<PAGE>
As filed with the Securities and Exchange
Commission on October 30, 1998
File Nos. 33-84270
811-8776
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 10 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 8 X
ALLIANCE ALL-ASIA INVESTMENT FUND, INC.
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:
(800) 221-5672
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
It is proposed that this filing will become effective (check
appropriate box)
X immediately upon filing pursuant to paragraph (b)
_____on (date) pursuant to paragraph (b)
_____60 days after filing pursuant to paragraph (a)(1)
_____on (date) pursuant to paragraph (a)(1)
_____75 days after filing pursuant to paragraph (a)(2)
_____on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
<PAGE>
_____ This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
Registrant has registered an indefinite number of shares of
common stock pursuant to Rule 24f-2 under the Investment Company
Act of 1940. Registrants filed a notice pursuant to such Rule
for its fiscal year ended October 31, 1997 on January 20,
1998.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-1A Item No. Location in
Prospectus
(Caption)
PART A
Item 1. Cover Page....................... Cover Page
Item 2. Synopsis......................... Alliance at a Glance
Item 3. Condensed Financial Information.. Not Applicable
Item 4. General Description of Registrant Description of
the Fund; General
Information
Item 5. Management of the Fund .......... Management of the
Fund; General
Information
Item 6. Capital Stock and Other
Securities.................... Dividends,
Distributions and
Taxes; General
Information
Item 7. Purchase of Securities Being
Offered....................... Purchase and Sale of
Shares; General
Information
Item 8. Redemption or Repurchase......... Purchase and Sale of
Shares; General
Information
Item 9. Pending Legal Proceedings........ Not Applicable
Location in
Statement of
Additional
PART B Information
Item 10. Cover Page....................... Cover Page
Item 11. Table of Contents................ Cover Page
<PAGE>
Location in
Statement of
Additional
PART B Information
(continued)
Item 12. General Information and History.. Management of the
Fund; General
Information
Item 13. Investment Objectives and
Policies...................... Description of the
Fund
Item 14. Management of the Registrant..... Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities......... Not Applicable
Item 16. Investment Advisory and Other
Services...................... Management of the Fund
Item 17. Brokerage Allocation and Other
Practices..................... Brokerage and
Portfolio Transactions
Item 18. Capital Stock and Other
Securities.................... General Information
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered... Purchase of Shares;
Redemption and
Repurchase of Shares;
Dividends,
Distributions and
Taxes
Item 20. Tax Status ...................... Investment Policies
and Restrictions;
Dividends,
Distributions and
Taxes
Item 21. Underwriters..................... General Information
Item 22. Calculation of Performance Data.. General Information
Item 23. Financial Statements............. Financial Statements
<PAGE>
<PAGE>
THE ALLIANCE
- --------------------------------------------------------------------------------
STOCK FUNDS
- --------------------------------------------------------------------------------
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
November 2, 1998
Domestic Stock Funds Global Stock Funds
- -The Alliance Fund -Alliance International Fund
-Alliance International
Premier Growth Fund
- -Alliance Growth Fund -Alliance Worldwide Privatization Fund
- -Alliance Premier Growth Fund -Alliance New Europe Fund
- -Alliance Technology Fund -Alliance All-Asia Investment Fund
-Alliance Greater China '97
Fund
- -Alliance Quasar Fund -Alliance Global Small Cap Fund
-Alliance Global Environment Fund
Total Return Funds
-Alliance Balanced Shares
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
-Alliance Real Estate Investment Fund
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Funds at a Glance ..................................................... 2
Expense Information ....................................................... 4
Financial Highlights ...................................................... 7
Glossary .................................................................. 19
Description of the Funds .................................................. 20
Investment Objectives and Policies ..................................... 20
Additional Investment Practices ........................................ 32
Certain Fundamental Investment Policies ................................ 40
Risk Considerations .................................................... 42
Purchase and Sale of Shares ............................................... 49
Management of the Funds ................................................... 52
Dividends, Distributions and Taxes ........................................ 57
General Information ....................................................... 58
</TABLE>
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
Each Fund offers three classes of shares through this Prospectus. These shares
may be purchased, at the investor's choice, at a price equal to their net asset
value (i) plus an initial sales charge imposed at the time of purchase (the
"Class A shares"), (ii) with a contingent deferred sales charge imposed on most
redemptions made within four years of purchase (the "Class B shares"), or (iii)
without any initial or contingent deferred sales charge, as long as the shares
are held for one year or more (the "Class C shares"). See "Purchase and Sale of
Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO]Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 120 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $262
billion in assets under management as of June 30, 1998. Alliance provides
investment management services to employee benefit plans for 32 of the FORTUNE
100 companies.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40-50 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
International Premier Growth Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A diversified portfolio of equity securities of a
limited number of large, carefully selected, high-quality non-U.S. companies
that are judged likely to achieve superior earnings growth.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Greater China '97 Fund
Seeks . . . Long-term capital appreciation.
Invests Prinicpally in . . . A non-diversified portfolio of equity securities of
Greater China companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
Global Environment Fund
Seeks . . . Long-term capital appreciation.
2
<PAGE>
Invests Principally in . . . A non-diversified portfolio of equity securities of
companies expected to benefit from advances or improvements in products,
processes or services intended to foster the protection of the environment.
Total Return Funds
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
Real Estate Investment Fund
Seeks . . . Total return on its assets from long-term growth of capital and from
income.
Invests Principally in . . . A diversified portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Distributions . . .
Balanced Shares, Utility Income Fund, Growth and Income Fund and Real Estate
Investment Fund intend to make distributions quarterly to shareholders. These
distributions may include ordinary income and capital gain (each of which is
taxable) and a return of capital (which is generally non-taxable). See
"Dividends, Distributions and Taxes."
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. An investment in the Real Estate
Investment Fund is subject to certain risks associated with the direct ownership
of real estate in general, including possible declines in the value of real
estate, general and local economic conditions, environmental problems and
changes in interest rates. Investments by Greater China '97 Fund in Greater
China companies entail certain risks which are different from, and in certain
cases, greater than, risks associated with investments in other international
markets. These risks are fully discussed in this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative and most
banks, insurance companies and brokerage firms nationwide. Shares can be
purchased for a minimum initial investment of $250, and subsequent investments
can be made for as little as $50. For detailed information about purchasing and
selling shares, see "Purchase and Sale of Shares." In addition, the Funds offer
several time and money saving services to investors. Be sure to ask your
financial representative about:
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AUTOMATIC REINVESTMENT
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AUTOMATIC INVESTMENT PROGRAM
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RETIREMENT PLANS
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SHAREHOLDER COMMUNICATIONS
- --------------------------------------------------------------------------------
DIVIDEND DIRECTION PLANS
- --------------------------------------------------------------------------------
AUTO EXCHANGE
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
- --------------------------------------------------------------------------------
A CHOICE OF PURCHASE PLANS
- --------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
24-HOUR INFORMATION
- --------------------------------------------------------------------------------
[LOGO]Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in a Fund and annual expenses for each class of shares of each
Fund. For each Fund, the "Examples" to the right of the table below show the
cumulative expenses attributable to a hypothetical $1,000 investment in each
class for the periods specified.
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum sales charge imposed on purchases (as a percentage of
offering price) ................................................. 4.25%(a) None None
Sales charge imposed on dividend reinvestments .................. None None None
Deferred sales charge (as a
percentage of original purchase
price or redemption proceeds,
whichever is lower) ............................................. None(a) 4.0% 1.0%
during the during the
first year, first year,
decreasing 1.0% 0% thereafter
annually to 0%
after the
fourth year (b)
Exchange fee .................................................... None None None
</TABLE>
- --------------------------------------------------------------------------------
(a) Reduced for larger purchases. Purchases of $1,000,000 or more are not
subject to an initial sales charge but may be subject to a 1% deferred
sales charge on redemptions within one year of purchase. See "Purchase and
Sale of Shares-How to Buy Shares".
(b) Class B shares of each Fund automatically convert to Class A after eight
years. See "Purchase and Sale of Shares-How to Buy Shares."
<TABLE>
<CAPTION>
Operating Expenses Examples
- --------------------------------------------------------- -------------------------------------------------------------
Alliance Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .68% .68% .68% After 1 year $ 53 $ 59 $ 19 $ 29 $ 19
12b-1 fees .20% 1.00% 1.00% After 3 years $ 74 $ 78 $ 58 $ 58 $ 58
Other expenses (a) .15% .17% .15% After 5 years $ 97 $100 $100 $ 99 $ 99
---- ---- ---- After 10 years $163 $195(b) $195(b) $215 $215
Total fund
operating expenses 1.03% 1.85% 1.83%
==== ==== ====
<CAPTION>
Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .74% .74% .74% After 1 year $ 55 $ 60 $ 20 $ 30 $ 20
12b-1 fees .30% 1.00% 1.00% After 3 years $ 81 $ 82 $ 62 $ 62 $ 62
Other expenses (a) .22% .22% .23% After 5 years $109 $106 $106 $106 $106
---- ---- ---- After 10 years $188 $210(b) $210(b) $230 $230
Total fund
operating expenses 1.26% 1.96% 1.97%
==== ==== ====
<CAPTION>
Premier Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 58 $ 63 $ 23 $ 33 $ 23
12b-1 fees .33% 1.00% 1.00% After 3 years $ 90 $ 90 $ 70 $ 70 $ 70
Other expenses (a) .24% .25% .24% After 5 years $124 $120 $120 $120 $120
---- ---- ---- After 10 years $221 $241(b) $241(b) $257 $257
Total fund
operating expenses 1.57% 2.25% 2.24%
==== ==== ====
<CAPTION>
Technology Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (f) 1.04% 1.04% 1.04% After 1 year $ 59 $ 64 $ 24 $ 34 $ 24
12b-1 fees .30% 1.00% 1.00% After 3 years $ 93 $ 94 $ 74 $ 74 $ 74
Other expenses (a) .33% .34% .34% After 5 years $129 $127 $127 $127 $127
---- ---- ---- After 10 years $232 $254(b) $254(b) $272 $272
Total fund
operating expenses 1.67% 2.38% 2.38%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 6.
4
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Operating Expenses Examples
- --------------------------------------------------------- -------------------------------------------------------------
Quasar Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (f) 1.16% 1.16% 1.16% After 1 year $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .22% 1.00% 1.00% After 3 years $ 93 $ 98 $ 78 $ 78 $ 78
Other expenses (a) .29% .35% .34% After 5 years $129 $134 $134 $133 $133
---- ---- ---- After 10 years $232 $264(b) $264(b) $284 $284
Total fund
operating expenses 1.67% 2.51% 2.50%
==== ==== ====
<CAPTION>
International Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees
(after waiver) (c)(f) .85% .85% .85% After 1 year $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .21% 1.00% 1.00% After 3 years $ 92 $ 98 $ 78 $ 77 $ 77
Other expenses (a) .59% .64% .63% After 5 years $128 $133 $133 $132 $132
---- ---- ---- After 10 years $230 $262(b) $262(b) $282 $282
Total fund
operating expenses (d) 1.65% 2.49% 2.48%
==== ==== ====
<CAPTION>
International Premier
Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 67 $ 72 $ 32 $ 42 $ 32
12b-1 fees .30% 1.00% 1.00% After 3 years $117 $119 $ 99 $ 99 $ 99
Other expenses (a) 1.20% 1.20% 1.20% After 5 years $170 $167 $167 $167 $167
---- ---- ---- After 10 years $314 $334(b) $334(b) $350 $350
Total fund
operating expenses (d) 2.50% 3.20% 3.20%
==== ==== ====
<CAPTION>
Worldwide Privatization Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 95 $ 96 $ 76 $ 76 $ 76
Other expenses (a) .43% .45% .44% After 5 years $132 $131 $131 $130 $130
---- ---- ---- After 10 years $238 $261(b) $261(b) $278 $278
Total fund
operating expenses 1.73% 2.45% 2.44%
==== ==== ====
<CAPTION>
New Europe Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.02% 1.02% 1.02% After 1 year $ 60 $ 66 $ 26 $ 36 $ 26
12b-1 fees .30% 1.00% 1.00% After 3 years $ 98 $ 99 $ 79 $ 79 $ 79
Other expenses (a) .52% .52% .52% After 5 years $138 $135 $135 $135 $135
---- ---- ---- After 10 years $249 $270(b) $270(b) $288 $288
Total fund
operating expenses 1.84% 2.54% 2.54%
==== ==== ====
<CAPTION>
All-Asia Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees After 1 year $ 63 $ 68 $ 28 $ 38 $ 28
(after waiver) (c) .65% .65% .65% After 3 years $104 $106 $ 86 $ 86 $ 86
12b-1 fees .30% 1.00% 1.00% After 5 years $149 $146 $146 $146 $146
Other expenses After 10 years $271 $293(b) $293(b) $310 $310
Administration fees
(after waiver) (e) .00% .00% .00%
Other operating
expenses (a) 1.11% 1.12% 1.12%
---- ---- ----
Total fund
operating expenses (d) 2.06% 2.77% 2.77%
==== ==== ====
<CAPTION>
Greater China '97 Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 67 $ 72 $ 32 $ 42 $ 32
12b-1 fees .30% 1.00% 1.00% After 3 years $117 $119 $ 99 $ 99 $ 99
Other expenses (a) 1.20% 1.20% 1.20% After 5 years $170 $167 $167 $167 $167
---- ---- ---- After 10 years $314 $334(b) $334(b) $350 $350
Total fund
operating expenses 2.50% 3.20% 3.20%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 6.
5
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Operating Expenses Examples
- -------------------------------------------------------- -------------------------------------------------------------
Global Small Cap Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 63 $ 69 $ 29 $ 39 $ 29
12b-1 fees .30% 1.00% 1.00% After 3 years $107 $109 $ 89 $ 88 $ 88
Other expenses (a) .84% .86% .85% After 5 years $153 $151 $151 $150 $150
---- ---- ---- After 10 years $279 $301(b) $301(b) $318 $318
Total fund
operating expenses 2.14% 2.86% 2.85%
==== ==== ====
<CAPTION>
Global Environment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.10% 1.10% 1.10% After 1 year $ 69 $ 74 $ 34 $ 44 $ 34
12b-1 fees .30% 1.00% 1.00% After 3 years $122 $123 $103 $104 $104
Other expenses (a) 1.29% 1.26% 1.29% After 5 years $179 $175 $175 $176 $176
---- ---- ---- After 10 years $332 $350(b) $350(b) $368 $368
Total fund
operating expenses 2.69% 3.36% 3.39%
==== ==== ====
<CAPTION>
Balanced Shares Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .63% .63% .63% After 1 year $ 55 $ 61 $ 21 $ 31 $ 21
12b-1 fees .24% 1.00% 1.00% After 3 years $ 82 $ 84 $ 64 $ 64 $ 64
Other expenses (a) .42% .42% .41% After 5 years $110 $110 $110 $110 $110
---- ---- ---- After 10 years $192 $218(b) $218(b) $237 $237
Total fund
operating expenses 1.29% 2.05% 2.04%
==== ==== ====
<CAPTION>
Utility Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.00% 0.00% 0.00% After 1 year $ 57 $ 62 $ 22 $ 32 $ 22
(after waiver) (c) After 3 years $ 88 $ 89 $ 69 $ 69 $ 69
12b-1 fees .30% 1.00% 1.00% After 5 years $121 $118 $118 $118 $118
Other expenses (a) 1.20% 1.20% 1.20% After 10 years $214 $236(b) $236(b) $253 $253
---- ---- ----
Total fund
operating expenses (d) 1.50% 2.20% 2.20%
==== ==== ====
<CAPTION>
Growth and Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .49% .49% .49% After 1 year $ 51 $ 57 $ 17 $ 27 $ 17
12b-1 fees .22% 1.00% 1.00% After 3 years $ 71 $ 74 $ 54 $ 54 $ 54
Other expenses (a) .21% .23% .22% After 5 years $ 91 $ 93 $ 93 $ 93 $ 93
---- ---- ---- After 10 years $151 $182(b) $182(b) $202 $202
Total fund
operating expenses .92% 1.72% 1.71%
==== ==== ====
<CAPTION>
Real Estate Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .90% .90% .90% After 1 year $ 58 $ 63 $ 23 $ 33 $ 23
12b-1 fees .30% 1.00% 1.00% After 3 years $ 89 $ 91 $ 71 $ 71 $ 71
Other expenses (a) .35% .36% .36% After 5 years $123 $121 $121 $121 $121
---- ---- ---- After 10 years $219 $242(b) $242(b) $260 $260
Total fund
operating expenses 1.55% 2.26% 2.26%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period.
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance. The expenses shown reflect the
application of credits that reduce Fund expenses.
(b) Assumes Class B shares converted to Class A shares after eight years.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be .75% for Utility Income Fund, 1.00% for All-Asia Investment Fund
and 1.00% for International Fund.
(d) Net of voluntary fee waivers and expense reimbursements. Absent such
waivers and/or reimbursements, total fund annualized operating expenses
would have been as follows:
All-Asia Investment Fund Greater China '97 Fund
Class A 2.56% Class A 18.27%
Class B 3.27% Class B 19.18%
Class C 3.27% Class C 19.37%
International Fund International Premier Growth Fund
Class A 1.80% Class A 6.40%
Class B 2.64% Class B 7.05%
Class C 2.63% Class C 6.70%
Utility Income Fund
Class A 3.55%
Class B 4.28%
Class C 4.28%
(e) Net of voluntary fee waiver. Absent such fee waiver, administration fees
would have been .15% for the Fund's Class A, Class B and Class C shares.
Reflects the fees payable by All-Asia Investment Fund to Alliance pursuant
to an administration agreement.
(f) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for each of International Fund,
Quasar Fund and Technology Fund.
6
<PAGE>
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. Long-term shareholders of a Fund may pay aggregate sales charges
totaling more than the economic equivalent of the maximum initial sales charges
permitted by the Conduct Rules of the National Association of Securities
Dealers, Inc. See "Management of the Funds--Distribution Services Agreements."
The Rule 12b-1 fee for each class comprises a service fee not exceeding .25% of
the aggregate average daily net assets of the Fund attributable to the class and
an asset-based sales charge equal to the remaining portion of the Rule 12b-1
fee. "Management fees" for All-Asia Investment Fund and "Administration fees"
for All-Asia Investment Fund have been restated to reflect current voluntary fee
waivers. "Other Expenses" for Global Environment Fund and International Premier
Growth are based on estimated amounts for its current fiscal year. The Examples
set forth above assume reinvestment of all dividends and distributions and
utilize a 5% annual rate of return as mandated by Commission regulations. The
Examples should not be considered representative of past or future expenses;
actual expenses may be greater or less than those shown.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables on the following pages present, for each Fund, per share income and
capital changes for a share outstanding throughout each period indicated. Except
as otherwise indicated, the information in the tables for Alliance Fund, Growth
Fund, Premier Growth Fund, Balanced Shares, Utility Income Fund, Worldwide
Privatization Fund International Premier Growth Fund and Growth and Income Fund
has been audited by PricewaterhouseCooper LLP, the independent accountants for
each Fund, and for All-Asia Investment Fund, Technology Fund, Quasar Fund,
International Fund, New Europe Fund, Greater China '97 Fund, Global Small Cap
Fund, Global Environment Fund and Real Estate Investment Fund by Ernst & Young
LLP, the independent auditors for each Fund. A report of PricewaterhouseCooper
LLP or Ernst & Young LLP, as the case may be, on the information with respect to
each Fund, appears in the Fund's Statement of Additional Information. The
following information for each Fund should be read in conjunction with the
financial statements and related notes which are included in the Fund's
Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting
Alliance Fund Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Prospectus.
7
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income
------------------- ------------ -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Alliance Fund
Class A
12/1/97 to 5/31/98+++........... $8.70 $(.01)(b) $ .48 $. 47 $0.00
Year ended 11/30/97 ............ 7.71 (.02)(b) 2.09 2.07 (.02)
Year ended 11/30/96 ............ 7.72 .02 1.06 1.08 (.02)
Year ended 11/30/95 ............ 6.63 .02 2.08 2.10 (.01)
1/1/94 to 11/30/94** ........... 6.85 .01 (.23) (.22) 0.00
Year ended 12/31/93 ............ 6.68 .02 .93 .95 (.02)
Year ended 12/31/92 ............ 6.29 .05 .87 .92 (.05)
Year ended 12/31/91 ............ 5.22 .07 1.70 1.77 (.07)
Year ended 12/31/90 ............ 6.87 .09 (.32) (.23) (.18)
Year ended 12/31/89 ............ 5.60 .12 1.19 1.31 (.04)
Year ended 12/31/88 ............ 5.15 .08 .80 .88 (.08)
Class B
12/1/97 to 5/31/98+++........... $8.25 $(.04)(b) $ .45 $. 41 $0.00
Year ended 11/30/97 ............ 7.40 (.08)(b) 1.99 1.91 0.00
Year ended 11/30/96 ............ 7.49 (.01) .99 .98 0.00
Year ended 11/30/95 ............ 6.50 (.03) 2.02 1.99 0.00
1/1/94 to 11/30/94** ........... 6.76 (.03) (.23) (.26) 0.00
Year ended 12/31/93 ............ 6.64 (.03) .91 .88 0.00
Year ended 12/31/92 ............ 6.27 (.01)(b) .87 .86 (.01)
3/4/91++ to 12/31/91 ........... 6.14 .01 (b) .79 .80 (.04)
Class C
12/1/97 to 5/31/98+++........... $8.26 $(.04)(b) $ .45 $. 41 $0.00
Year ended 11/30/97 ............ 7.41 (.08)(b) 1.99 1.91 0.00
Year ended 11/30/96 ............ 7.50 (.02) 1.00 .98 0.00
Year ended 11/30/95 ............ 6.50 (.03) 2.03 2.00 0.00
1/1/94 to 11/30/94** ........... 6.77 (.03) (.24) (.27) 0.00
5/3/93++ to 12/31/93 ........... 6.67 (.02) .88 .86 0.00
Growth Fund (g)
Class A
11/1/97 to 4/30/98+++........... $43.95 $(.06)(b) $ 7.47 $ 7.53 $0.00
Year ended 10/31/97 ............ 34.91 (.10)(b) 10.17 10.07 0.00
Year ended 10/31/96 ............ 29.48 .05 6.20 6.25 (.19)
Year ended 10/31/95 ............ 25.08 .12 4.80 4.92 (.11)
5/1/94 to 10/31/94** ........... 23.89 .09 1.10 1.19 0.00
Year ended 4/30/94 ............. 22.67 (.01)(c) 3.55 3.54 0.00
Year ended 4/30/93 ............. 20.31 .05 (c) 3.68 3.73 (.14)
Year ended 4/30/92 ............. 17.94 .29 (c) 3.95 4.24 (.26)
9/4/90++ to 4/30/91 ............ 13.61 .17 (c) 4.22 4.39 (.06)
Class B
11/1/97 to 4/30/98+++........... $36.31 $(.09)(b) $ 6.11 $ 6.02 $0.00
Year ended 10/31/97 ............ 29.21 (.31)(b) 8.44 8.13 0.00
Year ended 10/31/96 ............ 24.78 (.12) 5.18 5.06 0.00
Year ended 10/31/95 ............ 21.21 (.02) 4.01 3.99 (.01)
5/1/94 to 10/31/94** ........... 20.27 .01 .93 .94 0.00
Year ended 4/30/94 ............. 19.68 (.07)(c) 2.98 2.91 0.00
Year ended 4/30/93 ............. 18.16 (.06)(c) 3.23 3.17 (.03)
Year ended 4/30/92 ............. 16.88 .17 (c) 3.67 3.84 (.21)
Year ended 4/30/91 ............. 14.38 .08 (c) 3.22 3.30 (.09)
Year ended 4/30/90 ............. 14.13 .01 (b)(c) 1.26 1.27 0.00
Year ended 4/30/89 ............. 12.76 (.01)(c) 2.44 2.43 0.00
10/23/87+ to 4/30/88 ........... 10.00 (.02)(c) 2.78 2.76 0.00
Class C
11/1/97 to 4/30/98+++........... $36.33 $(.09)(b) $ 6.11 $ 6.02 $0.00
Year ended 10/31/97 ............ 29.22 (.31)(b) 8.45 8.14 0.00
Year ended 10/31/96 ............ 24.79 (.12) 5.18 5.06 0.00
Year ended 10/31/95 ............ 21.22 (.03) 4.02 3.99 (.01)
5/1/94 to 10/31/94** ........... 20.28 .01 .93 .94 0.00
8/2/93++ to 4/30/94 ............ 21.47 (.02)(c) 1.15 1.13 0.00
Premier Growth Fund
Class A
12/1/97 to 5/31/98+++........... $22.00 $(.05)(b) $ 4.71 $ 4.66 $0.00
Year ended 11/30/97 ............ 17.98 (.10)(b) 5.20 5.10 0.00
Year ended 11/30/96 ............ 16.09 (.04)(b) 3.20 3.16 0.00
Year ended 11/30/95 ............ 11.41 (.03) 5.38 5.35 0.00
Year ended 11/30/94 ............ 11.78 (.09) (.28) (.37) 0.00
Year ended 11/30/93 ............ 10.79 (.05) 1.05 1.00 (.01)
9/28/92+ to 11/30/92 ........... 10.00 .01 .78 .79 0.00
Class B
