17)% (1.17)%
---- ---- ----
Net Expenses .98% 1.68% 1.68%
==== ==== ====
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- ----------------------------------------------------------- -----------------------------------------------------------------------
Alliance Corporate Bond
Portfolio 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 .55% .55% .55% After 1 Year $ 533 $ 485 $ 185 $ 284 $ 184
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 763 $ 673 $ 573 $ 569 $ 569
Other Expenses .26% .27% .26% After 5 Years $ 1,011 $ 985 $ 985 $ 980 $ 980
---- ---- ----
Total Fund Operating Expenses 1.11% 1.82% 1.81% After 10 Years $ 1,719 $ 1,780 $ 1,780 $ 2,127 $ 2,127
==== ==== ====
<CAPTION>
Alliance High Yield 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 $ 553 $ 606 $ 206 $ 305 $ 205
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 823 $ 837 $ 637 $ 634 $ 634
Other Expenses .26% .28% .27% After 5 Years $ 1,113 $ 1,093 $ 1,093 $ 1,088 $ 1,088
---- ---- ----
Total Fund Operating Expenses 1.31% 2.03% 2.02% After 10 Years $ 1,937 $ 2,173 $ 2,173 $ 2,348 $ 2,348
==== ==== ====
<CAPTION>
Alliance Global Strategic
Income Trust 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 $ 597 $ 650 $ 250 $ 349 $ 249
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 959 $ 970 $ 770 $ 767 $ 767
Other Expenses .72% .72% .71% After 5 Years $ 1,344 $ 1,316 $ 1,316 $ 1,311 $ 1,311
---- ---- ----
Total Fund Operating Expenses 1.77% 2.47% 2.46% After 10 Years $ 2,420 $ 2,634 $ 2,634 $ 2,796 $ 2,796
==== ==== ====
<CAPTION>
Alliance North American
Government Income Trust 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++++ .73% .73% .73% After 1 Year $ 628 $ 581 $ 281 $ 381 $ 281
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 1,052 $ 962 $ 862 $ 862 $ 862
Interest Expense .71% .70% .70% After 5 Years $ 1,501 $ 1,469 $ 1,469 $ 1,469 $ 1,469
Other Expenses .35% .35% .35% After 10 Years $ 2,743 $ 2,794 $ 2,794 $ 3,109 $ 3,109
---- ---- ----
Total Fund Operating Expenses 2.09% 2.78% 2.78%
==== ==== ====
<CAPTION>
Alliance Global Dollar
Government 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 $ 580 $ 534 $ 234 $ 333 $ 233
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 906 $ 821 $ 721 $ 718 $ 718
Other Expenses .54% .56% .55% After 5 Years $ 1,254 $ 1,235 $ 1,235 $ 1,230 $ 1,230
---- ---- ----
Total Fund Operating Expenses 1.59% 2.31% 2.30% After 10 Years $ 2,234 $ 2,301 $ 2,301 $ 2,636 $ 2,636
==== ==== ====
<CAPTION>
Alliance Multi-Market
Strategy Trust 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 .60% .60% .60% After 1 Year $ 565 $ 518 $ 218 $ 318 $ 218
Distribution (12b-1) Fees .30% 1.00% 1.00% After 3 Years $ 861 $ 773 $ 673 $ 673 $ 673
Other Expenses .54% .55% .55% After 5 Years $ 1,178 $ 1,154 $ 1,154 $ 1,154 $ 1,154
---- ---- ----
Total Fund Operating Expenses 1.44% 2.15% 2.15% After 10 Years $ 2,076 $ 2,137 $ 2,137 $ 2,483 $ 2,483
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period and, with respect to shares held 10
years, conversion of Class B shares to Class A shares after 6 years, and
for Alliance High Yield Fund and Alliance Global Strategic Income Trust, 8
years.
+++ Reflects Alliance's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through the end of the Fund's current fiscal year and may
be extended by Alliance for additional one year terms.
@ These examples assume that Alliance's agreement to waive management fees
and/or bear Fund expenses is not extended beyond its initial term.
++++ Represents .65 of 1% of the Fund's average daily adjusted total net
assets.
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Glossary
- --------------------------------------------------------------------------------
This Prospectus uses the following terms.
TYPES OF SECURITIES
Bonds are fixed, floating, and variable rate debt obligations.
Convertible securities are bonds, debentures, corporate notes, and preferred
stocks that are convertible into common and preferred stock.
Debt securities are bonds, debentures, notes, and bills.
Equity securities are common and preferred stocks, securities convertible into
common and preferred stocks, and rights and warrants to subscribe for the
purchase of common and preferred stocks.
Fixed-income securities are debt securities, convertible securities, and
preferred stocks, including floating rate and variable rate instruments.
Fixed-income securities may be rated (or, if unrated, for purposes of the Funds'
investment policies as may be determined by Alliance to be of equivalent
quality) triple-A (Aaa or AAA), high quality (Aa or AA or above), high grade (A
or above) or investment grade (Baa or BBB or above) by, as the case may be,
Moody's, S&P, Duff & Phelps or Fitch, or may be lower-rated securities, as
defined below. In the case of "split-rated" fixed-income securities (i.e.,
securities assigned non-equivalent credit quality ratings, such as Baa by
Moody's but BB by S&P or Ba by Moody's and BB by S&P but B by Fitch), a Fund
will use the rating deemed by Alliance to be the most appropriate under the
circumstances.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by a foreign government or any of its political
subdivisions, authorities, agencies or instrumentalities.
Interest-only or IO securities are debt securities that receive only the
interest payments on an underlying debt that has been structured to have two
classes, one of which is the IO class and the other of which is the
principal-only or PO class, that receives only the principal payments on the
underlying debt obligation. POs are similar to, and are sometimes referred to
as, zero coupon securities, which are debt securities issued without interest
coupons.
Mortgage-related securities are pools of mortgage loans that are assembled for
sale to investors (such as mutual funds) by various governmental,
government-related, and private organizations. These securities include:
o ARMS, which are adjustable-rate mortgage securities;
o SMRS, which are stripped mortgage-related securities;
o CMOs, which are collateralized mortgage obligations;
o GNMA certificates, which are securities issued by the Government
National Mortgage Association or GNMA;
o FNMA certificates, which are securities issued by the Federal
National Mortgage Association or FNMA; and
o FHLMC certificates, which are securities issued by the Federal Home
Loan Mortgage Corporation or FHLMC.
Qualifying bank deposits are certificates of deposit, bankers' acceptances, and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold under Rule 144A under the
Securities Act.
Sovereign debt obligations are foreign government debt securities, loan
participations between foreign governments and financial institutions, and
interests in entities organized and operated for the purpose of restructuring
the investment characteristics of foreign government securities.
U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These securities include
securities backed by the full faith and credit of the United States, those
supported by the right of the issuer to borrow from the U.S. Treasury, and those
backed only by the credit of the issuing agency itself. The first category
includes U.S. Treasury securities (which are U.S. Treasury bills, notes and
bonds) and certificates issued by GNMA. U.S. Government securities not backed by
the full faith and credit of the United States include certificates issued by
FNMA and FHLMC.
RATING AGENCIES AND RATED SECURITIES
Duff & Phelps is Duff & Phelps Credit Rating Company.
Fitch is Fitch IBCA, Inc.
Higher quality commercial paper is commercial paper rated at least Prime-2 by
Moody's, A-2 by S&P, Fitch-2 by Fitch, or Duff 2 by Duff & Phelps.
Lower-rated securities are fixed-income securities rated Ba or BB or below, or
determined by Alliance to be of equivalent quality, and are commonly referred to
as "junk bonds."
Moody's is Moody's Investors Service, Inc.
NRSRO is a nationally recognized statistical rating organization.
Prime commercial paper is commercial paper rated Prime-1 or higher by Moody's,
A-1 or higher by S&P, Fitch-1 by Fitch, or Duff 1 by Duff & Phelps.
S&P is Standard & Poor's Ratings Services.
OTHER
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Commission is the Securities and Exchange Commission.
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<PAGE>
Duration is a measure that relates the price volatility of a security to changes
in interest rates. The duration of a debt security is the weighted average term
to maturity, expressed in years, of the present value of all future cash flows,
including coupon payments and principal repayments. Thus, by definition,
duration is always less than or equal to full maturity.
Exchange is the New York Stock Exchange.
LIBOR is the London Interbank Offered Rate.
Securities Act is the Securities Act of 1933, as amended.
World Bank is the commonly used name for the International Bank for
Reconstruction and Development.
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Description Of The Funds
- --------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of each
Fund's investment objectives and principal strategies and risks. Of course,
there can be no assurance that any Fund will achieve its investment objective.
Please note that:
o Additional discussion of the Funds' investments, including the risks of
the investments, can be found in the discussion under Description of
Additional Investment Practices following this section.
o The description of the principal risks for a Fund may include risks
described in the Summary of Principal Risks above. Additional information
about the risks of investing in a Fund can be found in the discussion
under Additional Risk Considerations.
o Additional descriptions of each Fund's strategies, investments, and risks
can be found in a Fund's Statement of Additional Information or SAI.
o Except as noted, (i) the Funds' investment objectives are "fundamental"
and cannot be changed without a shareholder vote, and (ii) the Funds'
investment policies are not fundamental and thus can be changed without a
shareholder vote.
INVESTMENT OBJECTIVES AND PRINCIPAL POLICIES
INVESTMENT GRADE FUNDS
The Investment Grade Funds offer investors high current income consistent with
preservation of capital by investing primarily in investment grade (rated Baa or
BBB or above) securities.
Alliance U.S. Government Portfolio
Alliance U.S. Government Portfolio seeks a high level of current income that is
consistent with Alliance's determination of prudent investment risk. As a matter
of fundamental policy, the Fund pursues its objective by investing at least 65%
of its total assets in U.S. Government securities, repurchase agreements and
forward contracts relating to U.S. Government securities. The Fund may invest
the remaining 35% of its total assets in non-U.S. Government mortgage-related
and asset-backed securities, including high-grade debt securities secured by
mortgages on commercial real estate or residential rental properties.
The Fund will not invest in any security rated below BBB or Baa. The Fund may
invest in unrated securities of equivalent quality to the rated securities in
which it may invest, as determined by Alliance. The Fund expects, but is not
required, to dispose of securities that are downgraded below BBB and Baa or, if
unrated, that are determined by Alliance to have undergone similar credit
quality deterioration.
The Fund also may:
o enter into reverse repurchase agreements and dollar rolls;
o enter into various hedging transactions, such as interest rate swaps,
caps, and floors;
o enter into forward contracts;
o purchase and sell futures contracts for hedging purposes;
o purchase call and put options on futures contracts or on securities for
hedging purposes; and
o enter into repurchase agreements.
Alliance Limited Maturity Government Fund
Alliance Limited Maturity Government Fund seeks the highest level of current
income, consistent with low volatility of net asset value. As a matter of
fundamental policy, the Fund normally invests at least 65% of its total assets
in U.S. Government securities, including mortgage-related securities and
repurchase agreements relating to U.S. Government securities.
In pursuing its investment objective and policies, the Fund takes advantage of a
wide range of maturities of debt securities and adjusts the dollar-weighted
average maturity of its portfolio from time to time, depending on its assessment
of relative yields on securities of different maturities and the expected effect
of future changes in interest rates on the market value of the Fund's portfolio.
At all times, however, each security held by the Fund has either a remaining
maturity of not more than ten years or a duration not exceeding that of a
ten-year Treasury note.
The Fund may invest up to 35% of its total assets in:
o high quality asset-backed securities, including mortgage-related
securities that are not U.S. Government securities;
o treasury securities issued by private corporate issuers;
o qualifying bank deposits;
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<PAGE>
o higher quality commercial paper or, if unrated, issued by companies that
have high quality debt issues outstanding; and
o high quality debt securities of corporate issuers.
The Fund may invest up to 15% of its total assets in high-quality debt
securities denominated in U.S. Dollars or in foreign currencies and issued or
guaranteed by foreign governments or issued by foreign non-governmental issuers.
The amount of Fund investments in foreign debt securities will vary and may
include those of a number of foreign countries or, depending upon market
conditions, those of a single country.
The Fund also may:
o enter into futures contracts and purchase and write options on futures
contracts;
o enter into forward commitments;
o enter into interest rate swaps, caps, and floors;
o invest in Eurodollar instruments;
o purchase and write put and call options on foreign currencies;
o invest in variable, floating, and inverse floating rate instruments;
o use reverse repurchase agreements and dollar rolls;
o make secured loans of its portfolio securities; and
o enter into repurchase agreements.
Alliance Mortgage Securities Income Fund
Alliance Mortgage Securities Income Fund seeks a high level of current income to
the extent consistent with prudent investment risk. The Fund maintains at least
65% of its total assets in mortgage-related securities, including CMOs. The
average weighted maturity of the Fund's portfolio of fixed-income securities is
expected to vary between two and ten years.
The Fund expects that governmental, government-related, or private entities may
create mortgage loan pools offering pass-through investments in addition to
those described in this Prospectus. The mortgages underlying these securities
may be instruments whose principal or interest payments may vary or whose terms
to maturity may differ from customary long-term fixed-rate mortgages. As new
types of mortgage-related securities are developed and offered to investors, the
Fund will consider making investments in these new types of securities.
The Fund normally invests all of its assets in securities that are rated at
least BBB- by S&P or Baa3 by Moody's or that are of comparable quality. In the
event that the credit rating of a security held by the Fund falls below
investment grade (or, if in the case of unrated securities, Alliance determines
that the quality of a security has deteriorated below investment grade), the
Fund will not be obligated to dispose of that security and may continue to hold
the security if, in the opinion of Alliance, such investment is appropriate in
the circumstances.
The Fund may invest up to 35% of its total assets in:
o U.S. Government securities;
o qualifying bank deposits;
o prime commercial paper or, if unrated, issued by companies that have an
outstanding high quality debt issue; and
o high-grade asset-backed securities.
The Fund also may:
o enter into forward commitments;
o purchase put and call options written by others and write covered put and
call options for hedging purposes;
o purchase high-grade debt securities secured by mortgages on commercial
real estate or residential rental properties;
o enter into interest rate swaps, caps, and floors;
o enter into interest rate futures contracts;
o invest in variable, floating, and inverse floating rate instruments;
o make secured loans of portfolio securities; and
o enter into repurchase agreements.
Alliance Quality Bond Portfolio
Alliance Quality Bond Portfolio seeks high current income consistent with
preservation of capital by investing in investment grade fixed-income
securities. In seeking to achieve its investment objective, the Fund invests in
readily marketable securities with relatively attractive yields that do not
involve undue risk of loss of capital. The Fund normally invests all of its
assets in securities that are rated at least BBB- by S&P or Baa3 by Moody's or
that are of comparable quality. The Fund normally maintains an average aggregate
quality rating of its portfolio securities of at least A (S&P and Moody's). The
Fund has the flexibility to invest in long- and short-term fixed-income
securities (including debt securities, convertible debt securities and U.S.
Government obligations) and preferred stocks based on Alliance's assessment of
prospective cyclical interest rate changes.
In the event that the credit rating of a security held by the Fund falls below
investment grade (or, if in the case of unrated securities, Alliance determines
that the quality of a security has deteriorated below investment grade), the
Fund will not be obligated to dispose of that security and may continue to hold
the security if, in the opinion of Alliance, such investment is appropriate in
the circumstances.
The Fund also may:
o purchase and sell interest rate futures contracts and options;
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<PAGE>
o enter into interest rate swaps, caps and floors for hedging purposes;
o purchase put and call options and write covered put and call options on
securities it may purchase;
o write covered call options for cross-hedging purposes;
o invest in foreign fixed-income securities, but only up to 20% of its total
assets;
o enter into foreign currency futures contracts and related options;
o enter into forward foreign currency exchange contracts and options on
foreign currencies for hedging purposes;
o invest in CMOs;
o invest in zero coupon securities and "pay-in-kind" debentures; and
o make secured loans of portfolio securities of up to 50% of its total
assets.
CORPORATE BOND FUNDS
The Corporate Bond Funds offer a selection of alternatives to investors seeking
to maximize current income through investments in corporate bonds.
Alliance Corporate Bond Portfolio
Alliance Corporate Bond Portfolio seeks primarily to maximize income over the
long term to the extent consistent with providing reasonable safety in the value
of each shareholder's investment and secondarily to increase its capital through
appreciation of its investments in order to preserve and, if possible, increase
the purchasing power of each shareholder's investment. In pursuing these
objectives, the Fund's policy is to invest in readily marketable securities that
give promise of relatively attractive yields but do not involve substantial risk
of loss of capital. The Fund invests at least 65% of its net assets in debt
securities. Although the Fund invests at least 65% of its total assets in
corporate bonds, it also may invest in securities of non-corporate issuers. The
Fund expects that the average weighted maturity of its portfolio of fixed-income
securities will vary between one year or less and 30 years.
The Fund follows an investment strategy that in certain respects can be regarded
as more aggressive than the strategies of many other funds investing primarily
in corporate bonds. The Fund's investments normally tend to have a relatively
long average maturity and duration. The Fund places significant emphasis on both
foreign corporate and sovereign debt obligations and corporate bonds that are
expected to benefit from improvement in their issuers' credit fundamentals. In
recent years the Fund frequently has had greater net asset value volatility than
most other corporate bond funds. Prospective investors in the Fund should
therefore be prepared to accept the degree of volatility associated with its
investment strategy.
The Fund's investments in fixed-income securities have no minimum rating
requirement, except the Fund expects that it will not retain a security that is
downgraded below B, or if unrated, determined to have undergone similar credit
quality deterioration after purchase. Currently, the Fund believes its
objectives and policies may best be implemented by investing at least 65% of its
total assets in fixed-income securities considered investment grade or higher.
The Fund may invest the remainder of its assets in lower-rated fixed-income
securities. As of June 30, 1999, the Fund's investments were rated (or
equivalent quality):
o A or above 9.64%
o Baa or BBB 47.40%
o Ba or BB 37.26%
o B 1.82%
o CC 3.50%
o C .38%
o Unrated 0%
The Fund may invest up to 50% of its total assets in foreign debt securities,
which will consist primarily of corporate fixed-income securities and sovereign
debt obligations. The Fund invests no more than 15% of its total assets in
sovereign debt obligations in the form of foreign government loan participations
and assignments, which may be lower rated and considered to be predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. All of the Fund's investments, whether foreign or domestic, are U.S.
Dollar-denominated.
Within these limitations, the Fund has complete flexibility as to the types and
relative proportions of securities in which it will invest. The Fund plans to
vary the proportions of its holdings of long- and short-term fixed-income
securities and of equity securities in order to reflect its assessment of
prospective cyclical changes even if such action may adversely affect current
income. Substantially all of the Fund's investments, however, will be income
producing.
The Fund also may:
o invest in structured securities;
o invest in fixed and floating rate loans that are arranged through private
negotiations between an issuer of sovereign debt obligations and one or
more financial institutions and in participations in and assignments of
these type of loans;
o for hedging purposes, purchase put and call options written by others and
write covered put and call options;
o for hedging purposes, enter into various hedging transactions, such as
interest rate swaps, caps, and floors;
o invest in variable, floating, and inverse floating rate instruments;
o invest in zero coupon and pay-in-kind securities; and
o invest in CMOs and multi-class pass-through mortgage-related securities.
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<PAGE>
Alliance High Yield Fund
Alliance High Yield Fund seeks primarily to achieve high total return by
maximizing current income and, to the extent consistent with that objective,
capital appreciation. The Fund pursues this objective by investing primarily in
a diversified mix of high yield, below investment grade debt securities, known
as "junk bonds." These securities involve greater volatility of price and risk
of principal and income than higher quality debt securities. The Fund is managed
to maximize current income by taking advantage of market developments, yield
disparities, and variations in the creditworthiness of issuers. The Fund uses
various strategies in attempting to achieve its objective.
The Fund normally invests at least 65% of its total assets in high yield debt
securities rated below investment grade by two or more NRSROs (i.e., rated lower
than Baa by Moody's or lower than BBB by S&P) or, if unrated, of equivalent
quality. The Fund may not invest more than 10% of its total assets in (i)
fixed-income securities which are rated lower than B3 or B- or their equivalents
by two or more NRSROs or, if unrated, of equivalent quality, and (ii) money
market instruments of any entity which has an outstanding issue of unsecured
debt that is rated lower than B3 or B- or their equivalents by two or more
NRSROs or, if unrated, of equivalent quality.
As of August 31, 1999, the Fund's investments were rated (or equivalent
quality):
o A and above 7.70%
o Ba or BB 12.79%
o B 63.04%
o CCC 3.07%
o Unrated 13.30%
The Fund may invest a portion of its assets in foreign securities. The Fund may
buy and sell foreign currencies principally for the purpose of preserving the
value of foreign securities or in anticipation of purchasing foreign securities.
The Fund also may invest in:
o U.S. Government securities;
o certificates of deposit, bankers' acceptances, bank notes, time deposits
and interest bearing savings deposits issued or guaranteed by certain
domestic and foreign banks;
o commercial paper (rated at least A-1 by S&P or Prime-1 by Moody's or, if
unrated, issued by domestic or foreign companies having high quality
outstanding debt securities) and participation interests in loans extended
by banks to these companies;
o corporate debt obligations with remaining maturities of less than one year
rated at least high quality as well as corporate debt obligations rated at
least high grade provided the corporation also has outstanding an issue of
commercial paper rated at least A-1 by S&P or Prime-1 by Moody's; and
o floating rate or master demand notes.
The Fund also may:
o invest in mortgage-backed and asset-backed securities;
o invest in loan participations and assignments of loans to corporate,
governmental, or other borrowers originally made by institutional lenders
or lending syndicates;
o enter into forward commitments;
o write covered put and call options on debt securities, securities indices
and foreign currencies and purchase put or call options on debt
securities, securities indices and foreign currencies;
o purchase and sell futures contracts and related options on debt securities
and on indices of debt securities;
o enter into contracts for the purchase or sale of a specific currency for
hedging purposes only;
o make secured loans of portfolio securities; and
o enter into repurchase agreements.
MULTI-SECTOR FUND
The Multi-Sector Fund offers investors seeking high current income the
alternative of investing in a variety of traditional and non-traditional fixed
income sectors based on Alliance's evaluation of changes in major economic and
credit cycles around the world.
Alliance Global Strategic Income Trust
Alliance Global Strategic Income Trust seeks primarily a high level of current
income and secondarily capital appreciation. The Fund invests primarily in a
portfolio of fixed-income securities of U.S. and non-U.S. companies and U.S.
Government and foreign government securities and supranational entities,
including lower-rated securities. The Fund also may use derivative instruments
to attempt to enhance income. The Fund expects that the average weighted
maturity of its portfolio of fixed-income securities will vary between five
years and 30 years in accordance with Alliance's changing perceptions of the
relative attractiveness of various maturity ranges.
The Fund normally invests at least 65% of its total assets in fixed-income
securities of issuers located in at least three countries, one of which may be
the United States. The Fund limits its investments in the securities of any one
foreign government to 25% of its total assets. The Fund's investments in U.S.
Government securities may include mortgage-related securities and zero coupon
securities. The Fund's investments in fixed-income securities may include
preferred stock, mortgage-related and other asset-backed securities, and zero
coupon securities.