12/1/97 to 5/31/98+++........... $21.26 $(.12)(b) $ 4.53 $ 4.41 $0.00
Year ended 11/30/97 ............ 17.52 (.23)(b) 5.05 4.82 0.00
Year ended 11/30/96 ............ 15.81 (.14)(b) 3.12 2.98 0.00
Year ended 11/30/95 ............ 11.29 (.11) 5.30 5.19 0.00
Year ended 11/30/94 ............ 11.72 (.15) (.28) (.43) 0.00
Year ended 11/30/93 ............ 10.79 (.10) 1.03 .93 0.00
9/28/92+ to 11/30/92 ........... 10.00 0.00 .79 .79 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
8
<PAGE>
<TABLE>
<CAPTION>
Total
Total Net Asset Investment
Distributions Dividends Value Return Based
From Net And End Of on Net Asset
Fiscal Year or Period Realized Gains Distributions Period Value (a)
------------------- -------------- -------------- ---------- ------------
<S> <C> <C> <C> <C>
Alliance Fund
Class A $(2.17) $(2.17) $7.00 7.31%
Year ended 11/30/97 ............ (1.06) (1.08) 8.70 31.82
Year ended 11/30/96 ............ (1.07) (1.09) 7.71 16.49
Year ended 11/30/95 ............ (1.00) (1.01) 7.72 37.87
1/1/94 to 11/30/94** ........... 0.00 0.00 6.63 (3.21)
Year ended 12/31/93 ............ (.76) (.78) 6.85 14.26
Year ended 12/31/92 ............ (.48) (.53) 6.68 14.70
Year ended 12/31/91 ............ (.63) (.70) 6.29 33.91
Year ended 12/31/90 ............ (1.24) (1.42) 5.22 (4.36)
Year ended 12/31/89 ............ 0.00 (.04) 6.87 23.42
Year ended 12/31/88 ............ (.35) (.43) 5.60 17.10
Class B
$(2.17) $(2.17) $6.49 6.87%
Year ended 11/30/97 ............ (1.06) (1.06) 8.25 30.74
Year ended 11/30/96 ............ (1.07) (1.07) 7.40 15.47
Year ended 11/30/95 ............ (1.00) (1.00) 7.49 36.61
1/1/94 to 11/30/94** ........... 0.00 0.00 6.50 (3.85)
Year ended 12/31/93 ............ (.76) (.76) 6.76 13.28
Year ended 12/31/92 ............ (.48) (.49) 6.64 13.75
3/4/91++ to 12/31/91 ........... (.63) (.67) 6.27 13.10
Class C
$(2.17) $(2.17) $6.50 6.86%
Year ended 11/30/97 ............ (1.06) (1.06) 8.26 30.72
Year ended 11/30/96 ............ (1.07) (1.07) 7.41 15.48
Year ended 11/30/95 ............ (1.00) (1.00) 7.50 36.79
1/1/94 to 11/30/94** ........... 0.00 0.00 6.50 (3.99)
5/3/93++ to 12/31/93 ........... (.76) (.76) 6.77 13.95
Growth Fund (i)
Class A
$(2.91) $(2.91) $48.57 17.96%
Year ended 10/31/97 ............ (1.03) (1.03) 43.95 29.54
Year ended 10/31/96 ............ (.63) (.82) 34.91 21.65
Year ended 10/31/95 ............ (.41) (.52) 29.48 20.18
5/1/94 to 10/31/94** ........... 0.00 0.00 25.08 4.98
Year ended 4/30/94 ............. (2.32) (2.32) 23.89 15.66
Year ended 4/30/93 ............. (1.23) (1.37) 22.67 18.89
Year ended 4/30/92 ............. (1.61) (1.87) 20.31 23.61
9/4/90++ to 4/30/91 ............ 0.00 (.06) 17.94 32.40
Class B
$(2.91) $(2.91) $39.42 17.56%
Year ended 10/31/97 ............ (1.03) (1.03) 36.31 28.64
Year ended 10/31/96 ............ (.63) (.63) 29.21 20.82
Year ended 10/31/95 ............ (.41) (.42) 24.78 19.33
5/1/94 to 10/31/94** ........... 0.00 0.00 21.21 4.64
Year ended 4/30/94 ............. (2.32) (2.32) 20.27 14.79
Year ended 4/30/93 ............. (1.62) (1.65) 19.68 18.16
Year ended 4/30/92 ............. (2.35) (2.56) 18.16 22.75
Year ended 4/30/91 ............. (.71) (.80) 16.88 24.72
Year ended 4/30/90 ............. (1.02) (1.02) 14.38 8.81
Year ended 4/30/89 ............. (1.06) (1.06) 14.13 20.31
10/23/87+ to 4/30/88 ........... 0.00 0.00 12.76 27.60
Class C
$(2.91) $(2.91) $39.44 17.55%
Year ended 10/31/97 ............ (1.03) (1.03) 36.33 28.66
Year ended 10/31/96 ............ (.63) (.63) 29.22 20.81
Year ended 10/31/95 ............ (.41) (.42) 24.79 19.32
5/1/94 to 10/31/94** ........... 0.00 0.00 21.22 4.64
8/2/93++ to 4/30/94 ............ (2.32) (2.32) 20.28 5.27
Premier Growth Fund
Class A
$(1.44) $(1.44) $25.22 22.74%
Year ended 11/30/97 ............ (1.08) (1.08) 22.00 30.46
Year ended 11/30/96 ............ (1.27) (1.27) 17.98 21.52
Year ended 11/30/95 ............ (.67) (.67) 16.09 49.95
Year ended 11/30/94 ............ 0.00 0.00 11.41 (3.14)
Year ended 11/30/93 ............ 0.00 (.01) 11.78 9.26
9/28/92+ to 11/30/92 ........... 0.00 0.00 10.79 7.90
Class B
$(1.44) $(1.44) $24.23 22.33%
Year ended 11/30/97 ............ (1.08) (1.08) 21.26 29.62
Year ended 11/30/96 ............ (1.27) (1.27) 17.52 20.70
Year ended 11/30/95 ............ (.67) (.67) 15.81 49.01
Year ended 11/30/94 ............ 0.00 0.00 11.29 (3.67)
Year ended 11/30/93 ............ 0.00 0.00 11.72 8.64
9/28/92+ to 11/30/92 ........... 0.00 0.00 10.79 7.90
<CAPTION>
Net Assets Ratio Of Net
At End Of Ratio Of Investment
Period Expenses Income (Loss)
(000's To Average To Average Portfolio
Fiscal Year or Period omitted) Net Assets Net Assets Turnover Rate
------------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Alliance Fund
Class A $1,188,742 98%* (.29)%* 53%
Year ended 11/30/97 ........... 1,201,435 1.03 (.29) 158
Year ended 11/30/96 ........... 999,067 1.04 .30 80
Year ended 11/30/95 ........... 945,309 1.08 .31 81
1/1/94 to 11/30/94** .......... 760,679 1.05* .21* 63
Year ended 12/31/93 ........... 831,814 1.01 .27 66
Year ended 12/31/92 ........... 794,733 .81 .79 58
Year ended 12/31/91 ........... 748,226 .83 1.03 74
Year ended 12/31/90 ........... 620,374 .81 1.56 71
Year ended 12/31/89 ........... 837,429 .75 1.79 81
Year ended 12/31/88 ........... 760,619 .82 1.38 65
Class B
$ 99,866 1.80%* 1.09%* 53%
Year ended 11/30/97 ........... 70,461 1.85 (1.12) 158
Year ended 11/30/96 ........... 44,450 1.87 (.53) 80
Year ended 11/30/95 ........... 31,738 1.90 (.53) 81
1/1/94 to 11/30/94** .......... 18,138 1.89* (.60)* 63
Year ended 12/31/93 ........... 12,402 1.90 (.64) 66
Year ended 12/31/92 ........... 3,825 1.64 (.04) 58
3/4/91++ to 12/31/91 .......... 852 1.64* .10* 74
Class C
$ 30,980 1.79%* 1.09%* 53%
Year ended 11/30/97 ........... 18,871 1.83 (1.10) 158
Year ended 11/30/96 ........... 13,899 1.86 (.51) 80
Year ended 11/30/95 ........... 10,078 1.89 (.51) 81
1/1/94 to 11/30/94** .......... 6,230 1.87* (.59)* 63
5/3/93++ to 12/31/93 .......... 4,006 1.94* (.74)* 66
Growth Fund (i)
Class A
$ 982,831 1.17%* .24%* 27%
ear ended 10/31/97 ........... 783,110 1.26 (i) (.25) 48
Year ended 10/31/96 ........... 499,459 1.30 .15 46
Year ended 10/31/95 ........... 285,161 1.35 .56 61
5/1/94 to 10/31/94** .......... 167,800 1.35* .86* 24
Year ended 4/30/94 ............ 102,406 1.40 (f) .32 87
Year ended 4/30/93 ............ 13,889 1.40 (f) .20 124
Year ended 4/30/92 ............ 8,228 1.40 1.44 137
9/4/90++ to 4/30/91 ........... 713 1.40* 1.99* 130
Class B
$4,352,301 1.88%* (.47)% 27%
Year ended 10/31/97 ........... 3,578,806 1.96 (i) (.94) 48
Year ended 10/31/96 ........... 2,498,097 1.99 (.54) 46
Year ended 10/31/95 ........... 1,052,020 2.05 (.15) 61
5/1/94 to 10/31/94** .......... 751,521 2.05* .16* 24
Year ended 4/30/94 ............ 394,227 2.10 (f) (.36) 87
Year ended 4/30/93 ............ 56,704 2.15 (f) (.53) 124
Year ended 4/30/92 ............ 37,845 2.15 .78 137
Year ended 4/30/91 ............ 22,710 2.10 .56 130
Year ended 4/30/90 ............ 15,800 2.00 .07 165
Year ended 4/30/89 ............ 7,672 2.00 (.03) 139
10/23/87+ to 4/30/88 .......... 1,938 2.00* (.40)* 52
Class C
$ 730,631 1.88% (.47)%* 27%
Year ended 10/31/97 ........... 599,449 1.97 (i) (.95)% 48
Year ended 10/31/96 ........... 403,478 2.00 (.55) 46
Year ended 10/31/95 ........... 226,662 2.05 (.15) 61
5/1/94 to 10/31/94** .......... 114,455 2.05* .16* 24
8/2/93++ to 4/30/94 ........... 64,030 2.10*(f) (.31)* 87
Premier Growth Fund
Class A
$ 796,794 1.51%* (.40)% 30%
Year ended 11/30/97 ........... 373,099 1.57 (.52) 76
Year ended 11/30/96 ........... 172,870 1.65 (.27) 95
Year ended 11/30/95 ........... 72,366 1.75 (.28) 114
Year ended 11/30/94 ........... 35,146 1.96 (.67) 98
Year ended 11/30/93 ........... 40,415 2.18 (.61) 68
9/28/92+ to 11/30/92 .......... 4,893 2.17* .91* 0
Class B
$1,633,922 2.20% (1.10)%* 30%
Year ended 11/30/97 ........... 858,449 2.25 (1.20)% 76
Year ended 11/30/96 ........... 404,137 2.32 (.94) 95
Year ended 11/30/95 ........... 238,088 2.43 (.95) 114
Year ended 11/30/94 ........... 139,988 2.47 (1.19) 98
Year ended 11/30/93 ........... 151,600 2.70 (1.14) 68
9/28/92+ to 11/30/92 .......... 19,941 2.68* .35* 0
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income
------------------- ------------ -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Premier Growth Fund (continued)
Class C
12/1/97 to 5/31/98+++........... $21.29 $(.12)(b) $4.54 $4.42 $0.00
Year ended 11/30/97 ............ 17.54 (.24)(b) 5.07 4.83 0.00
Year ended 11/30/96 ............ 15.82 (.14)(b) 3.13 2.99 0.00
Year ended 11/30/95 ............ 11.30 (.08) 5.27 5.19 0.00
Year ended 11/30/94 ............ 11.72 (.09) (.33) (.42) 0.00
5/3/93++ to 11/30/93 ........... 10.48 (.05) 1.29 1.24 0.00
Technology Fund
Class A
12/1/97 to 5/31/98+++........... $54.44 $(.30)(b) $6.90 $6.60 $0.00
Year ended 11/30/97 ............ 51.15 (.51)(b) 4.22 3.71 0.00
Year ended 11/30/96 ............ 46.64 (.39)(b) 7.28 6.89 0.00
Year ended 11/30/95 ............ 31.98 (.30) 18.13 17.83 0.00
1/1/94 to 11/30/94** ........... 26.12 (.32) 6.18 5.86 0.00
Year ended 12/31/93 ............ 28.20 (.29) 6.39 6.10 0.00
Year ended 12/31/92 ............ 26.38 (.22)(b) 4.31 4.09 0.00
Year ended 12/31/91 ............ 19.44 (.02) 10.57 10.55 0.00
Year ended 12/31/90 ............ 21.57 (.03) (.56) (.59) 0.00
Year ended 12/31/89 ............ 20.35 0.00 1.22 1.22 0.00
Year ended 12/31/88 ............ 20.22 (.03)(c) .16 .13 0.00
Class B
12/1/97 to 5/31/98+++........... $52.58 $(.49)(b) $6.66 $6.17 $0.00
Year ended 11/30/97 ............ 49.76 (.88)(b) 4.12 3.24 0.00
Year ended 11/30/96 ............ 45.76 (.70)(b) 7.08 6.38 0.00
Year ended 11/30/95 ............ 31.61 (.60)(b) 17.92 17.32 0.00
1/1/94 to 11/30/94** ........... 25.98 (.23) 5.86 5.63 0.00
5/3/93++ to 12/31/93 ........... 27.44 (.12) 6.84 6.72 0.00
Class C
12/1/97 to 5/31/98+++........... $52.57 $(.48)(b) $6.65 $6.17 $0.00
Year ended 11/30/97 ............ 49.76 (.88)(b) 4.11 3.23 0.00
Year ended 11/30/96 ............ 45.77 (.70)(b) 7.07 6.37 0.00
Year ended 11/30/95 ............ 31.61 (.58)(b) 17.91 17.33 0.00
1/1/94 to 11/30/94** ........... 25.98 (.24) 5.87 5.63 0.00
5/3/93++ to 12/31/93 ........... 27.44 (.13) 6.85 6.72 0.00
Quasar Fund
Class A
10/1/97 to 3/31/98+++........... $30.37 $(.09)(b) $2.36 $2.27 $0.00
Year ended 9/30/97 ............. 27.92 (.24)(b) 6.80 6.56 0.00
Year ended 9/30/96 ............. 24.16 (.25) 8.82 8.57 0.00
Year ended 9/30/95 ............. 22.65 (.22)(b) 5.59 5.37 0.00
Year ended 9/30/94 ............. 24.43 (.60) (.36) (.96) 0.00
Year ended 9/30/93 ............. 19.34 (.41) 6.38 5.97 0.00
Year ended 9/30/92 ............. 21.27 (.24) (1.53) (1.77) 0.00
Year ended 9/30/91 ............. 15.67 (.05) 5.71 5.66 (.06)
Year ended 9/30/90 ............. 24.84 .03(b) (7.18) (7.15) 0.00
Year ended 9/30/89 ............. 17.60 .02(b) 7.40 7.42 0.00
Year ended 9/30/88 ............. 24.47 (.08)(c) (2.08) (2.16) 0.00
Class B
10/1/97 to 3/31/98+++........... $27.83 $(.19)(b) $2.15 $1.96 $0.00
Year ended 9/30/97 ............. 26.13 (.42)(b) (6.23) 5.81 0.00
Year ended 9/30/96 ............. 23.03 (.20) 8.11 7.91 0.00
Year ended 9/30/95 ............. 21.92 (.37)(b) 5.34 4.97 0.00
Year ended 9/30/94 ............. 23.88 (.53) (.61) (1.14) 0.00
Year ended 9/30/93 ............. 19.07 (.18) 5.87 5.69 0.00
Year ended 9/30/92 ............. 21.14 (.39) (1.52) (1.91) 0.00
Year ended 9/30/91 ............. 15.66 (.13) 5.67 5.54 (.06)
9/17/90++ to 9/30/90 ........... 17.17 (.01) (1.50) (1.51) 0.00
Class C
10/1/97 to 3/31/98+++........... $27.85 $(.19)(b) $2.14 $1.95 $0.00
Year ended 9/30/97 ............. 26.14 (.42)(b) 6.24 5.82 0.00
Year ended 9/30/96 ............. 23.05 (.20) 8.10 7.90 0.00
Year ended 9/30/95 ............. 21.92 (.37)(b) 5.36 4.99 0.00
Year ended 9/30/94 ............. 23.88 (.36) (.78) (1.14) 0.00
5/3/93++ to 9/30/93 ............ 20.33 (.10) 3.65 3.55 0.00
International Fund
Class A
Year ended 6/30/98+++........... $18.69 $(.01)(b)(c) $1.13 $1.12 $(.05)
Year ended 6/30/97 ............. 18.32 .06(b) 1.51 1.57 (.12)
Year ended 6/30/96 ............. 16.81 .05(b) 2.51 2.56 0.00
Year ended 6/30/95 ............. 18.38 .04 .01 .05 0.00
Year ended 6/30/94 ............. 16.01 (.09) 3.02 2.93 0.00
Year ended 6/30/93 ............. 14.98 (.01) 1.17 1.16 (.04)
Year ended 6/30/92 ............. 14.00 .01(b) 1.04 1.05 (.07)
Year ended 6/30/91 ............. 17.99 .05 (3.54) (3.49) (.03)
Year ended 6/30/90 ............. 17.24 .03 2.87 2.90 (.04)
Year ended 6/30/89 ............. 16.09 .05 3.73 3.78 (.13)
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
10
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Distributions Dividends Value Return Based Period
From Net And End of on Net Asset (000's
Fiscal Year or Period Realized Gains Distributions Period Value (a) omitted)
--------------------- -------------- ------------- ------ --------- ----------
<S> <C> <C> <C> <C> <C>
Premier Growth Fund (continued)
Class C
12/1/97 to 5/31/98+++............. $(1.44) $(1.44) $24.27 22.35% $ 422,016
Year ended 11/30/97............... (1.08) (1.08) 21.29 29.64 177,923
Year ended 11/30/96............... (1.27) (1.27) 17.54 20.76 60,194
Year ended 11/30/95............... (.67) (.67) 15.82 48.96 20,679
Year ended 11/30/94............... 0.00 0.00 11.30 (3.58) 7,332
5/3/93++ to 11/30/93.............. 0.00 0.00 11.72 11.83 3,899
Technology Fund
Class A
12/1/97 to 5/31/98+++............. $(.58) $ (.58) $60.46 12.25% $ 720,675
Year ended 11/30/97............... (.42) (.42) 54.44 7.32 624,716
Year ended 11/30/96............... (2.38) (2.38) 51.15 16.05 594,861
Year ended 11/30/95............... (3.17) (3.17) 46.64 61.93 398,262
1/1/94 to 11/30/94/**/............ 0.00 0.00 31.98 22.43 202,929
Year ended 12/31/93............... (8.18) (8.18) 26.12 21.63 173,732
Year ended 12/31/92............... (2.27) (2.27) 28.20 15.50 173,566
Year ended 12/31/91............... (3.61) (3.61) 26.38 54.24 191,693
Year ended 12/31/90............... (1.54) (1.54) 19.44 (3.08) 131,843
Year ended 12/31/89............... 0.00 0.00 21.57 6.00 141,730
Year ended 12/31/88............... 0.00 0.00 20.35 0.64 169,856
Class B
12/1/97 to 5/31/98+++............. $ (.58) $ (.58) $58.17 11.87% $1,248,323
Year ended 11/30/97............... (.42) (.42) 52.58 6.57 1,053,436
Year ended 11/30/96............... (2.38) (2.38) 49.76 15.20 660,921
Year ended 11/30/95............... (3.17) (3.17) 45.76 60.95 277,111
1/1/94 to 11/30/94/**/............ 0.00 0.00 31.61 21.67 18,397
5/3/93++ to 12/31/93.............. (8.18) (8.18) 25.98 24.49 1,645
Class C
12/1/97 to 5/31/98+++............. $ (.58) $ (.58) $58.16 11.86% $ 219,120
Year ended 11/30/97............... (.42) (.42) 52.57 6.55 184,194
Year ended 11/30/96............... (2.38) (2.38) 49.76 15.17 108,488
Year ended 11/30/95............... (3.17) (3.17) 45.77 60.98 43,161
1/1/94 to 11/30/94/**/............ 0.00 0.00 31.61 21.67 7,470
5/3/93++ to 12/31/93.............. (8.18) (8.18) 25.98 24.49 1,096
Quasar Fund
Class A
10/1/97 to 3/31/98+++............. $(1.23) $(1.23) $31.41 7.97% $ 562,517
Year ended 9/30/97................ (4.11) (4.11) 30.37 27.81 402,081
Year ended 9/30/96................ (4.81) (4.81) 27.92 42.42 229,798
Year ended 9/30/95................ (3.86) (3.86) 24.16 30.73 146,663
Year ended 9/30/94................ (.82) (.82) 22.65 (4.05) 155,470
Year ended 9/30/93................ (.88) (.88) 24.43 31.58 228,874
Year ended 9/30/92................ (.16) (.16) 19.34 (8.34) 252,140
Year ended 9/30/91................ 0.00 (.06) 21.27 36.28 333,806
Year ended 9/30/90................ (2.02) (2.02) 15.67 (30.81) 251,102
Year ended 9/30/89................ (.18) (.18) 24.84 42.68 263,099
Year ended 9/30/88................ (4.71) (4.71) 17.60 (8.61) 90,713
Class B
10/1/97 to 3/31/98+++............. $(1.23) $(1.23) $28.56 7.57% $ 716,818
Year ended 9/30/97................ (4.11) (4.11) 27.83 26.70 503,037
Year ended 9/30/96................ (4.81) (4.81) 26.13 41.48 112,490
Year ended 9/30/95................ (3.86) (3.86) 23.03 29.78 16,604
Year ended 9/30/94................ (.82) (.82) 21.92 (4.92) 13,901
Year ended 9/30/93................ (.88) (.88) 23.88 30.53 16,779
Year ended 9/30/92................ (.16) (.16) 19.07 (9.05) 9,454
Year ended 9/30/91................ 0.00 (.06) 21.14 35.54 7,346
9/17/90++ to 9/30/90.............. 0.00 0.00 15.66 (8.79) 71
Class C
10/1/97 to 3/31/98+++............. $(1.23) $(1.23) $28.57 7.53% $ 206,104
Year ended 9/30/97................ (4.11) (4.11) 27.85 26.74 145,494
Year ended 9/30/96................ (4.81) (4.81) 26.14 41.46 28,541
Year ended 9/30/95................ (3.86) (3.86) 23.05 29.87 1,611
Year ended 9/30/94................ (.82) (.82) 21.92 (4.92) 1,220
5/3/93++ to 9/30/93............... 0.00 0.00 23.88 17.46 118
International Fund
Class A
Year ended 6/30/98................ $(1.21) $(1.26) $18.55 6.79% $ 131,565
Year ended 6/30/97................ (1.08) (1.20) 18.69 9.30 190,173
Year ended 6/30/96................ (1.05) (1.05) 18.32 15.83 196,261
Year ended 6/30/95................ (1.62) (1.62) 16.81 .59 165,584
Year ended 6/30/94................ (.56) (.56) 18.38 18.68 201,916
Year ended 6/30/93................ (.09) (.13) 16.01 7.86 161,048
Year ended 6/30/92................ 0.00 (.07) 14.98 7.52 179,807
Year ended 6/30/91................ (.47) (.50) 14.00 (19.34) 214,442
Year ended 6/30/90................ (2.11) (2.15) 17.99 16.98 265,999
Year ended 6/30/89................ (2.50) (2.63) 17.24 27.65 166,003
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss)
To Average To Average Portfolio
Fiscal Year or Period Net Assets Net Assets Turnover Rate
--------------------- ---------- ---------- -------------
<S> <C> <C> <C>
Premier Growth Fund (continued)
Class C
12/1/97 to 5/31/98+++............. 2.19%* (1.10)%* 30%
Year ended 11/30/97............... 2.24 (1.22) 76
Year ended 11/30/96............... 2.32 (.94) 95
Year ended 11/30/95............... 2.42 (.97) 114
Year ended 11/30/94............... 2.47 (1.16) 98
5/3/93++ to 11/30/93.............. 2.79* (1.35)* 68
Technology Fund
Class A
12/1/97 to 5/31/98+++............. 1.63%* (1.04)%* 31%
Year ended 11/30/97............... 1.67(i) (.97) 51
Year ended 11/30/96............... 1.74 (.87) 30
Year ended 11/30/95............... 1.75 (.77) 55
1/1/94 to 11/30/94/**/............ 1.66* (1.22)* 55
Year ended 12/31/93............... 1.73 (1.32) 64
Year ended 12/31/92............... 1.61 (.90) 73
Year ended 12/31/91............... 1.71 (.20) 134
Year ended 12/31/90............... 1.77 (.18) 147
Year ended 12/31/89............... 1.66 .02 139
Year ended 12/31/88............... 1.42 (.16) 139
Class B
12/1/97 to 5/31/98+++............. 2.35%(i)* (1.76)%* 31%
Year ended 11/30/97............... 2.38(i) (1.70) 51
Year ended 11/30/96............... 2.44 (1.61) 30
Year ended 11/30/95............... 2.48 (1.47) 55
1/1/94 to 11/30/94/**/............ 2.43* (1.95)* 55
5/3/93++ to 12/31/93.............. 2.57* (2.30)* 64
Class C
12/1/97 to 5/31/98+++............. 2.35%(i)* (1.77)%* 31%
Year ended 11/30/97............... 2.38(i) (1.70) 51
Year ended 11/30/96............... 2.44 (1.60) 30
Year ended 11/30/95............... 2.48 (1.47) 55
1/1/94 to 11/30/94/**/............ 2.41* (1.94)* 55
5/3/93++ to 12/31/93.............. 2.52* (2.25)* 64
Quasar Fund
Class A
10/1/97 to 3/31/98+++............. 1.56%* (.66)%* 63%
Year ended 9/30/97................ 1.67 (.91) 135
Year ended 9/30/96................ 1.79 (1.11) 168
Year ended 9/30/95................ 1.83 (1.06) 160
Year ended 9/30/94................ 1.67 (1.15) 110
Year ended 9/30/93................ 1.65 (1.00) 102
Year ended 9/30/92................ 1.62 (.89) 128
Year ended 9/30/91................ 1.64 (.22) 118
Year ended 9/30/90................ 1.66 .16 90
Year ended 9/30/89................ 1.73 .10 90
Year ended 9/30/88................ 1.28 (.40) 58
Class B
10/1/97 to 3/31/98+++............. 2.34%* (1.44)%* 63%
Year ended 9/30/97................ 2.51 (1.73) 135
Year ended 9/30/96................ 2.62 (1.96) 168
Year ended 9/30/95................ 2.65 (1.88) 160
Year ended 9/30/94................ 2.50 (1.98) 110
Year ended 9/30/93................ 2.46 (1.81) 102
Year ended 9/30/92................ 2.42 (1.67) 128
Year ended 9/30/91................ 2.41 (1.28) 118
9/17/90++ to 9/30/90.............. 2.09* (.26)* 90
Class C
10/1/97 to 3/31/98+++............. 2.33%* (1.44)%* 63%
Year ended 9/30/97................ 2.50 (1.72) 135
Year ended 9/30/96................ 2.61 (1.94) 168
Year ended 9/30/95................ 2.64* (1.76)* 160
Year ended 9/30/94................ 2.48 (1.96) 110
5/3/93++ to 9/30/93............... 2.49* (1.90)* 102
International Fund
Class A
Year ended 6/30/98................ 1.65%(f) (.05)% 121%
Year ended 6/30/97................ 1.74(i) .31 94
Year ended 6/30/96................ 1.72 .31 78
Year ended 6/30/95................ 1.73 .26 119
Year ended 6/30/94................ 1.90 (.50) 97
Year ended 6/30/93................ 1.88 (.14) 94
Year ended 6/30/92................ 1.82 .07 72
Year ended 6/30/91................ 1.73 .37 71
Year ended 6/30/90................ 1.45 .33 37
Year ended 6/30/89................ 1.41 .39 87
- ------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase Distributions
Value Unrealized (Decrease) In Dividends From In Excess Of
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Income
------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
International Fund (continued)
Class B
Year ended 6/30/98 ............. $17.71 $(.16)(b)(c) $ 1.07 $ .91 $0.00 $0.00
Year ended 6/30/97 ............. 17.45 (.09)(b) 1.43 1.34 0.00 0.00
Year ended 6/30/96 ............. 16.19 (.07)(b) 1.38) 2.31 0.00 0.00
Year ended 6/30/95 ............. 17.90 (.01) (0.08) (.09) 0.00 0.00
Year ended 6/30/94 ............. 15.74 (.19)(b) 2.91 2.72 0.00 0.00
Year ended 6/30/93 ............. 14.81 (.12) 1.14 1.02 0.00 0.00
Year ended 6/30/92 13.93 (.11)(b) 1.02 .91) (.03) 0.00
9/17/90++ to 6/30/91 ........... 15.52 .03 (1.12) (1.09) (.03) 0.00
Class C
Year ended 6/30/98 ............. $17.73 $(.15)(b)(c) $ 1.05 $ .90 $0.00 $0.00
Year ended 6/30/97 ............. 17.46 (.09)(b) 1.44 1.35 0.00 0.00
Year ended 6/30/96 ............. 16.20 (.07)(b) 2.38 2.31 0.00 0.00
Year ended 6/30/95 ............. 17.91 (.14) .05 (.09) 0.00 0.00
Year ended 6/30/94 ............. 15.74 (.11) 2.84 2.73 0.00 0.00
5/3/93++ to 6/30/93 ............ 15.93 0.00 (.19) (.19) 0.00 0.00
International Premier Growth fund
Class A
-------
3/3/98+ to 5/31/98+++ .......... $10.00 $ .04(b)(c) $ .30 $ .34 $0.00 $0.00
Class B
-------
3/3/98+ to 5/31/98+++ .......... $10.00 $ .03(b)(c) $ .30 $ .33 $0.00 $0.00
Class C
-------
3/3/98+ to 5/31/98+++ .......... $10.00 $ .02(b)(c) $ .30 $ .32 $0.00 $0.00
Worldwide Privatization Fund
Class A
Year ended 6/30/98 ............. $13.26 $ .10(b) $ .85 $ .95 $(.18) $0.00
Year ended 6/30/97 ............. 12.13 .15(b) 2.55 2.70 (.15) 0.00
Year ended 6/30/96 ............. 10.18 .10(b) 1.85 1.95 0.00 0.00
Year ended 6/30/95 ............. 9.75 .06 .37 .43 0.00 0.00
6/2/94+ to 6/30/94 ............. 10.00 .01 (.26) (.25) 0.00 0.00
Class B
Year ended 6/30/98 ............. $13.04 $ .02(b) $ .82 $ .84 $(.15) $0.00
Year ended 6/30/97 ............. 11.96 .08(b) 2.50 2.58 (.08) 0.00
Year ended 6/30/96 ............. 10.10 (.02) 1.88 1.86 0.00 0.00
Year ended 6/30/95 ............. 9.74 .02 .34 .36 0.00 0.00
6/2/94+ to 6/30/94 ............. 10.00 .00 (.26) (.26) 0.00 0.00
Class C
Year ended 6/30/98 ............. $13.04 $ .05(b) $ .79 $ .84 $(.15) $0.00
Year ended 6/30/97 ............. 11.96 .12(b) 2.46 2.58 (.08) 0.00
Year ended 6/30/96 ............. 10.10 .03 1.83 1.86 0.00 0.00
2/8/95++ to 6/30/9 ............. 9.53 .05 .52 .57 0.00 0.00
New Europe Fund
Class A
Year ended 7/31/98 ............. $18.61 $ .05(b) $ 5.28 $ 5.33 $0.00 $(.04)
Year ended 7/31/97 ............. 15.84 .07(b) 4.20 4.27 (.15) (.03)
Year ended 7/31/96 ............. 15.11 .18 1.02 1.20 0.00 0.00
Year ended 7/31/95 ............. 12.66 .04 2.50 2.54 (.09) 0.00
Period ended 7/31/94**.......... 12.53 .09 .04 .13 0.00 0.00
Year ended 2/28/94 ............. 9.37 .02(b) 3.14 3.16 0.00 0.00
Year ended 2/28/93 ............. 9.81 .04 (.33) (.29) (.15) 0.00
Year ended 2/29/92 ............. 9.76 .02(b) .05 .07 (.02) 0.00
4/2/90+ to 2/28/91 ............. 11.11(e) .26 (.91) (.65) (.26) 0.00
Class B
Year ended 7/31/98 ............. $17.87 $(.08)(b) $ 5.02 $ 4.94 $0.00 $0.00
Year ended 7/31/97 ............. 15.31 (.04)(b) 4.02 3.98 0.00 (.10)
Year ended 7/31/96 ............. 14.71 .08 .99 1.07 0.00 0.00
Year ended 7/31/95 ............. 12.41 (.05) 2.44 2.39 (.09) 0.00
Period ended 7/31/94**.......... 12.32 .07 .02 .09 0.00 0.00
Year ended 2/28/94 ............. 9.28 (.05)(b) 3.09 3.04 0.00 0.00
Year ended 2/28/93 ............. 9.74 (.02) (.33) (.35) (.11) 0.00
3/5/91++ to 2/29/92 ............ 9.84 (.04)(b) (.04) (.08) (.02) 0.00
Class C
Year ended 7/31/98 ............. $17.89 $(.08)(b) $ 5.01 $ 4.93 $0.00 $0.00
Year ended 7/31/97 ............. 15.33 (.04)(b) 4.02 3.98 0.00 (.10)
Year ended 7/31/96 ............. 14.72 .08 1.00 1.08 0.00 0.00
Year ended 7/31/95 ............. 12.42 (.07) 2.46 2.39 (.09) 0.00
Period ended 7/31/94**.......... 12.33 .06 .03 .09 0.00 0.00
5/3/93++ to 2/28/94 ............. 10.21 (.04)(b) 2.16 2.12 0.00 0.00
All-Asia Investment Fund
Class A
11/1/97 to 4/30/98+++........... $ 7.54 $(.07)(b)(c) $ (.26) $ (.33) $0.00 $0.00
Year ended 10/31/97 ............. 11.04 (.21)(b)(c) (2.95) (3.16) 0.00 0.00
Year ended 10/31/96 ............. 10.45 (.21)(b)(c) .88 .67 0.00 0.00
11/28/94+ to 10/31/9 ............ 10.00 (.19)(c) .64 .45 0.00 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
12
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End of
Distributions Dividends Value Return Based Period
From Net And End of On Net Asset (000's
Fiscal Year or Period Realized Gains Distributions Period Value (a) omitted)
------------------- -------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
International Fund (continued)
Class B
Year ended 6/30/98 ............. $(1.21) $(1.21) $17.41 5.92% $ 71,370
Year ended 6/30/97 ............. (1.08) (1.08) 17.71 8.37 77,725
Year ended 6/30/96 ............. (1.05) (1.05) 17.45 14.87 72,470
Year ended 6/30/95 ............. (1.62) (1.62) 16.19 (.22) 48,998
Year ended 6/30/94 ............. (.56) (.56) 17.90 17.65 29,943
Year ended 6/30/93 ............. (.09) (.09) 14.74 6.98 6,363
Year ended 6/30/92 ............. 0.00 (.03) 14.81 6.54 5,585
9/17/90++ to 6/30/91 ........... (.47) (.50) 13.93 (6.97) 3,515
Class C
Year ended 6/30/98 ............. $(1.21) $(1.21) $17.42 5.85% $ 20,428
Year ended 6/30/97 ............. (1.08) (1.08) 17.73 8.42 23,268
Year ended 6/30/96 ............. (1.05) (1.05) 17.46 14.85 26.965
Year ended 6/30/95 ............. (1.62) (1.62) 16.20 (.22) 19,395
Year ended 6/30/94 ............. (.56) (.56) 17.91 17.72 13,503
5/3/93++ to 6/30/93 ............ 0.00 0.00 15.74 (1.19) 229
International Premier Growth fund
Class A
3/3/98+ to 5/31/98+++ .......... 0.00 0.00 10.34 3.40 2,764
Class B
3/3/98+ to 5/31/98+++ .......... 0.00 0.00 10.33 3.30 7,042
Class C
3/3/98+ to 5/31/98+++ .......... 0.00 0.00 10.32 3.20 1,017
Worldwide Privatization Fund
Class A
Year ended 6/30/98 ............. $(1.36) $(1.54) $12.67 9.11% $ 467,960
Year ended 6/30/97 ............. (1.42) (1.57) 13.26 25.16 561,793
Year ended 6/30/96 ............. 0.00 0.00 12.13 19.16 672,732
Year ended 6/30/95 ............. 0.00 0.00 10.18 4.41 13,535
6/2/94+ to 6/30/94 ............. 0.00 0.00 9.75 (2.50) 4,990
Class B
Year ended 6/30/98 ............. $(1.36) $(1.51) $12.37 8.34% $ 156,348
Year ended 6/30/97 ............. (1.42) (1.50) 13.04 24.34 121,173
Year ended 6/30/96 ............. 0.00 0.00 11.96 18.42 83,050
Year ended 6/30/95 ............. 0.00 0.00 10.10 3.70 79,359
6/2/94+ to 6/30/94 ............. 0.00 0.00 9.74 (2.60) 22,859
Class C
Year ended 6/30/98 ............. $(1.36) $(1.51) $12.37 8.34% $ 26,635
Year ended 6/30/97 ............. (1.42) (1.50) 13.04 24.33 12,929
Year ended 6/30/96 ............. 0.00 0.00 11.96 18.42 2,383
2/8/95++ to 6/30/9 ............. 0.00 0.00 10.10 5.98 338
New Europe Fund
Class A
Year ended 7/31/98 ............. $(2.05) $(2.09) $21.85 32.21% $ 130,777
Year ended 7/31/97 ............. (1.32) (1.50) 18.61 28.78 78,578
Year ended 7/31/96 ............. (.47) (.47) 15.84 8.20 74,026
Year ended 7/31/95 ............. 0.00 (.09) 15.11 20.22 86,112
Period ended 7/31/94**.......... 0.00 0.00 12.66 1.04 86,739
Year ended 2/28/94 ............. 0.00 0.00 12.53 33.73 90,372
Year ended 2/28/93 ............. 0.00 (.15) 9.37 (2.82) 79,285
Year ended 2/29/92 ............. 0.00 (.02) 9.81 .74 108,510
4/2/90+ to 2/28/91 ............. (.44) (.70) 9.76 (5.63) 188,016
Class B
Year ended 7/31/98 ............. $(2.05) $(2.05) $20.76 31.22% $ 137,425
Year ended 7/31/97 ............. (1.32) (1.42) 17.87 27.76 77,032
Year ended 7/31/96 ............. (.47) (.47) 15.31 7.53 42,662
Year ended 7/31/95 ............. 0.00 (.09) 14.71 19.42 34,527
Period ended 7/31/94**.......... 0.00 0.00 12.41 .73 31,404
Year ended 2/28/94 ............. 0.00 0.00 12.32 32.76 20,729
Year ended 2/28/93 ............. 0.00 (.11) 9.28 (3.49) 1,732
3/5/91++ to 2/29/92............. 0.00 (.02) 9.74 .03 1,423
Class C
Year ended 7/31/98 ............. $(2.05) $(2.05) $20.77 31.19% $ 39,618
Year ended 7/31/97 ............. (1.32) (1.42) 17.89 27.73 16,907
Year ended 7/31/96 ............. (.47) (.47) 15.33 7.59 10,141
Year ended 7/31/95 ............. 0.00 (.09) 14.72 19.40 7,802
Period ended 7/31/94**.......... 0.00 0.00 12.42 .73 11,875
5/3/93++ to 2/28/94............. 0.00 0.00 12.33 20.77 10,886
All-Asia Investment Fund
Class A
11/1/97 to 4/30/98 ............ $ 0.00 $(0.00) $ 7.21 (4.38)% $ 4,816
Year ended 10/31/97 ............ .34 .34 7.54 (29.61) 5,916
Year ended 10/31/96 ............ (.08) (.08) 11.04 6.43 12,284
11/28/94+ to 10/31/95........... 0.00 0.00) 10.45 4.50 2,870
Ratio of Net
Ratio of Investment
Expenses Income (Loss)
To Average To Average Portfolio
Net Assets Net Assets Turnover Rate
------------ ------------- ---------------
Class B
Year ended 6/30/98 ............. 2.49%(f) (.90)% 121%
Year ended 6/30/97 ............. 2.59 (i) (.51) 94
Year ended 6/30/96 ............. 2.55 (.46) 78
Year ended 6/30/95 ............. 2.57 (.62) 119
Year ended 6/30/94 ............. 2.78 (1.15) 97
Year ended 6/30/93 ............. 2.70 (.96) 94
Year ended 6/30/92 ............. 2.68 (.70) 72
9/17/90++ to 6/30/91 ........... 3.39* .84* 71
Class C
Year ended 6/30/98 ............. 2.48%(f) (.90)% 121%
Year ended 6/30/97 ............. 2.58 (.51) 94
Year ended 6/30/96 ............. 2.53 (.47) 78
Year ended 6/30/95 ............. 2.54 (.88) 119
Year ended 6/30/94 ............. 2.78 (1.12) 97
5/3/93++ to 6/30/93 ............ 2.57* .08* 94
International Premier Growth fund
Class A
3/3/98+ to 5/31/98+++ .......... 2.50%* 2.08%* 26%
Class B
3/3/98+ to 5/31/98+++ .......... 3.20% 1.59%* 26%
Class C
3/3/98+ to 5/31/98+++ .......... 3.20% 1.42%* 26%
Worldwide Privatization Fund
Class A
Year ended 6/30/98 ............. 1.73% .80% 53%
Year ended 6/30/97 ............. 1.72 1.27 48
Year ended 6/30/96 ............. 1.87 .95 28
Year ended 6/30/95 ............. 2.56 .66 36
6/2/94+ to 6/30/94 ............. 2.75* 1.03* 0
Class B
Year ended 6/30/98 ............. 2.45% .20% 53%
Year ended 6/30/97 ............. 2.43 .66 48
Year ended 6/30/96 ............. 2.83 (.20) 28
Year ended 6/30/95 ............. 3.27 .01 36
6/2/94+ to 6/30/94 ............. 3.45* .33* 0
Class C
Year ended 6/30/98 ............. 2.44% .38% 53%
Year ended 6/30/97 ............. 2.42 1.06 48
Year ended 6/30/96 ............. 2.57 .63 28
2/8/95++ to 6/30/9 ............. 3.27* 2.65* 36
New Europe Fund
Class A
Year ended 7/31/98 ............. 1.85%(i) .25% 99%
Year ended 7/31/97 ............. 2.05 (i) .40 89
Year ended 7/31/96 ............. 2.14 1.10 69
Year ended 7/31/95 ............. 2.09 .37 74
Period ended 7/31/94**.......... 2.06* 1.85* 35
Year ended 2/28/94 ............. 2.30 .17 94
Year ended 2/28/93 ............. 2.25 .47 125
Year ended 2/29/92 ............. 2.24 .16 34
4/2/90+ to 2/28/91 ............. 1.52* 2.71* 48
Class B
Year ended 7/31/98 ............. 2.56%(i) (.40)% 99%
Year ended 7/31/97 ............. 2.75 (i) (.23) 89
Year ended 7/31/96 ............. 2.86 .59 69
Year ended 7/31/95 ............. 2.79 (.33) 74
Period ended 7/31/94**.......... 2.76 1.15* 35
Year ended 2/28/94 ............. 3.02 (.52) 94
Year ended 2/28/93 ............. 3.00 (.50) 125
3/5/91++ to 2/29/92............. 3.02* (.71)* 34
Class C
Year ended 7/31/98 ............. 2.56%(i) (.41)% 99%
Year ended 7/31/97 ............. 2.74 (i) (.23) 89
Year ended 7/31/96 ............. 2.87 .58 69
Year ended 7/31/95 ............. 2.78 (.33) 74
Period ended 7/31/94**.......... 2.76* 1.15* 35
5/3/93++ to 2/28/94............. 3.00* (.52)* 94
All-Asia Investment Fund
Class A
11/1/97 to 4/30/98 ............ 3.74%* (1.86)%* 87%
Year ended 10/31/97 ............ 3.45 (f) (1.97) 70
Year ended 10/31/96 ............ 3.37*(f) (1.75) 66
11/28/94+ to 10/31/95........... 4.42*(f) (1.87)* 90
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income
------------------- ------------ -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
All-Asia Investment Fund (continued)
Class B
11/1/97 to 4/30/98+++..... $ 7.39 $(.09)(b)(c) $ (.25) $ (.34) $0.00
Year ended 10/31/97....... 10.90 (.28)(b)(c) (2.89) (3.17) 0.00
Year ended 10/31/96....... 10.41 (.28)(b)(c) .85 .57 0.00
11/28/94+ to 10/31/95..... 10.00 (.25)(c) .66 .41 0.00
Class C
11/1/97 to 4/30/98+++..... $ 7.40 $(.09)(b)(c) $ (.25) $ (.34) $0.00
Year ended 10/31/97....... $10.91 $(.27)(b)(c) $(2.90) $(3.17) $0.00
Year ended 10/31/96....... 10.41 (.28)(b)(c) .86 .58 0.00
11/28/94+ to 10/31/95..... 10.00 (.35)(c) .76 .41 0.00
Greater China '97 Fund
Class A
September 3, 1997 to 7/31/98..... $10.00 $ .08(b)(c) $(5.18) $(5.10) $(.06)
Class B
September 3, 1997 to 7/31/98..... $10.00 $ .03(b)(c) $(5.17) $(5.14) $(.03)
Class c
September 3, 1997 to 7/31/98..... $10.00 $ .03(b)(c) $(5.17) $(5.14) $(.03)
Global Small Cap Fund
Class A
Year ended 7/31/98........ $12.87 $(.11)(b) $ .37 $ .26 $0.00
Year ended 7/31/97........ 11.61 (.15)(b) 2.97 2.82 0.00
Year ended 7/31/96........ 10.38 (.14)(b) 1.90 1.76 0.00
Year ended 7/31/95........ 11.08 (.09) 1.50 1.41 0.00
Period ended 7/31/94**.... 11.24 (.15)(b) (.01) (.16) 0.00
Year ended 9/30/93........ 9.33 (.15) 2.49 2.34 0.00
Year ended 9/30/92........ 10.55 (.16) (1.03) (1.19) 0.00
Year ended 9/30/91........ 8.26 (.06) 2.35 2.29 0.00
Year ended 9/30/90........ 15.54 (.05)(b) (4.12) (4.17) 0.00
Year ended 9/30/89........ 11.41 (.03) 4.25 4.22 0.00
Class B
Year ended 7/31/98........ $12.03 $(.18)(b) $ .34 $ .16 $0.00
Year ended 7/31/97........ 11.03 (.21)(b) 2.77 2.56 0.00
Year ended 7/31/96........ 9.95 (.20)(b) 1.81 1.61 0.00
Year ended 7/31/95........ 10.78 (.12) 1.40 1.28 0.00
Period ended 7/31/94**.... 11.00 (.17)(b) (.05) (.22) 0.00
Year ended 9/30/93........ 9.20 (.15) 2.38 2.23 0.00
Year ended 9/30/92........ 10.49 (.20) (1.06) (1.26) 0.00
Year ended 9/30/91........ 8.26 (.07) 2.30 2.23 0.00
9/17/90++ to 9/30/90...... 9.12 (.01) (.85) (.86) 0.00
Class C
Year ended 7/31/98........ $12.05 $(.19)(b) $ .35 $ .16 $0.00
Year ended 7/31/97........ 11.05 (.22)(b) 2.78 2.56 0.00
Year ended 7/31/96........ 9.96 (.20)(b) 1.82 1.62 0.00
Year ended 7/31/95........ 10.79 (.17) 1.45 1.28 0.00
Period ended 7/31/94**.... 11.00 (.17)(b) (.04) (.21) 0.00
5/3/93++ to 9/30/93....... 9.86 (.05) 1.19 1.14 0.00
Global Environment Fund (k)
Class A
11/1/97 to 4/30/98++...... $18.77 $(.14)(b) $ 1.30 $ 1.16 $0.00
Year ended 10/31/97 ...... 16.48 (.23)(b) 3.65 3.42 0.00
Year ended 10/31/96 ...... 12.37 (.13)(b) 4.26 4.13 (.02)
Year ended 10/31/95 ...... 11.74 .03 .60 .63 0.00
Year ended 10/31/94 ...... 10.97 0.00 .77 .77 0.00
Year ended 10/31/93 ...... 10.78 .01 .18 .19 0.00
Year ended 10/31/92 ...... 13.12 .01 (2.17) (2.16) (.10)
Year ended 10/31/91 ...... 12.46 .13 .87 1.00 (.25)
6/1/90+ to 10/31/90 ...... 13.83 .20 (1.57) (1.37) 0.00
Class B
11/1/97 to 4/30/98++...... $18.76 $(.15)(b) $ 1.30 $ 1.15 $0.00
10/3/97++to 10/31/97...... 19.92 (.20)(b) (.96) (1.16) 0.00
Class C
11/1/97 to 4/30/98++...... $19.15 $(.16)(b) $ 0.88 $ .72 $0.00
Balanced Shares
Class A
Year ended 7/31/98 ....... $16.17 $ .33 (b) $ 1.86 $ 2.19 $(.32)
Year ended 7/31/97 ....... 14.01 .31(b) 3.97 4.28 (.32)
Year ended 7/31/96 ....... 15.08 .37 .45 .82 (.41)
Year ended 7/31/95 ....... 13.38 .46 1.62 2.08 (.36)
Period ended 7/31/94** ... 14.40 .29 (.74) (.45) (.28)
Year ended 9/30/93 ....... 13.20 .34 1.29 1.63 (.43)
Year ended 9/30/92 ....... 12.64 .44 .57 1.01 (.45)
Year ended 9/30/91 ....... 10.41 .46 2.17 2.63 (.40)
Year ended 9/30/90 ....... 14.13 .45 (2.14) (1.69) (.40)
Year ended 9/30/89 ....... 12.53 .42 2.18 2.60 (.46)
Class B
Year ended 7/31/98 ....... $15.83 $ .21(b) $ 1.81 $ 2.02 $(.24)
Year ended 7/31/97 ....... 13.79 .19(b) 3.89 4.08 (.24)
Year ended 7/31/96 ....... 14.88 .28 .42 .70 (.31)
Year ended 7/31/95 ....... 13.23 .30 1.65 1.95 (.28)
Period ended 7/31/94** ... 14.27 .22 (.75) (.53) (.22)
Year ended 9/30/93 ....... 13.13 .29 1.22 1.51 (.37)
Year ended 9/30/92 ....... 12.61 .37 .54 .91 (.39)
2/4/91++ to 9/30/91 ...... 11.84 .25 .80 1.05 (.28)
2/4/91++ to 9/30/91 ...... 11.84 .25 .80 1.05 (.28)
<CAPTION>
Distributions
In Excess Of
Net Investment
Fiscal Year or Period Income
------------------- --------------
<S> <C>
All-Asia Investment Fund (continued)
Class B
11/1/97 to 4/30/98+++..... $0.00
Year ended 10/31/97....... 0.00
Year ended 10/31/96....... 0.00
11/28/94+ to 10/31/95..... 0.00
Class C
11/1/97 to 4/30/98+++..... $0.00
Year ended 10/31/97....... 0.00
Year ended 10/31/96....... 0.00
11/28/94+ to 10/31/95..... 0.00
Greater China '97 Fund
Class A
September 3, 1997 to 7/31/98..... $0.00
Class B
September 3, 1997 to 7/31/98..... $(.01)
Class c
September 3, 1997 to 7/31/98..... $(.01)
Global Small Cap Fund
Class A
Year ended 7/31/97........ $0.00
Year ended 7/31/97........ 0.00
Year ended 7/31/96........ 0.00
Year ended 7/31/95........ 0.00
Period ended 7/31/94**.... 0.00
Year ended 9/30/93........ 0.00
Year ended 9/30/92........ 0.00
Year ended 9/30/91........ 0.00
Year ended 9/30/90........ 0.00
Year ended 9/30/89........ 0.00
Year ended 9/30/88........ 0.00
Class B
Year ended 7/31/97........ $0.00
Year ended 7/31/97........ 0.00
Year ended 7/31/96........ 0.00
Year ended 7/31/95........ 0.00
Period ended 7/31/94**.... 0.00
Year ended 9/30/93........ 0.00
Year ended 9/30/92........ 0.00
Year ended 9/30/91........ 0.00
9/17/90++ to 9/30/90...... 0.00
Class C
Year ended 7/31/98........ $0.00
Year ended 7/31/97........ 0.00
Year ended 7/31/97........ 0.00
Year ended 7/31/96........ 0.00
Year ended 7/31/95........ 0.00
Period ended 7/31/94**.... 0.00
5/3/93++ to 9/30/93....... 0.00
Global Environment Fund (k)
Class A
11/1/97 to 4/30/98++...... $0.00
Year ended 10/31/97 ...... 0.00
Year ended 10/31/96 ...... 0.00
Year ended 10/31/95 ...... 0.00
Year ended 10/31/94 ...... 0.00
Year ended 10/31/93 ...... 0.00
Year ended 10/31/92 ...... 0.00
Year ended 10/31/91 ...... 0.00
6/1/90+ to 10/31/90 ...... 0.00
Class B
11/1/97 to 4/30/98++...... $0.00
10/3/97++to 10/31/97...... 0.00
Class C
11/1/97 to 4/30/98++...... $0.00
Balanced Shares
Class A
Year ended 7/31/98 ....... $0.00
Year ended 7/31/97 ....... 0.00
Year ended 7/31/96 ....... 0.00
Year ended 7/31/95 ....... 0.00
Period ended 7/31/94** ... 0.00
Year ended 9/30/93 ....... 0.00
Year ended 9/30/92 ....... 0.00
Year ended 9/30/91 ....... 0.00
Year ended 9/30/90 ....... 0.00
Year ended 9/30/89 ....... 0.00
Class B
Year ended 7/31/98 ....... $0.00
Year ended 7/31/97 ....... 0.00
Year ended 7/31/96 ....... 0.00
Year ended 7/31/95 ....... 0.00
Period ended 7/31/94** ... 0.00
Year ended 9/30/93 ....... 0.00
Year ended 9/30/92 ....... 0.00
2/4/91++ to 9/30/91 ...... 0.00
2/4/91++ to 9/30/91 ...... 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to footnotes on page 18.
14
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Distributions Dividends Value Return Based Period
From Net And End Of on Net Asset (000's
Fiscal Year or Period Realized Gains Distributions Period Value (a) omitted)
------------------- -------------- ------------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
All-Asia Investment Fund (continued)
Class B
11/1/97 to 4/30/98+++..... $ (0.00) $ (.00) $ 7.05 (4.60)% $ 11,139
Year ended 10/31/97....... (.34) (.34) 7.39 (30.09) 11,439
Year ended 10/31/96....... (.08) (.08) 10.90 5.49 23,784
11/28/94+ to 10/31/95..... 0.00 0.00 10.41 4.10 5,170
Class C
11/1/97 to 4/30/98+++..... $ (0.00) $(0.00) $ 7.06 (4.60)% $ 1,981
Year ended 10/31/97....... (.34) (.34) 7.40 (30.06) 1,859
Year ended 10/31/96....... (.08) (.08) 10.91 5.59 4,228
11/28/94+ to 10/31/95..... 0.00 0.00 10.41 4.10 597
Greater China '97 Fund
Class A
September 3, 1997 to 7/31/98..... $ 0.00 $ (.06) $ 4.84 (51.20)% $ 445
Class B
September 3, 1997 to 7/31/98..... $ 0.00 (.04) $ 4.82 (51.53)% $ 1,551
Class C
September 3, 1997 to 7/31/98..... $ 0.00 (.04) $ 4.82 (51.53)% $ 102
Global Small Cap Fund
Class A
Year ended 7/31/98........ $ ( .99) $( .99) $12.14 2.49% $ 82,843
Year ended 7/31/97........ (1.56) (1.56) 12.87 26.47 85,217
Year ended 7/31/96........ (.53) (.53) 11.61 17.46 68,623
Year ended 7/31/95........ (2.11)(h) (2.11) 10.38 16.62 60,057
Period ended 7/31/94**.... 0.00 0.00 11.08 (1.42) 61,372
Year ended 9/30/93........ (.43) (.43) 11.24 25.83 65,713
Year ended 9/30/92........ (.03) (.03) 9.33 (11.30) 58,491
Year ended 9/30/91........ 0.00 0.00 10.55 27.72 84,370
Year ended 9/30/90........ (3.11) (3.11) 8.26 (31.90) 68,316
Year ended 9/30/89........ (.09) (.09) 15.54 37.34 113,583
Class B
Year ended 7/31/98........ $ ( .99) $( .99) $11.20 1.80% $ 38,827
Year ended 7/31/97........ (1.56) (1.56) 12.03 25.42 31,946
Year ended 7/31/96........ (.53) (.53) 11.03 16.69 14,247
Year ended 7/31/95........ (2.11)(h) (2.11) 9.95 15.77 5,164
Period ended 7/31/94**.... 0.00 0.00 10.78 (2.00) 3,889
Year ended 9/30/93........ (.43) (.43) 11.00 24.97 1,150
Year ended 9/30/92........ (.03) (.03) 9.20 (12.03) 819
Year ended 9/30/91........ 0.00 0.00 10.49 27.00 121
9/17/90++ to 9/30/90...... 0.00 0.00 8.26 (9.43) 183
Class C
Year ended 7/31/98........ $ ( .99) $( .99) $11.22 1.79% $ 9,471
Year ended 7/31/97........ (1.56) (1.56) 12.05 25.37 8,718
Year ended 7/31/96........ (.53) (.53) 11.05 16.77 4,119
Year ended 7/31/95........ (2.11)(h) (2.11) 9.96 15.75 1,407
Period ended 7/31/94**.... 0.00 0.00 10.79 (1.91) 1,330
5/3/93++ to 9/30/93....... 0.00 0.00 11.00 11.56 261
Global Environment Fund (k)
Class A
11/1/97 to 4/30/98++...... $(9.07) $(9.07) $10.86 16.53% $ 29,087
Year ended 10/31/97 ...... (1.13) (1.13) 18.77 23.51 52,378
Year ended 10/31/96 ...... 0.00 (.02) 16.48 33.48 100,271
Year ended 10/31/95 ...... 0.00 0.00 12.37 5.37 85,416
Year ended 10/31/94 ...... 0.00 0.00 11.74 7.02 81,102
Year ended 10/31/93 ...... 0.00 0.00 10.97 1.76 75,805
Year ended 10/31/92 ...... (.08) (.18) 10.78 (16.59) 74,442
Year ended 10/31/91 ...... (.09) (.34) 13.12 8.66 90,612
6/1/90+ to 10/31/90 ...... 0.00 0.00 12.46 (10.68) 86,041
Class B
11/1/97 to 4/30/98++...... $(9.07) $(9.07) $10.84 16.50% $ 114
10/3/97++to 10/31/97...... 0.00 $0.00 $18.76 (5.82) 235
Class C
11/1/97 to 4/30/98++...... $(9.07) $(9.07) $10.80 13.78% $ 4
Balanced Shares
Class A
Year ended 7/31/98 ....... $ 2.07 $(2.39) $15.97 14.99% $123,623
Year ended 7/31/97 ....... 1.80 (2.12) 16.17 33.46 115,500
Year ended 7/31/96 ....... (1.48) (1.89) 14.01 5.23 102,567
Year ended 7/31/95 ....... (.02) (.38) 15.08 15.99 122,033
Period ended 7/31/94** ... (.29) (.57) 13.38 (3.21) 157,637
Year ended 9/30/93 ....... 0.00 (.43) 14.40 12.52 172,484
Year ended 9/30/92 ....... 0.00 (.45) 13.20 8.14 143,883
Year ended 9/30/91 ....... 0.00 (.40) 12.64 25.52 154,230
Year ended 9/30/90 ....... (1.63) (2.03) 10.41 (13.12) 140,913
Year ended 9/30/89 ....... (.54) (1.00) 14.13 22.27 159,290
Class B
Year ended 7/31/98 ....... $ 2.07 $(2.31) $15.54 14.13% $ 47,728
Year ended 7/31/97 ....... 1.80 (2.04) 15.83 32.34 24,192
Year ended 7/31/96 ....... (1.48) (1.79) 13.79 4.45 18,393
Year ended 7/31/95 ....... (.02) (.30) 14.88 15.07 15,080
Period ended 7/31/94** ... (.29) (.51) 13.23 (3.80) 14,347
Year ended 9/30/93 ....... 0.00 (.37) 14.27 11.65 12,789
Year ended 9/30/92 ....... 0.00 (.39) 13.13 7.32 6,499
2/4/91++ to 9/30/91 ...... 0.00 (.28) 12.61 8.96 1,830
2/4/91++ to 9/30/91 ...... 0.00
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss)
To Average To Average Portfolio
Fiscal Year or Period Net Assets Net Assets Turnover Rate
--------------------- ---------- ---------- -------------
<S> <C> <C> <C>
All-Asia Investment Fund (continued)
Class B
11/1/97 to 4/30/98+++..... 4.46%* (2.56)%* 87%
Year ended 10/31/97....... 4.15(f) (2.67) 70
Year ended 10/31/96....... 4.07(f) (2.44) 66
11/28/94+ to 10/31/95..... 5.20*(f) (2.64)* 90
Class C
11/1/97 to 4/30/98+++..... 4.47%* (2.56)%* 87%
Year ended 10/31/97....... 4.15(f) (2.66) 70
Year ended 10/31/96....... 4.07(f) (2.42) 66
11/28/94+ to 10/31/95..... 5.84*(f) (3.41) 90
Greater China '97 Fund
Class A
September 3, 1997 to 7/31/98..... 2.52%(f)(i) 1.20% 58%
Class B
September 3, 1997 to 7/31/98..... 3.22%(f)(i) .53%* 58%
Class C
September 3, 1997 to 7/31/98..... 3.22%(f)(i) .50% 58%
Global Small Cap Fund
Class A
Year ended 7/31/98........ 2.16%(i) (.88)% 113%
Year ended 7/31/97........ 2.41(i) (1.25) 129
Year ended 7/31/96........ 2.51 (1.22) 139
Year ended 7/31/95........ 2.54(f) (1.17) 128
Period ended 7/31/94**.... 2.42* (1.26)* 78
Year ended 9/30/93........ 2.53 (1.13) 97
Year ended 9/30/92........ 2.34 (.85) 108
Year ended 9/30/91........ 2.29 (.55) 104
Year ended 9/30/90........ 1.73 (.46) 89
Year ended 9/30/89........ 1.56 (.17) 106
Class B
Year ended 7/31/98........ 2.88%(i) (1.58)% 113%
Year ended 7/31/97........ 3.11(i) (1.92) 129
Year ended 7/31/96........ 3.21 (1.88) 139
Year ended 7/31/95........ 3.20(f) (1.92) 128
Period ended 7/31/94**.... 3.15* (1.93)* 78
Year ended 9/30/93........ 3.26 (1.85) 97
Year ended 9/30/92........ 3.11 (1.31) 108
Year ended 9/30/91........ 2.98 (1.39) 104
9/17/90++ to 9/30/90...... 2.61* (1.30)* 89
Class C
Year ended 7/31/98........ 2.88%(i) (1.59)% 113%
Year ended 7/31/97........ 3.10(i) (1.93) 129
Year ended 7/31/96........ 3.19 (1.85) 139
Year ended 7/31/95........ 3.25(f) (2.10) 128
Period ended 7/31/94**.... 3.13* (1.92)* 78
5/3/93++ to 9/30/93....... 3.75* (2.51)* 97
Global Environment Fund (k)
Class A
11/1/97 to 4/30/98++............ 2.75%* (2.31)%* 199%
Year ended 10/31/97 ............ 2.39 (1.35) 145
Year ended 10/31/96 ............ 1.60 (.85) 268
Year ended 10/31/95 ............ 1.57 .21 109
Year ended 10/31/94 ............ 1.67 (.04) 42
Year ended 10/31/93 ............ 1.62 .15 25
Year ended 10/31/92 ............ 1.63 .10 41
Year ended 10/31/91 ............ 1.49 .95 32
6/1/90+ to 10/31/90 ............ 1.72* 3.95* 4
Class B
11/1/97++ to 4/30/98++.......... 3.55% (3.08)%* 199%
10/3/97++ to 10/31/97 .......... 20.84 (1.03) 145
Class C
11/1/97++ to 4/30/98++.......... 3.32%* (2.71)% 199%
Balanced Shares
Class A
Year ended 7/31/98 ............. 1.30%(i) 2.07% 145%
Year ended 7/31/97 ............. 1.47(i) 2.11 207
Year ended 7/31/96 ............. 1.38 2.41 227
Year ended 7/31/95 ............. 1.32 3.12 179
Period ended 7/31/94** ......... 1.27* 2.50* 116
Year ended 9/30/93 ............. 1.35 2.50 188
Year ended 9/30/92 ............. 1.40 3.26 204
Year ended 9/30/91 ............. 1.44 3.75 70
Year ended 9/30/90 ............. 1.36 4.01 169
Year ended 9/30/89 ............. 1.42 3.29 132
Class B
Year ended 7/31/98 ............. 2.06%(i) 1.34% 145%
Year ended 7/31/97 ............. 2.25(i) 1.32 207
Year ended 7/31/96 ............. 2.16 1.61 227
Year ended 7/31/95 ............. 2.11 2.30 179
Period ended 7/31/94** ......... 2.05* 1.73* 116
Year ended 9/30/93 ............. 2.13 1.72 188
Year ended 9/30/92 ............. 2.16 2.46 204
2/4/91++ to 9/30/91 ............ 2.13* 3.19* 70
</TABLE>
- --------------------------------------------------------------------------------
15
<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>
Balanced Shares (continued)
Class C
Year ended 7/31/98 ............. $15.86 $ .21(b) $1.81 $ 2.02 $ (.24) $(2.07)
Year ended 7/31/97 ............. 13.81 .20(b) 3.89 4.09 (.24) (1.80)
Year ended 7/31/96 ............. 14.89 .26 .45 .71 (.31) (1.48)
Year ended 7/31/95 ............. 13.24 .30 1.65 1.95 (.28) (.02)
Period ended 7/31/94** ......... 14.28 .24 (.77) (.53) (.22) (.29)
5/3/93++ to 9/30/93............. 13.63 .11 .71 .82 (.17) 0.00
Utility Income Fund
Class A
12/1/97 to 5/31/98+++............ $12.48 $ .15(b)(c) $1.41 $ 1.56 $ (.16) $ (.47)
Year ended 11/30/97 ............. 10.59 .32(b)(c) 2.04 2.36 (.34) (.13)
Year ended 11/30/96 ............. 10.22 .18(b)(c) .65 .83 (.46) 0.00
Year ended 11/30/95 ............. 8.97 .27(c) 1.43 1.70 (.45) 0.00
Year ended 11/30/94 ............. 9.92 .42(c) (.89) (.47) (.48) 0.00
10/18/93+ to 11/30/93............ 10.00 .02(c) (.10) (.08) 0.00 0.00
Class B
12/1/97 to 5/31/98+++............ $12.46 $ .11(b)(c) $1.38 $ 1.49 $ (.12) $ (.47)
Year ended 11/30/97 ............. 10.57 .25(b)(c) 2.04 2.29 (.27) (.13)
Year ended 11/30/96 ............. 10.20 .10(b)(c) .67 .77 (.40) 0.00
Year ended 11/30/95 ............. 8.96 .18(c) 1.45 1.63 (.39) 0.00
Year ended 11/30/94 ............. 9.91 .37(c) (.91) (.54) (.41) 0.00
10/18/93+ 11/30/93............... 10.00 .01(c) (.10) (.09) 0.00 0.00
Class C
12/1/97 to 5/31/98+++............ $12.47 $ .10(b)(c) $1.41 $ 1.51 $ (.12) $ (.47)
Year ended 11/30/97 ............. 10.59 .25(b)(c) 2.03 2.28 (.27) (.13)
Year ended 11/30/96 ............. 10.22 .11(b)(c) .66 .77 (.40) 0.00
Year ended 11/30/95 ............. 8.97 .18(c) 1.46 1.64 (.39) 0.00
Year ended 11/30/94 ............. 9.92 .39(c) (.93) (.54) (.41) 0.00
10/27/93+ to 11/30/93............ 10.00 .01(c) (.09) (.08) 0.00 0.00
Growth and Income Fund
Class A
11/1/97 to 4/30/98+++............ $ 3.48 $ .02(b) $ .58 $ .60 $ (.02) $ (.46)
Year ended 10/31/97 ............. 3.00 .04(b) .87 .91 (.05) (.38)
Year ended 10/31/96 ............. 2.71 .05 .50 .55 (.05) (.21)
Year ended 10/31/95 ............. 2.35 .02 .52 .54 (.06) (.12)
Year ended 10/31/94 ............. 2.61 .06 (.08) (.02) (.06) (.18)
Year ended 10/31/93 ............. 2.48 .06 .29 .35 (.06) (.16)
Year ended 10/31/92 ............. 2.52 .06 .11 .17 (.06) (.15)
Year ended 10/31/91 ............. 2.28 .07 .56 .63 (.09) (.30)
Year ended 10/31/90 ............. 3.02 .09 (.30) (.21) (.10) (.43)
Year ended 10/31/89 ............. 3.05 .10 .43 .53 (.08) (.48)
Year ended 10/31/88 ............. 3.48 .10 .33 .43 (.08) (.78)
Class B
11/1/97 to 4/30/98+++............ $ 3.45 $0.00(b) $ .59 $ .59 $ (.01) $ (.46)
Year ended 10/31/97 ............. 2.99 .02(b) .85 .87 (.03) (.38)
Year ended 10/31/96 ............. 2.69 .03 .51 .54 (.03) (.21)
Year ended 10/31/95 ............. 2.34 .01 .49 .50 (.03) (.12)
Year ended 10/31/94 ............. 2.60 .04 (.08) (.04) (.04) (.18)
Year ended 10/31/93 ............. 2.47 .05 .28 .33 (.04) (.16)
Year ended 10/31/92 ............. 2.52 .04 .11 .15 (.05) (.15)
2/8/91++ to 10/31/91 2.40 .04 .12 .16 (.04) 0.00
Class C
11/1/97 to 4/30/98+++............ $ 3.45 $0.00(b) $ .59 $ .59 $ (.01) $ (.46)
Year ended 10/31/97 ............. 2.99 .02(b) .85 .87 (.03) (.38)
Year ended 10/31/96 ............. 2.70 .03 .50 .53 (.03) (.21)
Year ended 10/31/95 ............. 2.34 .01 .50 .51 (.03) (.12)
Year ended 10/31/94 ............. 2.60 .04 (.08) (.04) (.04) (.18)
5/3/93 ++ to 10/31/93............ 2.43 .02 .17 .19 (.02) 0.00
Real Estate Investment Fund
Class A
Year ended 8/31/98 .............. $12.80 $ .52(b) $(2.33) $(1.81) $ (.51) $ (.01)
10/1/96+ to 8/31/97.............. 10.00 .30(b) 2.88 3.18 (.38)(j) 0.00
Class B
Year ended 8/31/98 .............. $12.79 $ .42(b) $(2.33) $(1.91) $ (.43) $ (.01)
10/1/96+ to 8/31/97.............. 10.00 .23(b) 2.89 3.12 (.33)(j) 0.00
Class C
Year ended 8/31/98 .............. $12.79 $ .42(b) $(2.33) $(1.91) $ (.43) $ (.01)
10/1/96+ to 8/31/97.............. 10.00 .23(b) 2.89 3.12 (.33)(j) 0.00
</TABLE>
Please refer to the footnotes on page 18.