The Fund will maintain at least 65% of its total assets in investment grade
securities and may maintain not more than 35% of its total assets in lower-rated
securities. Unrated securities will be considered for investment by the Fund
when Alliance believes that the financial condition of
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<PAGE>
the issuers of such obligations and the protection afforded by the terms of the
obligations limit the risk to the Fund to a degree comparable to that of rated
securities that are consistent with the Fund's investment objectives and
policies. Lower-rated securities in which the Fund may invest include Brady
Bonds and fixed-income securities of issuers located in emerging markets.
The Fund also may:
o invest in rights and warrants;
o invest in loan participations and assignments;
o invest in foreign currencies;
o purchase and write put and call options on securities and foreign
currencies;
o purchase or sell forward foreign exchange contracts;
o invest in variable, floating, and inverse floating rate instruments;
o invest in indexed commercial paper;
o invest in structured securities;
o purchase and sell securities on a forward commitment basis;
o enter into standby commitments;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of U.S. Government securities,
foreign government securities or common stock, and purchase and write
options on futures contracts;
o invest in Eurodollar instruments;
o enter into interest rate swaps, caps, and floors; and
o make short sales of securities or maintain a short position;
o enter into reverse repurchase agreements and dollar rolls;
o make loans of portfolio securities; and
o enter into repurchase agreements.
The Fund may borrow in order to purchase securities or make other investments,
although it currently limits its borrowings to 25% of its total assets.
GLOBAL BOND FUNDS
The Global Bond Funds are non-diversified investment companies that offer
investors a high level of current income through investments primarily in
foreign government securities.
Alliance North American Government Income Trust
Alliance North American Government Income Trust seeks the highest level of
current income, consistent with what Alliance considers to be prudent investment
risk, that is available from a portfolio of debt securities issued or guaranteed
by the United States, Canada, and Mexico, their political subdivisions
(including Canadian provinces but excluding states of the United States),
agencies, instrumentalities or authorities ("Government securities"). The Fund
invests in investment grade securities denominated in the U.S. Dollar, the
Canadian Dollar, and the Mexican Peso and expects to maintain at least 25% of
its assets in securities denominated in the U.S. Dollar. In addition, the Fund
may invest up to 25% of its total assets in debt securities issued by
governmental entities of Argentina ("Argentine Government securities").
The Fund invests at least 65%, and normally substantially more, of its assets in
Government securities and income-producing securities. The average weighted
maturity of the Fund's portfolio of fixed-income securities is expected to vary
between one year or less and 30 years. The Fund maintains borrowings of
approximately one-third of its net assets.
The Fund expects that it will not retain a debt security that is downgraded
below BBB or Baa, or, if unrated, determined by Alliance to have undergone
similar credit quality deterioration. The Fund may conclude, under certain
circumstances, such as the downgrading to below investment grade of all of the
securities of a governmental issuer in one of the countries in which the Fund
has substantial investments, that it is in the best interests of the
shareholders to retain its holdings in securities of that issuer.
Alliance believes that the increasingly integrated economic relationship among
the United States, Canada and Mexico, characterized by the reduction and
projected elimination of most barriers to free trade among the three nations and
the growing coordination of their fiscal and monetary policies, will, over the
long term, benefit the economic performance of all three countries and promote
greater correlation of currency fluctuation among the U.S. and Canadian Dollars
and the Mexican Peso.
Alliance will actively manage the Fund's assets in relation to market conditions
and general economic conditions and adjust the Fund's investments in an effort
to best enable the Fund to achieve its investment objective. Thus, the
percentage of the Fund's assets invested in a particular country or denominated
in a particular currency will vary in accordance with Alliance's assessment of
the relative yield and appreciation potential of such securities and the
relationship of the country's currency to the U.S. Dollar. To the extent that
its assets are not invested in Government securities, however, the Fund may
invest the balance of its total assets in investment grade debt securities
issued by, and denominated in the local currencies of, governments of countries
located in Central and South America or any of their political subdivisions,
agencies, instrumentalities or authorities, provided that such securities are
denominated in their local currencies. The Fund limits its investments in debt
securities issued by the governmental entities of any
24
<PAGE>
one country, except for Argentine Government securities, to 10% of its total
assets.
The Fund also may:
o enter into futures contracts and purchase and write options on futures
contracts for hedging purposes;
o purchase and write put and call options on foreign currencies;
o purchase or sell forward foreign currency exchange contracts;
o write covered put and call options and purchase put and call options on
U.S. Government and foreign government securities traded on U.S. and
foreign securities exchanges, and write put and call options for
cross-hedging purposes;
o enter into interest rate swaps, caps, and floors;
o enter into forward commitments;
o invest in variable, floating, and inverse floating rate instruments;
o make secured loans of its portfolio securities; and
o enter into repurchase agreements.
Alliance Global Dollar Government Fund
Alliance Global Dollar Government Fund seeks primarily a high level of current
income and secondarily capital appreciation. In seeking to achieve these
objectives, the Fund invests at least 65% of its total assets in sovereign debt
obligations. The Fund's investments in sovereign debt obligations will emphasize
obligations referred to as "Brady Bonds," which are issued as part of debt
restructurings and collateralized in full as to principal due at maturity by
zero coupon U.S. Government securities.
The Fund also may invest up to 35% of its total assets in U.S. and non-U.S.
corporate fixed-income securities. The Fund will limit its investments in
sovereign debt obligations and U.S. and non-U.S. corporate fixed-income
securities to U.S. Dollar-denominated securities. Alliance expects the average
weighted maturity of the Fund's investments will be approximately:
o for U.S. fixed-income securities, nine to 15 years;
o for non-U.S. fixed-income securities, 15 to 25 years; and
o for sovereign debt obligations, longer than 25 years.
Substantially all of the Fund's assets will be invested in lower-rated
securities, which may include securities having the lowest rating for
non-subordinated debt instruments (i.e., rated C by Moody's or CCC or lower by
S&P, Duff & Phelps and Fitch) and unrated securities of equivalent investment
quality. These securities may have extremely poor prospects of ever attaining
any real investment standing and a current identifiable vulnerability to
default, be unlikely to have the capacity to pay interest and repay principal
when due in the event of adverse business, financial or economic conditions, and
be in default or not current in the payment of interest or principal.
The Fund also may invest in investment grade securities. Unrated securities will
be considered for investment by the Fund when Alliance believes that the
financial condition of the issuers of such obligations and the protection
afforded by the terms of the obligations themselves limit the risk to the Fund
to a degree comparable to that of rated securities which are consistent with the
Fund's investment objectives and policies.
As of August 31, 1999, securities ratings (or equivalent quality) of the Fund's
securities were:
o A and above .37%
o Baa or BBB 4.55%
o Ba or BB 50.00%
o B 29.35%
o CCC 9.43%
o CC 2.64%
o C 1.60%
o Unrated 2.06%
The Fund's investments in sovereign debt obligations and non-U.S. corporate
fixed-income securities emphasize countries that are considered at the time of
purchase to be emerging markets or developing countries by the World Bank. A
substantial part of the Fund's investment focus is in obligations of or
securities of issuers in Argentina, Brazil, Mexico, Morocco, the Philippines,
Russia and Venezuela because these countries are now, or are expected in the
future to be, the principal participants in debt restructuring programs
(including, in the case of Argentina, Mexico, the Philippines and Venezuela,
issuers of currently outstanding Brady Bonds) that, in Alliance's opinion, will
provide the most attractive investment opportunities for the Fund. Alliance
anticipates that other countries that will provide investment opportunities for
the Fund include, among others, Bolivia, Costa Rica, the Dominican Republic,
Ecuador, Jordan, Nigeria, Panama, Peru, Poland, Thailand, Turkey and Uruguay.
The Fund limits its investments in the sovereign debt obligations of any single
foreign country to less than 25% of its total assets, although the Fund may
invest up to 30% of its total assets in the sovereign debt obligations of and
corporate fixed-income securities of issuers in each of Argentina, Brazil,
Mexico, Morocco, the Philippines, Russia and Venezuela. The Fund expects that it
will limit its investments in any other single foreign country to not more than
10% of its total assets.
The Fund also may:
o invest in structured securities;
o invest in fixed and floating rate loans that are arranged through private
negotiations between an issuer of sovereign debt obligations and one or
more financial institutions and in participations in and assignments of
these types of loans;
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o invest in other investment companies;
o invest in warrants;
o enter into interest rate swaps, caps, and floors;
o enter into forward commitments;
o enter into standby commitment agreements;
o make short sales of securities or maintain a short position;
o write put and call options on securities of the types in which it is
permitted to invest and write call options for cross-hedging purposes;
o purchase and sell exchange-traded options on any securities index of the
types of securities in which it may invest;
o invest in variable, floating, and inverse floating rate instruments;
o enter into reverse repurchase agreements and dollar rolls;
o make secured loans of its portfolio securities; and
o enter into repurchase agreements.
While it does not currently intend to do so, the Fund reserves the right to
borrow an amount not to exceed one-third of the Fund's net assets.
Alliance Multi-Market Strategy Trust
Alliance Multi-Market Strategy Trust is a non-diversified investment company
that offers investors a higher yield than a money market fund and less
fluctuation in net asset value than a longer-term bond fund. The Fund seeks the
highest level of current income, consistent with what Alliance considers to be
prudent investment risk, that is available from a portfolio of high-quality debt
securities having remaining maturities of not more than five years. The Fund
invests in a portfolio of debt securities denominated in the U.S. Dollar and
selected foreign currencies. The Fund seeks investment opportunities in foreign,
as well as domestic, securities markets. The Fund normally expects to maintain
at least 70% of its assets in debt securities denominated in foreign currencies.
The Fund limits its investments in a single currency other than the U.S. Dollar
to 25% of its net assets, except for the Euro in which the Fund may invest up to
50% of its net assets.
In pursuing its investment objective, the Fund seeks to minimize credit risk and
fluctuations in net asset value by investing only in short-term debt securities.
Normally, a high proportion of the Fund's portfolio consists of money market
instruments. Alliance actively manages the Fund's portfolio in accordance with a
multi-market investment strategy, allocating the Fund's investments among
securities denominated in the U.S. Dollar and the currencies of a number of
foreign countries and, within each such country, among different types of debt
securities. Alliance adjusts the Fund's exposure to each currency so that the
percentage of assets invested in securities of a particular country or
denominated in a particular currency varies in accordance with Alliance's
assessment of the relative yield and appreciation potential of such securities
and the relative strength of a country's currency. Fundamental economic
strength, credit quality, and interest rate trends are the principal factors
considered by Alliance in determining whether to increase or decrease the
emphasis placed upon a particular type of security or industry sector within a
Fund's investment portfolio.
The returns available from short-term foreign currency-denominated debt
instruments can be adversely affected by changes in exchange rates. Alliance
believes that the use of foreign currency hedging techniques, including
"cross-hedges", can help protect against declines in the U.S. Dollar value of
income available for distribution to shareholders and declines in the net asset
value of the Fund's shares resulting from adverse changes in currency exchange
rates. The Fund invests in debt securities denominated in the currencies of
countries whose governments are considered stable by Alliance.
An issuer of debt securities purchased by the Fund may be domiciled in a country
other than the country in whose currency the instrument is denominated. In
addition, the Fund may purchase debt securities (sometimes referred to as
"linked" securities) that are denominated in one currency while the principal
amounts of, and value of interest payments on, such securities are determined
with reference to another currency.
The Fund seeks to minimize investment risk by limiting its investments to debt
securities of high quality and invests in:
o U.S. Government securities;
o high-quality foreign government securities;
o obligations issued by supranational entities and corporate debt securities
having a high-quality rating;
o certificates of deposit and bankers' acceptances issued or guaranteed by,
or time deposits maintained at, banks (including foreign branches of
foreign banks) having total assets of more than $500 million, and
determined by Alliance to be of high quality; and
o prime commercial paper or unrated commercial paper of equivalent quality
and issued by U.S. or foreign companies having outstanding high-quality
debt securities.
As a matter of fundamental policy, the Fund concentrates at least 25% of its
total assets in debt instruments issued by domestic and foreign companies
engaged in the banking industry, including bank holding companies. These
investments may include certificates of deposit, time deposits, bankers'
acceptances, and obligations issued by bank holding companies, as well as
repurchase agreements entered into with banks.
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The Fund also may:
o invest in indexed commercial paper;
o enter into futures contracts and purchase and write options on futures
contracts;
o purchase and write put and call options on foreign currencies;
o purchase or sell forward foreign currency exchange contracts;
o enter into interest rate swaps, caps, and floors;
o invest in variable, floating, and inverse floating rate instruments;
o make secured loans of its portfolio securities; and
o enter into repurchase agreements.
DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES
This section describes certain investment practices and associated risks that
are common to a number of Funds. There can be no assurance that at any given
time a Fund will engage in any of these derivative or other practices.
Derivatives. The Funds may use derivatives to achieve their investment
objectives. Derivatives are financial contracts whose value depends on, or is
derived from, the value of an underlying asset, reference rate or index. These
assets, rates, and indices may include bonds, stocks, mortgages, commodities,
interest rates, currency exchange rates, bond indices, and stock indices.
Derivatives can be used to earn income or protect against risk, or both. For
example, one party with unwanted risk may agree to pass that risk to another
party who is willing to accept the risk, the second party being motivated, for
example, by the desire either to earn income in the form of a fee or premium
from the first party, or to reduce its own unwanted risk by attempting to pass
all or part of that risk to the first party.
Derivatives can be used by investors such as the Funds to earn income and
enhance returns, to hedge or adjust the risk profile of a portfolio, and either
to replace more traditional direct investments or to obtain exposure to
otherwise inaccessible markets. Each of the Funds is permitted to use
derivatives for one or more of these purposes, although most of the Funds
generally use derivatives primarily as direct investments in order to enhance
yields and broaden portfolio diversification. Each of these uses entails greater
risk than if derivatives were used solely for hedging purposes. Derivatives are
a valuable tool, which, when used properly, can provide significant benefits to
Fund shareholders. A Fund may take a significant position in those derivatives
that are within its investment policies if, in Alliance's judgment, this
represents the most effective response to current or anticipated market
conditions. , Alliance High Yield, Alliance Global Strategic Income and Alliance
Multi-Market Strategy in particular, generally make extensive use of carefully
selected forwards and other derivatives to achieve the currency hedging that is
an integral part of their investment strategy. Alliance's use of derivatives is
subject to continuous risk assessment and control from the standpoint of each
Fund's investment objectives and policies.
Derivatives may be (i) standardized, exchange-traded contracts or (ii)
customized, privately-negotiated contracts. Exchange-traded derivatives tend to
be more liquid and subject to less credit risk than those that are privately
negotiated.
There are four principal types of derivative instruments -- options, futures,
forwards, and swaps -- from which virtually any type of derivative transaction
can be created.
o Options -- An option, which may be standardized and exchange-traded, or
customized and privately negotiated, is an agreement that, for a premium
payment or fee, gives the option holder (the buyer) the right but not the
obligation to buy or sell the underlying asset (or settle for cash an
amount based on an underlying asset, rate or index) at a specified price
(the exercise price) during a period of time or on a specified date. A
call option entitles the holder to purchase, and a put option entitles the
holder to sell, the underlying asset (or settle for cash an amount based
on an underlying asset, rate or index). Likewise, when an option is
exercised the writer of the option is obligated to sell (in the case of a
call option) or to purchase (in the case of a put option) the underlying
asset (or settle for cash an amount based on an underlying asset, rate or
index).
o Futures -- A futures contract is an agreement that obligates the buyer to
buy and the seller to sell a specified quantity of an underlying asset (or
settle for cash the value of a contract based on an underlying asset, rate
or index) at a specific price on the contract maturity date. Futures
contracts are standardized, exchange-traded instruments and are fungible
(i.e., considered to be perfect substitutes for each other). This
fungibility allows futures contracts to be readily offset or cancelled
through the acquisition of equal but opposite positions, which is the
primary method in which futures contracts are liquidated. A cash-settled
futures contract does not require physical delivery of the underlying
asset but instead is settled for cash equal to the difference between the
values of the contract on the date it is entered into and its maturity
date.
o Forwards -- A forward contract is an obligation by one party to buy, and
the other party to sell, a specific quantity of an underlying commodity or
other tangible asset for an agreed upon price at a future date. Forward
contracts are customized, privately negotiated agreements designed to
satisfy the objectives of each party. A forward contract usually results
in the delivery of the underlying asset upon maturity of the contract in
return for the agreed upon payment.
o Swaps -- A swap is a customized, privately negotiated agreement that
obligates two parties to exchange a
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series of cash flows at specified intervals (payment dates) based upon or
calculated by reference to changes in specified prices or rates (interest
rates in the case of interest rate swaps, currency exchange rates in the
case of currency swaps) for a specified amount of an underlying asset (the
"notional" principal amount). The payment flows are netted against each
other, with the difference being paid by one party to the other. Except
for currency swaps, the notional principal amount is used solely to
calculate the payment streams but is not exchanged. With respect to
currency swaps, actual principal amounts of currencies may be exchanged by
the counterparties at the initiation, and again upon the termination, of
the transaction.
Debt instruments that incorporate one or more of these building blocks for the
purpose of determining the principal amount of and/or rate of interest payable
on the debt instruments are often referred to as "structured securities." An
example of this type of structured security is indexed commercial paper. The
term is also used to describe certain securities issued in connection with the
restructuring of certain foreign obligations. The term "derivative" also is
sometimes used to describe securities involving rights to a portion of the cash
flows from an underlying pool of mortgages or other assets from which payments
are passed through to the owner of, or that collateralize, the securities. These
securities are described below under Mortgage-Related Securities and Other
Asset-Backed Securities.
While the judicious use of derivatives by highly-experienced investment managers
such as Alliance can be quite beneficial, derivatives involve risks different
from, and, in certain cases, greater than, the risks presented by more
traditional investments. The following is a general discussion of important risk
factors and issues relating to the use of derivatives that investors should
understand before investing in a Fund.
o Market Risk -- This is the general risk of all investments that the value
of a particular investment will change in a way detrimental to the Fund's
interest based on changes in the bond market generally.
o Management Risk -- Derivative products are highly specialized instruments
that require investment techniques and risk analyses different from those
associated with stocks and bonds. The use of a derivative requires an
understanding not only of the underlying instrument but also of the
derivative itself, without the benefit of observing the performance of the
derivative under all possible market conditions. In particular, the use
and complexity of derivatives require the maintenance of adequate controls
to monitor the transactions entered into, the ability to assess the risk
that a derivative adds to a Fund's portfolio, and the ability to forecast
price, interest rate, or currency exchange rate movements correctly.
o Credit Risk -- This is the risk that a loss may be sustained by a Fund as
a result of the failure of a derivative counterparty to comply with the
terms of the derivative contract. The credit risk for exchange-traded
derivatives is generally less than for privately negotiated derivatives,
since the clearing house, which is the issuer or counterparty to each
exchange-traded derivative, provides a guarantee of performance. This
guarantee is supported by a daily payment system (i.e., margin
requirements) operated by the clearing house in order to reduce overall
credit risk. For privately negotiated derivatives, there is no similar
clearing agency guarantee. Therefore, the Funds consider the
creditworthiness of each counterparty to a privately negotiated derivative
in evaluating potential credit risk.
o Liquidity Risk -- Liquidity risk exists when a particular instrument is
difficult to purchase or sell. If a derivative transaction is particularly
large or if the relevant market is illiquid (as is the case with many
privately negotiated derivatives), it may not be possible to initiate a
transaction or liquidate a position at an advantageous price.
o Leverage Risk -- Since many derivatives have a leverage component, adverse
changes in the value or level of the underlying asset, rate or index can
result in a loss substantially greater than the amount invested in the
derivative itself. In the case of swaps, the risk of loss generally is
related to a notional principal amount, even if the parties have not made
any initial investment. Certain derivatives have the potential for
unlimited loss, regardless of the size of the initial investment.
o Other Risks -- Other risks in using derivatives include the risk of
mispricing or improper valuation of derivatives and the inability of
derivatives to correlate perfectly with underlying assets, rates and
indices. Many derivatives, in particular privately negotiated derivatives,
are complex and often valued subjectively. Improper valuations can result
in increased cash payment requirements to counterparties or a loss of
value to a Fund. Derivatives do not always perfectly or even highly
correlate or track the value of the assets, rates or indices they are
designed to closely track. Consequently, a Fund's use of derivatives may
not always be an effective means of, and sometimes could be
counterproductive to, furthering the Fund's investment objective. In
addition, there is no guarantee that a specific derivative will be
available for a Fund to utilize at any given time.
Derivatives Used by the Funds. The following describes specific derivatives that
one or more of the Funds may use.
Eurodollar Instruments. Eurodollar instruments are essentially U.S.
Dollar-denominated futures contracts or options that are linked to LIBOR.
Eurodollar futures contracts enable purchasers to obtain a fixed rate for the
lending of funds and sellers to obtain a fixed rate for borrowings. Alliance
Limited Maturity Government and
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Alliance Global Strategic Income intend to use Eurodollar futures contracts and
options thereon to hedge against changes in LIBOR (to which many short-term
borrowings and floating rate securities in which each Fund invests are linked).
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
foreign currency exchange contracts ("forward contracts") to minimize the risk
from adverse changes in the relationship between the U.S. Dollar and other
currencies. 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 (a
"transaction hedge"). 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 (a
"position hedge"). 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 (a "cross-hedge").
Futures Contracts and Options on Futures Contracts. A Fund may buy and sell
futures contracts on fixed-income or other securities or foreign currencies, and
contracts based on interest rates or financial indices, including any index of
U.S. Government securities, foreign government securities or corporate debt
securities.
Options on futures contracts are options that call for the delivery of futures
contracts upon exercise. Options on futures contracts written or purchased by a
Fund will be traded on U.S. or foreign exchanges and, except for Alliance Global
Strategic Income, will be used only for hedging purposes.
Alliance U.S. Government, Alliance Limited Maturity Government, Alliance Global
Strategic Income, Alliance North American Government Income and Alliance
Multi-Market Strategy will not enter into a futures contract or write or
purchase an option on a futures contract 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. Alliance Mortgage Securities Income will not
write or purchase options on futures contracts. Nor will Alliance U.S.
Government, Alliance Limited Maturity Government, Alliance Mortgage Securities
Income, Alliance Global Strategic Income, Alliance North American Government
Income or Alliance Multi-Market Strategy enter into a futures contract or, if
otherwise permitted, write or purchase an option on a futures contract, 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. In addition, Alliance Mortgage Securities Income and
Alliance Global Strategic Income will not enter into any futures contract (i)
other than one on fixed-income securities or based on interest rates, or (ii) if
immediately thereafter the sum of the then aggregate futures market prices of
financial instruments required to be delivered under open futures contract sales
and the aggregate futures market prices of instruments required to be delivered
under open futures contract purchases would exceed 30% of the value of the
Fund's total assets.
Interest Rate Transactions (Swaps, Caps, and Floors). Each Fund that may enter
into interest rate swap, cap, or floor transactions expects to do so primarily
for hedging purposes, which may include preserving a return or spread on a
particular investment or portion of its portfolio or protecting against an
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) computed based on a contractually-based
principal (or "notional") amount. Interest rate swaps are entered into 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).
Interest rate caps and floors are similar to options in that the purchase of an
interest rate cap or floor entitles the purchaser, to the extent that a
specified index exceeds (in the case of a cap) or falls below (in the case of a
floor) a predetermined interest rate, to receive payments of interest on a
notional amount from the party selling the interest rate cap or 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.
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.
Alliance Global Strategic Income, Alliance North American Government Income and
Alliance Multi-Market Strategy, may enter into interest rate swaps involving
payments in the same currency or in different currencies. Alliance U.S.