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Dividends Value Return Based Period
And End Of on Net Asset (000's
Fiscal Year or Period Distributions Period Value (a) omitted)
------------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Balanced Shares (continued)
Class C
Year ended 7/31/98 ............. $(2.31) $15.57 14.09% $ 10,855
Year ended 7/31/97 ............. (2.04) 15.86 32.37 5,510
Year ended 7/31/96 ............. (1.79) 13.81 4.52 6,096
Year ended 7/31/95 ............. (.30) 14.89 15.06 5,108
Period ended 7/31/94** ......... (.51) 13.24 (3.80) 6,254
5/3/93++ to 9/30/93 ............ (.17) 14.28 6.01 1,487
Utility Income Fund
Class A
12/1/97 to 5/31/98+++........... $(.63) $13.41 12.83% $ 6,196
Year ended 11/30/97 ............ (.47) 12.48 23.10% 4,117
Year ended 11/30/96 ............ (.46) 10.59 8.47 3,294
Year ended 11/30/95 ............ (.45) 10.22 19.58 2,748
Year ended 11/30/94 ............ (.48) 8.97 (4.86) 1,068
10/18/93+ to 11/30/93 .......... 0.00 9.92 (.80) 229
Class B
12/1/97 to 5/31/98+++........... $(.59) $13.36 12.29% $ 19,744
Year ended 11/30/97 ............ (.40) 12.46 22.35 14,782
Year ended 11/30/96 ............ (.40) 10.57 7.82 13,561
Year ended 11/30/95 ............ (.39) 10.20 18.66 10,988
Year ended 11/30/94 ............ (.41) 8.96 (5.59) 2,353
10/18/93+ 11/30/93 ............. 0.00 9.91 (.90) 244
Class C
12/1/97 to 5/31/98+++........... $(.59) $13.39 12.44% $ 4,259
Year ended 11/30/97 ............ (.40) 12.47 22.21 3,413
Year ended 11/30/96 ............ (.40) 10.59 7.81 3,376
Year ended 11/30/95 ............ (.39) 10.22 18.76 3,500
Year ended 11/30/94 ............ (.41) 8.97 (5.58) 2,651
10/27/93+ to 11/30/93 .......... 0.00 9.92 (.80) 18
Growth and Income Fund
Class A
11/1/97 to 4/30/98+++........... $(.48) $3.60 19.32% $ 966,167
Year ended 10/31/97 ............ (.43) 3.48 33.28 787,566
Year ended 10/31/96 ............ (.26) 3.00 21.51 553,151
Year ended 10/31/95 ............ (.18) 2.71 24.21 458,158
Year ended 10/31/94 ............ (.24) 2.35 (.67) 414,386
Year ended 10/31/93 ............ (.22) 2.61 14.98 459,372
Year ended 10/31/92 ............ (.21) 2.48 7.23 417,018
Year ended 10/31/91 ............ (.39) 2.52 31.03 409,597
Year ended 10/31/90 ............ (.53) 2.28 (8.55) 314,670
Year ended 10/31/89 ............ (.56) 3.02 21.59 377,168
Year ended 10/31/88 ............ (.86) 3.05 16.45 350,510
Class B
11/1/97 to 4/30/98+++........... $(.47) $3.57 19.14% $ 666,923
Year ended 10/31/97 ............ (.41) 3.45 31.83 456,399
Year ended 10/31/96 ............ (.24) 2.99 21.20 235,263
Year ended 10/31/95 ............ (.15) 2.69 22.84 136,758
Year ended 10/31/94 ............ (.22) 2.34 (1.50) 102,546
Year ended 10/31/93 ............ (.20) 2.60 14.22 76,633
Year ended 10/31/92 ............ (.20) 2.47 6.22 29,656
2/8/91++ to 10/31/91 ........... (.04) 2.52 6.83 10,221
Class C
11/1/97 to 4/30/98+++........... $(.47) $3.57 19.14% $ 150,335
Year ended 10/31/97 ............ (.41) 3.45 31.83 106,526
Year ended 10/31/96 ............ (.24) 2.99 20.72 61,356
Year ended 10/31/95 ............ (.15) 2.70 23.30 35,835
Year ended 10/31/94 ............ (.22) 2.34 (1.50) 19,395
5/3/93 ++ to 10/31/93 .......... (.02) 2.60 7.85 7,774
Real Estate Investment Fund
Class A
Year ended 8/31/98 ............. $(.52) $10.47 (14.90)% $ 51,214
10/1/96+ to 8/31/97 ............ (.38) 12.80 32.24 37,638
Class B
Year ended 8/31/98 ............. $(.44) $10.44 (15.56)% $ 268,856
10/1/96+ to 8/31/97 ............ (.33) 12.79 31.49 186,802
Class C
Year ended 8/31/98 ............. $(.44) $10.44 (15.56)% $ 69,575
10/1/96+ to 8/31/97 ............ (.33) 12.79 31.49 42,719
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss)
To Average To Average Portfolio
Fiscal Year or Period Net Assets Net Assets Turnover Rate
------------------- ----------- ------------- -------------
<S> <C> <C> <C>
Balanced Shares (continued)
Class C
Year ended 7/31/98 ............. 2.05%(i) 1.36% 145%
Year ended 7/31/97 ............. 2.23(l) 1.37 207
Year ended 7/31/96 ............. 2.15 1.63 227
Year ended 7/31/95 ............. 2.09 2.32 179
Period ended 7/31/94** ......... 2.03* 1.81* 116
5/3/93++ to 9/30/93 ............ 2.29* 1.47* 188
Utility Income Fund
Class A
12/1/97/ to 5/31/98+++.......... 1.51%(i) 2.30% 9%
Year ended 11/30/97 ............ 1.50(i) 2.89 37
Year ended 11/30/96 ............ 1.50(f) 1.67 98
Year ended 11/30/95 ............ 1.50(f) 2.48 162
Year ended 11/30/94 ............ 1.50(f) 4.13 30
10/18/93+ to 11/30/93 .......... 1.50*(f) 2.35* 11
Class B
12/1/97/ to 5/31/98+++.......... 2.21%(i) 1.60% 9%
Year ended 11/30/97 ............ 2.20(f) 2.27 37
Year ended 11/30/96 ............ 2.20(f) .95 98
Year ended 11/30/95 ............ 2.20(f) 1.60 162
Year ended 11/30/94 ............ 2.20(f) 3.53 30
10/18/93+ 11/30/93 ............. 2.20*(f) 2.84* 11
Class C
12/1/97/ to 5/31/98+++.......... 2.21%(i) 1.59% 9%
Year ended 11/30/97 ............ 2.20(f) 2.27 37
Year ended 11/30/96 ............ 2.20(f) .94 98
Year ended 11/30/95 ............ 2.20(f) 1.88 162
Year ended 11/30/94 ............ 2.20(f) 3.60 30
10/27/93+ to 11/30/93 .......... 2.20*(f) 3.08* 11
Growth and Income Fund
Class A
11/1/97/ to 4/30/98+++.......... .88% .97% 41%
Year ended 10/31/97 ............ .92(i) 1.39* 88
Year ended 10/31/96 ............ .97 1.73 88
Year ended 10/31/95 ............ 1.05 1.88 142
Year ended 10/31/94 ............ 1.03 2.36 68
Year ended 10/31/93 ............ 1.07 2.38 91
Year ended 10/31/92 ............ 1.09 2.63 104
Year ended 10/31/91 ............ 1.14 2.74 84
Year ended 10/31/90 ............ 1.09 3.40 76
Year ended 10/31/89 ............ 1.08 3.49 79
Year ended 10/31/88 ............ 1.09 3.09 66
Class B
11/1/97/ to 4/30/98+++.......... 1.66% .18% 41%
Year ended 10/31/97 ............ 1.72(i) .56 88
Year ended 10/31/96 ............ 1.78 .91 88
Year ended 10/31/95 ............ 1.86 1.05 142
Year ended 10/31/94 ............ 1.85 1.56 68
Year ended 10/31/93 ............ 1.90 1.58 91
Year ended 10/31/92 ............ 1.90 1.69 104
2/8/91++ to 10/31/91 ........... 1.99* 1.67* 84
Class C
11/1/97/ to 4/30/98+++.......... 1.66% .18% 41%
Year ended 10/31/97 ............ 1.71(i) .58 88
Year ended 10/31/96 ............ 1.76 .93 88
Year ended 10/31/95 ............ 1.84 1.04 142
Year ended 10/31/94 ............ 1.84 1.61 68
5/3/93 ++ to 10/31/93 .......... 1.96* 1.45* 91
Real Estate Investment Fund
Class A
Year ended 8/31/98 ............ 1.55% 3.87% 23%
10/1/96+ to 8/31/97 ............ 1.77*(l) 2.73* 20
Class B
Year ended 8/31/98 ............ 2.26% 3.16% 23%
10/1/96+ to 8/31/97 ............ 2.44*(i) 2.08* 20
Class C
Year ended 8/31/98 ............ 2.26% 3.15% 23%
10/1/96+ to 8/31/97 ............ 2.43*(i) 2.06* 20
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
- ----------
+ Commencement of operations.
++ Commencement of distribution.
+++ Unaudited
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment returns calculated for periods of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and expense reimbursement.
(d) Not Applicable.
(e) Net of offering costs of ($.05).
(f) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, without giving effect to the expense offset arrangement
described in (l) below, would have been as follows:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
All-Asia Investment Fund
<S> <C> <C> <C> <C> <C> <C>
Class A -- -- 10.57%* 3.61% 3.57% --
Class B -- -- 11.32%* 4.33% 4.27% --
Class C -- -- 11.38%* 4.30% 4.27% --
Growth Fund
Class A 1.84% 1.46% -- -- -- --
Class B 2.52% 2.13% -- -- -- --
Class C -- 2.13%* -- -- -- --
Global Small Cap Fund
Class A -- -- 2.61% -- -- --
Class B -- -- 3.27% -- -- --
Class C -- -- 3.31% -- -- --
Utility Income Fund
Class A 145.63%* 13.72% 4.86%* 3.38% 3.55% --
Class B 133.62%* 14.42% 5.34%* 4.08% 4.28% --
Class C 148.03%* 14.42% 5.99%* 4.07% 4.28% --
International Fund
Class A -- -- -- -- -- 1.80%
Class B -- -- -- -- -- 2.64%
Class C -- -- -- -- -- 2.63%
Greater China '97 Fund
Class A -- -- -- -- -- 18.27%*
Class B -- -- -- -- -- 19.18%*
Class C -- -- -- -- -- 19.37%*
</TABLE>
- ----------
For the expense ratios of the Funds in years prior to fiscal year 1993, assuming
the Funds had borne all expenses, please see the Financial Statements in each
Fund's Statement of Additional Information.
(g) Prior to July 22, 1993, Equitable Capital Management Corporation
("Equitable Capital") served as the investment adviser to the predecessor
to The Alliance Portfolios, of which Growth Fund is a series. On July 22,
1993, Alliance acquired the business and substantially all assets of
Equitable Capital and became investment adviser to the Fund.
(h) "Distributions from Net Realized Gains" includes a return of capital of
$(.12).
(i) Amounts do not reflect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offset arrangements, the
ratio of expenses to average net assets, assuming the assumption and/or
waiver/reimbursement of expenses described in (f) above, would have been as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balanced Shares 1997 1998 Technology Fund 1997 1998
Class A 1.46% 1.29% Class A 1.66% --
Class B 2.24% 2.05% Class B 2.36% --
Class C 2.22% 2.04% Class C 2.37% --
Real Estate Greater China
Investment Fund 1997 1998 '97 Fund 1997 1998
Class A 1.77% -- Class A -- 2.50%
Class B 2.43% -- Class B -- 3.20%
Class C 2.42% -- Class C -- 3.20%
Growth Fund 1997 1998 New Europe Fund 1997 1998
Class A 1.25% -- Class A 2.04% 1.84%
Class B 1.95% -- Class B 2.74% 2.54%
Class C 1.95% -- Class C 2.73% 2.54%
International Fund 1997 1998 Growth and Income Fund 1997 1998
Class A 1.73% -- Class A .91% --
Class B 2.58% -- Class B 1.71% --
Class C 2.56% -- Class C 1.70% --
Global Small Cap Fund 1997 1998
Class A 2.38% 2.14%
Class B 3.08% 2.86%
Class C 3.08% 2.85%
</TABLE>
(j) Distributions from net investment income include a tax return of capital of
$.08, $.09 and $.08 for Class A, B and C shares, respectively.
(k) Global Environment Fund operated as a closed-end investment company
through October 3, 1997, when it converted to an open-end investment
company and all shares of its common stock then outstanding were
reclassified as Class A shares.
18
<PAGE>
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus.
Equity securities, except as noted otherwise, are (i) common stocks, partnership
interests, business trust shares and other equity or ownership interests in
business enterprises, and (ii) securities convertible into, and rights and
warrants to subscribe for the purchase of, such stocks, shares and
interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Greater China company is an entity that (i) is organized under the laws of a
Greater China country and conducts business in a Greater China country, (ii)
derives 50% or more of its total revenues from businesses in Greater China
countries, or (iii) issues equity or debt securities that are trade principally
on a stock exchange in a Greater China country. A company of a particular
Greater China country is a company that meets any of these criteria with respect
to that country.
Greater China countries are the People's Republic of China ("China"), the Hong
Kong Special Administrative Region of the People's Republic of China ("Hong
Kong") and the Republic of China ("Taiwan").
Non-U.S. company is an entity that (i) is organized under the laws of a foreign
country and conducts business in a foreign country, (ii) derives 50% or more of
its total revenues from business in foreign countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in a foreign
country.
Eligible Companies are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
Environmental Companies are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
Beneficiary Companies are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and healthier
environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous waste.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Exchange is the New York Stock Exchange.
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DESCRIPTION OF THE FUNDS
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Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
DOMESTIC STOCK FUNDS
The Domestic Stock Funds have been designed to offer investors seeking capital
appreciation a range of alternative approaches to investing in the U.S. equity
markets.
The Alliance Fund
The Alliance Fund, Inc. ("Alliance Fund") is a diversified investment company
that seeks long-term growth of capital and income primarily through investment
in common stocks. The Fund normally invests substantially all of its assets in
common stocks that Alliance believes will appreciate in value, but it may invest
in other types of securities such as convertible securities, high grade
instruments, U.S. Government securities and high quality, short-term obligations
such as repurchase agreements, bankers' acceptances and domestic certificates of
deposit, and may invest without limit in foreign securities. While the
diversification and generally high quality of the Fund's investments cannot
prevent fluctuations in market values, they tend to limit investment risk and
contribute to achieving the Fund's objective. The Fund generally does not effect
portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund may also: (i) make secured loans of its portfolio securities equal in
value up to 25% of its total assets to brokers, dealers and financial
institutions; (ii) enter into repurchase agreements of up to one week in
duration with commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily available
market quotations do not exceed 10% of its net assets; and (iii) write
exchange-traded covered call options with respect to up to 25% of its total
assets. For additional information on the use, risks and costs of these policies
and practices see "Additional Investment Practices."
Alliance Growth Fund
Alliance Growth Fund ("Growth Fund") is a diversified investment company that
seeks long-term growth of capital. Current income is only an incidental
consideration. The Fund seeks to achieve its objective by investing primarily in
equity securities of companies with favorable earnings outlooks and whose
long-term growth rates are expected to exceed that of the U.S. economy over
time. The Fund's investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated
fixed-income and convertible bonds. See "Risk Considerations--Securities
Ratings" and "--Investment in Lower-Rated Fixed-Income Securities." The Fund
generally will not invest in securities rated at the time of purchase below Caa-
by Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. If the credit rating of a
security held by the Fund falls below its rating at the time of purchase (or
Alliance determines that the quality of such security has so deteriorated), the
Fund may continue to hold the security if such investment is considered
appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements of up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40-50 companies will be represented in the
Fund's portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity securities of which are traded principally in the U.S.
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Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more than
600 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options; (ii)
invest up to 10% of its total assets in warrants; (iii) invest in restricted
securities and in other assets having no ready market if as a result no more
than 10% of the Fund's net assets are invested in such securities and assets;
(iv) lend portfolio securities equal in value to not more than 30% of the Fund's
total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities for the
Fund, Alliance considers the economic and political outlook, the values of
specific securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
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The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10% of its total assets may be
invested in such securities or assets; (ii) make short sales of securities
"against the box," but not more than 15% of its net assets may be deposited on
short sales; and (iii) write call options and purchase and sell put and call
options written by others. For additional information on the use, risks and
costs of these policies and practices see "Additional Investment Practices."
Global Stock Funds
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. In this
regard, at June 30, 1998, approximately 15% of the Fund's assets were invested
in securities of Japanese issuers. The Fund may invest in companies, wherever
organized, that Alliance judges have their principal activities and interests
outside the U.S. These companies may be located in developing countries, which
involves exposure to economic structures that are generally less diverse and
mature, and to political systems which can be expected to have less stability,
than those of developed countries. The Fund currently does not intend to invest
more than 10% of its total assets in companies in, or governments of, developing
countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or over-the-
counter; (v) lend portfolio securities equal in value to not more than 30% of
its total assets; and (vi) enter into repurchase agreements of up to seven days'
duration, provided that not more than 10% of the Fund's total assets would be so
invested. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance International Premier Growth Fund
Alliance International Premier Growth Fund, Inc. ("International Premier Growth
Fund") is a diversified investment company that seeks long term capital
appreciation by investing predominately in the equity securities of a limited
number of carefully selected non-U.S. companies that are judged likely to
achieve superior earnings growth. Investments will be made based upon their
potential for capital appreciation. Current income is incidental to that
objective.
In the main, the Fund's investments will be in comparatively large, high-quality
companies. Normally, about 60 companies will be represented in the Fund's
portfolio, and the 30 most highly regarded of these companies usually will
constitute approximately 70% of the Fund's net assets. The Fund thus differs
from more typical international equity mutual funds by focusing on a relatively
small number of intensively researched companies. The Fund is designed for
investors seeking to accumulate capital over time. Because of the market risks
inherent in any investment, the selection of securities on the basis of their
appreciation possibilities cannot ensure against possible loss in value, and
there is, of course, no assurance that the Fund's investment objective will be
met.
Alliance expects the average weighted market capitalization of the companies
represented in the Fund's portfolio (i.e., the number of a company's outstanding
shares multiplied by the price per share) normally will be in the range of, or
in excess of, that of the companies comprising the Morgan Stanley Capital
International Europe, Australasia and Far East ("EAFE") Index. As of December
31, 1997, the average weighted market capitalization of those companies was
approximately $2.6 billion.
Within the investment framework described herein, Alliance's Large Cap Growth
Group, headed by Alfred Harrison, Alliance's Vice Chairman, has responsibility
for managing the Fund's portfolio. As discussed below, in selecting the Fund's
portfolio investments Alliance's Large Cap Growth Group will follow a
structured, disciplined research and investment process which is essentially
similar to that which it employs in managing Premier Growth Fund.
In managing the Fund's assets, Alliance's investment strategy will emphasize
stock selection and investment in the securities of a limited number of issuers.
Alliance depends heavily upon the fundamental analysis and research of its large
global equity research team situated in numerous locations around the world. Its
global equity analysts follow a research universe of approximately 900
companies. As one of the largest multinational investment management firms,
Alliance has
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access to considerable information concerning the companies in its research
universe, an in-depth understanding of the products, services, markets and
competition of these companies and a good knowledge of their managements.
Research emphasis is placed on the identification of companies whose superior
prospective earnings growth is not fully reflected in current market valuations.
Companies are constantly added to and deleted from this universe as fundamentals
and valuations change. Alliance's global equity analysts rate companies in three
categories. The performance of each analyst's ratings is an important
determinant of his or her incentive compensation. The equity securities of "one-
rated" companies are expected to significantly outperform the local market in
local currency terms. All equity securities purchased for the Fund's portfolio
will be selected from the universe of approximately 100 "one-rated" companies.
As noted above, approximately 70% of the Fund's net assets will usually be
invested in the approximately 30 most highly regarded such companies. The Fund
will not concentrate more than 25% of its total assets in any one industry.
Within this limit, portfolio emphasis upon particular industries or sectors will
be a by-product of the stock selection process rather than the result of
assigned targets or ranges.
The Fund's investments will be diversified among at least four, and usually
considerably more, countries. No more than 15% of the Fund's total assets will
be invested in issuers in any one foreign country, except that the Fund may
invest up to 25% of its total assets in issuers in each of Canada, France,
Germany, Italy, Japan, The Netherlands, Switzerland and the United Kingdom.
Within these limits, geographic distribution of the Fund's investments among
countries or regions will also be a product of the stock selection process
rather than predetermined allocation. To the extent that the Fund's assets will
be concentrated within any one region, the Fund may be subject to any special
risks that may be associated with that region. While the Fund may engage in
currency hedging programs in periods in which Alliance perceives extreme
exchange rate risk, the Fund will not normally make significant use of currency
hedging strategies.
In the management of the Fund's investment portfolio, Alliance will seek to
utilize market volatility judiciously (assuming no change in company
fundamentals) to adjust the Fund's portfolio positions. To the extent consistent
with local market liquidity considerations, the Fund will strive to capitalize
on apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. Under normal
circumstances, the Fund will remain substantially fully invested in equity
securities and will not take significant cash positions for market timing
purposes. Rather, through "buying into declines" and "selling into strength,"
Alliance seeks superior relative returns over time.
As a matter of fundamental policy, which may not be changed without shareholder
approval, the Fund will invest under normal circumstances at least 85% of the
value of its total assets in equity securities. The Fund's other investment
policies are not fundamental and, therefore, may be changed by the Board of
Directors of the Fund without shareholder approval. For temporary defensive
purposes, the Fund may vary from its investment policies during periods in which
Alliance believes that business or financial conditions warrant, and may then
invest in high-grade short-term fixed-income securities, including U.S.
Government securities, or hold its assets in cash.
The Fund may invest up to 20% of its total assets in convertible securities of
issuers whose common stocks are eligible for purchase by the Fund. The Fund may
also: (i) invest up to 20% of its total assets in rights or warrants; (ii) write
covered put and call options and purchase put and call options on securities of
the types in which it is permitted to invest and on exchange-traded index
options and may also write uncovered options for cross hedging purposes; (iii)
enter into contracts for the purchase or sale for future delivery of fixed-
income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, foreign government
securities, or common stock and may purchase and write options on such future
contracts; (iv) purchase and write put and call options on foreign currencies
for hedging purposes; (v) purchase or sell forward contracts; (vi) enter into
forward commitments for the purchase or sale of securities; (vii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain short positions, provided that the Fund may not make a
short sale if as a result more than 5% of its net assets would be held as
collateral for short sales; and (xi) make secured loans of its portfolio
securities not in excess of 30% of its total assets to entities with which it is
permitted to enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices".
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities
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(an "initial equity offering") of a government-or state-owned or controlled
company or enterprise (a "state enterprise"). Secondly, the Fund may purchase
securities of a current or former state enterprise following its initial equity
offering. Finally, the Fund may make privately negotiated purchases of stock or
other equity interests in a state enterprise that has not yet conducted an
initial equity offering. Alliance believes that substantial potential for
capital appreciation exists as privatizing enterprises rationalize their
management structures, operations and business strategies in order to compete
efficiently in a market economy, and the Fund will thus emphasize investments in
such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established economies, including France,
Great Britain, Germany and Italy, and those with developing economies, including
Argentina, Mexico, Chile, Indonesia, Malaysia, Poland and Hungary, are engaged
in privatizations. The Fund will invest in any country believed to present
attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its
investments in any industry, it is permitted to invest more than 25% of its
total assets in issuers whose primary business activity is that of national
commercial banking. Prior to so concentrating, however, the Fund's Directors
must determine that its ability to achieve its investment objective would be
adversely affected if it were not permitted to concentrate. The staff of the
Commission is of the view that registered investment companies may not, absent
shareholder approval, change between concentration and non-concentration in a
single industry. The Fund disagrees with the staff's position but has undertaken
that it will not concentrate in the securities of national commercial banks
until, if ever, the issue is resolved. If the Fund were to invest more than 25%
of its total assets in national commercial banks, the Fund's performance could
be significantly influenced by events or conditions affecting this industry,
which is subject to, among other things, increases in interest rates and
deteriorations in general economic conditions, and the Fund's investments may be
subject to greater risk and market fluctuation than if its portfolio represented
a broader range of investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations--Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain
a non-convertible security that is downgraded below C or determined by Alliance
to have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter into forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
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Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund will invest in companies that Alliance
believes possess rapid growth potential. Thus, the Fund will emphasize
investments in larger, established companies, but will also invest in smaller,
emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although the Fund will not invest more than 20% of its total assets in
issuers based therein, or more than 10% of its total assets in issuers based in
any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country, at times 25% or more of its assets may be
invested in issuers located in a single country. During such times, the Fund
would be subject to a correspondingly greater risk of loss due to adverse
political or regulatory developments, or an economic downturn, within that
country. In this regard, at July 31, 1998, approximately 20% of the Fund's
assets were invested in securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a
non-diversified investment company whose investment objective is to seek
long-term capital appreciation. In seeking to achieve its investment objective,
the Fund will invest at least 65% of its total assets in equity securities (for
the purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, which may be in excess of 50%,
of its assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and
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India have recently relaxed investment restrictions and Vietnamese direct
investments have recently become available to U.S. investors. The Fund also
offers investors the opportunity to access relatively restricted markets.
Alliance believes that investment opportunities in Asian countries will continue
to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings," "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of Additional Information for
a description of such ratings. The Fund will not retain a security that is
downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and "semi-
governmental securities;" (iv) invest up to 25% of its net assets in equity-
linked debt securities with the objective of realizing capital appreciation; (v)
invest up to 25% of its net assets in loans and other direct debt instruments;
(vi) write covered put and call options on securities of the types in which it
is permitted to invest and on exchange-traded index options; (vii) enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices,
including any index of U.S. Government securities, securities issued by foreign
government entities, or common stock and may purchase and write options on
future contracts; (viii) purchase and write put and call options on foreign
currencies for hedging purposes; (ix) purchase or sell forward contracts; (x)
enter into interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements; (xiii) enter into
currency swaps for hedging purposes; (xiv) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make short sales of
securities or maintain a short position, in each case only if "against the box;"
and (xvi) make secured loans of its portfolio securities not in excess of 30% of
its total assets to entities with which it can enter into repurchase agreements.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Greater China '97 Fund, Inc.
Alliance Greater China '97 Fund, Inc. ("Greater China '97 Fund") is a non-
diversified investment company that seeks long-term capital appreciation through
investment of at least 80% of its total assets in equity securities issued by
Greater China companies. In furtherance of its investment objective, the Fund
expects to invest a significant portion, which may be greater than 50%, of its
assets in equity securities of Hong Kong companies and may invest, from time to
time, all of its assets in Hong Kong companies or companies of either of the
other Greater China countries.
In recent years, China, Hong Kong and Taiwan have each experienced a high level
of real economic growth, although growth is expected to slow in 1998. This
growth has resulted from advantageous economic conditions, including favorable
demographics, competitive wage rates, and rising per capita income and consumer
demand. Significantly, the growth has also been fueled by an easing by both
China and Taiwan of government restrictions and an increased receptivity to
foreign investment. This expanded, if not yet complete, openness to foreign
investment extends as well to the securities markets of both countries. Hong
Kong's free-market economy has historically included securities markets
completely open to foreign investments. All three countries have regulated stock
exchanges upon which shares of an increasing number of Greater China companies
are traded.
With its population estimated at more than 1.2 billion as a driving force, and
notwithstanding its continuing political rigidity, China's economic growth has
been coupled with significantly reduced government economic intervention and
basic economic structural change. Recent years have seen large increases in
industrial production with a significant decline in the state sector share of
industrial output, and increased involvement of local governmental units and the
private sector in establishing new business enterprises.
With China's growth has come an increasing direct and indirect economic
involvement of all three Greater China countries. For some time, Hong Kong, a
world financial and trade center in its own right, with a large stock exchange
and offices of many of the world's multinational companies, has been the gateway
to trade with and foreign investment in China. With the long-awaited transfer on
July 1, 1997 of the sovereignty of Hong Kong from Great Britain to China, not
only the political but the economic ties between China and Hong Kong are
expected to continue to intensify, albeit with the continuation of Hong Kong's
economic system as provided for in the law governing its sovereignty.
Notwithstanding the, at times considerable, political tension between the two
countries, it is generally recognized that substantially increased trade and
investment with China has been generated from Taiwan, in many cases through Hong
Kong. Along with this increased interaction with China, Taiwan is becoming a
regional technological and telecommunication center, while continuing the
process of opening its economy up to foreign investment. Although geographically
limited, Taiwan
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boasts an economy among the world's twenty largest and its foreign exchange
reserves are third largest in the world measured in U.S. dollars. As
China's economy continues to expand, it is expected that Taiwan's economic
interaction with China will likewise increase.
Alliance believes that over the long term conditions are favorable for
continuing and expanding economic growth in all three Greater China countries.
It is this potential which the Fund hopes to take advantage of by investing both
in established and new and emerging companies.
Set forth below under "Certain Considerations and Risks" and in Appendix A to
the Fund's Statement of Additional Information is additional information
concerning the Greater China countries.
In addition to investing in equity securities of Greater China companies, the
Fund may invest up to 20% of its total assets in (i) debt securities issued or
guaranteed by Greater China companies or by Greater China governments, their
agencies or instrumentalities, and (ii) equity or debt securities issued by
issuers other than Greater China companies. The Fund will not invest in debt
securities other than investment grade securities. Should a debt security in
which the Fund is invested be downgraded below investment grade or be determined
by Alliance to have undergone a similar credit quality deterioration, the Fund
will dispose of that security.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and "semi-
governmental securities;" (iv) invest up to 25% of its net assets in equity-
linked debt securities with the objective of realizing capital appreciation; (v)
invest up to 20% of its net assets in loans and other direct debt securities;
(vi) write covered put and call options on securities of the types in which it
is permitted to invest and on exchange-traded index options; (vii) enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices,
including any index of U.S. Government securities, securities issued by foreign
government entities, or common stock, and may purchase and write options on
future contracts; (viii) purchase and write put and call options on foreign
currencies for hedging purposes; (ix) purchase or sell forward contracts; (x)
enter into interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements; (xiii) enter into
currency swaps for hedging purposes; (xiv) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make short sales of
securities or maintain a short position, in each case only if "against the box;"
and (xvi) make secured loans of its portfolio securities not in excess of 30% of
its total assets to entities with which it can enter into repurchase agreements.
All or some of the policies and practices listed above may not be available to
the Fund in the Greater China countries, and the Fund will utilize these
policies only to the extent permissible. For additional information on the use,
risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1.5 billion. Because
the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization issuers, and these issuers are located in at least
three countries, one of which may be the U.S. Up to 35% of the Fund's total
assets may be invested in securities of companies whose market capitalizations
exceed the Fund's size standard. The Fund's portfolio securities may be listed
on a U.S. or foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to
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brokers, dealers and financial institutions. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance Global Environment Fund
Alliance Global Environment Fund, Inc. ("Global Environment Fund") is a
non-diversified investment company that seeks long-term capital appreciation
through investment in equity securities of Eligible Companies. For purposes of
the Fund's investment objective and investment policies, "equity securities" are
common stocks (but not preferred stocks), rights or warrants to subscribe for or
purchase common stocks, and preferred stocks or debt securities that are
convertible into common stocks without the payment of any further consideration.
Until October 3, 1997, the Fund operated as a closed-end investment company, and
its common stock (which then comprised a single class) was listed on the
Exchange.
The Fund invests in two categories of Eligible Companies--"Environmental
Companies" and "Beneficiary Companies." Environmental Companies are those that
have a principal business involving the sale of systems or services intended to
foster environmental protection, such as waste treatment and disposal,
remediation, air pollution control and recyclying. Under normal circumstances,
the Fund invests at least 65% of its total assets in equity securities of
Environmental Companies. Beneficiary Companies are those whose principal
businesses lie outside the environmental sector but nevertheless anticipate
environmental regulations or consumer preferences through the development of new
products, processes or services that are intended to contribute to a cleaner and
healthier environment. Examples of such companies could be companies that
anticipate the demand for plastic substitutes, aerosol substitutes, alternative
fuels and processes that generate less hazardous waste. In this regard, the Fund
may invest in an issuer with a broadly diversified business only a part of which
provides such products, processes or services, when Alliance believes that these
products, processes or services will yield a competitive advantage that
significantly enhances the issuer's growth prospects. As a matter of fundamental
policy, the Fund will, under normal circumstances, invest substantially all of
its total assets in equity securities of Eligible Companies.
A major premise of the Fund's investment approach is that environmental concerns
will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous waste treatment and disposal,
pulp and paper recycling, waste-to-energy alternatives, biodegradable cartons,
packages, plastics and other products, remedial projects and emergency cleanup
efforts, manufacture of environmental supplies and equipment, the achievement of
purer air, groundwater and foods and the detection, evaluation and treatment of
both existing and potential environmental problems including, among others, air
pollution and acid rain.
The environmental services industry is generally positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded substantial
opportunities for growth. Beneficiary Companies may also derive an advantage to
the extent that they have anticipated environmental regulation and are therefore
at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena that are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies which protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund spreads investment risk among the capital markets
of a number of countries and invests in equity securities of companies based in
at least three, and normally considerably more, such countries. The percentage
of the Fund's assets invested in securities of companies in a particular country
or denominated in a particular currency will vary in accordance with Alliance's
assessment of the appreciation potential of such securities and the strength of
that currency. As of August 31, 1998, approximately 82% of the Fund's net
assets were invested in equity securities of U.S. companies.
The Fund may also: (i) invest up to 20% of its total assets in warrants to
purchase equity securities to the extent consistent with its investment
objective: (ii) invest in depositary receipts; (iii) purchase and write put and
call options on foreign currencies for hedging purposes; (iv) enter into forward
foreign currency transactions for hedging purposes; (v) invest in currency
futures and options on such futures for hedging purposes; and (vi) make secured
loans of its portfolio securities not in excess of 30% of its total assets. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
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TOTAL RETURN FUNDS
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current
income.
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds, senior debt
securities and preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market outlooks. The Fund
may invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above. See "Risk Considerations--Foreign Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. The Fund may invest in securities of both U.S. and foreign
issuers, although no more than 15% of the Fund's total assets will be invested
in issuers in any one foreign country. The utilities industry consists of
companies engaged in (i) the manufacture, production, generation, provision,
transmission, sale and distribution of gas and electric energy, and
communications equipment and services, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities for
the public, or (ii) the provision of other utility or utility-related goods and
services, including, but not limited to, entities engaged in water provision,
cogeneration, waste disposal system provision, solid waste electric generation,
independent power producers and non-utility generators. The Fund is designed to
take advantage of the characteristics and historical performance of securities
of utility companies, many of which pay regular dividends and increase their
common stock dividends over time. As a fundamental policy, the Fund normally
invests at least 65% of its total assets in securities of companies in the
utilities industry. The Fund considers a company to be in the utilities industry
if, during the most recent twelve-month period, at least 50% of the company's
gross revenues, on a consolidated basis, were derived from its utilities
activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a security that is downgraded
below B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs,
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costs associated with compliance with environmental and nuclear safety
regulations, service interruptions, economic slowdowns, surplus capacity,
competition and regulatory changes. There can also be no assurance that
regulatory policies or accounting standards changes will not negatively affect
utility companies' earnings or dividends. Utility companies are subject to
regulation by various authorities and may be affected by the imposition of
special tariffs and changes in tax laws. To the extent that rates are
established or reviewed by governmental authorities, utility companies are
subject to the risk that such authorities will not authorize increased rates.