Government, Alliance Limited Maturity Government, Alliance Mortgage Securities
Income, Alliance Quality Bond, Alliance Corporate Bond, Alliance Global
Strategic Income and Alliance Global Dollar Government will not enter into an
interest rate swap, cap, or floor transaction unless the
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unsecured senior long- or short-term debt or the claims-paying ability of the
other party is then rated in the highest rating category of at least one NRSRO.
Each of Alliance Global Strategic Income, Alliance North American Government
Income and Alliance Multi-Market Strategy, will enter into interest rate swap,
cap or floor transactions with its respective custodian, and with other
counterparties, but only if: (i) for transactions with maturities under one
year, such other counterparty has outstanding prime commercial paper; or (ii)
for transactions with maturities greater than one year, the counterparty has
high-quality debt securities outstanding.
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 well established and relatively liquid. Caps and floors are less liquid
than swaps. These transactions do not involve the delivery of securities or
other underlying assets or principal. Accordingly, unless there is a
counterparty default, the risk of loss to a Fund from interest rate transactions
is limited to the net amount of interest payments that the Fund is contractually
obligated to make.
Options on Foreign Currencies. A Fund invests in options on foreign currencies
that are privately negotiated or traded on U.S. or foreign exchanges for the
purpose of protecting against declines in the U.S. Dollar value of foreign
currency denominated securities held by a Fund and against increases in the U.S.
Dollar cost of securities to be acquired. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations in exchange
rates, although if rates move adversely, a Fund may forfeit the entire amount of
the premium plus related transaction costs.
Options on Securities. In purchasing an option on securities, a Fund would be in
a position to realize a gain if, during the option period, the price of the
underlying securities 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 not greater than the premium paid for the option. Thus,
a Fund would realize a loss if the price of the underlying security declined or
remained the same (in the case of a call) or increased or remained the same (in
the case of a put) or otherwise did not increase (in the case of a put) or
decrease (in the case of a call) by more than the amount of the premium. If a
put or call option purchased by a Fund were permitted to expire without being
sold or exercised, its premium would represent a loss to the Fund.
A Fund may write a put or call option in return for a premium, which is retained
by the Fund whether or not the option is exercised. Except with respect to
uncovered call options written for cross-hedging purposes, none of the Funds
will write uncovered call or put options on securities. 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.
The risk involved in writing an uncovered call option is that there could be an
increase in the market value of the underlying security, and a Fund could be
obligated to acquire the underlying security at its current price and sell it at
a lower price. The risk of loss from writing an uncovered put option is limited
to the exercise price of the option.
A Fund may write a call option on a security that it does not own in order to
hedge against a decline in the value of a security that it owns or has the right
to acquire, a technique referred to as "cross-hedging." 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 exceeds
that to be received from writing a covered call option, while at the same time
achieving the desired hedge. The correlation risk involved in cross-hedging may
be greater than the correlation risk involved with other hedging strategies.
Alliance U.S. Government, Alliance Mortgage Securities Income, Alliance Quality
Bond, Alliance Corporate Bond, Alliance High Yield, Alliance Global Strategic
Income, Alliance North American Government Income and Alliance Global Dollar
Government, generally purchase or write privately negotiated options on
securities. A Fund that does so 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. Privately
negotiated options purchased or written by a Fund may be illiquid and it may not
be possible for the Fund to effect a closing transaction at an advantageous
time. Alliance U.S. Government, Alliance Mortgage Securities Income, and
Alliance Corporate Bond will not purchase an option on a security if,
immediately thereafter, the aggregate cost of all outstanding options purchased
by the Fund would exceed 2% of the Fund's total assets. Nor will these Funds
write an option if, immediately thereafter, the aggregate value of the Fund's
portfolio securities subject to outstanding options would exceed 15% of the
Fund's total assets.
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than taking or making 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.
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Brady Bonds. Brady Bonds are created through the exchange of existing commercial
bank loans to foreign entities for new obligations in connection with debt
restructurings under a plan introduced by former U.S. Secretary of the Treasury,
Nicholas F. Brady (the "Brady Plan"). Brady Bonds have been issued only
recently, and, accordingly, do not have a long payment history. They may be
collateralized or uncollateralized and issued in various currencies (although
most are U.S. Dollar-denominated) and they are actively traded in the
over-the-counter secondary market.
U.S. Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate par
bonds or floating rate discount bonds, are generally collateralized in full as
to principal due at maturity by U.S. Treasury zero coupon obligations that have
the same maturity as the Brady Bonds. Interest payments on these Brady Bonds
generally are collateralized by cash or securities in an amount that, in the
case of fixed rate bonds, is equal to at least one year of rolling interest
payments based on the applicable interest rate at that time and is adjusted at
regular intervals thereafter. Certain Brady Bonds are entitled to "value
recovery payments" in certain circumstances, which in effect constitute
supplemental interest payments but generally are not collateralized. Brady Bonds
are often viewed as having up to four valuation components: (i) collateralized
repayment of principal at final maturity, (ii) collateralized interest payments,
(iii) uncollateralized interest payments, and (iv) any uncollateralized
repayment of principal at maturity (these uncollateralized amounts constitute
the "residual risk"). In the event of a default with respect to collateralized
Brady Bonds as a result of which the payment obligations of the issuer are
accelerated, the U.S. Treasury zero coupon obligations held as collateral for
the payment of principal will not be distributed to investors, nor will such
obligations be sold and the proceeds distributed. The collateral will be held by
the collateral agent to the scheduled maturity of the defaulted Brady Bonds,
which will continue to be outstanding, at which time the face amount of the
collateral will equal the principal payments that would have then been due on
the Brady Bonds in the normal course. In light of the residual risk of Brady
Bonds and, among other factors, the history of defaults with respect to
commercial bank loans by public and private entities of countries issuing Brady
Bonds, investments in Brady Bonds are to be viewed as speculative.
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 generally higher yields than those of equity
securities of the same or similar issuers. The price of a convertible security
will normally vary with changes in the price of the underlying equity security,
although the higher yield tends to make the convertible security less volatile
than the underlying equity security. As with debt securities, the market value
of convertible securities tends to decrease as interest rates rise and increase
as interest rates decline. While convertible securities generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality, they enable investors 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 may share some or all of the risks of debt securities with
those ratings.
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 or approval of a proposed
financing by appropriate authorities (i.e., a "when, as and if issued" trade).
When forward commitments with respect to fixed-income securities are negotiated,
the price, which is generally expressed in yield terms, is fixed at the time the
commitment is made, but payment for and delivery of 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 accrues to the purchaser prior to the settlement
date.
The use of forward commitments helps 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 bond
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. No forward commitments will be made by
Alliance Limited Maturity Government, Alliance Global Strategic Income, Alliance
North American Government Income or Alliance Global Dollar Government if, as a
result, the Fund's aggregate forward commitments under such transactions would
be more than 25% of the total assets of Alliance Global Strategic Income and 30%
of the total assets of each of the other Funds.
A Fund's right to receive or deliver a security under a forward commitment may
be sold prior to the settlement date. The Funds enter into forward commitments,
however, only with the intention of actually receiving securities or delivering
them, as the case may be. If a Fund, however, 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 realize a gain or
incur a loss.
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Illiquid Securities. The Funds will limit their investments in illiquid
securities to 15% of their net assets, except that the limit is 10% for Alliance
Mortgage Securities Income, Alliance North American Government Income and
Alliance Multi-Market Strategy. As a matter of fundamental policy, Alliance
Corporate Bond cannot purchase 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 currency swaps and any assets used to
cover currency swaps, (ii) over-the-counter options and assets used to cover
over-the-counter options, and (iii) repurchase agreements not terminable within
seven days.
A Fund that invests in illiquid securities may not be able to sell such
securities and may not be able to realize their full value upon sale. Alliance
will monitor each Fund's investments in illiquid securities. Rule 144A
securities will not be treated as "illiquid" for the purposes of the limit on
investments so long as the securities meet liquidity guidelines established by
the Board of Directors.
Indexed Commercial Paper. Indexed commercial paper may have its principal linked
to changes in foreign currency exchange rates whereby its principal amount is
adjusted upwards or downwards (but not below zero) at maturity to reflect
changes in the referenced exchange rate. Each Fund that invests in indexed
commercial paper may do so without limitation. A Fund will receive interest and
principal payments on such commercial paper in the currency in which such
commercial paper is denominated, but the amount of principal payable by the
issuer at maturity will change in proportion to the change (if any) in the
exchange rate between the two specified currencies between the date the
instrument is issued and the date the instrument matures. While such commercial
paper entails the risk of loss of principal, the potential for realizing gains
as a result of changes in foreign currency exchange rates enables a Fund to
hedge (or cross-hedge) against a decline in the U.S. Dollar value of investments
denominated in foreign currencies while providing an attractive money market
rate of return. A Fund will purchase such commercial paper for hedging purposes
only, not for speculation.
Investment in Other Investment Companies. Alliance Global Dollar Government may
invest in other investment companies whose investment objectives and policies
are consistent with those of the Fund. If the Fund acquires shares in investment
companies, shareholders would bear both their proportionate share of expenses in
the Fund (including management and advisory fees) and, indirectly, the expenses
of such investment companies (including management and advisory fees).
Loans of Portfolio Securities. A Fund may make secured loans of portfolio
securities to brokers, dealers and financial institutions, provided that cash,
liquid high grade debt securities or bank letters of credit equal to at least
100% of the market value of the securities loaned is deposited and maintained by
the borrower with the Fund. The risks in lending portfolio securities, as with
other secured extensions of credit, consist of 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 from
the securities. The Fund may invest any cash collateral in portfolio securities
and earn additional income or receive an agreed-upon amount of income from a
borrower who has delivered equivalent collateral. Lending of portfolio
securities is limited to 50% of net assets for Alliance High Yield, 25% of net
assets for Alliance Global Strategic Income, and 20% of net assets for Alliance
Limited Maturity Government, Alliance Mortgage Securities Income, Alliance North
American Government Income, Alliance Global Dollar Government and Alliance
Multi-Market Strategy, and to 50% of total assets for Alliance Quality Bond.
Loan Participations and Assignments. A Fund's investments in loans are expected
in most instances to be in the form of participations in loans and assignments
of all or a portion of loans from third parties. A Fund's investment in loan
participations typically will result in the Fund having a contractual
relationship only with the lender and not with the borrower. A Fund will acquire
participations only if the lender interpositioned between the Fund and the
borrower is a lender having total assets of more than $25 billion and whose
senior unsecured debt is rated investment grade or higher. When a Fund purchases
a loan assignment from a lender it will acquire direct rights against the
borrower on the loan. Because loan assignments are arranged through private
negotiations between potential assignees and potential assignors, however, the
rights and obligations acquired by a Fund as the purchaser of an assignment may
differ from, and be more limited than, those held by the assigning lender.
The assignability of certain sovereign debt obligations, with respect to
Alliance Global Strategic Income and Alliance Global Dollar Government, or
foreign government securities, with respect to Alliance Corporate Bond and
Alliance High Yield, is restricted by the governing documentation as to the
nature of the assignee such that the only way in which the Fund may acquire an
interest in a loan is through a participation and not an assignment. A Fund may
have difficulty disposing of assignments and participations because to do so it
will have to assign such securities to a third party. Because there may not be a
liquid market for such investments, they can probably be sold only to a limited
number of institutional investors. The lack of a liquid secondary market may
have an adverse effect on the value of such investments and a Fund's ability to
dispose of particular participations and assignments when
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necessary to meet its liquidity needs in response to a specific economic event
such as a deterioration in the creditworthiness of the borrower. The lack of a
liquid secondary market for participations and assignments also may make it more
difficult for the Fund to assign a value to these investments for purposes of
valuing the Fund's portfolio and calculating its net asset value.
Alliance Global Strategic Income and Alliance Global Dollar Government may
invest up to 25%, and Alliance Corporate Bond may invest up to 15%, of their
total assets in loan participations and assignments.
Mortgage-Related Securities. The Funds' investments in mortgage-related
securities typically are securities representing interests in pools of mortgage
loans made to home owners. The mortgage loan pools may be assembled for sale to
investors (such as a Fund) by governmental or private organizations.
Mortgage-related securities bear interest at either a fixed rate or an
adjustable rate determined by reference to an index rate. Mortgage-related
securities frequently provide for monthly payments that consist of both interest
and principal, unlike more traditional debt securities, which normally do not
provide for periodic repayments of principal.
Securities representing interests in pools created by private issuers generally
offer a higher rate of interest than securities representing interests in pools
created by governmental issuers because there are no direct or indirect
governmental guarantees of the underlying mortgage payments. Private issuers
sometimes obtain committed loan facilities, lines of credit, letters of credit,
surety bonds or other forms of liquidity and credit enhancement to support the
timely payment of interest and principal with respect to their securities if the
borrowers on the underlying mortgages fail to make their mortgage payments. The
ratings of such non-governmental securities are generally dependent upon the
ratings of the providers of such liquidity and credit support and would be
adversely affected if the rating of such an enhancer were downgraded. A Fund may
buy mortgage-related securities without credit enhancement if the securities
meet the Fund's investment standards.
One type of mortgage-related security is of the "pass-through" variety. The
holder of a pass-through security is considered to own an undivided beneficial
interest in the underlying pool of mortgage loans and receives a pro rata share
of the monthly payments made by the borrowers on their mortgage loans, net of
any fees paid to the issuer or guarantor of the securities. Prepayments of
mortgages resulting from the sale, refinancing, or foreclosure of the underlying
properties are also paid to the holders of these securities, which, as discussed
below, frequently causes these securities to experience significantly greater
price and yield volatility than experienced by traditional fixed-income
securities. Some mortgage-related securities, such as securities issued by GNMA,
are referred to as "modified pass-through" securities. The holders of these
securities are entitled to the full and timely payment of principal and
interest, net of certain fees, regardless of whether payments are actually made
on the underlying mortgages.
Another form of mortgage-related security is a "pay-through" security, which is
a debt obligation of the issuer secured by a pool of mortgage loans pledged as
collateral that is legally required to be paid by the issuer, regardless of
whether payments are actually made on the underlying mortgages. CMOs are the
predominant type of "pay-through" mortgage-related security. In a CMO, a series
of bonds or certificates is issued in multiple classes. Each class of a CMO,
often referred to as a "tranche," is issued at a specific coupon rate and has a
stated maturity or final distribution date. Principal prepayments on collateral
underlying a CMO may cause one or more tranches of the CMO to be retired
substantially earlier than the stated maturities or final distribution dates of
the collateral. The principal and interest on the underlying mortgages may be
allocated among several classes of a series of a CMO in many ways. CMOs may be
issued by a U.S. Government instrumentality or agency or by a private issuer.
Although payment of the principal of, and interest on, the underlying collateral
securing privately issued CMOs may be guaranteed by GNMA, FNMA or FHLMC, these
CMOs represent obligations solely of the private issuer and are not insured or
guaranteed by GNMA, FNMA, FHLMC, any other governmental agency or any other
person or entity.
Another type of mortgage-related security, known as ARMS, bears interest at a
rate determined by reference to a predetermined interest rate or index. There
are two main categories of rates or indices: (i) rates based on the yield on
U.S. Treasury securities; and (ii) indices derived from a calculated measure
such as a cost of funds index or a moving average of mortgage rates. Some rates
and indices closely mirror changes in market interest rate levels, while others
tend to lag changes in market rate levels and tend to be somewhat less volatile.
ARMS may be secured by fixed-rate mortgages or adjustable-rate mortgages. ARMS
secured by fixed-rate mortgages generally have lifetime caps on the coupon rates
of the securities. To the extent that general interest rates increase faster
than the interest rates on the ARMS, these ARMS will decline in value. The
adjustable-rate mortgages that secure ARMS will frequently have caps that limit
the maximum amount by which the interest rate or the monthly principal and
interest payments on the mortgages may increase. These payment caps can result
in negative amortization (i.e., an increase in the balance of the mortgage
loan). Since many adjustable-rate mortgages only reset on an annual basis, the
values of ARMS tend to fluctuate to the extent that changes in prevailing
interest rates are not immediately reflected in the interest rates payable on
the underlying adjustable-rate mortgages.
SMRS are mortgage-related securities that are usually structured with two
classes of securities collateralized by a pool of mortgages or a pool of
mortgage-backed bonds or
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pass-through securities, with each class receiving different proportions of the
principal and interest payments from the underlying assets. A common type of
SMRS has one class of interest-only securities or IOs receiving all of the
interest payments from the underlying assets; while the other class of
securities, principal-only securities or POs, receives all of the principal
payments from the underlying assets. IOs and POs are extremely sensitive to
interest rate changes and are more volatile than mortgage-related securities
that are not stripped. IOs tend to decrease in value as interest rates decrease,
while POs generally increase in value as interest rates decrease. If prepayments
of the underlying mortgages are greater than anticipated, the amount of interest
earned on the overall pool will decrease due to the decreasing principal balance
of the assets. Changes in the values of IOs and POs can be substantial and occur
quickly, such as occurred in the first half of 1994 when the value of many POs
dropped precipitously due to increases in interest rates. For this reason, none
of the Funds relies on IOs and POs as the principal means of furthering its
investment objective.
The value of mortgage-related securities is affected by a number of factors.
Unlike traditional debt securities, which have fixed maturity dates,
mortgage-related securities may be paid earlier than expected as a result of
prepayments of underlying mortgages. Such prepayments generally occur during
periods of falling mortgage interest rates. If property owners make unscheduled
prepayments of their mortgage loans, these prepayments will result in the early
payment of the applicable mortgage-related securities. In that event, a Fund may
be unable to invest the proceeds from the early payment of the mortgage-related
securities in investments that provide as high a yield as the mortgage-related
securities. Early payments associated with mortgage-related securities cause
these securities to experience significantly greater price and yield volatility
than is experienced by traditional fixed-income securities. The occurrence of
mortgage prepayments is affected by the level of general interest rates, general
economic conditions, and other social and demographic factors. During periods of
falling interest rates, the rate of mortgage prepayments tends to increase,
thereby tending to decrease the life of mortgage-related securities. Conversely,
during periods of rising interest rates, a reduction in prepayments may increase
the effective life of mortgage-related securities, subjecting them to greater
risk of decline in market value in response to rising interest rates. If the
life of a mortgage-related security is inaccurately predicted, a Fund may not be
able to realize the rate of return it expected.
Although the market for mortgage-related securities is becoming increasingly
liquid, those issued by certain private organizations may not be readily
marketable. In particular, the secondary markets for CMOs, IOs, and POs may be
more volatile and less liquid than those for other mortgage-related securities,
thereby potentially limiting a Fund's ability to buy or sell those securities at
any particular time.
As with fixed-income securities generally, the value of mortgage-related
securities also can be adversely affected by increases in general interest rates
relative to the yield provided by such securities. Such an adverse effect is
especially possible with fixed-rate mortgage securities. If the yield available
on other investments rises above the yield of the fixed-rate mortgage securities
as a result of general increases in interest rate levels, the value of the
mortgage-related securities will decline. Although the negative effect could be
lessened if the mortgage-related securities were to be paid earlier (thus
permitting a Fund to reinvest the prepayment proceeds in investments yielding
the higher current interest rate), as described above the rates of mortgage
prepayments and early payments of mortgage-related securities generally tend to
decline during a period of rising interest rates.
Although the values of ARMS may not be affected as much as the values of
fixed-rate mortgage securities by rising interest rates, ARMS may still decline
in value as a result of rising interest rates. Although, as described above, the
yields on ARMS vary with changes in the applicable interest rate or index, there
is often a lag between increases in general interest rates and increases in the
yield on ARMS as a result of relatively infrequent interest rate reset dates. In
addition, adjustable-rate mortgages and ARMS often have interest rate or payment
caps that limit the ability of the adjustable-rate mortgages or ARMS to fully
reflect increases in the general level of interest rates.
Other Asset-Backed Securities. The securitization techniques used to develop
mortgage-related securities are being applied to a broad range of financial
assets. Through the use of trusts and special purpose corporations, various
types of assets, including automobile loans and leases, credit card receivables,
home equity loans, equipment leases and trade receivables, are being securitized
in structures similar to the structures used in mortgage securitizations. These
asset-backed securities are subject to risks associated with changes in interest
rates and prepayment of underlying obligations similar to the risks of
investment in mortgage-related securities discussed above.
Each type of asset-backed security also entails unique risks depending on the
type of assets involved and the legal structure used. For example, credit card
receivables are generally unsecured obligations of the credit card holder and
the debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due. In
some transactions, the value of the asset-backed security is dependent on the
performance of a third party acting as credit enhancer or servicer. In some
transactions (such as those involving the securitization of vehicle loans or
leases) it may be administratively burdensome to perfect the interest of the
security issuer in the underlying collateral and the underlying collateral may
become damaged or stolen.
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Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. A Fund requires continual
maintenance of collateral in an amount equal to, or in excess of, the resale
price. 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.
Reverse Repurchase Agreements and Dollar Rolls. Reverse repurchase agreements
involve sales by a Fund of portfolio assets concurrently with an agreement by
the Fund to repurchase the same assets at a later date at a fixed price. During
the reverse repurchase agreement period, the Fund continues to receive principal
and interest payments on these securities. Generally, the effect of such a
transaction is that a Fund can recover all or most of the cash invested in the
portfolio securities involved during the term of the reverse repurchase
agreement, while it will be able to keep the interest income associated with
those portfolio securities. Such transactions are advantageous only if the
interest cost to a Fund of the reverse repurchase transaction is less than the
cost of otherwise obtaining the cash.
Dollar rolls involve sales by a Fund of securities for delivery in the current
month and the Fund's simultaneously contracting to repurchase substantially
similar (same type and coupon) securities on a specified future date. During the
roll period, a Fund forgoes principal and interest paid on the securities. A
Fund is compensated by the difference between the current sales price and the
lower forward price for the future purchase (often referred to as the "drop") as
well as by the interest earned on the cash proceeds of the initial sale.
Reverse repurchase agreements and dollar rolls involve the risk that the market
value of the securities a Fund is obligated to repurchase under the agreement
may decline below the repurchase price. In the event the buyer of securities
under a reverse repurchase agreement or dollar roll files for bankruptcy or
becomes insolvent, a Fund's use of the proceeds of the agreement may be
restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
Reverse repurchase agreements and dollar rolls are speculative techniques and
are considered borrowings by the Funds. Under normal circumstances, Alliance
U.S. Government and Alliance Limited Maturity Government do not expect to engage
in reverse repurchase agreements and dollar rolls with respect to greater than
50% of their total assets. Reverse repurchase agreements and dollar rolls
together with any borrowings by Alliance Global Dollar Government will not
exceed 33% of its total assets less liabilities (other than amounts borrowed).
Alliance Global Strategic Income may enter into reverse repurchase agreements
with commercial banks and registered broker-dealers in order to increase income,
in an amount up to 25% of its total assets. Reverse repurchase agreements and
dollar rolls together with any borrowings by Alliance Global Strategic Income
will not exceed 25% of its total assets.
Rights and Warrants. Rights and warrants are option securities permitting their
holders to subscribe for other securities. Alliance Global Dollar Government may
invest in warrants, and Alliance Quality Bond and Alliance Global Strategic
Income may invest in rights and warrants, for debt securities or for equity
securities that are acquired in connection with debt instruments. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants do not carry with them dividend or voting rights with
respect to the underlying securities, or any rights in the assets of the issuer.
As a result, an investment in rights and warrants may be considered more
speculative than certain other types of investments. In addition, the value of a
right or a warrant does not necessarily change with the value of the underlying
securities, and a right or a warrant ceases to have value if it is not exercised
prior to its expiration date. Alliance Global Strategic Income may invest up to
20% of its total assets in rights and warrants.
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund owns the security, is not to be delivered upon consummation
of the sale. A short sale is "against the box" if a Fund owns or has the right
to obtain without payment securities identical to those sold short. Alliance
Global Dollar Government may make short sales only against the box and only for
the purpose of deferring realization of a gain or loss for U.S. federal income
tax purposes. In addition, the Fund may not make a short sale if, as a result,
more than 10% of its net assets (taken at market value) would be held as
collateral for short sales.
Alliance Global Strategic Income may make a short sale in anticipation that the
market price of that security will decline. When the Fund makes a short sale of
a security that it does not own, it must borrow from a broker-dealer the
security sold short and deliver the security to the broker-dealer upon
conclusion of the short sale. The Fund may be required to pay a fee to borrow
particular securities and is often obligated to pay over any payments received
on such borrowed securities. The Fund's obligation to replace the borrowed
security will be secured by collateral deposited with a broker-dealer qualified
as a custodian. Depending on the arrangements the Fund makes with the
broker-dealer from which it borrowed the security regarding remittance of any
payments received by the Fund on such security, the
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Fund may or may not receive any payments (e.g., dividends or interest) on its
collateral deposited with the broker-dealer.
In order to defer realization of a gain or loss for U.S. federal income tax
purposes, Alliance Global Strategic Income may also make short sales "against
the box" of securities which are eligible for such deferral. The Fund may not
make a short sale, if as a result, more than 25% of its total 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 short-term
capital gain. Any gain will be decreased, and any loss increased, by the
transaction costs described above. Although a Fund's gain is limited to the
price at which it sold the security short, its potential loss is theoretically
unlimited.
Standby Commitment Agreements. Standby commitment agreements are similar to put
options that 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. The
Funds will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
and unavailable on a firm commitment basis. No Fund will enter into a standby
commitment with a remaining term in excess of 45 days. The Funds will limit
their investments in standby commitments so that the aggregate purchase price of
the securities subject to the commitments does not exceed 20%, or 25% with
respect to Alliance Global Strategic Income, of their assets.
There is no guarantee that the security subject to a standby commitment will be
issued. In addition, 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
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.
Structured Securities. Structured securities in which Alliance Global Dollar
Government, Alliance Global Strategic Income and Alliance Corporate Bond may
invest represent interests in entities organized and operated solely for the
purpose of restructuring the investment characteristics of sovereign debt
obligations, with respect to Alliance Global Dollar Government and Alliance
Global Strategic Income, or foreign government securities, with respect to
Alliance Corporate Bond. This type of restructuring involves the deposit with or
purchase by an entity, such as a corporation or trust, of specified instruments
(such as commercial bank loans or Brady Bonds) and the issuance by that entity
of one or more classes of structured securities backed by, or representing
interests in, the underlying instruments. The cash flow on the underlying
instruments may be apportioned among the newly issued structured securities to
create securities with different investment characteristics such as varying
maturities, payment priorities and interest rate provisions, and the extent of
the payments made with respect to structured securities is dependent on the
extent of the cash flow on the underlying instruments. Because structured
securities typically involve no credit enhancement, their credit risk generally
will be equivalent to that of the underlying instruments. Structured securities
of a given class may be either subordinated or unsubordinated to the right of
payment of another class. Subordinated structured securities typically have
higher yields and present greater risks than unsubordinated structured
securities. Alliance Global Dollar Government may invest up to 25% of its total
assets, and Alliance Global Strategic Income and Alliance Corporate Bond may
invest without limit, in these types of structured securities.
Variable, Floating and Inverse Floating Rate Instruments. Fixed-income
securities may have fixed, variable or floating rates of interest. Variable and
floating rate securities pay interest at rates that are adjusted periodically,
according to a specified formula. A "variable" interest rate adjusts at
predetermined intervals (e.g., daily, weekly or monthly), while a "floating"
interest rate adjusts whenever a specified benchmark rate (such as the bank
prime lending rate) changes.
A Fund may invest in fixed-income securities that pay interest at a coupon rate
equal to a base rate, plus additional interest for a certain period of time if
short-term interest rates rise above a predetermined level or "cap." The amount
of such an additional interest payment typically is calculated under a formula
based on a short-term interest rate index multiplied by a designated factor.
Leveraged inverse floating rate debt instruments are sometimes known as inverse
floaters. The interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may be considered to be leveraged to the extent that
its interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. The higher degree of leverage inherent in inverse
floaters is associated with greater volatility in market value, such that,
during periods of rising interest rates, the market values of inverse floaters
will tend to decrease more rapidly than those of fixed rate securities.
Zero Coupon and Principal-Only Securities. Zero coupon securities and
principal-only (PO) securities are debt securities that have been issued without
interest coupons or stripped of their unmatured interest coupons, and include
receipts or certificates representing interests in such stripped debt
obligations and coupons. Such a security pays no interest to its holder during
its life. Its value to an investor consists of the difference between its face
value at
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the time of maturity and the price for which it was acquired, which is generally
an amount significantly less than its face value. Such securities usually trade
at a deep discount from their face or par value and are subject to greater
fluctuations in market value in response to changing interest rates than debt
obligations of comparable maturities and credit quality that make current
distributions of interest. On the other hand, because there are no periodic
interest payments to be reinvested prior to maturity, these securities eliminate
reinvestment risk and "lock in" a rate of return to maturity.
Zero coupon Treasury securities are U.S. Treasury bills issued without interest
coupons. Principal-only Treasury securities are U.S. Treasury notes and bonds
that have been stripped of their unmatured interest coupons, and receipts or
certificates representing interests in such stripped debt obligations. Currently
the only U.S. Treasury security issued without coupons is the Treasury bill.
Although the U.S. Treasury does not itself issue Treasury notes and bonds
without coupons, under the U.S. Treasury STRIPS program interest and principal
payments on certain long-term Treasury securities may be maintained separately
in the Federal Reserve book entry system and may be separately traded and owned.
In addition, in the last few years a number of banks and brokerage firms have
separated ("stripped") the principal portions from the coupon portions of U.S.
Treasury bonds and notes and sold them separately in the form of receipts or
certificates representing undivided interests in these instruments (which are
generally held by a bank in a custodial or trust account).
Alliance Quality Bond, Alliance Corporate Bond and Alliance Global Strategic
Income also may invest in "pay-in-kind" debentures (i.e., debt obligations the
interest on which may be paid in the form of obligations of the same type rather
than cash), which have characteristics similar to zero coupon securities.
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 are different from or exceed those involved
in the practices described above.
Portfolio Turnover. The portfolio turnover rate for each Fund is included in the
Financial Highlights section. The Funds are actively managed and, in some cases
in response to market conditions, a Fund's portfolio turnover may exceed 100%. A
higher rate of portfolio turnover increases brokerage and other expenses, which
must be borne by the Fund and its shareholders. High portfolio turnover also may
result in the realization of substantial net short-term capital gains, which,
when distributed, are taxable to shareholders.
Temporary Defensive Position. For temporary defensive purposes, each Fund may
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. While the Funds are investing for temporary
defensive purposes, they may not meet their investment objectives.
ADDITIONAL RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. Certain of these risks may be heightened when investing in
emerging markets.
Currency Considerations. Those Funds that invest some portion of their assets in
securities denominated in, and receive revenues in, foreign currencies will be
adversely affected by reductions in the value of those currencies relative to
the U.S. Dollar. These changes will affect a Fund's net assets, distributions
and income. If the value of the foreign currencies in which a Fund receives
income falls relative to the U.S. Dollar between receipt of the income and the
making of Fund distributions, a Fund may be required to liquidate securities in
order to make distributions if the Fund has insufficient cash in U.S. Dollars to
meet the 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, as described above, which involve certain special
risks.
Effects of Borrowing. A Fund's loan agreements provide for additional borrowings
and for repayments and reborrowings from time to time, and each Fund that may
borrow expects to effect borrowings and repayments at such times and in such
amounts as will maintain investment leverage in an amount approximately equal to
its borrowing target. The loan agreements provide for a selection of interest
rates that are based on the bank's short-term funding costs in the U.S. and
London markets.
Borrowings by a Fund result in leveraging of the Fund's shares. Utilization of
leverage, which is usually considered speculative, involves certain risks to a
Fund's shareholders. These include a higher volatility of the net asset value of
a Fund's shares and the relatively greater effect on the net asset value of the
shares. So long as a Fund is able to realize a net return on its investment
portfolio that is higher
37
<PAGE>
than the interest expense paid on borrowings, the effect of leverage will be to
cause the Fund's shareholders to realize a higher current net investment income
than if the Fund were not leveraged. On the other hand, interest rates on U.S.
Dollar-denominated and foreign currency-denominated obligations change from time
to time as does their relationship to each other, depending upon such factors as
supply and demand forces, monetary and tax policies within each country and
investor expectations. Changes in such factors could cause the relationship
between such rates to change so that rates on U.S. Dollar-denominated
obligations may substantially increase relative to the foreign
currency-denominated obligations of a Fund's investments. If the interest
expense on borrowings approaches the net return on a Fund's investment
portfolio, the benefit of leverage to the Fund's shareholders will be reduced.
If the interest expense on borrowings were to exceed the net return to
shareholders, a Fund's use of leverage would result in a lower rate of return.
Similarly, the effect of leverage in a declining market could be a greater
decrease in net asset value per share. In an extreme case, if a Fund's current
investment income were not sufficient to meet the interest expense on
borrowings, it could be necessary for the Fund to liquidate certain of its
investments and reduce the net asset value of a Fund's shares.
In the event of an increase in rates on U.S. Government securities or other
changed market conditions, to the point where leverage by Alliance Quality
Bond, Alliance Global Strategic Income, Alliance North American Government
Income or Alliance Multi-Market Strategy could adversely affect the Funds'
shareholders, as noted above, or in anticipation of such changes, each Fund may
increase the percentage of its investment portfolio invested in U.S. Government
securities, which would tend to offset the negative impact of leverage on Fund
shareholders. Each Fund may also reduce the degree to which it is leveraged by
repaying amounts borrowed.
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 will change as
the general level of interest rates fluctuates. During periods of falling
interest rates, the values of a Fund's securities will generally rise, although
if falling interest rates are viewed as a precursor to a recession, the values
of a Fund's securities may fall along with interest rates. Conversely, during
periods of rising interest rates, the values of a Fund's securities will
generally decline. Changes in interest rates have a greater effect on
fixed-income securities with longer maturities and durations than those with
shorter maturities and durations.
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 will be reflected in the net asset value of a Fund.
Foreign Securities. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes foreign
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in securities of U.S. companies.
These markets may be subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant blocks of
securities, than is usual in the United States.
Securities registration, custody and settlements may in some instances be
subject to delays and legal and administrative uncertainties. Furthermore,
foreign investment in the securities markets of certain foreign countries is
restricted or controlled to varying degrees. These restrictions or controls may
at times limit or preclude investment in certain securities and may increase the
cost and expenses of a Fund. In addition, the repatriation of investment income,
capital or the proceeds of sales of securities from certain of the 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 also could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures or seek local governmental approvals
or other actions, any of which may involve additional costs to a Fund. These
factors may affect the liquidity of a Fund's investments in any country and
Alliance will monitor the effect of any such factor or factors on a Fund's
investments. Furthermore, transaction costs including brokerage commissions for
transactions both on and off the securities exchanges in many foreign countries
are generally higher than in the U.S.
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 most U.S. issuers.
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<PAGE>
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. In the
event of nationalization, expropriation or other confiscation, a Fund could lose
its entire investment in securities in the country involved. In addition, laws
in foreign countries governing business organizations, bankruptcy and insolvency
may provide less protection to security holders such as the Fund than that
provided by U.S. laws.
Alliance believes that, except for currency fluctuations between the U.S. Dollar
and the Canadian Dollar, the matters described above are not likely to have a
material adverse effect on Alliance North American Government Income's
investments in the securities of Canadian issuers or investments denominated in
Canadian Dollars. The factors described above are more likely to have a material
adverse effect on the Fund's investments in the securities of Mexican and other
non-Canadian foreign issuers, including investments in securities denominated in
Mexican Pesos or other non-Canadian foreign currencies. If not hedged, however,
currency fluctuations could affect the unrealized appreciation and depreciation
of Canadian Government securities as expressed in U.S. Dollars.
Investment in the Banking Industry. Due to its investment policies with respect
to investments in the banking industry, Alliance Multi-Market Strategy will have
greater exposure to the risk factors which are characteristic of such
investments. In particular, the value of and investment return on the Fund's
shares will be affected by economic or regulatory developments in or related to
the banking industry. Sustained increases in interest rates can adversely affect
the availability and cost of funds for a bank's lending activities, and a
deterioration in general economic conditions could increase the exposure to
credit losses. The banking industry is also subject to the effects of the
concentration of loan portfolios in particular businesses such as real estate,
energy, agriculture or high technology-related companies; competition within
those industries as well as with other types of financial institutions; and
national and local governmental regulation. In addition, the Fund's investments
in commercial banks located in several foreign countries are subject to
additional risks due to the combination in such banks of commercial banking and
diversified securities activities. As discussed above, however, the Fund will
seek to minimize their exposure to such risks by investing only in debt
securities which are determined to be of high quality.
Investment in Fixed-Income Securities Rated Baa and BBB. Securities rated Baa or
BBB are considered to have speculative characteristics and share some of the
same characteristics as lower-rated securities, as described below. 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.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities 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. Securities rated Ba or BB are judged to have
speculative elements or to be predominantly speculative with respect to the
issuer's ability to pay interest and repay principal. Securities rated B are
judged to have highly speculative elements or to be predominantly speculative.
Such securities may have small assurance of interest and principal payments.
Securities rated Baa by Moody's are also judged to have speculative
characteristics.
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.
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.
There can be no assurance, however, 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 considering investments for the Fund, Alliance will
attempt to identify those high-yielding securities whose financial condition is
adequate to meet future obligations, has improved, or is expected to improve in
the future. Alliance'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.
Unrated Securities. Unrated securities will also be considered for investment by
Alliance Quality Bond, Alliance Corporate Bond, Alliance High Yield, Alliance
Global Strategic Income, Alliance North American Government Income and Alliance
Global Dollar Government when Alliance believes that the financial condition of
the issuers of such securities, or the protection afforded by the
39
<PAGE>
terms of the securities themselves, limits the risk to the Fund to a degree
comparable to that of rated securities which are consistent with the Fund's
objective and policies.
Sovereign Debt Obligations. No established secondary markets may exist for many
of the sovereign debt obligations in which Alliance Global Strategic Income and
Alliance Global Dollar Government will invest. Reduced secondary market
liquidity may have an adverse effect on the market price and a Fund's ability to
dispose of particular instruments when necessary to meet its liquidity
requirements or in response to specific economic events such as a deterioration
in the creditworthiness of the issuer. Reduced secondary market liquidity for
certain sovereign debt obligations may also make it more difficult for a Fund to
obtain accurate market quotations for the purpose of valuing its portfolio.
Market quotations are generally available on many sovereign debt obligations
only from a limited number of dealers and may not necessarily represent firm
bids of those dealers or prices for actual sales.
By investing in sovereign debt obligations, the Funds will be exposed to the
direct or indirect consequences of political, social, and economic changes in
various countries. Political changes in a country may affect the willingness of
a foreign government to make or provide for timely payments of its obligations.
The country's economic status, as reflected in, among other things, its
inflation rate, the amount of its external debt and its gross domestic product,
will also affect the government's ability to honor its obligations.
The sovereign debt obligations in which the Funds will invest in many cases
pertain to countries that are among the world's largest debtors to commercial
banks, foreign governments, international financial organizations, and other
financial institutions. In recent years, the governments of some of these
countries have encountered difficulties in servicing their external debt
obligations, which led to defaults on certain obligations and the restructuring
of certain indebtedness. Restructuring arrangements have included, among other
things, reducing and rescheduling interest and principal payments by negotiating
new or amended credit agreements or converting outstanding principal and unpaid
interest to Brady Bonds, and obtaining new credit to finance interest payments.
Certain governments have not been able to make payments of interest on or
principal of sovereign debt obligations as those payments have come due.
Obligations arising from past restructuring agreements may affect the economic
performance and political and social stability of those issuers.
The Funds are permitted to invest in sovereign debt obligations that are not
current in the payment of interest or principal or are in default so long as
Alliance believes it to be consistent with the Funds' investment objectives. The
Funds may have limited legal recourse in the event of a default with respect to
certain sovereign debt obligations it holds. For example, remedies from defaults
on certain sovereign debt obligations, unlike those on private debt, must, in
some cases, be pursued in the courts of the defaulting party itself. Legal
recourse therefore may be significantly diminished. Bankruptcy, moratorium and
other similar laws applicable to issuers of sovereign debt obligations may be
substantially different from those applicable to issuers of private debt
obligations. The political context, expressed as the willingness of an issuer of
sovereign debt obligations to meet the terms of the debt obligation, for
example, is of considerable importance. In addition, no assurance can be given
that the holders of commercial bank debt will not contest payments to the
holders of securities issued by foreign governments in the event of default
under commercial bank loan agreements.
U.S. Corporate Fixed-Income Securities. The U.S. corporate fixed-income
securities in which Alliance High Yield and Alliance Global Dollar Government
invest may include securities issued in connection with corporate restructurings
such as takeovers or leveraged buyouts, which may pose particular risks.
Securities issued to finance corporate restructurings may have special credit
risks due to the highly leveraged conditions of the issuer. In addition, such
issuers may lose experienced management as a result of the restructuring.
Furthermore, the market price of such securities may be more volatile to the
extent that expected benefits from the restructuring do not materialize. The
Funds may also invest in U.S. corporate fixed-income securities that are not
current in the payment of interest or principal or are in default, so long as
Alliance believes such investment is consistent with the Fund's investment
objectives. The Funds' rights with respect to defaults on such securities will
be subject to applicable U.S. bankruptcy, moratorium and other similar laws.
- --------------------------------------------------------------------------------
Management Of The Funds
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Each Fund's Adviser is Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105. Alliance is a leading international
investment adviser managing client accounts with assets as of December 31, 1999,
totaling more than $368 billion (of which more than $169 billion represented
assets of investment companies). As of December 31, 1999, Alliance managed
retirement assets for many of the largest public and private employee benefit
plans (including 31 of the nation's FORTUNE 100 companies), for public employee
retirement funds in 31 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 53 registered
investment companies, managed by Alliance, comprising 119 separate investment
portfolios, currently have more than 5 million shareholder accounts.
Alliance provides investment advisory services and order placement facilities
for the Funds. For these advisory
40
<PAGE>
services, the Funds paid Alliance as a percentage of average daily net assets:
Fee as a
percentage of
average daily Fiscal
Fund net assets Year Ending
----------- ---------
Alliance U.S. Government .56 6/30/99
Alliance Limited Maturity
Government .65 11/30/99
Alliance Mortgage Securities
Income .53 12/31/99
Alliance Quality Bond .55* 6/30/00
Alliance Corporate Bond .55 6/30/99
Alliance High Yield .75 8/31/99
Alliance Global Strategic
Income .75 10/31/99
Alliance North American
Government Income .72 11/30/99
Alliance Global Dollar
Government .75 8/31/99
Alliance Multi-Market Strategy .60 10/31/99
- --------------------------------------------------------------------------------
* Prior to any waiver by Alliance. See the "Fee Table" at the beginning of
the Prospectus for more information about fee waivers.
PORTFOLIO MANAGER
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible for the Fund's portfolio, and each
person's principal occupation during the past five years.
Principal occupation
Employee; time period; during the past
Fund title with ACMC five years*
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U.S. Government Wayne D. Lyski; Associated with
since 1983; Alliance
Executive Vice President
Jeffrey S. Phlegar; Associated with
since 1997; Alliance
Senior Vice President
Limited Maturity Jeffrey S. Phlegar; (see above)
Government since 1997; (see above)
Mortgage Securities Jeffrey S. Phlegar; (see above)
Income since 1997; (see above)
Quality Bond Matthew Bloom; Associated with
since inception; Alliance
Senior Vice President
Corporate Bond Wayne D. Lyski; since (see above)
1987; (see above)
Paul J. DeNoon; Associated with
since January 1992; Alliance
Senior Vice President
High Yield Nelson Jantzen; Associated with
since 1997; Alliance
Senior Vice President
Global Strategic Wayne D. Lyski; since (see above)
Income inception; (see above)
Douglas J. Peebles; Associated with Alliance
since inception;
Senior Vice President
North American Wayne D. Lyski; since (see above)
Government Income inception; (see above)
Global Dollar Wayne D. Lyski; since (see above)
Government inception; (see above)
Multi-Market Strategy Douglas J. Peebles;
since inception;
(see above)
- --------------------------------------------------------------------------------
* Unless indicated otherwise, persons associated with Alliance have been
employed in a portfolio management, research or investment capacity.
PERFORMANCE OF SIMILARLY MANAGED PORTFOLIOS
Alliance is the investment adviser of a portfolio (the "Historical Portfolio")
of a registered investment company, sold only to separate accounts of insurance
companies in connection with variable life insurance contracts and variable
annuities certificates and contracts (the "Contracts"), that has substantially
the same investment objective and policies and has been managed in accordance
with essentially the same investment strategies and techniques as those of
Alliance High Yield. Alliance since July 22, 1993, and prior thereto, Equitable
Capital Management Corporation, whose advisory business Alliance acquired on
that date, have served as investment adviser to the Historical Portfolio since
its inception in 1987. Nelson Jantzen, the person primarily responsible for the
day-to-day management of Alliance High Yield, has supervised the management of
the Historical Portfolio since its inception.
The following tables set forth performance results for the Historical Portfolio
since its inception (January 2, 1987), together with those of Alliance High
Yield and the Lipper High Current Yield Mutual Funds Average as a comparative
benchmark. As of December 31, 1999, the assets in the Historical Portfolio
totalled approximately $567 million.
The performance data do not reflect account charges applicable to the Contracts
or imposed at the insurance company separate account level, which, if reflected,
would lower the performance of the Historical Portfolio. In addition, the
performance data do not reflect the Fund's higher expenses, which, if reflected,
would lower the performance of the Historical Portfolio. The performance data
have not been adjusted for corporate or individual taxes, if any, payable with
respect to the Historical Portfolio. The rates of return shown for the
Historical Portfolio are not an estimate or guarantee of future investment
performance of the Fund.
The Lipper High Current Yield Funds Average is a survey of the performance of a
large number of mutual funds the investment objective of each of which is
similar to that of the Fund. Nonetheless, the investment policies pursued by
Funds in the survey may differ from those of High Yield and the Historical
Portfolio. This survey is published by Lipper,
41
<PAGE>
Inc. ("Lipper"), a firm recognized for its reporting of performance of actively
managed funds. According to Lipper, performance data are presented net of
investment management fees, operating expenses and, for funds with Rule 12b-1
plans, asset-based sales charges.
The performance results presented below are based on percent changes in net
asset values of the Historical Portfolio with dividends and capital gains
reinvested. Cumulative rates of return reflect performance over a stated period
of time. Annualized rates of return represent the rate of growth that would have
produced the corresponding cumulative return had performance been constant over
the entire period. Rates of return for Alliance High Yield Class A shares assume
the imposition of the maximum 4.25% sales charge. The inception date for the
Historical Portfolio and Lipper data is January 2, 1987 and for Alliance High
Yield is April 22, 1997.