Because of the Fund's policy of concentrating its investments in utility
companies, the Fund is more susceptible than most other mutual funds to
economic, political or regulatory occurrences affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval for
rate increases. In addition, because many foreign utility companies use fuels
that cause more pollution than those used in the U.S., such utilities may yet be
required to invest in pollution control equipment. Foreign utility regulatory
systems vary from country to country and may evolve in ways different from
regulation in the U.S. The percentage of the Fund's assets invested in issuers
of particular countries will vary. See "Risk Considerations--Foreign
Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate
fixed-income securities of domestic issuers, corporate fixed-income securities
of foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter into forward commitments for the
purchase or sale of securities; (xi) enter into standby commitment agreements;
(xii) enter into repurchase agreements pertaining to U.S. Government securities
with member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices--Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund has restricted its investments in securities in this category to
issues of high quality. The Fund may also purchase and sell financial forward
and futures contracts and options thereon for hedging purposes. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund, Inc. ("Real Estate Investment Fund") is a
diversified investment company that seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of real estate investment trusts ("REITs") and
other real estate industry companies. A "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or interests therein. The
equity securities in which the Fund will invest for this purpose consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock or convertible securities ("Real
Estate Equity Securities").
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The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These instruments are
described below. The risks associated with the Fund's transactions in REMICs,
CMOs and other types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk. See "Risk Considerations" for a description of these and other
risks.
As to any investment in Real Estate Equity Securities, Alliance's analysis will
focus on determining the degree to which the company involved can achieve
sustainable growth in cash flow and dividend paying capability. Alliance
believes that the primary determinant of this capability is the economic
viability of property markets in which the company operates and that the
secondary determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will purchase
Real Estate Equity Securities when, in the judgment of Alliance, their market
price does not adequately reflect this potential. In making this determination,
Alliance will take into account fundamental trends in underlying property
markets as determined by proprietary models, site visits conducted by
individuals knowledgeable in local real estate markets, price-earnings ratios
(as defined for real estate companies), cash flow growth and stability, the
relationship between asset value and market price of the securities, dividend
payment history, and such other factors which Alliance may determine from time
to time to be relevant. Alliance will attempt to purchase for the Fund Real
Estate Equity Securities of companies whose underlying portfolios are
diversified geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
Investment Process for Real Estate Equity Securities. The Fund's investment
strategy with respect to Real Estate Equity Securities is based on the premise
that property market fundamentals are the primary determinant of growth
underlying the performance of Real Estate Equity Securities. Value added
management further distinguishes the most attractive Real Estate Equity
Securities. The Fund's research and investment process is designed to identify
those companies with strong property fundamentals and strong management teams.
This process is comprised of real estate market research, specific property
inspection and securities analysis. Alliance believes that this process will
result in a portfolio that will consist of Real Estate Equity Securities of
companies that own assets in the most desirable markets across the country,
diversified geographically and by property type.
In implementing the Fund's research and investment process, Alliance will avail
itself of the consulting services of CB Richard Ellis, Inc. ("CBRE"), a publicly
held company and the largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities management, and real
estate finance and investment advisory activities. In 1997, CBRE completed
22,100 sale and lease transactions, managed over 6,600 client properties,
created over $5 billion in mortgage originations, and completed over 3,600
appraisal and consulting assignments. In addition, it advised and managed for
institutions over $4 billion in real estate investments. As consultant to
Alliance, CBRE provides access to its proprietary model, REIT o Score, that
analyzes the approximately 18,000 properties owned by these 142 companies. Using
proprietary databases and algorithms, CBRE analyzes local market rent, expense,
and occupancy trends, market specific transaction pricing, demographic and
economic trends, and leading indicators of real estate supply such as building
permits. Over 1,000 asset-type specific geographic markets are analyzed and
ranked on a relative scale by CBRE in compiling its REIT o Score database. The
relative attractiveness of these real estate industry companies is similarly
ranked based on the composite rankings of the properties they own. See
"Management of the Funds--Consultant to Alliance with Respect to Investments in
Real Estate Securities" for more information about CBRE.
The universe of property-owning real estate industry firms consists of
approximately 142 companies of sufficient size and quality to merit
consideration for investment by the Fund. Once the universe of real estate
industry companies has been distilled through the market research process,
CBRE's local market presence provides the capability to perform site specific
inspections of key properties. This analysis examines specific location,
condition, and sub-market trends. CBRE's use of locally based real estate
professionals provides Alliance with a window on the operations of the portfolio
companies as information can immediately be put in the context of local market
events. Only those companies whose specific property portfolios reflect the
promise of their general markets will be considered for initial and continued
investment by the Fund.
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Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance will make extensive use of CBRE's
network of industry analysts in order to assess trends in tenant industries.
This information is then used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
The short-term investments in which Real Estate Investment Fund may invest are:
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not so rated, of equivalent credit quality as
determined by Alliance. The Fund expects that it will not retain a debt security
which is downgraded below BBB or Baa or, if unrated, determined by Alliance to
have undergone similar credit quality deterioration, subsequent to purchase by
the Fund.
The Fund may also engage in the following investment practices to the extent
indicated: (i) invest up to 10% of its net assets in rights or warrants; (ii)
invest up to 15% of its net assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund; (iii) lend portfolio
securities equal in value to not more than 25% of total assets; (iv) enter into
repurchase agreements of up to seven days' duration; (v) enter into forward
commitment transactions as long as the Fund's aggregate commitments under such
transactions are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of securities or maintain
a short position but only if at all times when a short position is open not more
than 25% of the Fund's net assets (taken at market value) is held as collateral
for such sales; and (viii) invest in illiquid securities unless, as a result,
more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which generally
provide a stable stream of income with yields that are generally higher than
those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying equity security, although the higher yield tends to make the
convertible security less volatile than the underlying equity security. As with
debt securities, the market value of convertible securities tends to decrease as
interest rates rise and increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields than non-
convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock. Convertible debt securities that are rated Baa or lower by Moody's or BBB
or lower by S&P, Duff & Phelps or Fitch and comparable unrated securities as
determined by Alliance may share some or all of the risks of non-convertible
debt securities with those ratings. For a description of these risks, see "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated Fixed-
Income Securities."
Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to buy
equity securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination thereof. If the
market price of the underlying security is below the exercise price set forth in
the warrant on the expiration date, the warrant will expire worthless. Moreover,
a right or warrant ceases to have value if it is not exercised prior to the
expiration date.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by a U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed
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for use in foreign securities markets. For purposes of determining the country
of issuance, investments in depositary receipts of either type are deemed to be
investments in the underlying securities except with respect to Growth Fund,
where investments in ADRs are deemed to be investments in securities issued by
U.S. issuers and those in GDRs and other types of depositary receipts are deemed
to be investments in the underlying securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the securities. As a result of the pass-through of
prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity would indicate. Prepayments occur when the mortgagor on a
mortgage prepays the remaining principal before the mortgage's scheduled
maturity date. Because the prepayment characteristics of the underlying
mortgages vary, it is impossible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayments are
important because of their effect on the yield and price of the mortgage-backed
securities. During periods of declining interest rates, prepayments can be
expected to accelerate and a Fund investing in such securities would be required
to reinvest the proceeds at the lower interest rates then available. Conversely,
during periods of rising interest rates, a reduction in prepayments may increase
the effective maturity of the securities, subjecting them to a greater risk of
decline in market value in response to rising interest rates. In addition,
prepayments of mortgages underlying securities purchased at a premium could
result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Some adjustable rate securities are backed by
pools of mortgage loans. Although the rate-adjustment feature may reduce sharp
changes in the value of adjustable rate securities, these securities can change
in value based on changes in market interest rates or the issuer's
creditworthiness. Changes in the interest rate on adjustable rate securities may
lag behind changes in prevailing market interest rates. Also, some adjustable
rate securities (or the underlying mortgages) are subject to caps or floors that
limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by a Fund. Furthermore, as with any debt securities, the values
of equity-linked debt securities will generally vary inversely with changes in
interest rates. A Fund's ability to dispose of equity-linked debt securities
will depend on the availability of liquid markets for such securities.
Investment in equity-linked debt securities may be considered to be speculative.
As with other securities, a Fund could lose its entire investment in equity-
linked debt securities.
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Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to a Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate a
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If a Fund does not receive scheduled interest or principal payments
on such indebtedness, the Fund's share price and yield could be adversely
affected. Loans that are fully secured offer a Fund more protection than
unsecured loans in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a secured
loan would satisfy the borrower's obligation, or that the collateral can be
liquidated. Maturing loans to borrowers whose creditworthiness is poor may
involve substantial risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries and Greater China countries will also involve a
risk that the governmental entities responsible for the repayment of the debt
may be unable, or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a Fund. For
example, if a loan is foreclosed, a Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of a Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by a Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
a Fund to pay additional cash on demand. These commitments may have the effect
of requiring a Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid. Greater China '97 Fund will not
invest in lower-rated loans and other lower-rated direct debt instruments.
Mortgage-Backed Securities and Associated Risks. Mortgage-Backed Securities
include mortgage pass-through certificates and multiple-class pass-through
securities, such as REMIC pass-through certificates, CMOs and stripped
mortgage-backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate Investment Fund may
invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private lenders. CMOs and
REMIC certificates are issued in multiple classes and the principal of and
interest on the mortgage assets may be allocated among the several classes of
CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC
certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Generally, interest is paid or accrues on all classes
of CMOs or REMIC certificates on a monthly basis. Real Estate Investment Fund
will not invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other
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mortgage assets such as whole loans or private mortgage pass-through securities.
Debt service on CMOs is provided from payments of principal and interest on
collateral of mortgaged assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although Real Estate
investment fund does not intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those generally associated with investing in the real estate
industry in general. These unique risks include the failure of a counterparty to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations--Mortgage-Backed
Securities" for a more complete description of the characteristics of
Mortgage-Backed Securities and associated risks.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps and any assets
used to cover currency swaps and most privately negotiated investments in state
enterprises that have not yet conducted an initial equity offering, (ii) over-
the-counter options and assets used to cover over-the-counter options, and (iii)
repurchase agreements not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent permitted by
applicable law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities meet liquidity
guidelines established by a Fund's Directors. Investment in non-publicly traded
securities by Growth Fund is restricted to 5% of its total assets (not including
for these purposes Rule 144A securities, to the extent permitted by applicable
law) and is also subject to the 15% restriction on investment in illiquid
securities described above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. Such securities are
unlike securities which are traded on in the open market and which can be
expected to be sold immediately if the market is adequate. The sale price of
illiquid securities may be lower or higher than Alliance's most recent estimate
of their fair value. Generally, less public information is available with
respect to the issuers of such securities than with respect to companies whose
securities are traded on an exchange. To the extent that these securities are
foreign securities, there is no law in many of the countries in which a Fund may
invest similar to the Securities Act requiring an issuer to register the sale of
securities with a governmental agency or imposing legal restrictions on resales
of securities, either as to length of time the securities may be held or manner
of resale. However, there may be contractual restrictions on resales of
securities.
Options on Securities. An option gives the purchaser of the option, upon payment
of a premium, the right to deliver to (in the case of a put) or receive from (in
the case of a call) the writer a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by a Fund is
"covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it has written. A
put option written by a Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than that of
the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Greater China '97 Fund,
International Premier Growth Fund and Utility Income Fund each may write call
options for cross-hedging purposes. A Fund would write a call option for cross-
hedging purposes, instead of writing a covered call option, when the premium to
be received from the cross-hedge transaction would exceed that which would be
received from writing a covered call option, while at the same time achieving
the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write
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uncovered call options. Technology Fund and Global Small Cap Fund will not write
a call option if the premium to be received by the Fund in doing so would not
produce an annualized return of at least 15% of the then current market value of
the securities subject to the option (without giving effect to commissions,
stock transfer taxes and other expenses that are deducted from premium
receipts). Technology Fund, Quasar Fund and Global Small Cap Fund will not write
a call option if, as a result, the aggregate of the Fund's portfolio securities
subject to outstanding call options (valued at the lower of the option price or
market value of such securities) would exceed 15% of the Fund's total assets or
more than 10% of the Fund's assets would be committed to call options that at
the time of sale have a remaining term of more than 100 days. The aggregate cost
of all outstanding options purchased and held by each of Premier Growth Fund,
Technology Fund, Quasar Fund and Global Small Cap Fund will at no time exceed
10% of the Fund's total assets. Neither International Fund nor New Europe Fund
will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
Options on futures contracts written or purchased by a Fund will be traded on
U.S. or foreign exchanges or over-the-counter. These investment techniques will
be used only to hedge against anticipated future changes in market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, or in the case of
International Premier Growth Fund 100% of its total assets. Premier Growth
Fund and Growth and Income Fund may not purchase or sell a stock index future if
immediately thereafter more than 30% of its total assets would be hedged by
stock index futures. Premier Growth Fund and Growth and Income Fund may not
purchase or sell a stock index future if, immediately thereafter, the sum of the
amount of margin deposits on the Fund's existing futures positions would exceed
5% of the market value of the Fund's total assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event of
rate movements adverse to a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
foreign currency exchange contracts to minimize the risk to it from adverse
changes in the relationship between the U.S. dollar and other currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date, and is individually negotiated and privately
traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the
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aggregate market value (at the time of making such sale) of the securities held
in its portfolio denominated or quoted in that currency. Instead of entering
into a position hedge, a Fund may, in the alternative, enter into a forward
contract to sell a different foreign currency for a fixed U.S. dollar amount
where the Fund believes that the U.S. dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a decline in the
U.S. dollar value of the currency in which portfolio securities of the Fund are
denominated ("cross-hedge"). Unanticipated changes in currency prices may result
in poorer overall performance for the Fund than if it had not entered into such
forward contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions.
Growth Fund may also purchase and sell foreign currency on a spot basis.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds to be received, in determining its net
asset value. Any unrealized appreciation or depreciation reflected in such
valuation of a "when, as and if issued" security would be canceled in the event
that the required conditions did not occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a when-
issued or forward commitment basis, thereby obtaining the benefit of currently
higher cash yields. However, if Alliance were to forecast incorrectly the
direction of interest rate movements, a Fund might be required to complete such
when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by New Europe Fund,
International Premier Growth Fund, All-Asia Investment Fund, Greater China '97
Fund, Worldwide Privatization Fund, Real Estate Investment Fund or Utility
Income Fund if, as a result, the Fund's aggregate commitments under such
transactions would be more than 30% of the Fund's total assets. In the event the
other party to a forward commitment transaction were to default, a Fund might
lose the opportunity to invest money at favorable rates or to dispose of
securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
Internation Premier Growth Fund, will enter into a standby commitment with a
remaining term in excess of 45 days. Investments in standby commitments will be
limited so that the aggregate purchase price of the securities subject to the
commitments will not exceed 25% with respect to New Europe Fund and Real Estate
Investment Fund, 50% with respect to International Premier Growth Fund,
Worldwide Privatization Fund, All-Asia Investment Fund and Greater China '97
Fund and 20% with respect to Utility Income Fund, of the Fund's assets taken at
the time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if
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issued, on the delivery date may be more or less than its purchase price. Since
the issuance of the security underlying the commitment is at the option of the
issuer, a Fund will bear the risk of capital loss in the event the value of the
security declines and may not benefit from an appreciation in the value of the
security during the commitment period if the issuer decides not to issue and
sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each currency swap will
be accrued on a daily basis. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund, Greater China '97 Fund and Utility Income
Fund, the exchange commitments can involve payments in the same currency or in
different currencies. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a predetermined interest
rate, to receive payments of interest on a contractually-based principal amount
from the party selling such interest rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on an agreed
principal amount from the party selling the interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap, cap
and floor is accrued daily. A Fund will not enter into an interest rate swap,
cap or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is then rated in the highest rating category
of at least one nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities
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identical to those sold short without payment. Worldwide Privatization Fund,
All-Asia Investment Fund, Greater China '97 Fund and Utility Income Fund each
may make short sales of securities or maintain short positions only for the
purpose of deferring realization of gain or loss for U.S. federal income tax
purposes, provided that at all times when a short position is open the Fund owns
an equal amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund, Greater China
'97 Fund and Real Estate Investment Fund may not make a short sale if as a
result more than 25% of the Fund's net assets would be held as collateral for
short sales. If the price of the security sold short increases between the time
of the short sale and the time a Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund will realize a
capital gain. See "Certain Fundamental Investment Policies." Certain special
federal income tax considerations may apply to short sales entered into by a
Fund. See "Dividends, Distributions and Taxes" in the relevant Fund's Statement
of Additional Information.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned thereon
and the Fund may invest any cash collateral in portfolio securities, thereby
earning additional income, or receive an agreed upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest or distributions. A Fund may pay reasonable
finders', administrative and custodial fees in connection with a loan. A Fund
will not lend its portfolio securities to any officer, director, employee or
affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to certain options and forward
contracts, and adverse market movements could therefore continue to an unlimited
extent over a period of time. In addition, the correlation between movements in
the prices of futures contracts, options and forward contracts and movements in
the prices of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option), with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations and the use of certain hedging
techniques may adversely impact the characterization of income to a Fund for
U.S. federal income tax purposes. See "Dividends, Distributions and Taxes" in
the Statement of Additional Information of each Fund that invests in options and
futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may reduce its
position in equity securities and invest in without limit certain types of
short-term, liquid, high grade or high quality (depending on the Fund) debt
securities. These securities may include U.S. Government securities, qualifying
bank deposits, money market instruments, prime commercial paper and other types
of short-term debt securities including notes and bonds. For Funds that may
invest in foreign countries, such securities may also include short-term,
foreign-currency denominated securities of the type mentioned above issued by
foreign governmental entities, companies and supranational organizations. For a
complete description of the types of securities each Fund may invest in while in
a temporary defensive position, please see such Fund's Statement of Additional
Information.
Portfolio Turnover. Portfolio turnover rates are set forth under "Financial
Highlights." These portfolio turnover rates are greater than those of most other
investment companies, including those which emphasize capital appreciation as a
basic policy. A high rate of portfolio turnover involves
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correspondingly greater brokerage and other expenses than a lower rate, which
must be borne by the Fund and its shareholders. High portfolio turnover also may
result in the realization of substantial net short-term capital gains. See
"Dividends, Distributions and Taxes" in each Fund's Statement of Additional
Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof; (iii)
in oil, gas or other mineral exploration or development programs; or (iv) more
than 5% of its gross assets in securities the disposition of which would be
subject to restrictions under the federal securities laws.
Growth Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than U.S. Government securities and
repurchase agreements relating thereto), although up to 25% of each Fund's total
assets may be invested without regard to this restriction; or (ii) invest 25% or
more of its total assets in the securities of any one industry.
Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than:(a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase would cause 10% or more of its total assets to be invested in the
securities of such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
International Premier Growth Fund may not: (i) invest 25% or more of its total
assets in securities of issuers conducting their principal business activities
in the same industry, except
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that this restriction does not apply to U.S. Government Securities; (ii) borrow
money or issue senior securities, except that the Fund may borrow (a) from a
bank if immediately after such borrowing there is asset coverage of at least
300% as defined in the 1940 Act and (b) for temporary purposes in an amount not
exceeding 5% of the value of the total assets of the Fund; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings. The exception contained in clause (i)(b) above is subject
to the operating policy regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be deemed
to prohibit the Fund from purchasing the securities of any issuer pursuant to
the exercise of rights distributed to the Fund by the issuer, except that no
such purchase may be made if as a result the Fund will fail to meet the
diversification requirements of the Code and any such acquisition in excess of
the foregoing 15% or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to U.S. Government securities, but
will apply to foreign government securities unless the Commission permits their
exclusion); (iii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the Fund's total assets will be repaid
before any subsequent investments are made; or (iv) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company, or
more than 10% of such value in closed-end investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Greater China '97 Fund may not: (i) invest 25% or more of its total assets on
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemption may not exceed 5%,
of the Fund's total assets (including the amount borrowed) less liabilities (not
including the amount borrowed) at the time the borrowing is made; outstanding
borrowings in excess of 5% of the value of the Fund's total assets will be
repaid before any investments are made; or (iii) pledge, hypothecate, mortgage
or otherwise encumber its assets, except to secure permitted borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding
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5% of the total assets of the Fund; or (iv) make short sales of securities or
maintain a short position, unless at all times when a short position is open it
owns an equal amount of such securities or securities convertible into or
exchangeable for, without payment of any further consideration, securities of
the same issue as, and equal in amount to, the securities sold short and unless
not more than 5% of the Fund's net assets is held as collateral for such sales
at any one time.
Global Environment Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest more than 15% of the value of
its total assets in the securities of any one issuer or 25% or more of the value
of its total assets in the same industry, except that the Fund will invest more
than 25% of its total assets in Environmental Companies, provided that this
restriction does not apply to U.S. Government securities, but will apply to
foreign government obligations unless the Commission permits their exclusion;
(iii) borrow money or issue senior securities, except that the Fund may borrow
(a) from a bank if immediately after such borrowing there is asset coverage of
at least 300% as defined in the 1940 Act and (b) for temporary purposes in an
amount not exceeding 5% of the value of the total assets of the Fund; (iv)
pledge, hypothecate, mortgage or otherwise encumber its assets, except (a) to
secure permitted borrowings and (b) in connection with initial and variation
margin deposits relating to futures contracts; (v) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company or
more than 10% of such value in closed-end investment companies in the aggregate;
(vi) make short sales of securities or maintain a short position, unless at all
times when a short position is open it owns an equal amount of such securities
or securities convertible into or exchangeable for, without payment of any
further consideration, securities of the same issue as, and equal in amount to,
the securities sold short ("short sales against the box"), and unless not more
than 5% of the Fund's net assets (taken at market value) is held as collateral
for such sales at any one time; or (vii) buy or write (i.e., sell) put or call
options, except (a) the Fund may buy foreign currency options or write covered
foreign currency options and options on foreign currency futures and (b) the
Fund may purchase warrants.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own any securities of an
open-end investment company or more than 3% of the total outstanding voting
stock of any closed-end investment company or more than 5% of the value of the
Fund's net assets would be invested in securities of any one or more closed-end
investment companies.
Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S. Government obligations or (ii) own more
than 10% of the outstanding voting securities of any issuer.
Real Estate Investment Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer (other than the
U.S. Government and its agencies or instrumentalities) not greater in value than
5% of the Fund's total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if as a result
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such issuer; (iii)
invest 25% or more of its total assets in the securities of issuers conducting
their principal business activities in any one industry, other than the real
estate industry in which the Fund will invest at least 25% or more of its total
assets, except that this restriction does not apply to U.S. Government
securities; (iv) purchase or sell real estate, except that it may purchase and
sell securities of companies which deal in real estate or interests therein,
including Real Estate Equity Securities; or (v) borrow money except for
temporary or emergency purposes or to meet redemption requests, in an amount not
exceeding 5% of the value of its total assets at the time the borrowing is made.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund
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may be able to participate may be less advantageous than for local investors.
Moreover, there can be no assurance that governments that have embarked on
privatization programs will continue to divest their ownership of state
enterprises, that proposed privatizations will be successful or that governments
will not re-nationalize enterprises that have been privatized. Furthermore, in
the case of certain of the enterprises in which the Fund may invest, large
blocks of the stock of those enterprises may be held by a small group of
stockholders, even after the initial equity offerings by those enterprises. The
sale of some portion or all of those blocks could have an adverse effect on the
price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
International Premier Growth Fund, New Europe Fund, All-Asia Investment Fund,
Greater China '97 Fund and Worldwide Privatization Fund and a substantial
portion of the assets of Global Small Cap Fund and Global Environment Fund will
be invested in securities denominated in foreign currencies, and a corresponding
portion of these Funds' revenues will be received in such currencies. Therefore,
the dollar equivalent of their net assets, distributions and income will be
adversely affected by reductions in the value of certain foreign currencies
relative to the U.S. dollar. If the value of the foreign currencies in which a
Fund receives its income falls relative to the U.S. dollar between receipt of
the income and the making of Fund distributions, the Fund may be required to
liquidate securities in order to make distributions if it has insufficient cash
in U.S. dollars to meet distribution requirements that the Fund must satisfy to
qualify as a regulated investment company for federal income tax purposes.
Similarly, if an exchange rate declines between the time a Fund incurs expenses
in U.S. dollars and the time cash expenses are paid, the amount of the currency
required to be converted into U.S. dollars in order to pay expenses in U.S.
dollars could be greater than the equivalent amount of such expenses in the
currency at the time they were incurred. In light of these risks, a Fund may
engage in certain currency hedging transactions, which themselves involve
certain special risks. See "Additional Investment Practices" above.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous terms (including
price) than securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority,
and if a deterioration occurs in a country's balance of payments, the country
could impose temporary restrictions on foreign capital remittances.
A Fund could also be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor the effect of
any such factor or factors on a Fund's investments. Furthermore, transaction
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly
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available about certain non-U.S. issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling--dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. dollar. The pound sterling has since recovered due to
interest rate cuts throughout Europe and an upturn in the economy of the United
Kingdom. The average exchange rate of the U.S. dollar to the pound sterling was
1.50 in 1993 and 1.64 in 1997. On October 13, 1998 the U.S. dollar-pound
sterling exchange rate was 1.71.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
5,135.5 at the end of 1997, up approximately 25% from the end of 1996. On
October 5, 1998 the FT-SE 100 index closed at 4648.7, the lowest close in the
12-month period prior to that date, after reaching a high of 6179.0 on July 20,
1998. The FT-SE 100 index closed at 4990.1 on October 14, 1998.
In January 1999, the Economic and Monetary Union ("EMU") is scheduled to take
effect. The EMU will establish a common currency for European countries that
meet the eligibility criteria and choose to participate. Although the United
Kingdom meets the eligibility criteria, the government has not taken any action
to join the EMU.
From 1979 until 1997 the Conservative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar, but has since
fallen from its post-World War II high (in 1995) against the U.S. dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1997. On
October 13, 1998 the TOPIX closed at 998.98, down approximately 15% from the end
of 1997. Certain valuation measures, such as price-to-book value and price-to-
cash flow ratios, indicate that the Japanese stock market is near its lowest
level in the last twenty years relative to other world markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan returned to a single-party government led by Ryutaro Hashimoto, a member
of the Liberal Democratic Party ("LDP"). While the LDP does not control a
majority of the seats in the parliament, it is only three seats short of the 251
seats required to attain a majority in the House of Representatives (down from a
12-seat shortfall just after the
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October 1996 election). The popularity of the LDP declined, however, due to the
dissatisfaction with Mr. Hashimoto's leadership. In the July 1998 House of
Councillors election, the LDP's representation fell to 103 seats from 120 seats.
As a result of the LDP's defeat, Mr. Hashimoto resigned as prime minister and
leader of the LDP. Mr. Hashimoto was replaced by Keizo Obuchi. For the past
several years, Japan's banking industry has been weakened by a significant
amount of problem loans. Japan's banks also have significant exposure to the
current financial turmoil in other Asian markets. Following the insolvency of
one of Japan's largest banks in November 1997, the government proposed several
plans designed to strengthen the weakened banking sector. In October 1998, the
Japanese parliament approved several new laws that will make $508 billion in
public funds available to increase the capital of Japanese banks, to guarantee
depositors' accounts and to nationalize the weakest banks. It is unclear whether
these new laws will achieve their intended effect. For further information
regarding Japan, see the Statements of Additional Information of All-Asia
Investment Fund and International Fund.
Investment in Greater China Issuers. China, in particular, but Hong Kong and
Taiwan, as well, in significant measure because of their existing and increasing
economic, and now in the case of Hong Kong, direct political ties with China,
may be subject to a greater degree of economic, political and social instability
than is the case in the United States.
China's economy is very much in transition. While the government still controls
production and pricing in major economic sectors, significant steps have been
taken toward capitalism and China's economy has become increasingly market
oriented. China's strong economic growth and ability to attract significant
foreign investment in recent years stem from the economic liberalization
initiated by Deng Xiaoping who assumed power in the late 1970s. The economic
growth, however, has not been smooth and has been marked by extremes in many
respects of inordinate growth, which has not been tightly controlled, followed
by rigid measures of austerity.
The rapidity and erratic nature of the growth have resulted in inefficiencies
and dislocations, including at times high rates of inflation.
China's economic development has occurred notwithstanding the continuation of
the power of China's Communist Party and China's authoritarian government
control, not only of centrally planned economic decisions, but of many aspects
of the social structure. While a significant portion of China's population has
benefited from China's economic growth, the conditions of many leave much room
for improvement. Notwithstanding restrictions on freedom of expression and the
absence of a free press, and notwithstanding the extreme manner in which past
unrest has been dealt with, the 1989 Tianamen Square uprising being a recent
reminder, the potential for renewed popular unrest associated with demands for
improved social, political and economic conditions cannot be dismissed.
Following the death of Deng Xiaoping in February 1997, Jiang Zemin became the
leader of China's Communist Party. The transfer of political power has
progressed smoothly and Jiang's popularity and credibility have gradually
increased. Jiang continues to consolidate his power, but as of yet does not
appear to have the same degree of control as did Deng Xiaoping. Jiang has
continued the market-oriented policies of Deng. Currently, China's major
economic challenge centers on reforming or eliminating inefficient state-owned
enterprises without creating an unacceptable level of unemployment. Recent
capitalistic policies have in many respects effectively outdated the Communist
Party and the governmental structure, but both remain entrenched. The Communist
Party still controls access to governmental positions and closely monitors
governmental action. Essentially there exists an inefficient set of parallel
bureaucracies and attendant opportunities for corruption.
In addition to the economic impact of China's internal political uncertainties,
the potential effect of China's actions, not only on China itself, but on Hong
Kong and Taiwan as well, could also be significant.
China is heavily dependent on foreign trade, particularly with Japan, the United
States, South Korea and Germany. Political developments adverse to its trading
partners, as well as political and social repression, could cause the United
States and others to alter their trading policy towards China. For example, in
the United States, the continued extension of most favored nation trading status
to China which is reviewed regularly and was reviewed in 1998 is an issue of
significant controversy. Loss of that status would clearly hurt China's economy
by reducing its exports. With much of China's trading activity being funneled
through Hong Kong and with trade through Taiwan becoming increasingly
significant, any sizable reduction in demand for goods from China would have
negative implications for both countries. China is believed to be the largest
investor in Hong Kong and its markets and an economic downturn in China would be
expected to reverberate through Hong Kong's markets as well.
Although China has committed by treaty to preserve Hong Kong's autonomy and its
economic, political and social freedoms for fifty years from the July 1, 1997
transfer of sovereignty from Great Britain to China. Hong Kong is headed by a
chief executive, appointed by the central government of China, whose power is
checked by both the government of China and a Legislative Council. Although
Hong Kong voters voted overwhelmingly for pro-democracy candidates in the recent
election, it remains possible that China could exert its authority so as to
alter the economic structure, political structure or existing social policy of
Hong Kong. Investor and business confidence in Hong Kong can be significantly
affected by such developments, which in turn can affect markets and business
performance. In this connection, it is noted that a substantial portion of the
companies listed on the Hong Kong Stock Exchange are involved in real estate-
related activities.
The securities markets of China and to a lesser extent Taiwan, are relatively
small, with the majority of market capitalization and
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trading volume concentrated in a limited number of companies representing a
small number of industries. Consequently, Greater China '97 Fund may experience
greater price volatility and significantly lower liquidity than a portfolio
invested solely in equity securities of U.S. companies. These markets may be
subject to greater influence by adverse events generally affecting the market,
and by large investors trading significant blocks of securities, than is usual
in the U.S. Securities settlements may in some instances be subject to delays
and related administrative uncertainties.
Foreign investment in the securities markets of China and Taiwan is restricted
or controlled to varying degrees. These restrictions or controls, which apply to
the Greater China '97 Fund may at times limit or preclude investment in certain
securities and may increase the cost and expenses of the Fund. China and Taiwan
require governmental approval prior to investments by foreign persons or limit
investment by foreign persons to only a specified percentage of an issuer's
outstanding securities or a specific class of securities which may have less
advantageous terms (including price) than securities of the company available
for purchase by nationals. In addition, the repatriation of investment income,
capital or the proceeds of sales of securities from China and Taiwan is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose restrictions on foreign
capital remittances.
Greater China '97 Fund could be adversely affected by delays in, or a refusal to
grant, any required governmental approval for repatriation, as well as by the
application to it of other restrictions on investment. The liquidity of the
Fund's investments in any country in which any of these factors exists could be
affected by any such factor or factors on the Fund's investments. The limited
liquidity in certain Greater China markets is a factor to be taken into account
in the Fund's valuation of portfolio securities in this category and may affect
the Fund's ability to dispose of securities in order to meet redemption requests
at the price and time it wishes to do so. It is also anticipated that
transaction costs, including brokerage commissions for transactions both on and
off the securities exchanges in Greater China countries, will be higher than in
the U.S.
Issuers of securities in Greater China countries are generally not subject to
the same degree of regulation as are U.S. issuers with respect to such matters
as timely disclosure of information, insider trading rules, restrictions on
market manipulation and shareholder proxy requirements. Reporting, accounting
and auditing standards of Greater China countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in securities of Greater China country issuers
than to investors in securities of U.S. issuers.
Investment in Greater China companies which are in the initial stages of their
development involves greater risk than is customarily associated with securities
of more established companies. The securities of such companies may have
relatively limited marketability and may be subject to more abrupt or erratic
market movements than securities of established companies or broad market
indices.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund, Greater China '97 Fund and Global
Environment Fund may emphasize investment in, smaller, emerging companies.