Annualized Rates of Return
Periods Ended December 31, 1999
- --------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years 10 Years Inception
- --------------------------------------------------------------------------------
Historical Portfolio -3.35% 2.79% 9.86% 10.23% 9.36%
Lipper High Current
Yield Funds
Average 4.53 5.18 8.84 10.03 8.68
Alliance High Yield -5.95 n/a n/a n/a 5.30
Cumulative Rates of Return
Periods Ending December 31, 1999
- --------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years 10 Years Inception
- --------------------------------------------------------------------------------
Historical Portfolio -3.35% 8.62% 60.06% 164.96% 220.01%
Lipper High Current
Yield Funds
Average 4.53 16.54 53.09 161.34 197.11
Alliance High Yield -5.95 n/a n/a n/a 14.91
Alliance is the investment adviser of a portfolio (the "Historical Fund") of a
registered investment company, sold only to separate accounts of insurance
companies in connection with variable life insurance contracts and variable
annuities certificates and contracts (the "Contracts"), that has substantially
the same investment objective and policies and has been managed in accordance
with substantially the same investment strategies and techniques as those of
Alliance Quality Bond. Alliance has served as investment adviser to the
Historical Fund since its inception in 1993. Matthew Bloom, who is primarily
responsible for the day-to-day management of Alliance Quality Bond, has been the
person principally responsible for the day-to-day management of the Historical
Fund since 1995.
The following tables set forth performance results for the Historical Fund since
its inception on October 1, 1993, together with those of the Lipper Corporate
Debt Funds BBB Rated Average and the Lehman Aggregate Bond index as comparative
benchmarks. As of March 31, 1999, the assets in the Historical Fund totalled
approximately $333 million.
The performance data do not reflect account charges applicable to the Contracts
or imposed at the insurance company separate account level, which, if reflected,
would lower the performance of the Historical Fund. In addition, the performance
data do not reflect Alliance Quality Bond's higher expenses, which, if
reflected, would lower the performance of the Historical Fund. The performance
data have not been adjusted for corporate or individual taxes, if any, payable
with respect to the Historical Fund. The rates of return shown for the
Historical Fund are not an estimate or guarantee of future investment
performance of Alliance Quality Bond.
The Lipper Corporate Debt Funds BBB Rated Average is a survey of the performance
of a large number of mutual funds the investment objective of each of which is
similar to that of Alliance Quality Bond. Nonetheless, the investment policies
pursued by Funds in the survey may differ from those of Alliance Quality Bond
and the Historical Fund. This survey is published by Lipper, Inc., a firm
recognized for its reporting of performance of actively managed funds. According
to Lipper, Inc., performance data are presented net of investment management
fees, operating expenses and, for funds with Rule 12b-1 plans, asset-based sales
charges. The Lehman Aggregate Bond Index is an Index comprised of investment
grade fixed-income securities, including U.S. Treasury, mortgage-backed,
corporate and "Yankee bonds" (U.S. dollar-denominated bonds issued outside the
United States).
The performance results presented below are based on percent changes in net
asset values of the Historical Fund with dividends and capital gains reinvested.
Cumulative rates of return reflect performance over a stated period of time.
Annualized rates of return represent the rate of growth that would have produced
the corresponding cumulative return had performance been constant over the
entire period. The inception date for the Historical Fund, the Lipper data and
the Lehman Index date is October 1, 1993.
Annualized Rates of Return
Periods Ended December 31, 1999
- --------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years Inception
- --------------------------------------------------------------------------------
Historical Fund -2.00% 5.15% 7.47% 4.96%
Lehman Aggregate
Bond Index -0.82% 5.73% 7.73% 5.65%
Lipper Corporate Debt
Funds BBB Rated
Average -1.73% 4.69% 7.65% 5.39%
Cumulative Rates of Return
Periods Ended December 31, 1999
- --------------------------------------------------------------------------------
Portfolio/Benchmark 1 Year 3 Years 5 Years Inception
- --------------------------------------------------------------------------------
Historical Fund -2.00% 16.25% 43.34% 35.34%
Lehman Aggregate
Bond Index -0.82% 18.20% 45.12% 40.97%
Lipper Corporate Debt
Funds BBB Rated
Average -1.73% 14.80% 44.85% 39.12%
42
<PAGE>
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PURCHASE AND SALE OF SHARES
- --------------------------------------------------------------------------------
HOW THE FUNDS VALUE THEIR SHARES
The Funds' net asset value or NAV is calculated at 4:00 p.m., Eastern time, each
day the Exchange is open for business. To calculate NAV, a Fund's assets are
valued and totaled, liabilities are subtracted, and the balance, called net
assets, is divided by the number of shares outstanding. The Funds' value their
securities at their current market value determined on the basis of market
quotations or, if such quotations are not readily available, such other methods
as the Funds' Directors or Trustees believe accurately reflect fair market
value.
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is received in proper form by the Fund. Your
purchase of Fund shares may be subject to an initial sales charge. Sales of Fund
shares may be subject to a contingent deferred sales charge or CDSC. See the
Distribution Arrangements section of this Prospectus for details.
HOW TO BUY SHARES
You may purchase a Fund's shares through broker-dealers, banks, or other
financial intermediaries. You also may purchase shares directly from the Funds'
principal underwriter, Alliance Fund Distributors, Inc., or AFD.
Minimum investment amounts are:
o Initial $250
o Subsequent $50
o Automatic Investment Program $25
If you are an existing Fund shareholder, you may purchase shares by electronic
funds transfer in amounts not exceeding $500,000 if you have completed the
appropriate section of the Subscription Application or the Shareholder Options
form obtained from AFS. Call 800-221-5672 to arrange a transfer from your bank
account.
A Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number. To avoid this, you
must provide your correct Tax Identification Number (Social Security Number for
most investors) on your account application.
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.
HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of the same class of other Alliance
Mutual Funds (including AFD Exchange Reserves, a money market fund managed by
Alliance). Exchanges of shares are made at next-determined NAV, without sales or
service charges. You may request an exchange by mail or telephone. You must call
by 4:00 p.m., Eastern time, to receive that day's NAV. The Funds may change,
suspend, or terminate the exchange service on 60 days' written notice.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to the Fund) on any day the
Exchange is open, either directly or through your financial intermediary. Your
sales price will be the next-determined NAV, less any applicable CDSC, after the
Fund receives your request in proper form. Normally, proceeds will be sent to
you within seven days. If you recently purchased your shares by check or
electronic funds transfer, your redemption payment may be delayed until the Fund
is reasonably satisfied that the check or electronic funds transfer has been
collected (which may take up to 15 days).
o Selling Shares Through Your Broker
Your broker must receive your request by 4:00 p.m., Eastern time, and submit it
to the Fund by 5:00 p.m., Eastern time, for you to receive that day's NAV, less
any applicable CDSC. Your broker is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service.
o Selling Shares Directly to a Fund
By Mail
-- Send a signed letter of instruction or stock power form to AFS,
along with certificates, to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
-- For your protection, a bank, a member firm of a national stock
exchange or other eligible guarantor institution must guarantee
signatures. Stock power forms are available from your financial
intermediary, AFS, and many commercial banks. Additional
documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries, and surviving joint owners.
By Telephone
-- You may redeem your shares for which no stock certificates have been
issued by telephone request. Call AFS at 800-221-5672 with
instructions on how you wish to receive your sale proceeds.
-- A telephone redemption request must be made by 4:00 p.m., Eastern
time, for you to receive that day's NAV, less any applicable CDSC
and, except for certain omnibus accounts, may be made only once per
day.
-- If you have selected electronic funds transfer in your Subscription
Application, the redemption proceeds may be sent directly to your
bank. Otherwise, the proceeds will be mailed to you.
43
<PAGE>
-- Redemption requests by electronic funds transfer may not exceed
$100,000 per day and redemption requests by check cannot exceed
$50,000 per day.
-- Telephone redemption is not available for shares held in nominees 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.
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DIVIDENDS, DISTRIBUTIONS
- --------------------------------------------------------------------------------
AND TAXES
- --------------------------------------------------------------------------------
The Funds declare dividends on their shares each Fund business day. For
Saturdays, Sundays, and holidays dividends will be as of the previous business
day. Each Fund pays dividends on its shares after the close of business on the
twentieth day of each month or on the first business day after that day if the
day is not a business day.
Each Fund's income dividends and capital gains distributions, if any, declared
by a Fund on its outstanding shares will, at the election of each shareholder,
be paid in cash or in additional shares of the same class of shares of that
Fund. If paid in additional shares, the shares will have an aggregate net asset
value as of the close of business on the day following the declaration date of
the dividend or distribution equal to the cash amount of the dividend or
distribution. You may make an election to receive dividends and distributions in
cash or in shares at the time you purchase shares. Your election can be changed
at any time prior to a record date for a dividend. There is no sales or other
charge in connection with the reinvestment of dividends or capital gains
distributions. Cash dividends may be paid in check, or at your election,
electronically via the ACH network. There is no sales or other charge on the
reinvestment of Fund dividends and distributions.
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing the dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
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 timing 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.
For federal income tax purposes, the Fund's dividend distributions of net income
(or short-term taxable gains) will be taxable to you as ordinary income.
Distributions of long-term capital gains generally will be taxable to you as
long-term capital gains. A Fund's distributions also may be subject to certain
state and local taxes.
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 or deductions for foreign
income taxes paid, but there can be no assurance that any Fund will be able to
do so. Furthermore, a shareholder's ability to claim a foreign tax credit or
deduction for foreign taxes paid by a Fund may be subject to certain limitations
imposed by the Code, as a result of which a shareholder may not be permitted to
claim all or a portion of a credit or deduction for the amount of such taxes.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant), any further returns of capital will be taxable as a capital gain.
If you buy shares just before a Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
Each year shortly after December 31, the Fund will send you tax information
stating the amount and type of all its distributions for the year. Consult your
tax adviser about the federal, state, and local tax consequences in your
particular circumstances.
44
<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS
- --------------------------------------------------------------------------------
Share Classes. The Funds offer three classes of shares.
Class A Shares -- Initial Sales Charge Alternative
You can purchase Class A shares at NAV plus an initial sales charge, as follows:
Initial Sales Charge
------------------------------------------------
As % of Commission to
Net Amount As % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
- ------------------- ------------ ------------- ------------------
Up to $100,000 ................. 4.44% 4.25% 4.00%
$100,000 up to
$250,000...................... 3.36 3.25 3.00
$250,000 up to
$500,000...................... 2.30 2.25 2.00
$500,000 up to
$1,000,000.................... 1.78 1.75 1.50
You pay no initial sales charge on purchases of Class A shares in the amount of
$1,000,000, but may pay a 1% CDSC if you redeem your shares within 1 year.
Alliance may pay the dealer or agent a fee of up to 1% of the dollar amount
purchased. Certain purchases of Class A shares may qualify for reduced or
eliminated sales charges under a Fund's Combined Purchase Privilege, Cumulative
Quantity Discount, Statement of Intention, Privilege for Certain Retirement
Plans, Reinstatement Privilege, and Sales at Net Asset Value Programs. Consult
the Subscription Application and a Fund's SAI for additional information about
these options.
Class B Shares -- Deferred Sales Charge Alternative
You can purchase Class B shares at NAV without an initial sales charge. A Fund
will thus receive the full amount of your purchase. Your investment, however,
will be subject to a CDSC if you redeem shares within three years (four years in
the case of Alliance Global Strategic Income and Alliance High Yield) after
purchase. The CDSC varies depending on the number of years you hold the shares.
The CDSC amounts are:
Alliance Global Strategic Income and Alliance High Yield:
Years Since Purchase CDSC
--------------------- --------
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
All Other Funds:
Years Since Purchase CDSC
--------------------- --------
First 3.0%
Second 2.0%
Third 1.0%
Fourth None
If you exchange your shares for the Class B shares of another Alliance Mutual
Fund, the CDSC also will apply to those Class B shares. The CDSC period begins
with the date of your original purchase, not the date of exchange for the other
Class B shares.
The Fund's Class B shares purchased for cash automatically convert to Class A
shares six years after the end of the month of your purchase (except for Class B
shares of Alliance High Yield Fund and Alliance Global Strategic Income Trust,
which automatically convert to Class A shares eight years after the end of the
month of purchase). If you purchase shares by exchange for the Class B shares of
another Alliance Mutual Fund, the conversion period runs from the date of your
original purchase.
Class C Shares -- Asset-Based Sales Charge Alternative
You can purchase Class C shares at NAV without any initial sales charge. A Fund
will thus receive the full amount of your purchase. Your investment, however,
will be subject to a 1% CDSC if you redeem your shares within 1 year. If you
exchange your shares for the Class C shares of another Alliance Mutual Fund, the
1% CDSC also will apply to those Class C shares. The 1-year period for the CDSC
begins with the date of your original purchase, not the date of the exchange for
the other Class C shares.
Class C shares do not convert to any other class of shares of the Fund.
Asset-based Sales Charge or Rule 12b-1 Fees. Each Fund has adopted a plan under
Commission Rule 12b-1 that allows the Fund to pay asset-based sales charges or
distribution and service fees for the distribution and sale of its shares. The
amount of these fees for each class of the Fund's shares is:
Rule 12b-1 Fee (as a percent of
aggregate average daily net assets)
-----------------------------------------
Class A .30%*
Class B 1.00%
Class C 1.00%
- ----------
* The Rule 12b-1 plan for Class A shares of Alliance Short-Term U.S. Government
Fund provides for payments of up to .50% of aggregate average daily net assets,
although the Fund's Trustees currently limit such payments to .30% of such
assets.
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales fees. Class B and Class C shares are subject to
higher distribution fees than Class A shares (Class B shares are subject to
these higher fees for a period of six years, after which they convert to Class A
shares except for Alliance High Yield Fund and Alliance Global Strategic Income
Trust's Class B shares which convert to Class A shares after eight years). The
higher fees mean a higher expense ratio, so Class B and Class C shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares.
Choosing a Class of Shares. The decision as to which class of shares is more
beneficial to you depends on the amount and intended length of your investment.
If you are making a large investment, thus qualifying for a reduced sales
45
<PAGE>
charge, you might consider purchasing Class A shares. If you are making a
smaller investment, you might consider purchasing Class B shares because 100% of
your purchase is invested immediately. If you are unsure of the length of your
investment, you might consider Class C shares because there is no initial sales
charge and no CDSC as long as the shares are held for one year or more. Dealers
and agents may receive differing compensation for selling Class A, Class B, or
Class C shares. There is no size limit on purchases of Class A shares. The
maximum purchase of Class B shares is $250,000. The maximum purchase of Class C
shares is $1,000,000.
You should consult your financial agent to assist in choosing a class of Fund
shares.
Application of the CDSC. The CDSC is applied to the lesser of the original cost
of shares being redeemed or NAV at the time of redemption (or, as to Fund shares
acquired through an exchange, the cost of the Alliance Fund shares originally
purchased for cash). Shares obtained from dividend or distribution reinvestment
are not subject to the CDSC. The Fund may waive the CDSC on redemptions of
shares following the death or disability of a shareholder, to meet the
requirements of certain qualified retirement plans, or under a monthly,
bi-monthly, or quarterly systematic withdrawal plan. See the Fund's SAI for
further information about CDSC waivers.
Other. A transaction, service, administrative, or other similar fee may be
charged by your broker-dealer, agent, financial intermediary, or other financial
representative with respect to the purchase, sale, or exchange of Class A, Class
B or Class C shares made through your financial representative. The financial
intermediaries also may impose requirements on the purchase, sale, or exchange
of shares that are different from, or in addition to, those imposed by a Fund,
including requirements as to the minimum initial and subsequent investment
amounts.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $200 for 90 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
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 manual explaining all available services will be
provided upon request. To request a shareholder manual, call 800-227-4618.
Employee Benefit Plans. Certain employee benefit plans, including
employer-sponsored tax-qualified 401(k) plans and other defined contribution
retirement plans ("Employee Benefit Plans"), may establish requirements as to
the purchase, sale or exchange of shares of the Funds, including maximum and
minimum initial investment requirements, that are different from those described
in this Prospectus. Employee Benefit Plans also may not offer all classes of
shares of the Funds. In order to enable participants investing through Employee
Benefit Plans to purchase shares of the Funds, the maximum and minimum
investment amounts may be different for shares purchased through Employee
Benefit Plans from those described in this Prospectus. In addition, the Class A,
Class B and Class C CDSC may be waived for investments made through Employee
Benefit Plans.
PENDING LEGAL PROCEEDINGS INVOLVING NORTH AMERICAN GOVERNMENT INCOME
On July 25, 1995, a Consolidated and Supplemental Class Action Complaint
("Complaint") styled In re Alliance North American Government Income Trust, Inc.
Securities Litigation was filed in the U.S. District Court for the Southern
District of New York ("District Court") against the Fund, Alliance, ACMC, AFD,
The Equitable Companies Incorporated ("ECI"), a parent of the Adviser, and
certain current and former officers and directors of the Fund and ACMC, alleging
violations of the federal securities laws, fraud and breach of fiduciary duty in
connection with the Fund's investments in Mexican and Argentine securities. The
Complaint sought certification of a plaintiff class of all persons who purchased
or owned Class A, Class B or Class C shares of the Fund from March 27, 1992
through December 23, 1994. Plaintiffs alleged that during 1995 the Fund's losses
exceeded $750,000,000 and sought as relief unspecified damages, costs and
attorney's fees.
On September 26, 1996, the District Court granted defendants' motion to dismiss
all counts of the Complaint ("First Decision"). On October 11, 1996, plaintiffs
filed a motion for reconsideration of the First Decision. On November 25, 1996,
the District Court denied plaintiffs' motion for reconsideration of the First
Decision. On October 29, 1997, the United States Court of Appeals for the Second
Circuit ("Court of Appeals") issued an order granting defendants' motion to
strike and dismissing plaintiffs' appeal of the First Decision.
46
<PAGE>
On October 29, 1996, plaintiffs filed a motion for leave to file an amended
complaint ("Amended Complaint"). In the Amended Complaint, plaintiffs asserted
claims against the Fund, Alliance, ACMC, AFD, ECI, and certain current and
former officers of the Fund and ACMC alleging violations of the federal
securities laws, fraud and breach of fiduciary duty. The principal allegations
of the Amended Complaint related to the Fund's hedging practices, the Fund's
investments in certain mortgage-backed securities, and the risk and objectives
of the Fund as described in the Fund's marketing materials. The Amended
Complaint made similar requests for class certification and damages as made in
the Complaint. On July 15, 1997, the District Court denied plaintiffs' motion
for leave to file the Amended Complaint and dismissed the case ("Second
Decision").
On November 17, 1997, plaintiffs filed a notice of appeal of the Second Decision
to the Court of Appeals. On October 15, 1998, the Court of Appeals affirmed in
part and reversed in part the Second Decision. The Court of Appeals affirmed the
District Court's denial of plaintiffs' motion for leave to file the Amended
Complaint insofar as the Amended Complaint alleged that defendants had made
misrepresentations and omissions relating to the Funds' investments in certain
mortgage-backed securities and in the Fund's marketing materials. The Court of
Appeals reversed the District Court's decision to deny plaintiffs' motions for
leave to file the Amended Complaint insofar as the Amended Complaint alleged
that defendants had made actionable misrepresentations and omissions relating to
the Fund's hedging practices. On December 1, 1999, after the completion of
discovery, the Court granted defendants' motion for summary judgment on all
claims against all defendants. On December 14 and 15, 1999, plaintiffs filed
motions for reconsideration of the Court's ruling. These motions are currently
pending with the Court. The Fund and Alliance believe that the allegations in
the Complaint and the Amended Complaint are without merit and intend to defend
vigorously against those claims.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
share of each Fund. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). Except as otherwise indicated,
this information has been audited by Ernst & Young LLP, the independent auditors
for the Funds, whose reports, along with each Fund's financial statements, are
included in the SAI, which is avaliable upon request.
47
<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>
U.S. Government
Class A
Year Ended 6/30/99...... $ 7.57 $ .52(f) $ (.37) $ .15 $ (.52) $ 0.00
Year Ended 6/30/98...... 7.41 .54(f) .18 .72 (.54) 0.00
Year Ended 6/30/97...... 7.52 .57(f) (.10) .47 (.57) 0.00
Year Ended 6/30/96...... 7.96 .58 (.44) .14 (.58) 0.00
Year Ended 6/30/95...... 7.84 .64 .13 .77 (.65) 0.00
Class B
Year Ended 6/30/99...... $ 7.57 $ .46(f) $ (.36) $ .10 $ (.46) $ 0.00
Year Ended 6/30/98...... 7.41 .48(f) .18 .66 (.48) 0.00
Year Ended 6/30/97...... 7.52 .52(f) (.10) .42 (.52) 0.00
Year Ended 6/30/96...... 7.96 .52 (.44) .08 (.52) 0.00
Year Ended 6/30/95...... 7.84 .58 .13 .71 (.59) 0.00
Class C
Year Ended 6/30/99...... $ 7.57 $ .46(f) $ (.36) $ .10 $ (.46) $ 0.00
Year Ended 6/30/98...... 7.41 .48(f) .18 .66 (.48) 0.00
Year Ended 6/30/97...... 7.52 .52(f) (.10) .42 (.52) 0.00
Year Ended 6/30/96...... 7.96 .52 (.44) .08 (.52) 0.00
Year Ended 6/30/95...... 7.83 .58 .14 .72 (.59) 0.00
Limited Maturity Government
Class A
Year Ended 11/30/99..... $ 9.54 $ .43(f) $ (.45) $ (.02) $ (.43) $ 0.00
Year Ended 11/30/98..... 9.44 .47(f) .17 .64 (.47) 0.00
Year Ended 11/30/97..... 9.45 .51(f) .02 .53 (.52) 0.00
Year Ended 11/30/96..... 9.52 .51(f) (.04) .47 (.51) 0.00
Year Ended 11/30/95..... 9.51 .52(f) .02 .54 (.50) 0.00
Class B
Year Ended 11/30/99..... $ 9.55 $ .37(f) $ (.47) $ (.10) $ (.37) $ 0.00
Year Ended 11/30/98..... 9.44 .39(f) .19 .58 (.39) 0.00
Year Ended 11/30/97..... 9.45 .45(f) .01 .46 (.45) 0.00
Year Ended 11/30/96..... 9.52 .44(f) (.04) .40 (.44) 0.00
Year Ended 11/30/95..... 9.52 .46(f) .01 .47 (.44) 0.00
Class C
Year Ended 11/30/99..... $ 9.55 $ .38(f) $ (.49) $ (.11) $ (.38) $ 0.00
Year Ended 11/30/98..... 9.44 .39(f) .19 .58 (.39) 0.00
Year Ended 11/30/97..... 9.45 .45(f) .01 .46 (.45) 0.00
Year Ended 11/30/96..... 9.52 .45(f) (.05) .40 (.45) 0.00
Year Ended 11/30/95..... 9.52 .46(f) .01 .47 (.44) 0.00
Mortgage Securities Income
Class A
Year Ended 12/31/99..... $ 8.56 $ .55(f) $ (.49) $ .06 $ (.54) $ 0.00
Year Ended 12/31/98..... 8.63 .52(f) (.03) .49 (.52) 0.00
Year Ended 12/31/97..... 8.51 .54(f) .15 .69 (.54) 0.00
Year Ended 12/31/96..... 8.75 .54(f) (.19) .35 (.51) 0.00
Year Ended 12/31/95..... 8.13 .57(f) .64 1.21 (.57) 0.00
Class B
Year Ended 12/31/99..... $ 8.56 $ .46(f) $ (.46) $ 0.00 $ (.48) $ 0.00
Year Ended 12/31/98..... 8.63 .45(f) (.02) .43 (.45) 0.00
Year Ended 12/31/97..... 8.51 .48(f) .15 .63 (.48) 0.00
Year Ended 12/31/96..... 8.75 .48(f) (.19) .29 (.46) 0.00
Year Ended 12/31/95..... 8.13 .51(f) .64 1.15 (.51) 0.00
Class C
Year Ended 12/31/99..... $ 8.56 $ .48(f) $ (.47) $ .01 $ (.48) $ 0.00
Year Ended 12/31/98..... 8.63 .46(f) (.03) .43 (.46) 0.00
Year Ended 12/31/97..... 8.51 .48(f) .15 .63 (.48) 0.00
Year Ended 12/31/96..... 8.75 .48(f) (.19) .29 (.46) 0.00
Year Ended 12/31/95..... 8.13 .51(f) .64 1.15 (.51) 0.00
Corporate Bond
Class A
Year Ended 6/30/99...... $ 14.19 $ 1.06(f) $ (1.64) $ (.58) $ (1.07) $ 0.00
Year Ended 6/30/98...... 14.19 1.08(f) .12 1.20 (1.08) 0.00
Year Ended 6/30/97...... 13.29 1.15(f) .97 2.12 (1.22) 0.00
Year Ended 6/30/96...... 12.92 1.26 .27 1.53 (1.16) 0.00
Year Ended 6/30/95...... 12.51 1.19 .36 1.55 (1.14) 0.00
Class B
Year Ended 6/30/99...... $ 14.19 $ .97(f) $ (1.64) $ (.67) $ (.98) $ 0.00
Year Ended 6/30/98...... 14.19 .98(f) .13 1.11 (.98) 0.00
Year Ended 6/30/97...... 13.29 1.05(f) .98 2.03 (1.13) 0.00
Year Ended 6/30/96...... 12.92 1.15 .29 1.44 (1.07) 0.00
Year Ended 6/30/95...... 12.50 1.11 .36 1.47 (1.05) 0.00
Class C
Year Ended 6/30/99...... $ 14.19 $ .97(f) $ (1.64) $ (.67) $ (.98) $ 0.00
Year Ended 6/30/98...... 14.19 .99(f) .12 1.11 (.99) 0.00
Year Ended 6/30/97...... 13.29 1.04(f) .99 2.03 (1.13) 0.00
Year Ended 6/30/96...... 12.93 1.14 .29 1.43 (1.07) 0.00
Year Ended 6/30/95...... 12.50 1.10 .38 1.48 (1.05) 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 52 & 53.
48
<PAGE>
<TABLE>
<CAPTION>
Distributions Total Net Assets
in Excess Total Investment At End Of Ratio
of Net Return Dividends Net Asset Return Period of Expenses
Investment of and Value End Based on Net (000's To Average
Fiscal Year or Period Income Capital Distributions of Period Asset Value (a) omitted) Net Assets
--------------------- ------------- ------- ------------- --------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
Class A
Year Ended 6/30/99...... $ (.01) $ 0.00 $ (.53) $ 7.19 1.83% $ 426,167 1.17%(b)
Year Ended 6/30/98...... 0.00 (.02) (.56) 7.57 10.02 352,749 1.06
Year Ended 6/30/97...... 0.00 (.01) (.58) 7.41 6.49 354,782 1.02
Year Ended 6/30/96...... 0.00 0.00 (.58) 7.52 1.74 397,894 1.01
Year Ended 6/30/95...... 0.00 0.00 (.65) 7.96 10.37 463,660 1.01
Class B
Year Ended 6/30/99...... $ (.01) $ 0.00 $ (.47) $ 7.20 1.22% $ 338,310 1.87%(b)
Year Ended 6/30/98...... 0.00 (.02) (.50) 7.57 9.20 390,523 1.76
Year Ended 6/30/97...... 0.00 (.01) (.53) 7.41 5.69 471,889 1.73
Year Ended 6/30/96...... 0.00 0.00 (.52) 7.52 1.01 628,628 1.72
Year Ended 6/30/95...... 0.00 0.00 (.59) 7.96 9.52 774,097 1.72
Class C
Year Ended 6/30/99...... $ (.01) $ 0.00 $ (.47) $ 7.20 1.22% $ 144,145 1.87%(b)
Year Ended 6/30/98...... 0.00 (.02) (.50) 7.57 9.21 114,392 1.76
Year Ended 6/30/97...... 0.00 (.01) (.53) 7.41 5.69 115,607 1.72
Year Ended 6/30/96...... 0.00 0.00 (.52) 7.52 1.01 166,075 1.71
Year Ended 6/30/95...... 0.00 0.00 (.59) 7.96 9.67 181,948 1.71
Limited Maturity Government
Class A
Year Ended 11/30/99..... $ 0.00 $ (.07) $ (.50) $ 9.02 (.22)% $ 27,272 2.48%(b)
Year Ended 11/30/98..... (.07) 0.00 (.54) 9.54 6.94 41,493 3.27(b)
Year Ended 11/30/97..... 0.00 (.02) (.54) 9.44 5.79 16,197 2.41(b)
Year Ended 11/30/96..... 0.00 (.03) (.54) 9.45 5.11 16,248 2.22(b)
Year Ended 11/30/95..... 0.00 (.03) (.53) 9.52 5.91 27,887 2.14(b)
Class B
Year Ended 11/30/99..... $ 0.00 $ (.06) $ (.43) $ 9.02 (1.04)% $ 25,910 3.23%(b)
Year Ended 11/30/98..... (.08) 0.00 (.47) 9.55 6.30 33,591 3.84(b)
Year Ended 11/30/97..... 0.00 (.02) (.47) 9.44 5.04 33,613 3.14(b)
Year Ended 11/30/96..... 0.00 (.03) (.47) 9.45 4.36 50,386 2.94(b)
Year Ended 11/30/95..... 0.00 (.03) (.47) 9.52 5.05 84,362 2.85(b)
Class C
Year Ended 11/30/99..... $ 0.00 $ (.05) $ (.43) $ 9.01 (1.15)% $ 24,805 3.21%(b)
Year Ended 11/30/98..... (.08) 0.00 (.47) 9.55 6.30 28,562 3.84(b)
Year Ended 11/30/97..... 0.00 (.02) (.47) 9.44 5.05 28,738 3.13(b)
Year Ended 11/30/96..... 0.00 (.02) (.47) 9.45 4.38 43,457 2.92(b)
Year Ended 11/30/95..... 0.00 (.03) (.47) 9.52 5.06 68,459 2.85(b)
Mortgage Securities Income
Class A
Year Ended 12/31/99..... $ 0.00 $ 0.00 $ (.54) $ 8.08 .79% $ 429,627 1.93%(b)
Year Ended 12/31/98..... (.04) 0.00 (.56) 8.56 5.82 469,750 1.99(b)
Year Ended 12/31/97..... (.03) 0.00 (.57) 8.63 8.40 372,494 1.41(b)
Year Ended 12/31/96..... 0.00 (.08) (.59) 8.51 4.23 412,899 1.68(b)
Year Ended 12/31/95..... 0.00 (.02) (.59) 8.75 15.34 502,390 1.66(b)
Class B
Year Ended 12/31/99..... $ 0.00 $ 0.00 $ (.48) $ 8.08 .02% $ 44,410 2.59%(b)
Year Ended 12/31/98..... (.05) 0.00 (.50) 8.56 5.04 126,879 2.68(b)
Year Ended 12/31/97..... (.03) 0.00 (.51) 8.63 7.60 323,916 2.14(b)
Year Ended 12/31/96..... 0.00 (.07) (.53) 8.51 3.46 477,196 2.37(b)
Year Ended 12/31/95..... 0.00 (.02) (.53) 8.75 14.48 737,593 2.37(b)
Class C
Year Ended 12/31/99..... $ 0.00 $ 0.00 $ (.48) $ 8.09 .14% $ 19,219 2.64%(b)
Year Ended 12/31/98..... (.04) 0.00 (.50) 8.56 5.04 23,728 2.69(b)
Year Ended 12/31/97..... (.03) 0.00 (.51) 8.63 7.60 27,859 2.12(b)
Year Ended 12/31/96..... 0.00 (.07) (.53) 8.51 3.46 35,355 2.38(b)
Year Ended 12/31/95..... 0.00 (.02) (.53) 8.75 14.46 45,558 2.35(b)
Corporate Bond
Class A
Year Ended 6/30/99...... $ (.01) $ (.04) $ (1.12) $ 12.49 (4.08)% $ 476,141 1.11%
Year Ended 6/30/98...... (.12) 0.00 (1.20) 14.19 8.66 510,397 1.05
Year Ended 6/30/97...... 0.00 0.00 (1.22) 14.19 16.59 370,845 1.12
Year Ended 6/30/96...... 0.00 0.00 (1.16) 13.29 12.14 277,369 1.20
Year Ended 6/30/95...... 0.00 0.00 (1.14) 12.92 13.26 230,750 1.24
Class B
Year Ended 6/30/99...... $ (.01) $ (.04) $ (1.03) $ 12.49 (4.77)% $ 630,631 1.82%
Year Ended 6/30/98...... (.13) 0.00 (1.11) 14.19 7.95 672,374 1.75
Year Ended 6/30/97...... 0.00 0.00 (1.13) 14.19 15.80 480,326 1.82
Year Ended 6/30/96...... 0.00 0.00 (1.07) 13.29 11.38 338,152 1.90
Year Ended 6/30/95...... 0.00 0.00 (1.05) 12.92 12.54 241,393 1.99
Class C
Year Ended 6/30/99...... $ (.01) $ (.04) $ (1.03) $ 12.49 (4.77)% $ 204,271 1.81%
Year Ended 6/30/98...... (.12) 0.00 (1.11) 14.19 7.95 254,530 1.75
Year Ended 6/30/97...... 0.00 0.00 (1.13) 14.19 15.80 174,762 1.82
Year Ended 6/30/96...... 0.00 0.00 (1.07) 13.29 11.30 83,095 1.90
Year Ended 6/30/95...... 0.00 0.00 (1.05) 12.93 12.62 51,028 1.84
<CAPTION>
Ratio of Net
Investment
Income (Loss) Portfolio
To Average Turnover
Fiscal Year or Period Net Assets Rate
--------------------- ------------- ---------
<S> <C> <C>
U.S. Government
Class A
Year Ended 6/30/99...... 6.86% 320%
Year Ended 6/30/98...... 7.08 153
Year Ended 6/30/97...... 7.66 330
Year Ended 6/30/96...... 7.38 334
Year Ended 6/30/95...... 8.27 190
Class B
Year Ended 6/30/99...... 6.13% 320%
Year Ended 6/30/98...... 6.37 153
Year Ended 6/30/97...... 6.95 330
Year Ended 6/30/96...... 6.67 334
Year Ended 6/30/95...... 7.57 190
Class C
Year Ended 6/30/99...... 6.13% 320%
Year Ended 6/30/98...... 6.38 153
Year Ended 6/30/97...... 6.96 330
Year Ended 6/30/96...... 6.68 334
Year Ended 6/30/95...... 7.59 190
Limited Maturity Government
Class A
Year Ended 11/30/99..... 4.75% 374%
Year Ended 11/30/98..... 4.74 500
Year Ended 11/30/97..... 5.52 249
Year Ended 11/30/96..... 5.44 159
Year Ended 11/30/95..... 5.53 293
Class B
Year Ended 11/30/99..... 4.06% 374%
Year Ended 11/30/98..... 4.10 500
Year Ended 11/30/97..... 4.80 249
Year Ended 11/30/96..... 4.73 159
Year Ended 11/30/95..... 4.83 293
Class C
Year Ended 11/30/99..... 4.06% 374%
Year Ended 11/30/98..... 4.11 500
Year Ended 11/30/97..... 4.82 249
Year Ended 11/30/96..... 4.75 159
Year Ended 11/30/95..... 4.84 293
Mortgage Securities Income
Class A
Year Ended 12/31/99..... 6.54% 229%
Year Ended 12/31/98..... 6.06 202
Year Ended 12/31/97..... 6.30 184
Year Ended 12/31/96..... 6.38 208
Year Ended 12/31/95..... 6.77 285
Class B
Year Ended 12/31/99..... 5.68% 229%
Year Ended 12/31/98..... 5.33 202
Year Ended 12/31/97..... 5.60 184
Year Ended 12/31/96..... 5.66 208
Year Ended 12/31/95..... 6.06 285
Class C
Year Ended 12/31/99..... 5.80% 229%
Year Ended 12/31/98..... 5.35 202
Year Ended 12/31/97..... 5.61 184
Year Ended 12/31/96..... 5.67 208
Year Ended 12/31/95..... 6.07 285
Corporate Bond
Class A
Year Ended 6/30/99...... 8.13% 281%
Year Ended 6/30/98...... 7.52 244
Year Ended 6/30/97...... 8.34 307
Year Ended 6/30/96...... 9.46 389
Year Ended 6/30/95...... 9.70 387
Class B
Year Ended 6/30/99...... 7.41% 281%
Year Ended 6/30/98...... 6.80 244
Year Ended 6/30/97...... 7.62 307
Year Ended 6/30/96...... 8.75 389
Year Ended 6/30/95...... 9.07 387
Class C
Year Ended 6/30/99...... 7.37% 281%
Year Ended 6/30/98...... 6.83 244
Year Ended 6/30/97...... 7.61 307
Year Ended 6/30/96...... 8.74 389
Year Ended 6/30/95...... 8.95 387
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 52 & 53.
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>
High Yield
Class A
Year Ended 8/31/99........... $ 10.76 $ 1.02(f) $ (1.08) $ (.06) $ (1.02) $ (.15)
Year Ended 8/31/98........... 11.17 1.03(f) (.27) .76 (1.02) (.14)
4/22/97+ to 8/31/97.......... 10.00 .37(f) 1.15 1.52 (.35) 0.00
Class B
Year Ended 8/31/99........... $ 10.75 $ .95(f) $ (1.08) $ (.13) $ (.95) $ (.15)
Year Ended 8/31/98........... 11.17 .96(f) (.28) .68 (.95) (.14)
4/22/97+ to 8/31/97.......... 10.00 .31(f) 1.19 1.50 (.33) 0.00
Class C
Year Ended 8/31/99........... $ 10.75 $ .95(f) $ (1.07) $ (.12) $ (.95) $ (.15)
Year Ended 8/31/98........... 11.17 .96(f) (.28) .68 (.95) (.14)
4/22/97+ to 8/31/97.......... 10.00 .32(f) 1.18 1.50 (.33) 0.00
Global Strategic Income
Class A
Year Ended 10/31/99.......... $ 10.18 $ .94(f) $ (.22) $ .72 $ (.94) $ 0.00
Year Ended 10/31/98.......... 11.46 .78(f) (.64) .14 (.78) (.36)
Year Ended 10/31/97.......... 10.83 .74(f) 1.02 1.76 (.75) (.10)
1/9/96+ to 10/31/96.......... 10.00 .69(f) .95 1.64 (.81) 0.00
Class B
Year Ended 10/31/99.......... $ 10.17 $ .87(f) $ (.22) $ .65 $ (.87) $ 0.00
Year Ended 10/31/98.......... 11.46 .69(f) (.63) .06 (.69) (.36)
Year Ended 10/31/97.......... 10.83 .66(f) 1.03 1.69 (.67) (.10)
3/25/96++ to 10/31/96........ 9.97 .41(f) 1.01 1.42 (.56) 0.00
Class C
Year Ended 10/31/99.......... $ 10.17 $ .88(f) $ (.23) $ .65 $ (.88) $ 0.00
Year Ended 10/31/98.......... 11.46 .68(f) (.62) .06 (.68) (.36)
Year Ended 10/31/97.......... 10.83 .66(f) 1.03 1.69 (.67) (.10)
3/25/96++ to 10/31/96........ 9.97 .39(f) 1.03 1.42 (.56) 0.00
North American Government Income
Class A
Year Ended 11/30/99.......... $ 7.59 $ .87(f) $ (.25) $ .62 $ (.64) $ 0.00
Year Ended 11/30/98.......... 8.02 .87(f) (.33) .54 (.87) 0.00
Year Ended 11/30/97.......... 8.01 1.03(f) (.05) .98 (.97) 0.00
Year Ended 11/30/96.......... 6.75 1.09(f) 1.14 2.23 (.75) 0.00
Year Ended 11/30/95.......... 8.13 1.18(f) (1.59) (.41) 0.00 0.00
Class B
Year Ended 11/30/99.......... $ 7.61 $ .81(f) $ (.25) $ .56 $ (.59) $ 0.00
Year Ended 11/30/98.......... 8.02 .81(f) (.32) .49 (.81) 0.00
Year Ended 11/30/97.......... 8.01 .98(f) (.07) .91 (.90) 0.00
Year Ended 11/30/96.......... 6.75 1.04(f) 1.12 2.16 (.69) 0.00
Year Ended 11/30/95.......... 8.13 1.13(f) (1.61) (.48) 0.00 0.00
Class C
Year Ended 11/30/99.......... $ 7.61 $ .81(f) $ (.25) $ .56 $ (.59) $ 0.00
Year Ended 11/30/98.......... 8.02 .82(f) (.33) .49 (.82) 0.00
Year Ended 11/30/97.......... 8.01 .98(f) (.07) .91 (.90) 0.00
Year Ended 11/30/96.......... 6.75 1.05(f) 1.11 2.16 (.69) 0.00
Year Ended 11/30/95.......... 8.13 1.13(f) (1.61) (.48) 0.00 0.00
Global Dollar Government
Class A
Year Ended 8/31/99........... $ 5.05 $ .71(f) $ .74 $ 1.45 $ (.74) $ 0.00
Year Ended 8/31/98........... 10.64 .73(f) (4.03) (3.30) (.73) (1.37)
Year Ended 8/31/97........... 10.01 .88(f) 1.85 2.73 (.95) (1.15)
Year Ended 8/31/96........... 8.02 .84 2.10 2.94 (.95) 0.00
Year Ended 8/31/95........... 9.14 .86 (1.10) (.24) (.88) 0.00
Class B
Year Ended 8/31/99........... $ 5.05 $ .67(f) $ .76 $ 1.43 $ (.68) $ 0.00
Year Ended 8/31/98........... 10.64 .67(f) (4.05) (3.38) (.67) (1.36)
Year Ended 8/31/97........... 10.01 .81(f) 1.84 2.65 (.87) (1.15)
Year Ended 8/31/96........... 8.02 .78 2.08 2.86 (.87) 0.00
Year Ended 8/31/95........... 9.14 .80 (1.11) (.31) (.81) 0.00
Class C
Year Ended 8/31/99........... $ 5.05 $ .67(f) $ .76 $ 1.43 $ (.68) $ 0.00
Year Ended 8/31/98........... 10.64 .67(f) (4.05) (3.38) (.67) (1.36)
Year Ended 8/31/97........... 10.01 .82(f) 1.84 2.66 (.88) (1.15)
Year Ended 8/31/96........... 8.02 .77 2.10 2.87 (.88) 0.00
Year Ended 8/31/95........... 9.14 .79 (1.10) (.31) (.81) 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 52 & 53.