Investment in such companies involves greater risks than is customarily
associated with securities of more established companies. Companies in the
earlier stages of their development often have products and management personnel
which have not been thoroughly tested by time or the marketplace; their
financial resources may not be as substantial as those of more established
companies. The securities of smaller companies may have relatively limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger companies or broad market indices. The revenue flow of such
companies may be erratic and their results of operations may fluctuate widely
and may also contribute to stock price volatility.
Extreme Governmental Action; Less Protective Laws. In contrast with investing in
the United States, foreign investment may involve in certain situations greater
risk of nationalization, expropriation, confiscatory taxation, currency blockage
or other extreme governmental action which could adversely impact a Fund's
investments. In the event of certain such actions, a Fund could lose its entire
investment in the country involved. In addition, laws in various foreign
countries, including in certain respects each of the Greater China countries,
governing, among other subjects, business organization and practices, securities
and securities trading, bankruptcy and insolvency may provide less protection to
investors such as the Fund than provided under United States laws.
Investing in Environmental Companies by Global Environment Fund. Governmental
regulations or other action can inhibit an Environmental Company's performance,
and it may take years to translate environmental legislation into sales and
profits. Environmental Companies generally face competition in fields often
characterized by relatively short product cycles and competitive pricing
policies. Losses may result from large product development or expansion costs,
unprotected marketing or distribution systems, erratic revenue flows and low
profit margins. Additional risks that Environmental Companies may face include
difficulty in financing the high cost of technological development,
uncertainties due to changing governmental regulation or rapid technological
advances, potential liabilities associated with hazardous components and
operations, and difficulty in finding experienced employees.
The Real Estate Industry. Although Real Estate Investment Fund does not invest
directly in real estate, it invests primarily in Real Estate Equity Securities
and has a policy of concentration of its investments in the real estate
industry. Therefore, an investment in the Fund is subject to certain risks
associated with the direct ownership of real estate and with the real estate
industry in
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general. These risks include, among others: possible declines in the value of
real estate; risks related to general and local economic conditions; possible
lack of availability of mortgage funds; overbuilding; extended vacancies of
properties; increases in competition, property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability to
third parties for damages resulting from, environmental problems; casualty or
condemnation losses; uninsured damages from floods, earthquakes or other natural
disasters; limitations on and variations in rents; and changes in interest
rates. To the extent that assets underlying the Fund's investments are
concentrated geographically, by property type or in certain other respects, the
Fund may be subject to certain of the foregoing risks to a greater extent.
In addition, if Real Estate Investment Fund receives rental income or income
from the disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company. See
"Dividends, Distributions and Taxes" in the Fund's Statement of Additional
Information. Investments by the Fund in securities of companies providing
mortgage servicing will be subject to the risks associated with refinancings and
their impact on servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common Stocks.
Mortgage-Backed Securities. As discussed above, investing in Mortgage-Backed
Securities involves certain unique risks in addition to those risks associated
with investment in the real estate industry in general. These risks include the
failure of a counterparty to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest rates
decline, the value of an investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of an investment in fixed
rate obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage pass-
through securities in particular, may be less effective than other types of U.S.
Government securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes. Investors should review
carefully the information discussed under the heading "Dividends, Distributions
and Taxes" and should discuss with their tax advisers the specific tax
consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each
47
<PAGE>
Fund's investments in fixed-income securities will change as the general level
of interest rates fluctuates. During periods of falling interest rates, the
values of fixed-income securities generally rise. Conversely, during periods of
rising interest rates, the values of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between five and 25
years in the case of Utility Income Fund and between one year or less and 30
years in the case of all other Funds that invest in such securities. In periods
of increasing interest rates, each of the Funds may, to the extent it holds
mortgage-backed securities, be subject to the risk that the average dollar-
weighted maturity of the Fund's portfolio of debt or other fixed-income
securities may be extended as a result of lower than anticipated prepayment
rates. See "Additional Investment Practices--Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in lower-
rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of
48
<PAGE>
Additional Information for each Fund that invests in lower-rated securities for
a description of the bond ratings of Moody's, S&P, Duff & Phelps and Fitch.
Certain lower-rated securities in which Growth Fund, and Utility Income Fund may
invest may contain call or buy-back features that permit the issuers thereof to
call or repurchase such securities. Such securities may present risks based on
prepayment expectations. If an issuer exercises such a provision, a Fund may
have to replace the called security with a lower yielding security, resulting in
a decreased rate of return to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund, Greater China '97 Fund and Global Environment Fund is
a "non-diversified" investment company, which means the Fund is not limited in
the proportion of its assets that may be invested in the securities of a single
issuer. However, each Fund intends to conduct its operations so as to qualify to
be taxed as a "regulated investment company" for purposes of the Code, which
will relieve the Fund of any liability for federal income tax to the extent its
earnings are distributed to shareholders. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information. To so qualify, among
other requirements, the Fund will limit its investments so that, at the close of
each quarter of the taxable year, (i) not more than 25% of the Fund's total
assets will be invested in the securities of a single issuer, and (ii) with
respect to 50% of its total assets, not more than 5% of its total assets will be
invested in the securities of a single issuer and the Fund will not own more
than 10% of the outstanding voting securities of a single issuer. A Fund's
investments in U.S. Government securities and other regulated investment
companies are not subject to these limitations. Because each of Worldwide
Privatization Fund, New Europe Fund, Greater China '97 Fund and Global
Environment Fund and All-Asia Investment Fund is a non-diversified investment
company, it may invest in a smaller number of individual issuers than a
diversified investment company, and an investment in such Fund may, under
certain circumstances, present greater risk to an investor than an investment in
a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
Year 2000 and Euro. Many computer systems and applications in use today process
transactions using two-digit date fields for the year of the transaction, rather
than the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year "1900", which could
result in processing inaccuracies and computer system failures. This is commonly
known as the Year 2000 problem. In addition to the Year 2000 problem, the
European Economic and Monetary Union has established a single currency, the Euro
Currency ("Euro") that will replace the national currency of certain European
countries effective January 1, 1999. Computer systems and applications must be
adapted in order to be able to process Euro sensitive information accurately
beginning in 1999. Should any of the computer systems employed by the Funds'
major service providers fail to process Year 2000 or Euro related information
properly, that could have a significant negative impact on the Funds' operations
and the services that are provided to the Funds' shareholders. In addition, to
the extent that the operations of issuers of securities held by the Funds are
impaired by the Year 2000 problem or the Euro, or prices of securities held by
the Funds decline as a result of real or perceived problems relating to the Year
2000 or the Euro, the value of the Funds' shares may be materially
affected.
With respect to the Year 2000, the Funds have been advised that Alliance, each
Fund's investment adviser, Alliance Fund Distributors, Inc. ("AFD"), each Fund's
principal underwriter, and Alliance Fund Services, Inc. ("AFS"), each Fund's
registrar, transfer agent and dividend disbursing agent (collectively,
"Alliance") began to address the Year 2000 issue several years ago in connection
with the replacement or upgrading of certain computer systems and applications.
During 1997, Alliance began a formal Year 2000 initiative, which established a
structured and coordinated process to deal with the Year 2000 issue. Alliance
reports that it has completed its assessment of the Year 2000 issues on its
domestic and international computer systems and applications. Currently,
management of Alliance expects that the required modifications for the majority
of its significant systems and applications that will be in use on January 1,
2000, will be completed and tested by the end of 1998. Full integration testing
of these systems and testing of interfaces with third-party suppliers will
continue through 1999. At this time, management of Alliance believes that the
costs associated with resolving this issue will not have a material adverse
effect on its operations or on its ability to provide the level of services it
currently provides to the Funds.
With respect to the Euro, the Funds have been advised that Alliance has
established a project team to assess changes that will be required in connection
with the introduction of the Euro. Alliance reports that its project team has
assessed all systems, including those developed or managed internally, as well
as those provided by vendors, in order to determine the modifications that will
be required to process accurately transactions denominated in Euro after 1998.
At this time, management of Alliance expects that the required modifications for
the introduction of the Euro will be completed and tested before the end of
1998. Management of Alliance believes that the costs associated with resolving
this issue will not have a material adverse effect on its operations or on its
ability to provide the level of services it currently provides to the
Funds.
The Funds and Alliance have been advised by the Funds' Custodians that they are
also in the process of reviewing their systems with the same goals. As of the
date of this prospectus, the Funds and Alliance have no reason to believe that
the Custodians will be unable to achieve these goals.
49
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE AND SALE
- --------------------------------------------------------------------------------
OF SHARES
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You can purchase shares of any of the Funds at a price based on the next
calculation of their net asset value after receipt of a proper purchase order
either through broker-dealers, banks or other financial intermediaries, or
directly through AFD. The minimum initial investment in each Fund is $250. The
minimum for subsequent investments in each Fund is $50. Investments of $25 or
more are allowed under the automatic investment program of each Fund. Share
certificates are issued only upon request. See the Subscription Application and
Statements of Additional Information for more information.
Existing shareholders may make subsequent purchases by electronic funds transfer
if they have completed the appropriate section of the Subscription Application
or the Shareholder Options form obtained from AFS. Telephone purchase orders can
be made by calling 800-221-5672 and may not exceed $500,000.
Each Fund offers three classes of shares through this prospectus, Class A, Class
B and Class C. The Funds may refuse any order to purchase shares. In this
regard, the Funds reserve the right to restrict purchases of shares (including
through exchanges) when they appear to evidence a pattern of frequent purchases
and sales made in response to short-term considerations.
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at net asset value plus an initial sales charge,
as follows:
<TABLE>
<CAPTION>
Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.44% 4.25% 4.00%
- --------------------------------------------------------------------------------------
$100,000 to
less than $250,000 3.36 3.25 3.00
- --------------------------------------------------------------------------------------
$250,000 to
less than $500,000 2.30 2.25 2.00
- --------------------------------------------------------------------------------------
$500,000 to
less than $1,000,000 1.78 1.75 1.50
- --------------------------------------------------------------------------------------
</TABLE>
On purchases of $1,000,000 or more, you pay no initial sales charge but may pay
a contingent deferred sales charge ("CDSC") equal to 1% of the lesser of net
asset value at the time of redemption or original cost if you redeem within one
year; Alliance may pay the dealer or agent a fee of up to 1% of the dollar
amount purchased. Certain purchases of Class A shares may qualify for reduced or
eliminated sales charges in accordance with a Fund's Combined Purchase
Privilege, Cumulative Quantity Discount, Statement of Intention, Privilege for
Certain Retirement Plans, Reinstatement Privilege and Sales at Net Asset Value
programs. Consult the Subscription Application and Statements of Additional
Information.
Class B Shares--Deferred Sales Charge Alternative
You can purchase Class B shares at net asset value without an initial sales
charge. A Fund will thus receive the full amount of your purchase. However, you
may pay a CDSC if you redeem shares within four years after purchase. The amount
of the CDSC (expressed as a percentage of the lesser of the current net asset
value or original cost) will vary according to the number of years from the
purchase of Class B shares until the redemption of those shares.
The amount of the CDSC for Class B shares for each Fund is as set forth below.
Class B shares of a Fund purchased prior to the date of this Prospectus may be
subject to a different CDSC schedule, which was disclosed in the Fund's
prospectus in use at the time of purchase and is set forth in the Fund's current
Statement of Additional Information.
<TABLE>
<CAPTION>
Year Since Purchase CDSC
--------------------------------------------
<S> <C>
First ................................ 4.0%
Second ............................... 3.0%
Third ................................ 2.0%
Fourth ............................... 1.0%
Fifth ................................ None
</TABLE>
Class B shares are subject to higher distribution fees than Class A shares for a
period (after which they convert to Class A shares) of eight years. The higher
fees mean a higher expense ratio, so Class B shares pay correspondingly lower
dividends and may have a lower net asset value than Class A shares.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase Class C shares at net asset value without any initial sales
charge. A Fund will thus receive the full amount of your purchase, and, if you
hold your shares for one year or more, you will receive the entire net asset
value of your shares upon redemption. Class C shares incur higher distribution
fees than Class A shares and do not convert to any other class of shares of the
Fund. The higher fees mean a higher expense ratio, so Class C shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares.
Class C shares redeemed within one year of purchase will be subject to a CDSC
equal to 1% of the lesser of their original cost or net asset value at the time
of redemption.
Application of the CDSC
Shares obtained from dividend or distribution reinvestment are not subject to
the CDSC. The CDSC is deducted from the amount of the redemption and is paid to
AFD. The CDSC will be waived on redemptions of shares following the death or
disability of a shareholder, to meet the requirements of certain qualified
retirement plans or pursuant to a monthly, bimonthly or quarterly systematic
withdrawal plan. See the Statements of Additional Information.
How the Funds Value Their Shares
The net asset value of each Class of shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to that Class by the outstanding
shares of that Class. Shares are valued each day the Exchange is open as of the
close of regular trading (currently 4:00 p.m. Eastern time). The securities in a
Fund are valued at their current market value determined on the basis of market
quotations or, if such quotations are not readily
50
<PAGE>
available, such other methods as the Fund's Directors believe accurately
reflects fair market value.
Employee Benefit Plans
Certain employee benefit plans, including employer-sponsored tax-qualified
401(k) plans and other defined contribution retirement plans ("Employee Benefit
Plans"), may establish requirements as to the purchase, sale or exchange of
shares, including maximum and minimum initial investment requirements, that are
different from those described in this Prospectus. Employee Benefit Plans may
also 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.
General
The decision as to which class of shares is more beneficial to you depends on
the amount and intended length of your investment. If you are making a large
investment, thus qualifying for a reduced sales charge, you might consider Class
A shares. If you are making a smaller investment, you might consider Class B
shares because 100% of your purchase is invested immediately. If you are unsure
of the length of your investment, you might consider Class C shares because
there is no initial sales charge and no CDSC as long as the shares are held for
one year or more. Consult your financial agent. Dealers and agents may receive
differing compensation for selling Class A, Class B or Class C shares. There is
no size limit on purchases of Class A shares. The maximum purchase of Class B
shares is $250,000. The maximum purchase of Class C shares is $1,000,000.
Each Fund offers a fourth class of shares, Advisor Class shares, by means of
separate prospectus. Advisor Class shares may be purchased and held solely by
(i) accounts established under a fee-based program sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by AFD,
(ii) a self-directed defined contribution employee benefit plan (e.g., a 401(k)
plan) that has at least 1,000 participants or $25 million in assets and (iii)
certain other categories of investors described in the prospectus for the
Advisor Class, including investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or the Funds. Advisor Class
shares are offered without any initial sales charge or CDSC and without an
ongoing distribution fee and are expected, therefore, to have different
performance than Class A, Class B or Class C shares. You can obtain more
information about Advisor Class shares by contacting AFS at 800-221-5672 or by
contacting your financial representative.
A transaction, service, administrative or other similar fee may be charged by
your broker-dealer, agent, financial intermediary or other financial
representative with respect to the purchase, sale or exchange of Class A, Class
B or Class C shares made through such financial representative. Such financial
intermediaries may also impose requirements with respect to the purchase, sale
or exchange of shares that are different from, or in addition to, those imposed
by a Fund, including requirements as to the minimum initial and subsequent
investment amounts.
In addition to the discount or commission paid to dealers or agents, AFD from
time to time pays additional cash or other incentives to dealers or agents in
connection with the sale of shares of the Funds. Such additional amounts may be
utilized, in whole or in part, in some cases together with other revenues of
such dealers or agents, to provide additional compensation to registered
representatives who sell shares of the Funds. On some occasions, such cash or
other incentives will be conditioned upon the sale of a specified minimum dollar
amount of the shares of a Fund and/or other Alliance Mutual Funds during a
specific period of time. Such incentives may take the form of payment for
attendance at seminars, meals, sporting events or theater performances, or
payment for travel, lodging and entertainment incurred in connection with travel
by persons associated with a dealer or agent to urban or resort locations within
or outside the United States. Such dealer or agent may elect to receive cash
incentives of equivalent amount in lieu of such payments.
HOW TO SELL SHARES
You may "redeem"(i.e., sell your shares in a Fund to the Fund) on any day the
Exchange is open, either directly or through your financial intermediary. The
price you will receive is the net asset value (less any applicable CDSC) next
calculated after the Fund receives your request in proper form. Proceeds
generally will be sent to you within seven days. However, for shares recently
purchased by check or electronic funds transfer, a Fund will not send proceeds
until it is reasonably satisfied that the check or electronic funds transfer has
been collected (which may take up to 15 days).
Selling Shares Through Your Broker
Your broker must receive your request before 4:00 p.m. Eastern time, and your
broker must transmit your request to the Fund by 5:00 p.m. Eastern time, for you
to receive that day's net asset value (less any applicable CDSC). Your broker is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Selling Shares Directly To A Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. Stock power forms are
available from your financial intermediary, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
51
<PAGE>
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4:00 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value. A shareholder who
has completed the appropriate section of the Subscription Application, or the
Shareholder Options form obtained from AFS, can elect to have the proceeds of
his or her redemption sent to his or her bank via an electronic funds transfer.
Proceeds of telephone redemptions also may be sent by check to a shareholder's
address of record. Redemption requests by electronic funds transfer may not
exceed $100,000 and redemption requests by check may not exceed $50,000 per day.
Telephone redemption is not available for shares held in nominee or "street
name" accounts or retirement plan accounts or shares held by a shareholder who
has changed his or her address of record within the previous 30 calendar
days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it fails to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672. Some
services are described in the attached Subscription Application. A shareholder's
manual explaining all available services will be provided upon request. To
request a shareholder manual, call 800-227-4618.
HOW TO EXCHANGE SHARES
You may exchange your shares of any Fund for shares of the same class of other
Alliance Mutual Funds (including AFD Exchange Reserves, a money market fund
managed by Alliance). Exchanges of shares are made at the net asset values next
determined, without sales or service charges. Exchanges may be made by telephone
or written request. Telephone exchange requests must be received by AFS by 4:00
p.m. Eastern time on a Fund business day in order to receive that day's net
asset value.
Shares will continue to age without regard to exchanges for purposes of
determining the CDSC, if any, upon redemption and, in the case of Class B
shares, for the purposes of conversion to Class A shares. After an exchange,
your Class B shares will automatically convert to Class A shares in accordance
with the conversion schedule applicable to the Class B shares of the Alliance
Mutual Fund you originally purchased for cash ("original shares"). When
redemption occurs, the CDSC applicable to the original shares is applied.
Please read carefully the Prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended or terminated on
60 days' written notice.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- -------------------------------------------------------------------------------------
<S> <C> <C>
Alliance Fund Alden M. Stewart since 1997-- Associated with
Executive Vice President of Alliance
Alliance Capital Management
Corporation (ACMC*)
Randall E. Haase since 1997-- Associated with
Senior Vice President of ACMC Alliance
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance
Premier Growth Alfred Harrison since inception-- Associated with
Fund Vice Chairman of ACMC Alliance
Technology Fund Peter Anastos since 1992-- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992-- Associated with
Senior Vice President of ACMC Alliance
Quasar Fund Alden M. Stewart since 1994-- (see above)
(see above)
Randall E. Haase since 1994-- (see above)
(see above)
International Fund Bruce W. Calvert since 1998-- Associated with
Vice Chairman and Chief Alliance
Investment Officer
of ACMC
International Premier Alfred Harrison since 1998-- (see above)
Growth Fund (see above)
Thomas Kamp since 1998-- Associated with
Senior Vice President of ACMC Alliance
Worldwide Privatization Mark H. Breedon since inception Associated with
Fund Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited **
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- ----------------------------------------------------------------------------------
<S> <C> <C>
New Europe Fund Steven Beinhacker since 1997-- Associated with
Vice President of ACMC Alliance
All-Asia Investment Hiroshi Motoki since 1998-- Associated with
Fund Senior Vice President of ACMC Alliance since
and director of Japanese/Asian 1994; prior
Equity research thereto,
associated with
Ford Motor
Company
Greater China '97 Matthew W. S. Lee since 1997-- Associated with
Fund Vice President of ACMC Alliance since
1997; prior
thereto,
associated
with National
Mutual Funds
Management
(Asia) since 1994
and James Capel
and Co. since
prior to 1994
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance
Global Environment Linda Bolton Weiser since 1998-- Associated with
Fund Vice President of ACMC Alliance
Balanced Shares Paul Rissman since 1997-- Associated with
Senior Vice President of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- (see above)
(See above)
Growth & Income Paul Rissman since 1994-- (see above)
Fund (see above)
Real Estate Daniel G. Pine since 1996-- Associated with
Investment Fund Senior Vice President of ACMC Alliance since
1996; prior
thereto, Senior
Vice President of
Desai Capital
Management
Real Estate David Kruth since 1997-- Associated with
Investment Fund Vice President of ACMC Alliance since
(cont.) 1997; prior
thereto Senior
Vice President of
the Yarmouth
Group
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The sole general partner of Alliance.
** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1998 totaling more than $262 billion (of
which approximately $107 billion represented the assets of investment
companies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations and
endowment funds. The 58 registered investment companies managed by Alliance
comprising 123 separate investment portfolios currently have over two million
shareholders. As of June 30, 1998, Alliance was an investment manager of
employee benefit plan assets for 32 of the Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States ("Equitable"), one of the largest
life insurance companies in the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding company controlled
by AXA-UAP, a French insurance holding company. Certain information concerning
the ownership and control of Equitable by AXA-UAP is set forth in each Fund's
Statement of Additional Information under "Management of the Funds."
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Premier Growth Fund, Mr. Harrison has ultimate responsibility for the
management of discretionary tax-exempt accounts of institutional clients managed
as described below without significant client-imposed restrictions "(Historical
Portfolios"). These accounts have substantially the same investment objectives
and policies and are managed in accordance with essentially the same investment
strategies and techniques as those for Premier Growth Fund, except for the
ability of Premier Growth Fund to use futures and options as hedging tools and
to invest in warrants. The Historical Portfolios are also not subject to certain
limitations, diversification requirements and other restrictions imposed under
the 1940 Act and the Code to which Premier Growth Fund, as a registered
investment company, is subject and which, if applicable to the Historical
Portfolios, may have adversely affected the performance results of the
Historical Portfolios. See "Investment Objective and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the nineteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios as an employee of Alliance
and cumulatively through September 30, 1998. As of September 30, 1998, the
assets in the Historical Portfolios totaled approximately $12.3 billion and the
average size of an institutional account in the Historical Portfolio was $412
million. Each Historical Portfolio has a nearly identical composition of
investment holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be payable by Premier
Growth Fund, which are higher than the fees imposed on the Historical Portfolio
and will result in a higher expense ratio and lower returns for Premier Growth
Fund. Expenses associated with the distribution of Class A, Class B and Class C
shares of Premier Growth Fund in accordance with the plan adopted by Premier
Growth Fund's Board of Directors pursuant to Rule 12b-1 under the 1940 Act
("distribution fees") are also excluded. See "Expense Information." The
performance data has also not been adjusted for corporate or individual taxes,
if any, payable by the account owners.
53
<PAGE>
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The total returns set forth below are
calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation. In contrast with
the securities in the Russell Price-Driven Indices, companies in the Growth
Index tend to exhibit higher price-to-book and price-earnings ratios, lower
dividend yield and higher forecasted growth values.
To the extent Premier Growth Fund does not invest in U.S. common stocks or
utilizes investment techniques such as futures or options, the S&P 500 Index and
Russell 1000 Growth Index may not be substantially comparable to Premier Growth
Fund. The S&P 500 Index and Russell 1000 Growth Index are included to illustrate
material economic and market factors that existed during the time period shown.
The S&P 500 Index and Russell 1000 Growth Index do not reflect the deduction of
any fees. If Premier Growth Fund were to purchase a portfolio of securities
substantially identical to the securities comprising the S&P 500 Index or the
Russell 1000 Growth Index, Premier Growth Fund's performance relative to the
index would be reduced by Premier Growth Fund's expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees, transfer agency
costs and other administrative expenses, as well as by the impact on Premier
Growth Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the Premier Growth Fund as
measured against certain broad based market indices and against the composite
performance of other open-end growth mutual funds. Investors should not rely on
the following performance data of the Historical Portfolios as an indication of
future performance of Premier Growth Fund. The composite investment performance
for the periods presented may not be indicative of future rates of return. Other
methods of computing investment performance may produce different results, and
the results for different periods may vary.
Schedule of Composite Investment Performance--Historical Portfolios*
<TABLE>
<CAPTION>
Russell Lipper
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
---- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1/1/98-
9/30/98*** 9.09% 15.27% 6.04% 9.44% 2.38%
Year ended December:
1997*** 27.05% 34.64% 33.36% 30.49% 25.30%
1996*** 18.84 22.06 22.96 23.12 17.48
1995*** 40.66 39.83 37.58 37.19 32.65
1994 (9.78) (4.82) 1.32 2.66 (1.57)
1993 5.35 10.54 10.08 2.90 11.98
1992 -- 12.18 7.62 5.00 7.63
1991 -- 38.91 30.47 41.16 35.20
1990 -- (1.57) (3.10) (0.26) (5.00)
1989 -- 38.80 31.69 35.92 28.60
1988 -- 10.88 16.61 11.27 15.80
1987 -- 8.49 5.25 5.31 1.00
1986 -- 27.40 18.67 15.36 15.90
1985 -- 37.41 31.73 32.85 30.30
1984 -- (3.31) 6.27 (.95) (2.80)
1983 -- 20.80 22.56 15.98 22.30
1982 -- 28.02 21.55 20.46 20.20
1981 -- (1.09) (4.92) (11.31) (8.40)
1980 -- 50.73 32.50 39.57 37.30
1979 -- 30.76 18.61 23.91 27.40
Cumulative total
return for the
period
January 1,
1979 to
September 30,
1998 -- 3,542% 2,064% 1,852% 1,613%
- ----------------------------------------------------------------------------------------------
</TABLE>
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion. Total returns for Premier Growth Fund are for Class A
shares, with imposition of the maximum 4.25% sales charge.
** Assumes imposition of the maximum advisory fee charged by Alliance for any
Historical Portfolio for the period involved.
*** During this period, the Historical Portfolios differed from Premier Growth
Fund in that Premier Growth Fund invested a portion of its net assets in
warrants on equity securities in which the Historical Portfolios were
unable, by their investment restrictions, to purchase. In lieu of warrants,
the Historical Portfolios acquired the common stock upon which the warrants
were based.
54
<PAGE>
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 1998 and, for more than one year, assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
<TABLE>
<CAPTION>
Average Annual Total Returns
-----------------------------------------------------------------------
Premier Russell Lipper
Growth Historical S&P 500 1000 Growth
Fund Portfolios** Index Growth Index Fund Index
---- ---------- ----- ------------ ----------
<S> <C> <C> <C> <C> <C>
One year ................ 6.21% 13.19% 6.08% 11.11% 3.07%
Three years ............. 21.82 24.22 22.60 22.50 16.43
Five years .............. 20.23 20.70 19.91 20.80 15.52
Ten years ............... 19.98+ 19.70 17.29 18.07 15.01
Since January 1,
1979 .................. -- 19.97 16.84 16.23 15.47
- ----------------------------------------------------------------------------------------------------
</TABLE>
+ Since inception on 9/28/92
ADMINISTRATOR TO ALL-ASIA INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
CONSULTANT TO ALLIANCE WITH RESPECT TO GREATER CHINA COUNTRIES
In connection with its provision of advisory services to Greater China '97 Fund.
Alliance has retained at its expense as a consultant New Alliance, a joint
venture company headquartered in Hong Kong which was formed in 1997 by Alliance
and Sun Hung Kai Properties Limited ("SHKP"). New Alliance provides Alliance
with ongoing, current and comprehensive information and analysis of conditions
and developments in Greater China countries consisting of, but not limited to,
statistical and factual research and assistance with respect to economic,
financial, political, technological and social conditions and trends in Greater
China countries, including information on markets and industries. In addition to
its own staff of professionals, New Alliance has access to the expertise and
personnel of SHKP, one of Hong Kong's preeminent property and business groups.
SHKP is one of the largest enterprises in Hong Kong measured by market
capitalization and has considerable expertise in evaluating business and market
conditions in Hong Kong and the other Greater China countries. Its activities
complementary to property development include insurance and estate management,
and SHKP is diversified as well into telecommunications and infrastructure
projects.
CONSULTANT TO ALLIANCE WITH RESPECT TO INVESTMENT IN REAL ESTATE SECURITIES
Alliance, with respect to investment in real estate securities, has retained as
a consultant CB Commercial Richard Ellis, Inc. ("CBRE"), a publicly held company
and the largest real estate services company in the United States, comprised of
real estate brokerage, property and facilities management, and real estate
finance and investment advisory activities. In 1997, CBRE completed 22,100 sale
and lease transactions, managed over 6,600 client properties, created over $5
billion in mortgage originations, and completed over 3,600 appraisal and
consulting assignments. In addition, they advised and managed for institutions
over $4 billion in real estate investments. CBRE will make available to Alliance
the CBRE's National Real Estate Index, which gathers, analyzes and publishes
targeted research data for the 66 largest U.S. markets, based on a variety of
public-sector and private-sector sources as well as CBRE's proprietary database
of approximately 80,000 property transactions representing over $500 billion of
investment property. This information provides a substantial component of the
research and data used to create the REIToScore model. As a consultant, CBRE
provides to Alliance, at Alliance's expense, such in-depth information regarding
the real estate market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-family properties
as Alliance shall from time to time request. CBRE will not furnish advice or
make recommendations regarding the purchase or sale of securities by the Fund
nor will it be responsible for making investment decisions involving Fund
assets.
CBRE is one of the three largest fee-based property management firms in the
United States, the largest commercial real estate lease brokerage firm in the
country, the largest investment property brokerage firm in the country, as well
as one of the largest publishers of real estate research, with approximately
8,000 employees worldwide. CBRE will provide Alliance with exclusive access to
its REIT o Score model which ranks approximately 142 REITS based on the relative
attractiveness of the property markets in which they own real estate. This model
scores the approximately 18,000 individual properties owned by these companies.
REIT o Score is in turn based on CBRE's National Real Estate Index which
gathers, analyzes and publishes targeted research for the 66 largest U.S. real
estate markets based on a variety of public- and private-sector sources as well
as CBRE's proprietary database of 80,000 commercial property transactions
representing over $500 billion of investment property and over 2,500 tracked
properties which report rent and expense data quarterly. CBRE has previously
provided access to its REIT o Score model results primarily to the institutional
market through subscriptions. The model is no longer provided to any research
publications and Real Estate Investment Fund is currently the only mutual fund
available to retail investors that has access to CBRE's REIT o Score model.
Distribution Services Agreements
Rule 12b-1 adopted by the Commission under the 1940 Act permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has adopted one or more "Rule
12b-1 plans" (for each Fund, a "Plan") and has entered into a Distribution
Services Agreement (the "Agreement") with AFD. Pursuant to its Plan, a Fund pays
to AFD a Rule 12b-1 distribution services fee, which may not exceed an annual
rate of .30% (.50% with respect to Growth Fund and Premier Growth Fund) of the
Fund's aggregate average daily net assets attributable to the Class A shares,
1.00% of the Fund's aggregate average daily net assets attributable to the Class
B shares and 1.00% of the Fund's aggregate average daily net
55
<PAGE>
assets attributable to the Class C shares, for distribution expenses. The
Directors of Growth Fund currently limit payments with respect to Class A shares
under the Plan to .30% of the Fund's aggregate average daily net assets
attributable to Class A shares. The Directors of Premier Growth Fund currently
limit payments under the Plan with respect to sales of Class A shares made after
November 1993 to .30% of the Fund's aggregate average daily net assets. The
Plans provide that a portion of the distribution services fee in an amount not
to exceed .25% of the aggregate average daily net assets of each Fund
attributable to each of the Class A, Class B and Class C shares constitutes a
service fee used for personal service and/or the maintenance of shareholder
accounts.
The Plans provide that AFD will use the distribution services fee received from
a Fund in its entirety for payments (i) to compensate broker-dealers or other
persons for providing distribution assistance, (ii) to otherwise promote the
sale of shares of the Fund, and (iii) to compensate broker-dealers, depository
institutions and other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's shareholders. In this
regard, some payments under the Plans are used to compensate financial
intermediaries with trail or maintenance commissions in an amount equal to .25%,
annualized, with respect to Class A shares and Class B shares, and 1.00%,
annualized, with respect to Class C shares, of the assets maintained in a Fund
by their customers. Distribution services fees received from the Funds, except
Growth Fund, with respect to Class A shares will not be used to pay any interest
expenses, carrying charges or other financing costs or allocation of overhead of
AFD. Distribution services fees received from the Funds, with respect to Class B
and Class C shares, may be used for these purposes. The Plans also provide that
Alliance may use its own resources to finance the distribution of each Fund's
shares.
The Funds are not obligated under the Plans to pay any distribution services fee
in excess of the amounts set forth above. Except as noted below for Growth Fund,
with respect to Class A shares of each Fund, distribution expenses accrued by
AFD in one fiscal year may not be paid from distribution services fees received
from the Fund in subsequent fiscal years. Except as noted below for Growth Fund
AFD's compensation with respect to Class B and Class C shares under the Plans of
the other Funds is directly tied to its expenses incurred. Actual distribution
expenses for such Class B and Class C shares for any given year, however, will
probably exceed the distribution services fees payable under the applicable Plan
with respect to the class involved and, in the case of Class B and Class C
shares, payments received from CDSCs. The excess will be carried forward by AFD
and reimbursed from distribution services fees payable under the Plan with
respect to the class involved and, in the case of Class B and Class C shares,
payments subsequently received through CDSCs, so long as the Plan and the
Agreement are in effect. Since AFD's compensation under the Plans of Growth Fund
is not directly tied to the expenses incurred by AFD, the amount of compensation
received by it under the applicable Plan during any year may be more or less
than its actual expenses.
Unreimbursed distribution expenses incurred as of the end of each Fund's most
recently completed fiscal period, and carried over for reimbursement in future
years in respect of the Class B and Class C shares for all Funds were, as of
that time, as follows:
<TABLE>
<CAPTION>
Amount of Unreimbursed Distribution Expenses
(as % of Net Assets of Class)
--------------------------------------------
Class B Class C
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Fund $ 3,782,063 (5.37%) $1,025,156 (5.43%)
Premier Growth Fund $20,874,319 (2.43%) $1,413,557 (0.79%)
Technology Fund $32,259,341 (3.06%) $1,464,569 (0.80%)
Quasar Fund $15,242,262 (3.03%) $1,262,697 (0.90%)
International Fund $ 2,638,659 (3.70%) $ 838,475 (4.10%)
International Premier Growth
Fund $ 325,310 (4.62%) $ 15,653 (1.54%)
Worldwide Privatization Fund $ 6,609,791 (4.23%) $ 537,949 (2.02%)
New Europe Fund $ 4,377,262 (3.19%) $ 741,808 (1.87%)
All-Asia Investment Fund $ 1,690,408 (14.78%) $ 162,319 (8.73%)
Greater China '97 Fund $ 533,473 (34.39%) $ 18,510 (18.19%)
Global Small Cap Fund $ 2,594,264 (6.68%) $ 676,624 (7.14%)
Balanced Shares $ 2,579,772 (5.41%) $ 608,865 (5.61%)
Utility Income Fund $ 1,400,456 (9.47%) $ 456,135 (13.37%)
Growth and Income Fund $11,066,118 (2.42%) $1,326,535 (1.25%)
Real Estate Investment Fund $12,995,878 (4.83%) $ 699,723 (1.01%)
- ------------------------------------------------------------------------------
</TABLE>
The Plans are in compliance with rules of the National Association of Securities
Dealers, Inc. which effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to .75% and .25%,
respectively, of the average annual net assets attributable to that class. The
rules also limit the aggregate of all front-end, deferred and asset-based sales
charges imposed with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of shares of that
class, plus interest at the prime rate plus 1% per annum.
The Glass-Steagall Act and other applicable laws may limit the ability of a bank
or other depository institution to become an underwriter or distributor of
securities. However, in the opinion of the Funds' management, based on the
advice of counsel, these laws do not prohibit such depository institutions from
providing services for investment companies such as the administrative,
accounting and other services referred to in the Agreements. In the event that a
change in these laws prevented a bank from providing such services, it is
expected that other services arrangements would be made and that shareholders
would not be adversely affected. The State of Texas requires that shares of a
Fund may be sold in that state only by dealers or other financial institutions
that are registered there as broker-dealers.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
- --------------------------------------------------------------------------------
AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance,
56
<PAGE>
with appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund. Each income dividend and capital gains distribution, if any, declared
by a Fund on its outstanding shares will, at the election of each shareholder,
be paid in cash or in additional shares of the same class of shares of that Fund
having an aggregate net asset value as of the close of business on the day
following the declaration date of such dividend or distribution equal to the
cash amount of such income dividend or distribution. Election to receive
dividends and distributions in cash or shares is made at the time shares are
initially purchased and may be changed at any time prior to the record date for
a particular dividend or distribution. Cash dividends can be paid by check or,
if the shareholder so elects, electronically via the ACH network. There is no
sales or other charge in connection with the reinvestment of dividends and
capital gains distributions. Dividends paid by a Fund, if any, with respect to
Class A, Class B and Class C shares will be calculated in the same manner at the
same time on the same day and will be in the same amount, except that the higher
distribution services fees applicable to Class B and C shares, and any
incremental transfer agency costs relating to Class B and Class C shares, will
be borne exclusively by the class to which they relate.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains. Since REITs pay
distributions based on cash flow, without regard to depreciation and
amortization, it is likely that a portion of the distributions paid to Real
Estate Investment Fund and subsequently distributed to shareholders may be a
nontaxable return of capital. The final determination of the amount of a Fund's
return of capital distributions for the period will be made after the end of
each calendar year.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
Foreign Income Taxes
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so. Furthermore, a
shareholder's ability to claim a foreign tax credit or deduction in respect of
foreign taxes paid by a Fund may be subject to certain limitations imposed by
the Code, as a result of which a shareholder may not be permitted to claim a
full credit or deduction for the amount of such taxes.
U.S. Federal Income Taxes
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. Qualification as a regulated investment company relieves that
Fund of federal income taxes on that part of its taxable income, including net
capital gain, which it pays out to its shareholders. Dividends out of net
ordinary income and distributions of net short-term capital gains are taxable to
the recipient shareholders as ordinary income. In the case of corporate
shareholders, such dividends may be eligible for the dividends-received
deduction, except that the amount eligible for the deduction is limited to the
amount of qualifying dividends received by the Fund. Distributions received from
REITs or from foreign corporations generally do not constitute qualifying
dividends. A corporation's dividends-received deduction generally will be
disallowed unless the corporation holds shares in the Fund at least 46 days
during the 90-day period beginning 45 days before the date on which the
corporation becomes entitled to receive the dividend. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of a Fund is financed with indebtedness.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gain,
regardless of how long a shareholder has held shares in a Fund. Distributions of
net captial gain are not eligible for the dividends-received deduction referred
to above.
Under current federal tax law, the amount of an income dividend or capital
gains distribution declared by a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to him or her
as described above. If a shareholder held shares six months or less and during
that period received a distribution of net capital gain, any loss realized on
the sale of such shares during such six-month period would be a long-term
capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, generally
will not be taxable to the plan. Distributions from such plans will be
57
<PAGE>
taxable to individual participants under applicable tax rules without regard to
the character of the income earned by the qualified plan.
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant) any further returns of capital will be taxable as capital gain. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Shareholders will be advised annually as to the federal tax status of dividends
and capital gains and return of capital distributions made by a Fund for the
preceding year. Shareholders are urged to consult their tax advisers regarding
their own tax situation. Distributions by a Fund may be subject to state and
local taxes.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance International Premier
Growth Fund (1997), Alliance Worldwide Privatization Fund, Inc. (1994), Alliance
New Europe Fund, Inc. (1990), Alliance All-Asia Investment Fund, Inc. (1994),
Alliance Greater China '97 Fund (1997), Alliance Global Small Cap Fund, Inc.
(1966), Alliance Global Environment Fund, Inc. (1990), Alliance Utility Income
Fund, Inc. (1993), Alliance Growth and Income Fund, Inc. (1932), and Alliance
Real Estate Investment Fund, Inc. (1996). Each of the following Funds is either
a Massachusetts business trust or a series of a Massachusetts business trust
organized in the year indicated: Alliance Growth Fund (a series of The Alliance
Portfolios) (1987), and Alliance International Fund (1980). Prior to August 2,
1993, The Alliance Portfolios was known as The Equitable Funds and Growth Fund
was known as The Equitable Growth Fund.
It is anticipated that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal or state law. Shareholders
have available certain procedures for the removal of Directors.
A shareholder in a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares less any applicable CDSC. The
Funds are empowered to establish, without shareholder approval, additional
portfolios, which may have different investment objectives and policies than
those of the Funds, and additional classes of shares within the Funds. If an
additional portfolio or class were established in a Fund, each share of the
portfolio or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together as a single
class on matters, such as the election of Directors, that affect each portfolio
and class in substantially the same manner. Class A, B, C and Advisor Class
shares have identical voting, dividend, liquidation and other rights, except
that each class bears its own transfer agency expenses, each of Class A, Class B
and Class C shares of each Fund bears its own distribution expenses and Class B
shares and Advisor Class shares convert to Class A shares under certain
circumstances. Each class of shares of each Fund votes separately with respect
to a Fund's Rule 12b-1 distribution plan and other matters for which separate
class voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the Directors and, in
liquidation of a Fund, are entitled to receive the net assets of the Fund. Since
this Prospectus sets forth information about all the Funds, it is theoretically
possible that a Fund might be liable for any materially inaccurate or incomplete
disclosure in this Prospectus concerning another Fund. Based on the advice of
counsel, however, the Funds believe that the potential liability of each Fund
with respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a Fund's
organization are discussed in its Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds. The transfer agency fee with respect to the
Class B shares will be higher than the transfer agency fee with respect to the
Class A shares or Class C shares.
58
<PAGE>
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for Class A, Class B and Class C shares. Such advertisements disclose
a Fund's average annual compounded total return for the periods prescribed by
the Commission. A Fund's total return for each such period is computed by
finding, through the use of a formula prescribed by the Commission, the average
annual compounded rate of return over the period that would equate an assumed
initial amount invested to the value of the investment at the end of the period.
For purposes of computing total return, income dividends and capital gains
distributions paid on shares of a Fund are assumed to have been reinvested when
paid and the maximum sales charges applicable to purchases and redemptions of a
Fund's shares are assumed to have been paid.
Balanced Shares, Growth and Income Fund, Real Estate Investment Fund and Utility
Income Fund may also advertise their "yield," which is also computed separately
for Class A, Class B and Class C shares. A Fund's yield for any 30-day (or one-
month) period is computed by dividing the net investment income per share earned
during such period by the maximum public offering price per share on the last
day of the period, and then annualizing such 30-day (or one-month) yield in
accordance with a formula prescribed by the Commission which provides for
compounding on a semi-annual basis.
Real Estate Investment Fund, Balanced Shares, Utility Income Fund and Growth and
Income Fund may also state in sales literature an "actual distribution rate" for
each class which is computed in the same manner as yield except that actual
income dividends declared per share during the period in question are
substituted for net investment income per share. The actual distribution rate is
computed separately for Class A, Class B and Class C shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
59
<PAGE>
================================================================================
ALLIANCE STOCK FUNDS
SUBSCRIPTION APPLICATION
================================================================================
The Alliance Fund
Growth Fund
Premier Growth Fund
Technology Fund
Quasar Fund
International Fund
International Premier Growth Fund
Worldwide Privatization Fund
New Europe Fund
All-Asia Investment Fund
Alliance Greater China '97 Fund
Global Small Cap Fund
Global Environment Fund
Balanced Shares
Utility Income Fund
Growth & Income Fund
Real Estate Investment Fund
To Open Your New Alliance Account...
Please complete the application and mail it to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration
(Required)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
-- Individuals, Joint Tenants, 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). (3) Check off a distribution
<PAGE>
option for your dividends. (4) 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.
================================================================================
For Literature Call: (800) 227-4618
================================================================================
<PAGE>
The Alliance Stock Funds Subscription Application
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print in Capital Letters and Mark Check Boxes Where Applicable)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
|_| Individual Account { |_| Male |_| Female } --or-- Joint Account --or--
|_| Transfer On Death { |_| Male |_| Female } --or-- Gift/Transfer to a Minor
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Owner or Custodian (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
(First Name) Joint Owner*, Transfer On Death Beneficiary or Minor (MI) (Last Name)
|_|_|_|-|_|_|-|_|_|_|_| If Uniform Gift/Transfer
Social Security Number of Owner or Minor (required to open account) to Minor 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 (First Name) (MI) (Last 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
</TABLE>
Alliance Capital[LOGO](R)
80841GEN-TASFApp=P1
1
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
I hereby subscribe for shares of the following Alliance Stock Fund(s) and elect distribution options as indicated.
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
- ----------------------
- ------------------------------------------ C Send my distributions in cash to the address I have provided in
Broker/Dealer Use Only: Wire Confirm # - -----------------------------
|_|_|_|_|_|_|_|_| 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).
- ------------- ============== ======================== =============================
Indicate three Distributions Options
digit Fund *Check One*
number located Indicate Dollar Amount =============================
below Dividends Captital Gains
Make all ============== ======================== =============================
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
==========================
Total Investment $
==========================
*Cash and money orders are not accepted
- --------------------------------------------------------------------------------------------------------------------------
Alliance Stock Fund Names and Numbers
- --------------------------------------------------------------------------------------------------------------------------
============= ============== =================
Contingent
Initial Sales Deferred Sales Asset-Based Sales
Charge Charge Charge
A B C
============= ============== =================
Domestic The Alliance Fund 044 043 344
Growth Fund 031 001 331
Premier Growth Fund 078 079 378
Technology Fund 082 282 382
Quasar Fund 026 029 326
Global International Fund 040 041 340
International Premier Growth 179 279 379
Worldwide Privatization Fund 112 212 312
New Europe Fund 062 058 362
All-Asia Investment Fund 118 218 318
Alliance Greater China '97 Fund 160 260 360
Global Small Cap Fund 045 048 345
Global Environment Fund 181 281 381
Total Return Balanced Shares 096 075 396
Utility Income Fund 009 209 309
Real Estate Investment Fund 110 210 310
Growth & Income Fund 094 074 394
</TABLE>
80841GEN-TASFApp-P2
2
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. Your Shareholder Options
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
A. Automatic Investment Plans (AIP)
|_| Withdraw From My Bank Account Via EFT*
I authorize Alliance to draw on my bank account for investment in my fund account(s) as indicated below
(Complete Section 4D also for the bank account you wish to use).
1- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_| M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = Annually
3- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
*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 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: o Review the information in the Prospectus about telephone transaction services.
o 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 that the check or electronic funds transfer has been collected, normally 15
calendar days after the purchase date.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
4. Your Shareholder Options (CONTINUED)
C. Systematic Withdrawal Plans (SWP)
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.
<TABLE>
<S> <C> <C> <C> <C> <C>
1- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_]
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_] M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = annually
3- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_]
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
</TABLE>
Please send my SWP proceeds to:
[_] My Address of Record (via check)
[_] The Payee and address specified in section 4E (via check)(Medallion
Signature Guarantee required)
[_] My checking account-via EFT (complete section 4D) Your bank must be a
member of the National Automated Clearing House Association (NACHA)
in order for you to receive SWP proceeds directly into your bank
account. Otherwise payment will be made by check
D. Bank Information This bank account information will be used for:
[_] Distributions (Section 3) [_] Telephone Transactions
(Section 4B)
[_] Automatic Investments (Section 4A) [_] Withdrawals (Section 4C)
Please Tape a Pre-printed Voided Check Here*
103
J. Smith
123 Main Street
ANYTOWN, USA 12345 ____ 19 __
Pay to the
Order of ________________________________________$ _______________
____________________________________________________________Dollars
YOUR BANK
123 STREET
ANYTOWN, USA 12345 VOID
Note ___________________________ _______________________________
:000000000:103 000000000:765
ABA Routing Number Check Bank Account Number
Number
* 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
80887GEN-TASFApp-Advisor-P4
4
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS(CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
E. THIRD PARTY PAYMENT DETAILS Your signautre(s) in Section 5 must be Medallion Signature Guaranteed if your account is
not maintained by a dealer/broker. 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 privilieges, 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
</TABLE>
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 for redemptions by check.
|_| 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]
80841GEN-TASFApp-P6
6
<PAGE>
<PAGE>
The Alliance
- --------------------------------------------------------------------------------
Stock Funds
- --------------------------------------------------------------------------------
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
Advisor Class
November 2, 1998
Domestic Stock Funds Global Stock Funds
- -The Alliance Fund -Alliance International Fund
- -Alliance Growth Fund
- -Alliance Premier Growth Fund -Alliance International
- -Alliance Technology Fund Premier Growth Fund
- -Alliance Quasar Fund -Alliance Worldwide
Privatization Fund
-Alliance New Europe Fund
-Alliance All-Asia Investment
Fund
-Alliance Greater China '97
Fund
-Alliance Global Small Cap
Fund
-Alliance Global
Environment Fund
Total Return Funds
-Alliance Balanced Shares
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
-Alliance Real Estate Investment Fund
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Funds at a Glance................................................. 2
Expense Information................................................... 4
Financial Highlights.................................................. 7
Glossary.............................................................. 11
Description of the Funds.............................................. 12
Investment Objectives and Policies............................... 12
Additional Investment Practices.................................. 24
Certain Fundamental Investment Policies.......................... 31
Risk Considerations.............................................. 34
Purchase and Sale of Shares........................................... 41
Management of the Funds............................................... 43
Dividends, Distributions and Taxes.................................... 47
Conversion Feature.................................................... 48
General Information................................................... 48
</TABLE>
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
This Prospectus offers the Advisor Class shares of each Fund which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., each Fund's
principal underwriter, (ii) participants in self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that meet certain minimum standards
and (iii) certain other categories of investors described in the Prospectus,
including investment advisory clients of, and certain other persons associated
with, Alliance Capital Management L.P. and its affiliates or the Funds. See
"Purchase and Sale of Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
ALLIANCE(R)
Investing without the Mystery./SM/
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 120 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $262
billion in assets under management as of June 30, 1998. Alliance provides
investment management services to employee benefit plans for 32 of the FORTUNE
100 companies.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40-50 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
International Premier Growth Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A diversified portfolio of equity securities of a
limited number of large, carefully selected, high-quality non-U.S. companies
that are judged likely to achieve superior earnings growth.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Greater China '97 Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Greater China companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
Global Environment Fund
Seeks . . . Long-term capital appreciation.
2
<PAGE>
Invests Principally in . . . A non-diversified portfolio of equity securities of
companies expected to benefit from advances or improvements in products,
processes or services intended to foster the protection of the environment.
Total Return Funds
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
Real Estate Investment Fund
Seeks . . . Total return on its assets from long-term growth of capital and from
income.
Invests Principally in . . . A diversified portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Distributions . . .
Balanced Shares, Utility Income Fund, Growth and Income Fund and Real Estate
Investment Fund intend to make distributions quarterly to shareholders. These
distributions may include ordinary income and capital gain (each of which is
taxable) and a return of capital (which is generally nontaxable). See
"Dividends, Distributions and Taxes."
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives, such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. An investment in the Real Estate
Investment Fund is subject to certain risks associated with the direct ownership
of real estate in general, including possible declines in the value of real
estate, general and local economic conditions, environmental problems and
changes in interest rates. Investments by Greater China '97 Fund in Greater
China companies entail certain risks which are different from, and in certain
cases, greater than, risks associated with investments in other international
markets. These risks are fully discussed in this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative. Each
Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares may be purchased at net asset
value without any initial or contingent deferred sales charges and are not
subject to ongoing distribution expenses. Advisor Class shares may be purchased
and held solely (i) through accounts established under a fee-based program,
sponsored and maintained by a registered broker-dealer or other financial
intermediary and approved by Alliance Fund Distributors, Inc. ("AFD"), each
Fund's principal underwriter, (ii) through a self-directed defined contribution
employee benefit plan (e.g., a 401(k) plan) that has at least 1,000 participants
or $25 million in assets, (iii) by investment advisory clients of, and certain
other persons associated with, Alliance and its affiliates or the Funds, and
(iv) through registered investment advisers or other financial intermediaries
who charge a management, consulting or other fee for their service and who
purchase shares through a broker or agent approved by AFD and clients of such
registered investment advisers or financial intermediaries whose accounts are
linked to the master account of such investment adviser or financial
intermediary on the books of such approved broker or agent. A shareholder's
Advisor Class shares will automatically convert to Class A shares of the same
Fund under certain circumstances. See "Conversion Feature--Conversion to Class A
Shares." Generally, a fee-based program must charge an asset-based or other
similar fee and must invest at least $250,000 in Advisor Class shares of each
Fund in which the program invests in order to be approved by AFD for investment
in Advisor Class shares. For more detailed information about who may purchase
and hold Advisor Class shares see the Statement of Additional Information. Fee-
based and other programs through which Advisor Class shares may be purchased may
impose different requirements with respect to investment in Advisor Class shares
than described above. For detailed information about purchasing and selling
shares, see "Purchase and Sale of Shares."
ALLIANCE(R)
Investing without the Mystery./SM/
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
<PAGE>
- --------------------------------------------------------------------------------
Expense Information
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in the Advisor Class shares of each Fund and estimated annual
expenses for Advisor Class shares of each Fund. For each Fund, the "Examples" to
the right of the table below show the cumulative expenses attributable to a
hypothetical $1,000 investment in Advisor Class shares for the periods
specified.
Advisor Class Shares
--------------------
Maximum sales charge imposed on purchases.............. None
Sales charge imposed on dividend reinvestments......... None
Deferred sales charge.................................. None
Exchange fee........................................... None
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Examples
---------------------------------------- -------------------------------------------
Alliance Fund Advisor Class Advisor Class
-------------- -------------
<S> <C> <C> <C>
Management fees .68% After 1 year $ 8
12b-1 fees None After 3 years $ 26
Other expenses (a) .15% After 5 years $ 46
---- After 10 years $103
Total fund
operating expenses (b) .83%
===
Growth Fund Advisor Class Advisor Class
------------- -------------
Management fees .74% After 1 year $ 10
12b-1 fees None After 3 years $ 31
Other expenses (a) .24% After 5 years $ 54
---- After 10 years $120
Total fund
operating expenses (b) .98%
====
Premier Growth Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 13
12b-1 fees None After 3 years $ 40
Other expenses (a) .25% After 5 years $ 69
---- After 10 years $151
Total fund
operating expenses (b) 1.25%
====
Technology Fund Advisor Class Advisor Class
------------- -------------
Management fees (f) 1.04% After 1 year $ 14
12b-1 fees None After 3 years $ 44
Other expenses (a) .35% After 5 years $ 76
---- After 10 years $167
Total fund
operating expenses (b) 1.39%
====
Quasar Fund Advisor Class Advisor Class
------------- -------------
Management fees (f) 1.16% After 1 year $ 16
12b-1 fees None After 3 years $ 50
Other expenses (a) .42% After 5 years $ 86
----
Total fund
operating expenses (b) 1.58%
====
International Fund Advisor Class Advisor Class
------------- -------------
Management fees
(after waiver) (c)(f) .85% After 1 year $ 15
12b-1 fees None After 3 years $ 46
Other expenses (a) .62% After 5 years $ 80
---- After 10 years $176
Total fund
operating expenses (b) (e) 1.47%
====
International Premier
Growth Fund Advisor Class Advisor Class
------------- -------------
Management fees (g) 1.00% After 1 year $ 22
12b-1 fees None After 3 years $ 69
Other expenses (a) 1.20% After 5 years $118
---- After 10 years $253
Total fund
operating expenses (b)(e) 2.20%
====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes and the discussion following these tables on page
6.
4
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- ---------------------------------------------- -------------------------------------------
Worldwide Privatization Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 15
12b-1 fees None After 3 years $ 46
Other expenses (a) .45% After 5 years $ 79
---- After 10 years $174
Total fund
operating expenses (b) 1.45%
====
New Europe Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.02% After 1 year $ 16
12b-1 fees None After 3 years $ 49
Other expenses (a) .52% After 5 years $ 84
---- After 10 years $183
Total fund
operating expenses (b) 1.54%
====
All-Asia Investment Fund Advisor Class Advisor Class
------------- -------------
Management fees
(after waiver) (c) .65% After 1 year $ 18
12b-1 fees None After 3 years $ 56
Other expenses After 5 years $ 96
Administration fees After 10 years $209
(after waiver) (d) .00%
Other operating expenses (a) 1.13%
----
Total fund
operating expenses (b) (e) 1.78%
====
Greater China '97 Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 22
12b-1 fees None After 3 years $ 69
Other expenses (a) 1.20% After 5 years $118
---- After 10 years $253
Total fund
operating expenses (b) (e) 2.20%
====
Global Small Cap Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 19
12b-1 fees None After 3 years $ 58
Other expenses (a) .84% After 5 years $100
---- After 10 years $216
Total fund
operating expenses (b) 1.84%
====
Global Environment Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.10% After 1 year $ 24
12b-1 fees None After 3 years $ 75
Other expenses (a) 1.29% After 5 years $128
---- After 10 years $273
Total fund
operating expenses (b) 2.39%
====
Balanced Shares Advisor Class Advisor Class
------------- -------------
Management fees .63% After 1 year $ 11
12b-1 fees None After 3 years $ 33
Other expenses (a) .42% After 5 years $ 58
---- After 10 years $128
Total fund
operating expenses (b) 1.05%
====
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- ------------------------------------------- --------------------------------------------
Utility Income Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .00% After 1 year $ 12
12b-1 fees None After 3 years $ 38
Other expenses (a) 1.20% After 5 years $ 66
---- After 10 years $145
Total fund
operating expenses (b) (e) 1.20%
====
Growth and Income Fund Advisor Class Advisor Class
------------- -------------
Management fees .49% After 1 year $ 7
12b-1 fees None After 3 years $ 23
Other expenses (a) .22% After 5 years $ 40
---- After 10 years $ 88
Total fund
operating expenses (b) .71%
====
Real Estate Investment Fund Advisor Class Advisor Class
------------- -------------
Management fees .90% After 1 year $ 13
12b-1 fees None After 3 years $ 40
Other expenses (a) .35% After 5 years $ 69
---- After 10 years $151
Total fund
operating expenses (b) 1.25%
====
</TABLE>
- --------------------------------------------------------------------------------
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance. The expenses shown include the
application of credits that reduce Fund expenses.
(b) The expense information does not reflect any charges or expenses imposed by
your financial representative or your employee benefit plan.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be 1.00% for All-Asia Investment Fund,.75% for Utility Income Fund and
1.00% for International Fund.
(d) Net of voluntary fee waiver. Absent such fee waiver, administration fees
would have been .15%. Reflects the fees payable by All-Asia Investment Fund
to Alliance pursuant to an administration agreement.
(e) Net of voluntary fee waivers and expense reimbursements. Absent such waivers
and/or reimbursements, total fund operating expenses would have been as
follows:
All-Asia Investment Fund International Premier Growth Fund
Advisor Class 2.28% Advisor Class 8.36%
International Fund Utility Income Fund
Advisor Class 1.62% Advisor Class 3.29%
Greater China '97 Fund
Advisor Class 18.13%
(f) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for International Fund, Quasar
Fund and Technology Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. "Management fees" for All-Asia Investment Fund and "Administration
fees" for All-Asia Investment Fund have been restated to reflect current
voluntary fee waivers. "Other Expenses" for Global Environment Fund and
International Premier Growth Fund are based on estimated amounts for its current
fiscal year. The Examples set forth above assume reinvestment of all dividends
and distributions and utilize a 5% annual rate of return as mandated by
Commission regulations. The Examples should not be considered representative of
future expenses; actual expenses may be greater or less than those shown.
6
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The tables on the following pages present per share income and capital changes
for an Advisor Class share outstanding throughout each period indicated. Except
as otherwise indicated, information for Alliance Fund, Growth Fund, Premier
Growth Fund, Balanced Shares, Utility Income Fund, Worldwide Privatization Fund,
International Premier Growth Fund and Growth and Income Fund has been audited
by PricewaterhouseCoopers LLP, the independent accountants for each such Fund,
and for All-Asia Investment Fund, Technology Fund, Quasar Fund, International
Fund, New Europe Fund, Greater China '97 Fund, Global Small Cap Fund and Real
Estate Investment Fund by Ernst & Young LLP, the independent auditors for each
such Fund. A report of PricewaterhouseCoopers LLP or Ernst & Young LLP, as the
case may be, on the information with respect to each Fund, appears in the Fund's
Statement of Additional Information. The following information for each Fund
should be read in conjunction with the financial statements and related notes
which are included in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting
Alliance Fund Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Prospectus.
7
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In
Beginning Of Net Investment Gain (Loss) On Net Asset Value
Fiscal Year or Period Period Income (Loss) Investments From Operations
--------------------- ------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Alliance Fund
Advisor Class
12/1/97 to 5/31/98++ $ 8.69 0.00(b) $ .48 $ .48
Year ended 11/30/97 7.71 (.02)(b) 2.10 2.08
10/2/96+ to 11/30/96 6.99 0.00 .72 .72
Growth Fund
Advisor Class
11/1/97 to 4/30/98++ $ 44.08 $ .12(b) $ 7.50 $ 7.62
Year ended 10/31/97 34.91 (.05)(b) 10.25 10.20
10/2/96+ to 10/31/96 34.14 0.00(b) .77 .77
Premier Growth Fund
Advisor Class
12/1/97 to- 5/31/98++ $ 22.10 $ (.02)(b) $ 4.74 $ 4.72
Year ended 11/30/97 17.99 (.06)(b) 5.25 5.19
10/2/96+ to 11/30/96 15.94 (.01)(b) 2.06 2.05
Technology Fund
Advisor Class
12/1/97 to 5/31/98++ $ 54.63 $ (.21)(b) $ 6.92 $ 6.71
Year ended 11/30/97 51.17 (.45)(b) 4.33 3.88
10/2/96+ to 11/30/96 47.32 (.05)(b) 3.90 3.85
Quasar Fund
Advisor Class
10/1/97 to 3/31/98++ $ 30.42 $ (.06)(b) $ 2.37 $ 2.31
10/2/96+ to 9/30/97 27.82 (.17)(b) 6.88 6.71
International Fund
Advisor Class
Year ended 6/30/98 $ 18.67 $ .02(b)(c) $ 1.13 $ 1.15
10/2/96+ to 6/30/97 17.96 .16(b) 1.78 1.94
International Premier Growth Fund
Advisor Class
3/31/98+ to 5/31/98++ $ 10.00 $ .06(b)(c) $ .29 $ .35
Worldwide Privatization Fund
Advisor Class
Year ended 6/30/98 $ 13.23 $ .19(b) $ .80 $ .99
10/2/96+ to 6/30/97 12.14 .18(b) 2.52 2.70
New Europe Fund
Advisor Class
Year ended 7/31/98 $ 18.57 $ .08(b) $ 5.28 $ 5.36
10/2/96+ to 7/31/97 16.25 .11(b) 3.76 3.87
All-Asia Investment Fund
Advisor Class
11/1/97 to 4/30/98++ $ 7.56 $ (.06)(b)(c) $ (.25) $ (.31)
Year ended 10/31/97 11.04 (.15)(b)(c) (2.99) (3.14)
10/2/96+ to 10/31/96 11.65 0.00(c) (.61) (.61)
Greater China '97 Fund
Advisor Class
9/3/97+ to 7/31/98 $ 10.00 $ .10(b)(c) $ (5.18) $ (5.08)
Global Small Cap Fund
Advisor Class
Year ended 7/31/98 $ 12.89 $ (.07)(b) $ .37 $ .30
10/2/96+ to 7/31/97 12.56 (.08)(b) 1.97 1.89
Global Environment
12/29/97+ to 4/30/98 $ 9.15 $ (.10)(b) $ 1.83 $ 1.73
Balanced Shares
Advisor Class
Year ended 7/31/98 $ 16.17 $ .37(b) $ 1.87 $ 2.24
10/2/96+ to 7/31/97 14.79 .23 3.22 3.45
Utility Income Fund
Advisor Class
12/1/97 to 5/31/98++ $ 12.49 $ .17(b)(c) $ 1.40 $ 1.57
Year ended 11/30/97 10.59 .36(b)(c) 2.04 2.40
10/2/96+ to 11/30/96 9.95 .03(b)(c) .61 .64
Growth and Income Fund
Advisor Class
11/1/97 to 4/30/98++ $ 3.48 $ .02(b) $ .59 $ .61
Year ended 10/31/97 3.00 .05(b) .87 .92
10/2/96+ to 10/31/96 2.97 0.00 .03 .03
Real Estate Investment Fund
Advisor Class
Year ended 8/31/98 $ 12.82 $ .55(b) $ (2.34) $ (1.79)
10/1/96+ to 8/31/97 10.00 .35(b) 2.88 3.23
</TABLE>
<TABLE>
<CAPTION>
Distributions
Dividends From In Excess Of
Net Investment Net Investment
Fiscal Year or Period Income Income
--------------------- --------------- --------------
<S> <C> <C>
Alliance Fund
Advisor Class
12/1/97 to 5/31/98++ $ 0.00 $ 0.00
Year ended 11/30/97 (.04) 0.00
10/2/96+ to 11/30/96 0.00 0.00
Growth Fund
Advisor Class
11/1/97 to 4/30/98++ $ 0.00 $ 0.00
Year ended 10/31/97 0.00 0.00
10/2/96+ to 10/31/96 0.00 0.00
Premier Growth Fund
Advisor Class
12/1/97 to- 5/31/98++ $ 0.00 $ 0.00
Year ended 11/30/97 0.00 0.00
10/2/96+ to 11/30/96 0.00 0.00
Technology Fund
Advisor Class
12/1/97 to 5/31/98++ $ 0.00 $ 0.00
Year ended 11/30/97 0.00 0.00
10/2/96+ to 11/30/96 0.00 0.00
Quasar Fund
Advisor Class
10/1/97 to 3/31/98++ $ 0.00 $ 0.00
10/2/96+ to 9/30/97 0.00 0.00
International Fund
Advisor Class
Year ended 6/30/98 $ (.07) $ 0.00
10/2/96+ to 6/30/97 (.15) 0.00
International Premier Growth Fund
Advisor Class
3/31/98+ to 5/31/98++ $ 0.00 $ 0.00
Worldwide Privatization Fund
Advisor Class
Year ended 6/30/98 $ (.23) $ 0.00
10/2/96+ to 6/30/97 (.19) 0.00
New Europe Fund
Advisor Class
Year ended 7/31/98 $ 0.00 $ (.09)
10/2/96+ to 7/31/97 (.09) (.14)
All-Asia Investment Fund
Advisor Class
11/1/97 to 4/30/98++ $ 0.00 $ 0.00
Year ended 10/31/97 0.00 0.00
10/2/96+ to 10/31/96 0.00 0.00
Greater China '97 Fund
Advisor Class
9/3/97+ to 7/31/98 $ (.07) $ 0.00
Global Small Cap Fund
Advisor Class
Year ended 7/31/98 $ 0.00 $ 0.00
10/2/96+ to 7/31/97 0.00 0.00
Global Environment
12/29/97+ to 4/30/98 $ 0.00 $ 0.00
Balanced Shares
Advisor Class
Year ended 7/31/98 $ (.36) $ 0.00
10/2/96+ to 7/31/97 (.27) 0.00
Utility Income Fund
Advisor Class
12/1/97 to 5/31/98++ $ (.18) $ 0.00
Year ended 11/30/97 (.37) 0.00
10/2/96+ to 11/30/96 0.00 0.00
Growth and Income Fund
Advisor Class
11/1/97 to 4/30/98++ $ (.03) $ 0.00
Year ended 10/31/97 (0.06) 0.00
10/2/96+ to 10/31/96 0.00 0.00
Real Estate Investment Fund
Advisor Class
Year ended 8/31/98 $ (.54) $ 0.00
10/1/96+ to 8/31/97 (.41)(f) 0.00
</TABLE>
Please refer to the footnotes on page 10.