50
<PAGE>
<TABLE>
<CAPTION>
Distributions Total Net Assets
in Excess Total Investment At End Of Ratio
of Net Return Dividends Net Asset Return Period of Expenses
Investment of and Value End Based on Net (000's To Average
Fiscal Year or Period Income Capital Distributions of Period Asset Value (a) omitted) Net Assets
--------------------- ------------- ------- ------------- --------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
High Yield
Class A
Year Ended 8/31/99...... $ (.05) $ (.01) $ (1.23) $ 9.47 (.58)% $ 102,400 1.31%
Year Ended 8/31/98...... (.01) 0.00 (1.17) 10.76 6.42 43,960 1.43(c)
4/22/97+ to 8/31/97..... 0.00 0.00 (.35) 11.17 15.33 5,889 1.70*(c)
Class B
Year Ended 8/31/99...... $ (.05) $ (.01) $ (1.16) $ 9.46 (1.26)% $ 527,337 2.03%
Year Ended 8/31/98...... (.01) 0.00 (1.10) 10.75 5.69 269,426 2.13(c)
4/22/97+ to 8/31/97..... 0.00 0.00 (.33) 11.17 15.07 43,297 2.40*(c)
Class C
Year Ended 8/31/99...... $ (.05) $ (.01) $ (1.16) $ 9.47 (1.16)% $ 99,927 2.02%
Year Ended 8/31/98...... (.01) 0.00 (1.10) 10.75 5.69 48,337 2.13(c)
4/22/97+ to 8/31/97..... 0.00 0.00 (.33) 11.17 15.07 7,575 2.40*(c)
Global Strategic Income
Class A
Year Ended 10/31/99..... $ (.05) $ 0.00 $ (.99) $ 9.91 7.17% $ 33,813 1.77%
Year Ended 10/31/98..... (.28) 0.00 (1.42) 10.18 1.00 24,576 1.89(c)
Year Ended 10/31/97..... (.28) 0.00 (1.13) 11.46 16.83 12,954 1.90(c)
1/9/96+ to 10/31/96..... 0.00 0.00 (.81) 10.83 17.31 2,295 1.90*(c)
Class B
Year Ended 10/31/99..... $ (.05) $ 0.00 $ (.92) $ 9.90 6.44% $ 79,085 2.47%
Year Ended 10/31/98..... (.30) 0.00 (1.35) 10.17 .27 58,058 2.58(c)
Year Ended 10/31/97..... (.29) 0.00 (1.06) 11.46 16.12 18,855 2.60(c)
3/25/96++ to 10/31/96... 0.00 0.00 (.56) 10.83 14.47 800 2.60*(c)
Class C
Year Ended 10/31/99..... $ (.04) $ 0.00 $ (.92) $ 9.90 6.44% $ 22,598 2.46%
Year Ended 10/31/98..... (.31) 0.00 (1.35) 10.17 .27 16,067 2.58(c)
Year Ended 10/31/97..... (.29) 0.00 (1.06) 11.46 16.12 4,388 2.60(c)
3/25/96++ to 10/31/96... 0.00 0.00 (.56) 10.83 14.47 750 2.60*(c)
North American Government
Income
Class A
Year Ended 11/30/99..... $ (.11) $ (.18) $ (.93) $ 7.28 8.56% $ 730,468 2.09%(d)
Year Ended 11/30/98..... (.07) (.03) (.97) 7.59 7.14 740,066 2.04(d)
Year Ended 11/30/97..... 0.00 0.00 (.97) 8.02 12.85 511,749 2.15(d)
Year Ended 11/30/96..... 0.00 (.22) (.97) 8.01 35.22 385,784 2.34(d)
Year Ended 11/30/95..... 0.00 (.97) (.97) 6.75 (3.59) 252,608 2.62(d)
Class B
Year Ended 11/30/99..... $ (.10) $ (.17) $ (.86) $ 7.31 7.79% $ 1,011,395 2.78%(d)
Year Ended 11/30/98..... (.06) (.03) (.90) 7.61 6.46 1,300,519 2.75(d)
Year Ended 11/30/97..... 0.00 0.00 (.90) 8.02 11.88 1,378,407 2.86(d)
Year Ended 11/30/96..... 0.00 (.21) (.90) 8.01 33.96 1,329,719 3.05(d)
Year Ended 11/30/95..... 0.00 (.90) (.90) 6.75 (4.63) 1,123,074 3.33(d)
Class C
Year Ended 11/30/99..... $ (.10) $ (.17) $ (.86) $ 7.31 7.79% $ 258,696 2.78%(d)
Year Ended 11/30/98..... (.05) (.03) (.90) 7.61 6.46 276,073 2.74(d)
Year Ended 11/30/97.. 0.00 0.00 (.90) 8.02 11.88 283,483 2.85(d)
Year Ended 11/30/96..... 0.00 (.21) (.90) 8.01 33.96 250,676 3.04(d)
Year Ended 11/30/95..... 0.00 (.90) (.90) 6.75 (4.63) 219,009 3.33(d)
Global Dollar Government
Class A
Year Ended 8/31/99...... $ (.04) $ (.03) $ (.81) $ 5.69 29.40% $ 50,540 1.59%
Year Ended 8/31/98...... (.04) (.15) (2.29) 5.05 (38.56) 32,365 1.48
Year Ended 8/31/97...... 0.00 0.00 (2.10) 10.64 30.04 37,416 1.55
Year Ended 8/31/96...... 0.00 0.00 (.95) 10.01 38.47 23,253 1.65
Year Ended 8/31/95...... 0.00 0.00 (.88) 8.02 (1.48) 12,020 1.93
Class B
Year Ended 8/31/99...... $ (.03) $ (.03) $ (.74) $ 5.74 28.85% $ 110,003 2.31%
Year Ended 8/31/98...... (.04) (.14) (2.21) 5.05 (39.11) 79,660 2.22
Year Ended 8/31/97...... 0.00 0.00 (2.02) 10.64 29.14 93,377 2.26
Year Ended 8/31/96...... 0.00 0.00 (.87) 10.01 37.36 84,295 2.37
Year Ended 8/31/95...... 0.00 0.00 (.81) 8.02 (2.40) 62,406 2.64
Class C
Year Ended 8/31/99...... $ (.03) $ (.03) $ (.74) $ 5.74 28.85% $ 39,024 2.30%
Year Ended 8/31/98...... (.04) (.14) (2.21) 5.05 (39.09) 23,711 2.19
Year Ended 8/31/97...... 0.00 0.00 (2.03) 10.64 29.17 25,130 2.25
Year Ended 8/31/96...... 0.00 0.00 (.88) 10.01 37.40 14,511 2.35
Year Ended 8/31/95...... 0.00 0.00 (.81) 8.02 (2.36) 9,330 2.63
<CAPTION>
Ratio of Net
Investment
Income (Loss) Portfolio
To Average Turnover
Fiscal Year or Period Net Assets Rate
--------------------- ------------- ---------
<S> <C> <C>
High Yield
Class A
Year Ended 8/31/99...... 10.21% 182%
Year Ended 8/31/98...... 8.89 311
4/22/97+ to 8/31/97..... 8.04* 73
Class B
Year Ended 8/31/99...... 9.52% 182%
Year Ended 8/31/98...... 8.18 311
4/22/97+ to 8/31/97..... 7.19* 73
Class C
Year Ended 8/31/99...... 9.54% 182%
Year Ended 8/31/98...... 8.17 311
4/22/97+ to 8/31/97..... 7.24* 73
Global Strategic Income
Class A
Year Ended 10/31/99..... 9.34% 254%
Year Ended 10/31/98..... 7.08 183
Year Ended 10/31/97..... 6.56 417
1/9/96+ to 10/31/96..... 8.36* 282
Class B
Year Ended 10/31/99..... 8.54% 254%
Year Ended 10/31/98..... 6.41 183
Year Ended 10/31/97..... 5.86 417
3/25/96++ to 10/31/96... 7.26* 282
Class C
Year Ended 10/31/99..... 8.52% 254%
Year Ended 10/31/98..... 6.43 183
Year Ended 10/31/97..... 5.86 417
3/25/96++ to 10/31/96... 7.03* 282
North American Government
Income
Class A
Year Ended 11/30/99..... 11.72% 158%
Year Ended 11/30/98..... 11.17 175
Year Ended 11/30/97..... 12.78 118
Year Ended 11/30/96..... 14.82 166
Year Ended 11/30/95..... 18.09 180
Class B
Year Ended 11/30/99..... 10.97% 158%
Year Ended 11/30/98..... 10.44 175
Year Ended 11/30/97..... 12.15 118
Year Ended 11/30/96..... 14.20 166
Year Ended 11/30/95..... 17.31 180
Class C
Year Ended 11/30/99..... 10.98% 158%
Year Ended 11/30/98..... 10.45 175
Year Ended 11/30/97..... 12.14 118
Year Ended 11/30/96..... 14.22 166
Year Ended 11/30/95..... 17.32 180
Global Dollar Government
Class A
Year Ended 8/31/99...... 12.34% 179%
Year Ended 8/31/98...... 8.51 188
Year Ended 8/31/97...... 8.49 314
Year Ended 8/31/96...... 9.23 315
Year Ended 8/31/95...... 11.25 301
Class B
Year Ended 8/31/99...... 11.59% 179%
Year Ended 8/31/98...... 7.78 188
Year Ended 8/31/97...... 7.81 314
Year Ended 8/31/96...... 8.57 315
Year Ended 8/31/95...... 10.52 301
Class C
Year Ended 8/31/99...... 11.56% 179%
Year Ended 8/31/98...... 7.75 188
Year Ended 8/31/97...... 7.82 314
Year Ended 8/31/96...... 8.52 315
Year Ended 8/31/95...... 10.46 301
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 52 & 53.
51
<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>
Multi-Market Strategy
Class A
Year Ended 10/31/99.... $ 6.64 $ .42(f) $ (.22) $ .20 $ (.42) $ 0.00
Year Ended 10/31/98.... 7.11 .44(f) .02 .46 (.44) 0.00
Year Ended 10/31/97.... 7.23 .47(f) .08 .55 (.47) 0.00
Year Ended 10/31/96.... 6.83 .59(f) .48 1.07 (.67) 0.00
Year Ended 10/31/95.... 8.04 .77(f) (1.31) (.54) 0.00 0.00
Class B
Year Ended 10/31/99.... $ 6.66 $ .36(f) $ (.22) $ .14 $ (.36) $ 0.00
Year Ended 10/31/98.... 7.11 .36(f) .05 .41 (.36) 0.00
Year Ended 10/31/97.... 7.23 .42(f) .06 .48 (.42) 0.00
Year Ended 10/31/96.... 6.83 .53(f) .47 1.00 (.60) 0.00
Year Ended 10/31/95.... 8.04 .44(f) (1.05) (.61) 0.00 0.00
Class C
Year Ended 10/31/99.... $ 6.65 $ .36(f) $ (.22) $ .14 $ (.36) $ 0.00
Year Ended 10/31/98.... 7.11 .25(f) .16 .41 (.41) 0.00
Year Ended 10/31/97.... 7.23 .42(f) .07 .49 (.42) 0.00
Year Ended 10/31/96.... 6.83 .54(f) .47 1.01 (.61) 0.00
Year Ended 10/31/95.... 8.04 .44(f) (1.04) (.60) 0.00 0.00
</TABLE>
- --------------------------------------------------------------------------------
+ Commencement of operations.
++ Commencement of distribution.
* Annualized.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and
a redemption on the last day of the period. Initial sales 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) If Alliance U.S. Government Fund had not borne interest expense, the ratio
of expenses to average net assets would have been 1.08% with respect to
Class A shares, 1.79% with respect to Class B shares, 1.78% with respect
to Class C shares. If Alliance Limited Maturity Government had not borne
interest expenses, the ratio of expenses to average net assets would have
been with respect to Class A shares, 1.41% for 1995, 1.58% for 1996, 1.65%
for 1997, 1.68% for 1998 and 1.62% for 1999; with respect to Class B
shares, 2.11% for 1995, 2.30% for 1996, 2.39% for 1997, 2.39% for 1998 and
2.34% for 1999; with respect to Class C shares, 2.10% for 1995, 2.29% for
1996, 2.37% for 1997, 2.38% for 1998 and 2.33% for 1999. If Alliance
Mortgage Securities Income Fund had not borne interest expense the ratio
of expenses to average net assets would have been with respect to Class A
shares .1.03% for 1995, 1.03% for 1996, 1.07% for 1997, 1.14% for 1998 and
1.16% for 1999; with respect to Class B shares, 1.74% for 1995, 1.74% for
1996, 1.78% for 1997, 1.85% for 1998, and 1.89% for 1999; with respect to
Class C shares 1.73% for 1995, 1.73% for 1996, 1.77% for 1997, 1.84% for
1998, and 1.87% for 1999.
52
<PAGE>
<TABLE>
<CAPTION>
Distributions Total Net Assets
in Excess Total Investment At End Of Ratio
of Net Return Dividends Net Asset Return Period of Expenses
Investment of and Value End Based on Net (000's To Average
Fiscal Year or Period Income Capital Distributions of Period Asset Value (a) omitted) Net Assets
--------------------- ------------- ------- ------------- --------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Multi-Market Strategy
Class A
Year Ended 10/31/99.... $ (.02) $ (.11) $ (.55) $ 6.29 2.95% $ 396,867 1.44%(e)
Year Ended 10/31/98.... (.42) (.07) (.93) 6.64 6.90 95,568 1.74(e)
Year Ended 10/31/97.... (.20) 0.00 (.67) 7.11 7.82 96,133 1.58(e)
Year Ended 10/31/96.... 0.00 0.00 (.67) 7.23 16.37 68,776 1.64(d)
Year Ended 10/31/95.... 0.00 (.67) (.67) 6.83 (6.47) 76,837 1.60(d)
Class B
Year Ended 10/31/99.... $ (.02) $ (.10) $ (.48) $ 6.32 2.13% $ 18,129 2.15%(e)
Year Ended 10/31/98.... (.43) (.07) (.86) 6.66 6.24 7,217 2.41(e)
Year Ended 10/31/97.... (.18) 0.00 (.60) 7.11 6.90 29,949 2.29(e)
Year Ended 10/31/96.... 0.00 0.00 (.60) 7.23 15.35 88,427 2.35(d)
Year Ended 10/31/95.... 0.00 (.60) (.60) 6.83 (7.31) 116,551 2.29(d)
Class C
Year Ended 10/31/99.... $ (.02) $ (.10) $ (.48) $ 6.31 2.13% $ 19,076 2.15%(e)
Year Ended 10/31/98.... (.42) (.04) (.87) 6.65 6.10 16,518 2.61(e)
Year Ended 10/31/97.... (.19) 0.00 (.61) 7.11 6.92 1,203 2.28(e)
Year Ended 10/31/96.... 0.00 0.00 (.61) 7.23 15.36 1,076 2.34(d)
Year Ended 10/31/95.... 0.00 (.61) (.61) 6.83 (7.29) 786 2.29(d)
<CAPTION>
Ratio of Net
Investment
Income (Loss) Portfolio
To Average Turnover
Fiscal Year or Period Net Assets Rate
--------------------- -------------- ---------
<S> <C> <C>
Multi-Market Strategy
Class A
Year Ended 10/31/99.... 6.23% 124%
Year Ended 10/31/98.... 6.46 240
Year Ended 10/31/97.... 6.50 173
Year Ended 10/31/96.... 8.40 215
Year Ended 10/31/95.... 8.56 400
Class B
Year Ended 10/31/99.... 5.46% 124%
Year Ended 10/31/98.... 5.64 240
Year Ended 10/31/97.... 5.79 173
Year Ended 10/31/96.... 7.69 215
Year Ended 10/31/95.... 7.53 400
Class C
Year Ended 10/31/99.... 5.50% 124%
Year Ended 10/31/98.... 5.28 240
Year Ended 10/31/97.... 5.80 173
Year Ended 10/31/96.... 7.62 215
Year Ended 10/31/95.... 7.55 400
</TABLE>
- --------------------------------------------------------------------------------
(c) Net of expenses assumed and/or waived/reimbursed. If Alliance High Yield
had borne all expenses for the respective periods April 22, 1997 to August
31, 1997 and the fiscal year ended August 31, 1998, the expense ratios
would have been with respect to Class A shares, 3.11% (annualized) and
1.46%, respectively; with respect to Class B shares, 3.85% (annualized)
and 2.16%, respectively; and with respect to Class C shares, 3.84%
(annualized) and 2.16%, respectively. If Alliance Global Strategic Income
had borne all expenses for the respective periods January 9, 1996 to
October 31, 1996, its fiscal year ended 1997, its fiscal year ended in
1998, the expense ratio would have been with respect to Class A shares,
19.20% (annualized), 4.06%, and 2.08%, respectively; with respect to Class
B shares, 19.57% (annualized), 4.76%, and 2.76% respectively; and with
respect to Class C shares, 19.49% (annualized), 4.77%, and 2.77%
respectively.
(d) Includes interest expenses.If Alliance North American Government Income
had not borne interest expenses, the ratio of expenses (net of interest
expenses) to average net assets would have been with respect to Class A
shares, 1.51% for 1995, 1.41% for 1996, 1.38% for 1997, 1.36% for 1998 and
1.38% for 1999; with respect to Class B shares, 2.22% for 1995, 2.12% for
1996, 2.09% for 1997, 2.07% for 1998 and 2.08% for 1999; and with respect
to Class C shares, 2.21% for 1995, 2.12% for 1996, 2.08% for 1997, 2.06%
for 1998 and 2.08% for 1999. If Alliance Multi-Market Strategy had not
borne interest expenses or loan fees, the ratio of expenses to average net
assets would have been with respect to Class A shares, 1.55% for 1995, and
1.60% for 1996; with respect to Class B shares, 2.22% for 1995, and 2.31%
for 1996; with respect to Class C shares, 2.24% for 1995, and 2.30% for
1996.
(e) Amounts do not reflect the impact of expense offset arrangement with the
transfer agent. Taking into account such expense offset arrangements, the
ratio of expenses to average net assets, for Alliance Multi-Market
Strategy would have been with respect to Class A shares 1.57% for 1997,
1.73% for 1998 and 1.42% for 1999, with respect to Class B shares 2.28%
for 1997, 2.40% for 1998 and 2.14% for 1999 and with respect to Class C
shares 2.27% for 1997, 2.60% for 1998 and 2.14% for 1999.
(f) Based on average shares outstanding.
53
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
BOND RATINGS
- --------------------------------------------------------------------------------
MOODY'S INVESTORS SERVICE, INC.
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa-- Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Absence of Rating -- When no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that are
unrated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published
in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note -- Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through 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 in the lower end of its generic rating
category.
STANDARD & POOR'S RATINGS SERVICES
AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A -- 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 debt in higher rated categories.
BBB -- Debt rated BBB normally exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
BB, B, CCC, CC, C -- Debt rated BB, B, CCC, CC or C is regarded as having
significant speculative characteristics. BB indicates the lowest degree of
speculation and C the highest. While such debt will likely have some quality
and
54
<PAGE>
protective characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.
BB -- Debt rated BB is less vulnerable to nonpayment than other speculative
debt. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to an inadequate
capacity to pay interest and repay principal.
B -- Debt rated B is more vulnerable to nonpayment than debt rated BB, but there
is capacity to pay interest and repay principal. Adverse business, financial
or economic conditions will likely impair the capacity or willingness to pay
principal or repay interest.
CCC -- Debt rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial and economic conditions to pay interest and
repay principal. In the event of adverse business, financial or economic
conditions, there is not likely to be capacity to pay interest or repay
principal.
CC -- Debt rated CC is currently highly vulnerable to nonpayment.
C -- The C rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments are being
continued.
D -- The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred.
Plus (+) or Minus (-) -- The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR -- Not rated.
DUFF & PHELPS CREDIT RATING CO.
AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
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 fluctutate 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.
DP -- Preferred stock with dividend arrearages.
FITCH IBCA, INC.
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA -- Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the
AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F- 1+.
A -- Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of satisfactory credit
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 have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB -- Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B -- Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue.
55
<PAGE>
CCC -- Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC -- Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C -- Bonds are in imminent default in payment of interest or principal.
DDD, DD, D -- Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
Plus (+) Minus (-) -- Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA, DDD, DD or D categories.
NR -- Indicates that Fitch does not rate the specific issue.
56
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
ABOUT CANADA, MEXICO
- --------------------------------------------------------------------------------
AND ARGENTINA
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT CANADA
Canada consists of a federation of ten Provinces and three federal territories
(which generally fall under federal authority) with a constitutional division of
powers between the federal and Provincial governments. The Parliament of Canada
has jurisdiction over all areas not assigned exclusively to the Provincial
legislatures, and has jurisdiction over such matters as the federal public debt
and property, the regulation of trade and commerce, currency and coinage, banks
and banking, national defense, the postal services, navigation and shipping and
unemployment insurance.
The Canadian economy is based on the free enterprise system, with business
organizations ranging from small owner-operated businesses to large
multinational corporations. Manufacturing and resource industries are large
contributors to the country's economic output, but as in many other highly
developed countries, there has been a gradual shift from a largely
goods-producing economy to a predominantly service-based one. Agriculture and
other primary production play a small but key role in the economy. Canada is
also an exporter of energy to the United States in the form of natural gas (of
which Canada has substantial reserves) and hydroelectric power, and has
significant mineral resources.
Canadian Dollars are fully exchangeable into U.S. Dollars without foreign
exchange controls or other legal restriction. Since the major developed-country
currencies were permitted to float freely against one another, the range of
fluctuation in the Canadian Dollar-U.S. Dollar exchange rate generally has been
narrower than the range of fluctuation between the U.S. Dollar and most other
major currencies. Since 1991, Canada generally has experienced a weakening of
its currency. The Canadian Dollar reached an all-time low of 1.5770 Canadian
Dollars per U.S. Dollar on August 27, 1998. On February 15, 2000, the Canadian
Dollar-U.S. Dollar exchange rate was 1.4553:1. The range of fluctuation that has
occurred in the past is not necessarily indicative of the range of fluctuation
that will occur in the future. Future rates of exchange cannot be accurately
predicted.
GENERAL INFORMATION ABOUT THE UNITED MEXICAN STATES
The United Mexican States ("Mexico") is a nation formed by 31 states and a
Federal District (Mexico City). The Political Constitution of Mexico, which took
effect on May 1, 1917, established Mexico as a Federal Republic and provides for
the separation of executive, legislative and judicial branches. The President
and the members of the General Congress are elected by popular vote.
Prior to 1994, when Mexico experienced an economic crisis that led to the
devaluation of the Peso in December 1994, the Mexican economy experienced
improvement in a number of areas, including growth in gross domestic product and
a substantial reduction in the rate of inflation and in the public sector
financial deficit. Much of the past improvement in the Mexican economy was due
to a series of economic policy initiatives intended to modernize and reform the
Mexican economy, control inflation, reduce the financial deficit, increase
public revenues through the reform of the tax system, establish a competitive
and stable currency exchange rate, liberalize trade restrictions and increase
investment and productivity, while reducing the government's role in the
economy. In this regard, the Mexican government launched a program for
privatizing certain state owned enterprises, developing and modernizing the
securities markets, increasing investment in the private sector and permitting
increased levels of foreign investment.
In 1994, Mexico faced internal and external conditions that resulted in an
economic crisis that continues to affect the Mexican economy adversely. Growing
trade and current account deficits, which could no longer be financed by inflows
of foreign capital, were factors contributing to the crisis. A weakening economy
and unsettling political and social developments caused investors to lose
confidence in the Mexican economy. This resulted in a large decline in foreign
reserves followed by a sharp and rapid devaluation of the Mexican Peso. The
ensuing economic and financial crisis resulted in higher inflation and domestic
interest rates, a contraction in real gross domestic product and a liquidity
crisis.
In response to the adverse economic conditions that developed at the end of
1994, the Mexican government instituted a new economic program; and the
government and the business and labor sectors of the economy entered into a new
accord in an effort to stabilize the economy and the financial markets. To help
relieve Mexico's liquidity crisis and restore financial stability to Mexico's
economy, the Mexican government also obtained financial assistance from the
United States, other countries and certain international agencies conditioned
upon the implementation and continuation of the economic reform program.
In October 1995, and again in October 1996, the Mexican government announced new
accords designed to encourage economic growth and reduce inflation. While it
cannot be accurately predicted whether these accords will continue to achieve
their objectives, the Mexican economy has stabilized since the economic crisis
of 1994, and the high inflation and high interest rates that continued to be a
factor after 1994 have subsided as well. After declining for five consecutive
quarters beginning with the first quarter of 1995, Mexico's gross domestic
product began to grow in the second quarter of 1996. That growth has been
57
<PAGE>
sustained, resulting in increases of 5.2%, 6.8%, 4.8% and 3.7% in 1996, 1997,
1998 and 1999, respectively. In addition, inflation dropped from a 52% annual
rate in 1995 to a 12.3% annual rate in 1999. Mexico's economy is influenced by
international economic conditions, particularly those in the United States, and
by world prices for oil and other commodities. The recovery of the economy will
require continued economic and fiscal discipline as well as stable political and
social conditions. In addition, there is no assurance that Mexico's economic
policy initiatives will be successful or that succeeding administrations will
continue these initiatives.
Under economic policy initiatives implemented on and after December 1987, the
Mexican government introduced a series of schedules allowing for the gradual
devaluation of the Mexican Peso against the U.S. Dollar. These gradual
devaluations continued until December 1994. On December 22, 1994, the Mexican
government announced that it would permit the Peso to float freely against other
currencies, resulting in a precipitous decline against the U.S. Dollar. By
December 31, 1996, the Peso-Dollar exchange rate had decreased approximately 40%
from that on December 22, 1994. After dropping approximately 55% from 1994
through 1996, from 1997 through 1999 the Peso-Dollar exchange rate decreased
approximately 20%.
Mexico has in the past imposed strict foreign exchange controls. There is no
assurance that future regulatory actions in Mexico would not affect the Fund's
ability to obtain U.S. Dollars in exchange for Mexican Pesos.
GENERAL INFORMATION ABOUT THE REPUBLIC OF ARGENTINA
The Republic of Argentina ("Argentina") consists of 23 provinces and the federal
capital of Buenos Aires. Its federal constitution provides for an executive
branch headed by a President, a legislative branch and a judicial branch. Each
province has its own constitution, and elects its own governor, legislators and
judges, without the intervention of the federal government.
Shortly after taking office in 1989, the country's then President adopted
market-oriented and reformist policies, including an aggressive privatization
program, a reduction in the size of the public sector and an opening of the
economy to international competition.
In the decade prior to the announcement of a new economic plan in March 1991,
the Argentine economy was characterized by low and erratic growth, declining
investment rates and rapidly worsening inflation. Despite its strengths, which
include a well-balanced natural resource base and a high literacy rate, the
Argentine economy failed to respond to a series of economic plans in the 1980's.
The 1991 economic plan represented a pronounced departure from its predecessors
in calling for raising revenues, cutting expenditures and reducing the public
deficit. The extensive privatization program commenced in 1989 was accelerated,
the domestic economy deregulated and opened up to foreign trade and the
frame-work for foreign investment reformed. As a result of the economic
stabilization reforms, inflation was brought under control and gross domestic
product has increased each year between 1991 and 1998, with the exception of
1995. During the first two quarters of 1999, however, gross domestic product
contracted by an estimated 3.0% and 4.9%, respectively. The recent slowdown of
economic activity, which has been attributed to external economic conditions as
well as internal political uncertainties and is not expected to persist, has
fostered a deflationary process, evidenced by the 1.8% decrease in the consumer
price index during the 12 months ended November 30, 1999. Significant progress
was also made between 1991 and 1994 in rescheduling Argentina's debt with both
external and domestic creditors, which improved fiscal cash flows in the medium
term and allowed a return to voluntary credit markets. There is no assurance
that Argentina's economic policy initiatives will be successful or that the
current President, who took office on December 10, 1999, and succeeding
administrations will continue these initiatives.
In 1995 economic policy was directed toward the effects of the Mexican currency
crisis. The Mexican currency crisis led to a run on Argentine bank deposits,
which was brought under control by a series of measures designed to strengthen
the financial system. The measures included the "dollarization" of banking
reserves, the establishment of two trust funds and strengthening bank reserve
requirements.
In 1991 the Argentine government enacted currency reforms, which required the
domestic currency to be fully backed by international reserves, in an effort to
make the Argentine Peso fully convertible into the U.S. Dollar at a rate of one
to one.
The Argentine Peso has been the Argentine currency since January 1, 1992. Since
that date, the rate of exchange from the Argentine Peso to the U.S. Dollar has
remained approximately one to one. The fixed exchange rate has been instrumental
in stabilizing the economy, but has not reduced pressures from high rates of
unemployment. It is not clear that the government will be able to resist
pressure to devalue the currency. However, the historic range is not necessarily
indicative of fluctuations that may occur in the exchange rate over time and
future rates of exchange cannot be accurately predicted. The Argentine foreign
exchange market was highly controlled until December 1989, when a free exchange
rate was established for all foreign currency transactions. Argentina has
eliminated restrictions on foreign direct investment and capital repatriation.
In 1993, legislation was adopted abolishing previous requirements of a
three-year waiting period for capital repatriation. Under the legislation,
foreign investors are permitted to remit profits at any time.
58
<PAGE>
For more information about the Funds, the following documents are available upon
request:
Annual/Semi-Annual Reports to Shareholders
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected a Fund's performance during its last fiscal year.
Statement of Additional Information (SAI)
Each Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Funds' SAIs are
incorporated by reference into (and is legally part of) this Prospectus.
You may request a free copy of the current annual/semi-annual report or the SAI,
or make inquiries concerning the Funds, by contacting your broker or other
financial intermediary, or by contacting Alliance:
By mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
By phone: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
o Call the Commision at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov
o Copies of the information may be obtained, after paying a duplicating fee,
by electronic request at [email protected], or by writing the
Commission's Public Reference Section, Wash. DC 20549-0102
You also may find more information about Alliance and the Funds on the Internet
at: www.Alliancecapital.com.
Fund SEC File No.
U.S. Government 811-02383
Limited Maturity Government 811-06627
Mortgage Securities Income 811-03829
Quality Bond 811-02383
Corporate Bond 811-02383
High Yield 811-9160
Global Strategic Income 811-07391
North American Government Income 811-06554
Global Dollar Government 811-08188
Multi-Market Strategy 811-06251
59
<PAGE>
================================================================================
ALLIANCE BOND FUNDS SUBSCRIPTION APPLICATION
================================================================================
U.S. Government Portfolio
Limited Maturity Government Fund
Mortgage Securities Income Fund
Quality Bond Portfolio
Corporate Bond Portfolio
High Yield Fund
Global Strategic Income Trust
North American Government Income Trust
Global Dollar Government Fund
Multi-Market Strategy Trust
To Open Your New Alliance Account...
Please complete the application and mail it to:
Alliance Fund Services
P.O. Box 786003
San Antonio, TX 78278-6003
For certified or overnight deliveries, send to:
Alliance Fund Services
8000 IH 10 W, Suite 1400
San Antonio, TX 78230
Section 1 Your Account Registration (Required)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
> Individuals, Joint Tenants, Transfer on Death and Gift/Transfer to a
Minor:
o Indicate your name(s) exactly as it appears on your social
security card.
> Transfer on Death:
o Ensure that your state participates
> Trust/Other:
o Indicate the name of the entity exactly as it appeared on the
notice you received from the IRS when your Employer
Identification number was assigned.
Section 2 Your Address (Required)
Complete in full.
> Non-Resident Alien:
o Indicate your permanent country of residence.
Section 3 Your Initial Investment (Required)
For each fund in which you are investing: (1) Write the three digit fund number
in the column titled 'Indicate three digit fund number located below'.
(2) Write the dollar amount of your initial purchase in the column titled
'Indicate Dollar Amount'.
(If you are eligible for a reduced sales charge, you must also complete Section
4F). AE Check off a distribution option for your dividends. 0 Check off a
distribution option for your capital gains. All distributions (dividends and
capital gains) will be reinvested into your fund account unless you direct
otherwise. If you want distributions sent directly to your bank account, then
you must complete Section 4D and attach a preprinted, voided check for that
account. If you want your distributions sent to a third party you must complete
Section 4E.
Section 4 Your Shareholder Options
(Complete only those options you want)
A. Automatic Investment Plans (AIP) - You can make periodic investments into any
of your Alliance Funds in one of three ways. First, by a periodic withdrawal
($25 minimum) directly from your bank account and invested into an Alliance
Fund. Second, you can direct your distributions (dividends and capital gains)
from one Alliance Fund into another Fund. Or third, you can automatically
exchange monthly ($25 minimum) shares of one Alliance Fund for shares of another
Fund. To elect one of these options, complete the appropriate portion of Section
4A & 4D. If more than one dividend direction or monthly exchange is desired,
please call our Literature Center to obtain a Shareholder Account Services
Options Form for completion.
B. Telephone Transactions via EFT - Complete this option if you would like to be
able to transact via telephone between your fund account and your bank account.
C. Systematic Withdrawal Plans (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be made
via Electronic Funds Transfer (EFT) to your bank account or by check.
D. Bank Information - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a preprinted, voided check of the account you wish to use to this
section of the application.
E. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person and/or
address other than those provided in section 1 or 2, complete this option.
Medallion Signature Guarantee is required if your account is not maintained by a
broker dealer.
F. Reduced Charges (Class A only) - Complete if you would like to link fund
accounts that have combined balances that might exceed $100,000 so that future
purchases will receive discounts. Complete if you intend to purchase over
$100,000 within 13 months.
Section 5 Shareholder Authorization (Required) All owners must sign. If it is a
custodial, corporate, or trust account, the custodian, an authorized officer, or
the trustee respectively must sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At: (800)
221-5672
Or Visit Our Website At: www.alliancecapital.com
================================================================================
For Literature Call: (800) 227-4618
================================================================================
<PAGE>
The Alliance Bond Funds Subscription Application
================================================================================
1. Your Account Registration (Please Print in Capital Letters and Mark
Check Boxes Where Applicable)
================================================================================
|_| Individual Account { |_| Male |_| Female } - or - |_| Joint Account - or -
|_| Transfer on Death { |_| Male |_| Female } - or - |_| Gift/Transfer to a
Minor
o For TOD accounts, please check
Individuals or Joint Account and attach additional sheet of paper if necessary
|_||_||_||_||_||_||_||_||_||_| |_| |_||_||_||_||_||_||_||_||_||_|
Owner or Custodian (First Name) (MI) (Last Name)
|_||_||_||_||_||_||_||_||_||_| |_| |_||_||_||_||_||_||_||_||_||_|
(First Name) Joint Owner*, (MI) (Last Name)
Transfer On Death Beneficiary
or Minor
|_||_||_| - |_||_| - |_||_||_||_| If Uniform Gift/Transfer to
Social Security Number of Owner Minor Account:
or Minor (required to open account) |_||_| Minor's State of
Residence
If Joint Tenants Account: * The Account
will be registered "Joint Tenants with
right of Survivorship" unless you indicate
otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust - or - |_| Corporation - or - |_| Other______________________________
|_||_||_||_||_||_||_||_||_||_| |_| |_||_||_||_||_||_||_||_||_||_|
Name of Trustee if applicable (MI) (Last Name)
(First Name)
|_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_|
Name of Trust or Corporation or Other Entity
|_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_|
Name of Trust or Corporation or Other Entity continued
|_||_||_||_||_||_||_||_| |_||_||_||_||_||_||_||_||_|
Trust Dated (MM,DD,YYYY) Tax ID Number (required to open account)
|_| Employer ID Number - OR - |_| Social Security
Number
================================================================================
2. Your Address
================================================================================
|_||_||_||_||_||_||_| |_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_|
Street Number Street Name
|_||_||_||_||_||_||_||_||_||_||_||_| |_||_| |_||_||_||_||_|
City State Zip code
|_||_||_||_||_||_||_||_||_| |_||_||_| - |_||_||_| - |_||_||_||_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
----------------------------------------
----------------------------------------
e-mail address
1
<PAGE>
================================================================================
3. Your Initial Investment The minimum investment is $250 per fund.
The maximum investment in Class B is $250,000;
Class C is $1,000,000.
================================================================================
I hereby subscribe for shares of the Alliance Special Equity Institutional Fund
and elect distribution options as indicated.
Dividend and Capital Gain Distribution
Options:
R Reinvest distributions into my fund
account.
- --------------------------------------
Broker/Dealer Use Only: Wire Confirm # C Send my distributions in cash to the
address I have provided in Section
|_||_||_||_||_||_||_||_| 2. (Complete Section 4D for direct
- -------------------------------------- deposit to your bank account.
Complete Section 4E for payment to a
third party)
D Direct my distributions to another
Alliance fund. Complete the
appropriate portion of Section 4A to
direct your distributions (dividends
and capital gains) to another
Alliance Fund (the $250 minimum
investment requirement applies to
Funds into which distributions are
directed.
- ----------- -------------- ---------------------- --------------------------
Distributions Options
*Check One*
Indicate three --------------------------
digit Fund --------- --------------
number located Indicate Dollar Amount Dividends Capital Gains
Make all below R C D R C D
checks* -------------- ---------------------- --------- --------------
payable to: |_||_||_| $_____________________ |R||C||D| |R||C||D|
Alliance |_||_||_| $_____________________ |R||C||D| |R||C||D|
Funds |_||_||_| $_____________________ |R||C||D| |R||C||D|
$_____________________ |R||C||D| |R||C||D|
Cash and
Money
Orders are
not accepted
- -----------
- -------------------------
Total Investment $_____________________
- -------------------------
================================================================================
Alliance Bond fund Names and Numbers
================================================================================
For checkwriting privileges, please send the enclosed signature card with your
application. Checkwriting is offered on Class A and Class C shares only, and is
not offered on Corporate Bond Portfolio and High Yield Fund. A Medallion
Signature Guarantee is required if your account is not maintained by a
broker/dealer. For Class C shares, checkwriting may result in the imposition of
a contingent deferred sales charge against your account. The minimum amount for
checkwriting is $500.
<TABLE>
<CAPTION>
------------ ------------------- ------------
Initial Contingent Deferred Asset-Based
Sales Charge Sales Charge Sales Charge
A B C
------------ ------------------- ------------
<S> <C> <C> <C> <C>
- -------------------
U.S. Government Portfolio 46 76 346
----------------------------------------------------------------------------------------
Investment Limited Maturity Government Fund 88 89 388
----------------------------------------------------------------------------------------
Grade Mortgage Securities Income Fund 52 63 352
-----------------------------------------------------------------------------------------
Quality Bond Portfolio 104 204 304
- -------------------
Corporate Bond Corporate Bond Portfolio 95 295 395
----------------------------------------------------------------------------------------
Funds High Yield Fund 103 203 303
- -------------------
- -------------------
Multi-Sector Fund Global Strategic Income Trust 124 224 324
- -------------------
North American Government Income Trust 55 56 355
Global Bond ----------------------------------------------------------------------------------------
Global Dollar Government Fund 166 266 366
Funds ----------------------------------------------------------------------------------------
Multi-Market Strategy Trust 22 23 322
----------------------------------------------------------------------------------------
- -------------------
</TABLE>
2
<PAGE>
================================================================================
4. Your Shareholder Options
================================================================================
A. Automatic Investment Plans (AIP) - Periodic Purchases
|_| Withdraw From My Bank Account Via EFT*
I authorize Alliance to draw on my bank account for investment in my
Fund account as indicated below (Complete Section 4D also for the
bank account you wish to use).
1- |_||_||_| |_||_||_||_| |_||_|,|_||_||_|.00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
2- |_||_||_| |_||_||_||_| |_||_|,|_||_||_|.00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
3- |_||_||_| |_||_||_||_| |_||_|,|_||_||_|.00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
M = monthly
Q = quarterly
A = annually
* Electronic Funds Transfer. Your bank must be a member of the National
Automated Clearing House Association (NACHA)
|_| Direct My Distributions
As indicated in Section 3, I would like my dividends and/or capital gains
directed to the same class of shares of another Alliance Fund.
FROM: |_||_||_| |_||_||_||_||_||_||_||_||_| - |_|
Fund Class Number Account Number (If existing)
TO: |_||_||_| |_||_||_||_||_||_||_||_||_| - |_|
Fund Number Account Number (If existing)
|_| Exchange My Shares Monthly
I authorize Alliance to transact monthly exchanges, within the same class
of shares, between my fund accounts as listed below.
FROM: |_||_||_| |_||_||_||_||_||_||_||_||_| - |_|
Fund Number Account Number (If existing)
|_||_|,|_||_||_|.00 |_||_|
Amount ($25 minimum) Day of Exchange**
TO: |_||_||_| |_||_||_||_||_||_||_||_||_| - |_|
Fund Number Account Number (If existing)
** Shares exchanged will be redeemed at the net asset value on the "Day
of Exchange" (If the "Day of Exchange" is not a fund business day,
the exchange transaction will be processed on the next fund business
day). The exchange privilege is not available if stock certificates
have been issued.
B. Purchases and Redemptions Via EFT
You can call our toll-free number 1-800-221-5672 and instruct Alliance
Fund Services, Inc. in a recorded conversation to purchase, redeem or
exchange shares for your account. Purchase and redemption requests will be
processed via electronic funds transfer (EFT) to and from your bank
account.
Instructions: > Review the information in the Prospectus about telephone
transaction services.
> If you select the telephone purchase or redemption
privilege, you must write "VOID" across the face of a
check from the bank account you wish to use and attach it
to Section 4D of this application.
|_| Purchases and Redemptions via EFT
I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected.
================================================================================
For shares recently purchased by check or electronic funds transfer
redemption proceeds will not be made available until the Fund is
reasonably assured the check or electronic funds transfer has been
collected, normally 15 calendar days after the purchase date.
================================================================================
3
<PAGE>
================================================================================
4. Your Shareholder Options (CONTINUED)
================================================================================
C. Systematic Withdrawal Plans (SWP) - Periodic Redemptions
In order to establish a SWP, you must reinvest all dividends and capital gains.
|_| I authorize Alliance to transact periodic redemptions from my Fund account
and send the proceeds to me as indicated below.
1- |_||_||_| |_||_||_||_| |_||_|,|_||_||_|.00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
2- |_||_||_| |_||_||_||_| |_||_|,|_||_||_|.00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
3- |_||_||_| |_||_||_||_| |_||_|,|_||_||_|.00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
M = monthly
Q = quarterly
A = annually
Please send my SWP proceeds to:
|_| My Address of Record (via check)
|_| The Payee and address specified in section 4E (via check) (Medallion
Signature Guarantee required)
|_| My checking account-via EFT (complete section 4D) Your bank must be a
member of the National Automated Clearing House Association (NACHA) in
order for you to receive SWP proceeds directly into your bank account.
Otherwise payment will be made by check
D. Bank Information This bank account information will be used for:
|_| Distributions (Section 3) |_| Telephone Transactions
(Section 4B)
|_| Automatic Investments |_| Withdrawals (Section 4C)
(Section 4A)
================================================================================
Please Tape a Pre-printed Voided Check Here*
================================================================================
[GRAPHIC OF VOIDED CHECK OMITTED]
* The above services cannot be established without a pre-printed voided check.
For EFT transactions, the fund requires signatures of bank account owners
exactly as they appear on bank records. If the registration at the bank differs
from that on the Alliance mutual fund, all parties must sign in Section 5.
|_||_||_||_||_||_||_||_||_| |_||_||_||_||_||_||_||_||_||_||_||_||_|
Your Bank's ABA Routing Number Your Bank Account Number
|_| Checking Account |_| Savings Account
4
<PAGE>
================================================================================
4. Your Shareholder Options (CONTINUED)
================================================================================
E. Third Party Payment Details Your signature(s) in Section 5 must be
Medallion Signature Guaranteed if your account is not maintained by a
broker/dealer. This third party payee information will be used for:
|_| Distributions (Section 3) |_| Systematic
Withdrawals
(Section 4C)
|_||_||_||_||_||_||_||_||_||_| |_| |_||_||_||_||_||_||_||_||_||_|
Name (First Name) (MI) (Last Name)
|_||_||_||_||_||_||_| |_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_||_|
Street Number Street Name
|_||_||_||_||_||_||_||_||_||_||_||_| |_||_| |_||_||_||_||_|
City State Zip code
F. Reduced Charges (Class A only) If you, your spouse or minor children own
shares in other Alliance funds, you may be eligible for a reduced sales
charge. Please complete the Right of Accumulation section or the Statement
of Intent section.
|_| A. Right of Accumulation
Please link the tax identification numbers or account numbers listed
below for Right of Accumulation privileges, so that this and future
purchases will receive any discount for which they are eligible.
________________________ ________________________ ________________________
Tax ID or Account Number Tax ID or Account Number Tax ID or Account Number
|_| B. Statement of Intent
I want to reduce my sales charge by agreeing to invest the following
amount over a 13-month period.
|_| $100,000 |_| $250,000 |_| $500,000 |_| $1,000,000
If the full amount indicated is not purchased within 13 months, I
understand that an additional sales charge must be paid from my
account.
================================================================================
Dealer/Agent Authorization - For selected Dealers or Agents ONLY.
================================================================================
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 5, as well as the legal capacity of the
shareholder.
_________________________________ ____________________________
| | | |
|_________________________________| |____________________________|
Dealer/Agent Firm Authorized Signature
____________________________ _ ____________________________
| | | | | |
|____________________________| |_| |____________________________|
Representative First Name MI Last Name
_________________________________ ____________________________
| | | |
|_________________________________| |____________________________|
Dealer/Agent Firm Number Representative Number
_________________________________ ____________________________
| | | |
|_________________________________| |____________________________|
Branch Number Branch Telephone Number
__________________________________________________________________
| |
|__________________________________________________________________|
Branch Office Address
_________________________________ _ _ _____________________
| | | || | | |
|_________________________________| |_||_| |_____________________|
City State Zip Code
5
<PAGE>
================================================================================
5. Shareholder Authorization -- This section MUST be completed
================================================================================
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of an investment dealer or agent requesting a
redemption or exchange on my behalf. (NOTE: Telephone exchanges may only
be processed between accounts that have identical registrations.)
Telephone redemption checks will only be mailed to the name and address of
record; and the address must not have changed within the last 30 days. The
maximum telephone redemption amount is $50,000.
|_| I do not elect the telephone exchange service
|_| I do not elect the telephone redemption by check service
By selecting any of the above telephone privileges, I agree that neither
the Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund
Services, Inc. or other Fund Agent will be liable for any loss, injury,
damage or expense as a result of acting upon telephone instructions
purporting to be on my behalf, that the Fund reasonably believes to be
genuine, and that neither the Fund nor any such party will be responsible
for the authenticity of such telephone instructions. I understand that any
or all of these privileges may be discontinued by me or the Fund at any
time. I understand and agree that the Fund reserves the right to refuse
any telephone instructions and that my investment dealer or agent reserves
the right to refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the
best of my knowledge and belief, I qualify as a foreign person as
indicated in Section 2.
I am of legal age and capacity and have received and read the Prospectus
and agree to its terms.
I certify under penalty of perjury that the number shown in Section 1 of
this form is my correct tax identification number or I am waiting for a
number to be issued to me and that I have not been notified that this
account is subject to backup withholding.
The Internal Revenue Service does not require your consent to any
provision of this document other than the certification required to avoid
backup withholding.
_______________________________________________________ ______
| | | |
|_______________________________________________________| |______|
Signature Date
_______________________________________________________ ______
| | | |
|_______________________________________________________| |______|
Signature Date
__________________________________________
Medallion Signature Guarantee required if
completing Section 4E and your mutual fund
is not maintained by a broker dealer
Alliance Capital [LOGO](R)
The Investment Professional's Choice
BONDPRO300
6
<PAGE>
================================================================================
Signature Card
================================================================================
Alliance Capital [LOGO](R)
The Investment Professional's Choice
Medallion Signature Guarantee (see reverse)
----------------
Dealer/Bank Name:...................................... *Information
Necessary to
Fund Acct. No.:*....................................... Complete Request
----------------
Fund Name:*............................................
Account Name(s) as Registered:
................................................................................
................................................................................
Shareholder Address:
................................................................................
................................................................................
Social Security or Tax Identification Number:*
................................................................................
Authorized Signatures:
1...............................................................................
2...............................................................................
3...............................................................................
Joint Accounts check one: |_| Either owner is authorized to sign Redemption
Checks
|_| All owners are required to sign Redemption
Checks
(If no box is checked, only one signature will be
required.)
Checkbooks are not transferable to other accounts. If you change account
numbers, change funds or change of ownership you must reapply for check-writing.
STATE STREET BANK AND TRUST COMPANY Subject to conditions on reverse side.
================================================================================
Signature Card
================================================================================
The payment of funds is authorized by the signature(s) appearing on the reverse
side. Each signatory guarantees the genuineness of the other signatures.
State Street Bank and Trust Company (the "Bank") is hereby appointed agent by
the person(s) signing this card (the "Depositor(s)") and, as agent, is
authorized and directed, upon presentment of checks to the Bank.
(1) if pertaining to an Alliance deposit account (the "Account") - to
direct Alliance, which as the Depositor's agent and nominee
maintains such Account on the Depositors behalf at one or more
depository institutions, to withdraw funds from the Account in the
amounts of such checks for deposit in this checking account.
Alliance hereby appointed the Depositor's agent and, where
appropriate, messenger for the purpose of effecting such
withdrawals.
(2) if pertaining to an Alliance Mutual Fund (the "Fund") - to transmit
such checks to the Fund or its transfer agent as requests to redeem
shares registered in the name of the Depositor(s) in the amounts of
such checks for deposit in this checking account.
This checking arrangement is subject to the applicable terms and restrictions,
including charges, set forth in the current Prospectus or Statement of
Additional Information for each Alliance mutual fund or deposit account as to
which the Depositor has arranged to redeem shares or withdraw funds by
check-writing. The Bank is further authorized to effect withdrawals or
redemptions to defray the Bank's charges relating to this checking arrangement.
The Depositor(s) agrees that he shall be subject to the rules and regulations of
the Bank pertaining to this checking arrangement as amended from time to time,
that the Bank has the right not to honor checks which do not meet the Banks
normal standards for checks presented to it, that the Bank and Alliance have the
right to change, modify or terminate this check-writing service at any time; and
that the Bank shall be liable only for its own negligence.
Medallion Signature Guarantee - Signatures must be guaranteed by an institution
that is an "eligible guarantor" as defined in Rule 17 Ad-15 of the Securities
Exchange Act of 1934. This would include such institutions such as banks and
brokerage firms.
Send this card with any necessary authorizing documentation to:
Alliance Fund Services
Attn: Checkwriting Department
P.O. Box 786003
San Antonio, TX 78278-6003
00250117.BB8