8
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End of Ratio Of Investment
Distributions Dividends Value Return Based Period Expenses Income (Loss)
From Net And End Of on Net Asset (000's To Average To Average Portfolio
Realized Gains Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate
--------------- ------------- ----------- ------------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$(2.17) $(2.17) $7.00 7.47 % $ 13,947 .79%* (.09)%* 53%
(1.06) (1.10) $8.69 32.00 10,275 .83 (.21) 158
0.00 0.00 $7.71 10.30 1,083 .89* 0.38* 80
$(2.91) $(2.91) $48.79 18.12 % $141,589 .87%* .55%* 27%
(1.03) (1.03) $44.08 29.92 101,205 .98(e) (.12) 48
0.00 0.00 $34.91 2.26 946 1.26* .50* 46
$(1.44) $(1.44) $25.38 22.92 % $201,873 1.19%* (.15)%* 30%
(1.08) (1.08) $22.10 30.98 53,459 1.25 (.28) 76
0.00 0.00 $17.99 12.86 1,922 1.50* (.48)* 95
$ (.58) $ (.58) $60.76 12.41 % $169,504 1.33%* (.74)%* 31%
(.42) (.42) $54.63 7.65 167,120 1.39(e) (.81) 51
0.00 0.00 $51.17 8.14 566 1.75* (1.21)* 30
$(1.23) $(1.23) $31.50 8.09 % $192,181 1.35%* (.42)%* 63%
(4.11) (4.11) $30.42 28.47 62,455 1.58 (.74) 135
$(1.21) $(1.28) $18.54 6.98 % $ 47,154 1.47%(d) .13% 121%
(1.08) (1.23) $18.67 11.57 8,697 1.69(d)* 1.47* 94
$ 0.00 $ 0.00 $10.35 3.50 % $ 1,612 2.20%*(d) 2.31%* 26%
$(1.36) $(1.59) $12.63 9.48 % $ 1,716 1.45% 1.48% 53%
(1.42) (1.61) $13.23 25.24 374 1.96* 2.97* 48
$(2.05) $(2.14) $21.79 32.55 % $ 3,143 1.56%(e) .39% 99%
(1.32) (1.55) $18.57 25.76 4,130 1.71(d)* .77* 89
$ 0.00 $ 0.00 $7.25 (4.10) % $ 1,494 3.53%* (1.66)%* 87%
(.34) (.34) $7.56 (29.42) 1,338 3.21(d) (1.51) 70
0.00 0.00 $11.04 (5.24) 27 4.97*(d) 1.63* 66
$ 0.00 $ (.07) $4.85 (51.06)% $ 60 2.22%(d)(e)* 1.51% 58%
$ (.99) $ (.99) $12.20 2.82 % $ 392 1.87%(e) (.57)% 113%
(1.56) (1.56) $12.89 17.08 333 2.05*(e) (.84)* 129
$ 0.00 $ 0.00 $10.88 18.91 % $ 6 2.54%* (2.04)%* 199%
$(2.07) $(2.43) $15.98 15.32 % $ 2,079 1.06%(e) 2.33% 145%
$(1.80) $(2.07) $16.17 25.96 1,565 1.30*(e) 2.15* 207
$ (.47) $ (.65) $13.41 12.88 % $ 52 1.21%*(e) 2.59%* 9%
(.13) (.50) $12.49 23.57 42 1.20 3.29 37
0.00 0.00 $10.59 6.33 33 1.20*(d) 4.02* 98
$ (.46) $ (.49) $3.60 19.45 % $ 4,357 .66%* 1.16%* 41%
(.38) (.44) $3.48 33.61 3,207 .71(e) 1.42 88
0.00 0.00 $3.00 1.01 87 0.37* 3.40* 88
$ (.01) $ (.55) $10.48 (14.74) $ 2,899 1.25% 4.08% 23%
0.00 (.41) $12.82 32.72 2,313 1.45*(d)(e) 3.07* 20
---------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
________________
+ Commencement of distribution.
++ Unaudited.
* Annualized.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment return calculated for a period of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and expense reimbursement.
(d) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent fiscal year, their expense
ratios, without giving effect to the expense offset arrangements described
in (e) below, would have been as follows:
<TABLE>
<CAPTION>
1996 1997 1998 1997 1998
<S> <C> <C> <C> <C> <C> <C>
All-Asia Investment Fund International Fund
Advisor Class 5.54%* 3.43 -- Advisor Class -- 1.62%
Utility Income Fund Greater China '97 Fund
Advisor Class 3.48%* 3.29 -- Advisor Class -- 18.13%*
Real Estate Investment Fund
Advisor Class -- 1.47%* --
</TABLE>
(e) Amounts do not reflect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offset arrangements, the
rate of expenses to average net assets assuming the assumption and/or
waived reimbursement of expenses described in note (d) above would have
been as follows:
<TABLE>
<CAPTION>
1997 1998 1997 1998 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
International Fund Balanced Shares Growth Fund
Advisor Class 1.69%* -- Advisor Class 1.29%* 1.05% Advisor Class .96% --
Global Small Cap Fund Real Estate Investment Fund Technology Fund
Advisor Class 2.04%* 1.84% Advisor Class 1.44%* -- Advisor Class 1.38%
New Europe Fund Growth and Income Fund Greater China '97 Fund
Advisor Class 1.71%* 1.54% Advisor Class .70% -- Advisor Class -- 2.20%*
</TABLE>
___________________________
(f) Distributions from net investment income include a tax return of capital of
$.03.
10
<PAGE>
--------------------------------
Glossary
--------------------------------
The following terms are frequently used in this Prospectus.
Equity securities, except as noted otherwise, are (i) common stocks, partnership
interests, business trust shares and other equity or ownership interests in
business enterprises, and (ii) securities convertible into, and rights and
warrants to subscribe for the purchase of, such stocks, shares and interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Greater China company is an entity that (i) is organized under the laws of a
Greater China country and conducts business in a Greater China country, (ii)
derives 50% or more of its total revenues from business in Greater China
countries, or (iii) issues equity or debt securities that are traded principally
on a stock exchange in a Greater China country. A company of a particular
Greater China country is a company that meets any of these criteria with respect
to that country.
Greater China countries are the People's Republic of China ("China"), the Hong
Kong Special Administrative Region of the People's Republic of China ("Hong
Kong") and the Republic of China ("Taiwan").
Non-U.S. company is an entity that (i) is organized under the laws of a
foreign country and conducts business in a foreign country, (ii) derives 50% or
more of its total revenues from business in foreign countries, or (iii) issues
equity or debt securities that are traded principally on a stock exchange in a
foreign country.
Eligible Companies are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
Environmental Companies are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
Beneficiary Companies are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and healthier
environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous waste.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Exchange is the New York Stock Exchange.
11
<PAGE>
--------------------------------
Description Of The Funds
--------------------------------
Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
DOMESTIC STOCK FUNDS
The Domestic Stock Funds have been designed to offer investors seeking capital
appreciation a range of alternative approaches to investing in the U.S. equity
markets.
The Alliance Fund
The Alliance Fund, Inc. ("Alliance Fund") is a diversified investment company
that seeks long-term growth of capital and income primarily through investment
in common stocks. The Fund normally invests substantially all of its assets in
common stocks that Alliance believes will appreciate in value, but it may invest
in other types of securities such as convertible securities, high grade
instruments, U.S. Government securities and high quality, short-term obligations
such as repurchase agreements, bankers' acceptances and domestic certificates of
deposit, and may invest without limit in foreign securities. While the
diversification and generally high quality of the Fund's investments cannot
prevent fluctuations in market values, they tend to limit investment risk and
contribute to achieving the Fund's objective. The Fund generally does not effect
portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund may also: (i) make secured loans of its portfolio securities equal in
value up to 25% of its total assets to brokers, dealers and financial
institutions; (ii) enter into repurchase agreements of up to one week in
duration with commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily available
market quotations do not exceed 10% of its net assets; and (iii) write exchange-
traded covered call options with respect to up to 25% of its total assets. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Growth Fund
Alliance Growth Fund ("Growth Fund") is a diversified investment company that
seeks long-term growth of capital. Current income is only an incidental
consideration. The Fund seeks to achieve its objective by investing primarily in
equity securities of companies with favorable earnings outlooks and whose long-
term growth rates are expected to exceed that of the U.S. economy over time. The
Fund's investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated fixed-
income and convertible securities. See "Risk Considerations--Securities Ratings"
and "--Investment in Lower-Rated Fixed-Income Securities." The Fund generally
will not invest in securities rated at the time of purchase below Caa- by
Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. If the credit rating of a
security held by the Fund falls below its rating at the time of purchase (or
Alliance determines that the quality of such security has so deteriorated), the
Fund may continue to hold the security if such investment is considered
appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements of up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40-50 companies will be represented in the
Fund's portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity
12
<PAGE>
securities of which are traded principally in the U.S. Alliance's investment
strategy for the Fund emphasizes stock selection and investment in the
securities of a limited number of issuers. Alliance relies heavily upon the
fundamental analysis and research of its large internal research staff, which
generally follows a primary research universe of more than 600 companies that
have strong management, superior industry positions, excellent balance sheets
and superior earnings growth prospects. An emphasis is placed on identifying
companies whose substantially above average prospective earnings growth is not
fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options; (ii)
invest up to 10% of its total assets in warrants; (iii) invest in restricted
securities and in other assets having no ready market if as a result no more
than 10% of the Fund's net assets are invested in such securities and assets;
(iv) lend portfolio securities equal in value to not more than 30% of the Fund's
total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities for the
Fund, Alliance considers the economic and political outlook, the values of
specific securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10%
13
<PAGE>
of its total assets may be invested in such securities or assets; (ii) make
short sales of securities "against the box," but not more than 15% of its net
assets may be deposited on short sales; and (iii) write call options and
purchase and sell put and call options written by others. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
GLOBAL STOCK FUNDS
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. In this
regard, at June 30, 1998, approximately 15% of the Fund's assets were invested
in securities of Japanese issuers. The Fund may invest in companies, wherever
organized, that Alliance judges have their principal activities and interests
outside the U.S. These companies may be located in developing countries, which
involves exposure to economic structures that are generally less diverse and
mature, and to political systems which can be expected to have less stability,
than those of developed countries. The Fund currently does not intend to invest
more than 10% of its total assets in companies in, or governments of, developing
countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or over-the-
counter; (v) lend portfolio securities equal in value to not more than 30% of
its total assets; and (vi) enter into repurchase agreements of up to seven days'
duration, provided that not more than 10% of the Fund's total assets would be so
invested. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance International Premier Growth Fund, Inc.
Alliance International Premier Growth Fund, Inc. ("International Premier Growth
Fund") is a diversified investment company that seeks long term capital
appreciation by investing predominantly in the equity securities of a limited
number of carefully selected non-U.S. companies that are judged likely to
achieve superior earnings growth. Investments will be made based upon their
potential for capital appreciation. Current income is incidental to that
objective.
In the main, the Fund's investments will be in comparatively large, high-quality
companies. Normally, about 60 companies will be represented in the Fund's
portfolio, and the 30 most highly regarded of these companies usually will
constitute approximately 70% of the Fund's net assets. The Fund thus differs
from more typical international equity mutual funds by focusing on a relatively
small number of intensively researched companies. The Fund is designed for
investors seeking to accumulate capital over time. Because of the market risks
inherent in any investment, the selection of securities on the basis of their
appreciation possibilities cannot ensure against possible loss in value, and
there is, of course, no assurance that the Fund's investment objective will be
met.
Alliance expects the average weighted market capitalization of the companies
represented in the Fund's portfolio (i.e., the number of a company's outstanding
shares multiplied by the price per share) normally will be in the range of, or
in excess of, that of the companies comprising the Morgan Stanley Capital
International Europe, Australasia and Far East ("EAFE") Index. As of December
31, 1997, the average weighted market capitalization of those companies was
approximately $2.6 billion.
Within the investment framework described herein, Alliance's Large Cap Growth
Group, headed by Alfred Harrison, Alliance's Vice Chairman, has responsibility
for managing the Fund's portfolio. As discussed below, in selecting the Fund's
portfolio investments Alliance's Large Cap Growth Group will follow a
structured, disciplined research and investment process which is essentially
similar to that which it employs in managing Premier Growth Fund.
In managing the Fund's assets, Alliance's investment strategy will emphasize
stock selection and investment in the securities of a limited number of issuers.
Alliance depends heavily upon the fundamental analysis and research of its large
global equity research team situated in numerous locations around the world. Its
global equity analysts follow a research universe of approximately 900
companies. As one of the largest multinational investment management firms,
Alliance has access to considerable information concerning the companies
14
<PAGE>
in its research universe, an in-depth understanding of the products, services,
markets and competition of these companies and a good knowledge of their
managements. Research emphasis is placed on the identification of companies
whose superior prospective earnings growth is not fully reflected in current
market valuations.
Companies are constantly added to and deleted from this universe as fundamentals
and valuations change. Alliance's global equity analysts rate companies in three
categories. The performance of each analyst's ratings is an important
determinant of his or her incentive compensation. The equity securities of "one-
rated" companies are expected to significantly outperform the local market in
local currency terms. All equity securities purchased for the Fund's portfolio
will be selected from the universe of approximately 100 "one-rated" companies.
As noted above, approximately 70% of the Fund's net assets will usually be
invested in the approximately 30 most highly regarded such companies. The Fund
will not concentrate more than 25% of its total assets in any one industry.
Within this limit, portfolio emphasis upon particular industries or sectors will
be a by-product of the stock selection process rather than the result of
assigned targets or ranges.
The Fund's investments will be diversified among at least four, and usually
considerably more, countries. No more than 15% of the Fund's total assets will
be invested in issuers in any one foreign country, except that the Fund may
invest up to 25% of its total assets in issuers in each of Canada, France,
Germany, Italy, Japan, The Netherlands, Switzerland and the United Kingdom.
Within these limits, geographic distribution of the Fund's investments among
countries or regions will also be a product of the stock selection process
rather than predetermined allocation. To the extent that the Fund's assets will
be concentrated within any one region, the Fund may be subject to any special
risks that may be associated with that region. While the Fund may engage in
currency hedging programs in periods in which Alliance perceives extreme
exchange rate risk, the Fund will not normally make significant use of currency
hedging strategies.
In the management of the Fund's investment portfolio, Alliance will seek to
utilize market volatility judiciously (assuming no change in company
fundamentals) to adjust the Fund's portfolio positions. To the extent consistent
with local market liquidity considerations, the Fund will strive to capitalize
on apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. Under normal
circumstances, the Fund will remain substantially fully invested in equity
securities and will not take significant cash positions for market timing
purposes. Rather, through "buying into declines" and "selling into strength,"
Alliance seeks superior relative returns over time.
As a matter of fundamental policy, which may not be changed without shareholder
approval, the Fund will invest under normal circumstances at least 85% of the
value of its total assets in equity securities. The Fund's other investment
policies are not fundamental and, therefore, may be changed by the Board of
Directors of the Fund without shareholder approval. For temporary defensive
purposes, the Fund may vary from its investment policies during periods in which
Alliance believes that business or financial conditions warrants, and may then
invest in high-grade short-term fixed-income securities, including U.S.
Government securities, or hold its assets in cash.
The Fund may invest up to 20% of its total assets in convertible securities of
issuers whose common stocks are eligible for purchase by the Fund. The Fund may
also: (i) invest up to 20% of its total assets in rights or warrants; (ii) write
covered put and call options and purchase put and call options on securities of
the types in which it is permitted to invest and on exchange-traded index
options and may also write uncovered options for cross hedging purposes; (iii)
enter into contracts for the purchase or sale for future delivery of fixed-
income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, foreign government
securities, or common stock and may purchase and write options on such futures
contract: (iv) purchase and write put and call options on foreign currencies for
hedging purposes; (v) purchase or sell forward contracts; (vi) enter into
forward commitments for the purchase or sale of securities; (vii) enter into
standby commitment agreements; (viii) enter into currency swaps for hedging
purposes; (ix) enter into repurchase agreements pertaining to U.S. Government
securities with member banks of the Federal Reserve System or primary dealers in
such securities; (x) make short sales of securities or maintain short positions,
provided that the Fund may not make a short sale if as a result more than 5% of
its net assets would be held as collateral for short sales; and (xi) make
secured loans of its portfolio securities not in excess of 30% of its total
assets to entities with which it is permitted to enter into repurchase
agreements. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise").
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Secondly, the Fund may purchase securities of a current or former state
enterprise following its initial equity offering. Finally, the Fund may make
privately negotiated purchases of stock or other equity interests in a state
enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy, and the
Fund will thus emphasize investments in such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established economies, including France,
Great Britain, Germany and Italy, and those with developing economies, including
Argentina, Mexico, Chile, Indonesia, Malaysia, Poland and Hungary, are engaged
in privatizations. The Fund will invest in any country believed to present
attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its investments in
any industry, it is permitted to invest more than 25% of its total assets in
issuers whose primary business activity is that of national commercial banking.
Prior to so concentrating, however, the Fund's Directors must determine that its
ability to achieve its investment objective would be adversely affected if it
were not permitted to concentrate. The staff of the Commission is of the view
that registered investment companies may not, absent shareholder approval,
change between concentration and non-concentration in a single industry. The
Fund disagrees with the staff's position but has undertaken that it will not
concentrate in the securities of national commercial banks until, if ever, the
issue is resolved. If the Fund were to invest more than 25% of its total assets
in national commercial banks, the Fund's performance could be significantly
influenced by events or conditions affecting this industry, which is subject to,
among other things, increases in interest rates and deteriorations in general
economic conditions, and the Fund's investments may be subject to greater risk
and market fluctuation than if its portfolio represented a broader range of
investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations--Securities Ratings" and "--
Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain a
non-convertible security that is downgraded below C or determined by Alliance to
have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter into forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated fixed-
income securities issued or guaranteed by European governmental entities, or by
European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European
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economies may significantly accelerate economic development. The Fund will
invest in companies that Alliance believes possess rapid growth potential. Thus,
the Fund will emphasize investments in larger, established companies, but will
also invest in smaller, emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although the Fund will not invest more than 20% of its total assets in
issuers based therein, or more than 10% of its total assets in issuers based in
any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country, at times 25% or more of its assets may be
invested in issuers located in a single country. During such times, the Fund
would be subject to a correspondingly greater risk of loss due to adverse
political or regulatory developments, or an economic downturn, within that
country. In this regard, at July 31, 1998, approximately 20% of the Fund's
assets were invested in securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a non-
diversified investment company whose investment objective is to seek long-term
capital appreciation. In seeking to achieve its investment objective, the Fund
will invest at least 65% of its total assets in equity securities (for the
purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, which may be in excess of 50%,
of its assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and India have recently relaxed investment
restrictions and Vietnamese direct investments have recently become available to
U.S. investors. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
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The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings," "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of Additional Information for
a description of such ratings. The Fund will not retain a security that is
downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and "semi-
governmental securities;" (iv) invest up to 25% of its net assets in equity-
linked debt securities with the objective of realizing capital appreciation; (v)
invest up to 25% of its net assets in loans and other direct debt instruments;
(vi) write covered put and call options on securities of the types in which it
is permitted to invest and on exchange-traded index options; (vii) enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices,
including any index of U.S. Government securities, securities issued by foreign
government entities, or common stock and may purchase and write options on
future contracts; (viii) purchase and write put and call options on foreign
currencies for hedging purposes; (ix) purchase or sell forward contracts; (x)
enter into interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements; (xiii) enter into
currency swaps for hedging purposes; (xiv) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make short sales of
securities or maintain a short position, in each case only if "against the box;"
and (xvi) make secured loans of its portfolio securities not in excess of 30% of
its total assets to entities with which it can enter into repurchase agreements.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Greater China '97 Fund, Inc.
Alliance Greater China '97 Fund, Inc. ("Greater China '97 Fund") is a non-
diversified investment company that seeks long-term capital appreciation through
investment of at least 80% of its total assets in equity securities issued by
Greater China companies. In furtherance of its investment objective, the Fund
expects to invest a significant portion, which may be greater than 50%, of its
assets in equity securities of Hong Kong companies and may invest, from time to
time, all of its assets in Hong Kong companies or companies of either of the
other Greater China countries.
In recent years, China, Hong Kong and Taiwan have each experienced a high level
of real economic growth, although growth is expected to slow in 1998. This
growth has resulted from advantageous economic conditions, including favorable
demographics, competitive wage rates, and rising per capita income and consumer
demand. Significantly, the growth has also been fueled by an easing by both
China and Taiwan of government restrictions and an increased receptivity to
foreign investment. This expanded, if not yet complete, openness to foreign
investment extends as well to the securities markets of both countries. Hong
Kong's free market economy has historically included securities markets
completely open to foreign investments. All three countries have regulated stock
exchanges upon which shares of an increasing number of Greater China companies
are traded.
With its population estimated at more than 1.2 billion as a driving force, and
notwithstanding its continuing political rigidity, China's economic growth has
been coupled with significantly reduced government economic intervention and
basic economic structural change. Recent years have seen large increases in
industrial production with a significant decline in the state sector share of
industrial output, and increased involvement of local governmental units and the
private sector in establishing new business enterprises.
With China's growth has come an increasing direct and indirect economic
involvement of all three Greater China countries. For some time, Hong Kong, a
world financial and trade center in its own right, with a large stock exchange
and offices of many of the world's multinational companies, has been the
gateway to trade with and foreign investment in China. With the long-awaited
transfer on July 1, 1997 of the sovereignty of Hong Kong from Great Britain to
China, not only the political but the economic ties between China and Hong Kong
are expected to continue to intensify, albeit with the continuation of Hong
Kong's economic system as provided for in the law governing its sovereignty.
Notwithstanding the, at times considerable, political tension between the two
countries, it is generally recognized that substantially increased trade and
investment with China has been generated from Taiwan, in many cases through Hong
Kong. Along with this increased interaction with China, Taiwan is becoming a
regional technological and telecommunication center, while continuing the
process of opening its economy up to foreign investment. Although geographically
limited, Taiwan boasts an economy among the world's twenty largest and its
foreign exchange reserves are third largest in the world measured in U.S.
dollars. As China's economy continues to expand, it is expected that Taiwan's
economic interaction with China will likewise increase.
Alliance believes that over the long term conditions are favorable for
continuing and expanding economic growth in all three Greater China countries.
It is this potential which the
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Fund hopes to take advantage of by investing both in established and new and
emerging companies.
Set forth below under "Certain Considerations and Risks" and in Appendix A to
the Fund's Statement of Additional Information is additional information
concerning the Greater China countries.
In addition to investing in equity securities of Greater China companies, the
Fund may invest up to 20% of its total assets in (i) debt securities issued or
guaranteed by Greater China companies or by Greater China governments, their
agencies or instrumentalities, and (ii) equity or debt securities issued by
issuers other than Greater China companies. The Fund will not invest in debt
securities other than investment grade securities. Should a debt security in
which the Fund is invested be downgraded below investment grade or be determined
by Alliance to have undergone a similar credit quality deterioration, the Fund
will dispose of that security.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and "semi-
governmental securities;" (iv) invest up to 25% of its net assets in equity-
linked debt securities with the objective of realizing capital appreciation; (v)
invest up to 20% of its net assets in loans and other direct debt securities;
(vi) write covered put and call options on securities of the types in which it
is permitted to invest and on exchange-traded index options; (vii) enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices,
including any index of U.S. Government securities, securities issued by foreign
government entities, or common stock, and may purchase and write options on
future contracts; (viii) purchase and write put and call options on foreign
currencies for hedging purposes; (ix) purchase or sell forward contracts; (x)
enter into interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements; (xiii) enter into
currency swaps for hedging purposes; (xiv) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make short sales of
securities or maintain a short position, in each case only if "against the box;"
and (xvi) make secured loans of its portfolio securities not in excess of 30% of
its total assets to entities with which it can enter into repurchase agreements.
All or some of the policies and practices listed above may not be available to
the Fund in the Greater China countries, and the Fund will utilize these
policies only to the extent permissible. For additional information on the use,
risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1.5 billion. Because
the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization issuers, and these issuers are located in at least
three countries, one of which may be the U.S. Up to 35% of the Fund's total
assets may be invested in securities of companies whose market capitalizations
exceed the Fund's size standard. The Fund's portfolio securities may be listed
on a U.S. or foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Alliance Global Environment Fund
Alliance Global Environment Fund, Inc. ("Global Environment Fund") is a non-
diversified investment company that seeks long-term capital appreciation through
investment in equity securities of Eligible Companies. For purposes of the
Fund's investment objective and investment policies, "equity securities" are
common stocks (but not preferred stocks), rights or warrants to subscribe for or
purchase common
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stocks, and preferred stocks or debt securities that are convertible into common
stocks without the payment of any further consideration. Until October 3, 1997,
the Fund operated as a closed-end investment company, and its common stock
(which then comprised a single class) was listed on the Exchange.
The Fund invests in two categories of Eligible Companies--"Environmental
Companies" and "Beneficiary Companies." Environmental Companies are those that
have a principal business involving the sale of systems or services intended to
foster environmental protection, such as waste treatment and disposal,
remediation, air pollution control and recycling. Under normal circumstances,
the Fund invests at least 65% of its total assets in equity securities of
Environmental Companies. Beneficiary Companies are those whose principal
businesses lie outside the environmental sector but nevertheless anticipate
environmental regulations or consumer preferences through the development of new
products, processes or services that are intended to contribute to a cleaner and
healthier environment. Examples of such companies could be companies that
anticipate the demand for plastic substitutes, aerosol substitutes, alternative
fuels and processes that generate less hazardous waste. In this regard, the Fund
may invest in an issuer with a broadly diversified business only a part of which
provides such products, processes or services, when Alliance believes that these
products, processes or services will yield a competitive advantage that
significantly enhances the issuer's growth prospects. As a matter of fundamental
policy, the Fund will, under normal circumstances, invest substantially all of
its total assets in equity securities of Eligible Companies.
A major premise of the Fund's investment approach is that environmental concerns
will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous waste treatment and disposal,
pulp and paper recycling, waste-to-energy alternatives, biodegradable cartons,
packages, plastics and other products, remedial projects and emergency cleanup
efforts, manufacture of environmental supplies and equipment, the achievement of
purer air, groundwater and foods and the detection, evaluation and treatment of
both existing and potential environmental problems including, among others, air
pollution and acid rain.
The environmental services industry is generally positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded substantial
opportunities for growth. Beneficiary Companies may also derive an advantage to
the extent that they have anticipated environmental regulation and are therefore
at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena that are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies which protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund spreads investment risk among the capital markets
of a number of countries and invests in equity securities of companies based in
at least three, and normally considerably more, such countries. The percentage
of the Fund's assets invested in securities of companies in a particular country
or denominated in a particular currency will vary in accordance with Alliance's
assessment of the appreciation potential of such securities and the strength of
that currency. As of August 31, 1998, approximately 82% of the Fund's net assets
were invested in equity securities of U.S. companies.
The Fund may also: (i) invest up to 20% of its total assets in warrants to
purchase equity securities to the extent consistent with its investment
objective; (ii) invest in depositary receipts; (iii) purchase and write put and
call options on foreign currencies for hedging purposes; (iv) enter into forward
foreign currency transactions for hedging purposes; (v) invest in currency
futures and options on such futures for hedging purposes; and (vi) make secured
loans of its portfolio securities not in excess of 30% of its total assets. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
TOTAL RETURN FUNDS
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current income.
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds,
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senior debt securities and preferred and common stocks in such proportions and
of such type as are deemed best adapted to the current economic and market
outlooks. The Fund may invest up to 15% of the value of its total assets in
foreign equity and fixed-income securities eligible for purchase by the Fund
under its investment policies described above. See "Risk Considerations--Foreign
Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. The Fund may invest in securities of both U.S. and foreign
issuers, although no more than 15% of the Fund's total assets will be invested
in issuers in any one foreign country. The utilities industry consists of
companies engaged in (i) the manufacture, production, generation, provision,
transmission, sale and distribution of gas and electric energy, and
communications equipment and services, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities for
the public, or (ii) the provision of other utility or utility-related goods and
services, including, but not limited to, entities engaged in water provision,
cogeneration, waste disposal system provision, solid waste electric generation,
independent power producers and non-utility generators. The Fund is designed to
take advantage of the characteristics and historical performance of securities
of utility companies, many of which pay regular dividends and increase their
common stock dividends over time. As a fundamental policy, the Fund normally
invests at least 65% of its total assets in securities of companies in the
utilities industry. The Fund considers a company to be in the utilities industry
if, during the most recent twelve-month period, at least 50% of the company's
gross revenues, on a consolidated basis, were derived from its utilities
activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated Fixed-
Income Securities." The Fund will not retain a security that is downgraded below
B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition and regulatory
changes. There can also be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government
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approval for rate increases. In addition, because many foreign utility companies
use fuels that cause more pollution than those used in the U.S., such utilities
may yet be required to invest in pollution control equipment. Foreign utility
regulatory systems vary from country to country and may evolve in ways different
from regulation in the U.S. The percentage of the Fund's assets invested in
issuers of particular countries will vary. See "Risk Considerations--Foreign
Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate fixed-
income securities of domestic issuers, corporate fixed-income securities of
foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter into forward commitments for the
purchase or sale of securities; (xi) enter into standby commitment agreements;
(xii) enter into repurchase agreements pertaining to U.S. Government securities
with member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices--Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risks and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund has restricted its investments in securities in this category to
issues of high quality. The Fund may also purchase and sell financial forward
and futures contracts and options thereon for hedging purposes. For additional
information on the use, risks and costs of these policies and practice see
"Additional Investment Practices."
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund, Inc. ("Real Estate Investment Fund") is a
diversified investment company that seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of real estate investment trusts ("REITs") and
other real estate industry companies. A "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or interests therein. The
equity securities in which the Fund will invest for this purpose consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock or convertible securities ("Real
Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These instruments are
described below. The risks associated with the Fund's transactions in REMICs,
CMOs and other types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk. See "Risk Considerations" for a description of these and other
risks.
As to any investment in Real Estate Equity Securities, Alliance's analysis will
focus on determining the degree to which the company involved can achieve
sustainable growth in cash flow and dividend paying capability. Alliance
believes that the primary determinant of this capability is the economic
viability of property markets in which the company operates and that the
secondary determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will
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purchase Real Estate Equity Securities when, in the judgment of Alliance, their
market price does not adequately reflect this potential. In making this
determination, Alliance will take into account fundamental trends in underlying
property markets as determined by proprietary models, site visits conducted by
individuals knowledgeable in local real estate markets, price-earnings ratios
(as defined for real estate companies), cash flow growth and stability, the
relationship between asset value and market price of the securities, dividend
payment history, and such other factors which Alliance may determine from time
to time to be relevant. Alliance will attempt to purchase for the Fund Real
Estate Equity Securities of companies whose underlying portfolios are
diversified geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
Investment Process for Real Estate Equity Securities. The Fund's investment
strategy with respect to Real Estate Equity Securities is based on the premise
that property market fundamentals are the primary determinant of growth
underlying the performance of Real Estate Equity Securities. Value added
management further distinguishes the most attractive Real Estate Equity
Securities. The Fund's research and investment process is designed to identify
those companies with strong property fundamentals and strong management teams.
This process is comprised of real estate market research, specific property
inspection and securities analysis. Alliance believes that this process will
result in a portfolio that will consist of Real Estate Equity Securities of
companies that own assets in the most desirable markets across the country,
diversified geographically and by property type.
In implementing the Fund's research and investment process, Alliance will avail
itself of the consulting services of CB Richard Ellis, Inc. ("CBRE"), a publicly
held company and the largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities management, and real
estate finance and investment advisory activities. In 1997, CBRE completed
22,100 sale and lease transactions, managed over 6,600 client properties,
created over $5 billion in mortgage originations, and completed over 3,600
appraisal and consulting assignments. In addition, it advised and managed for
institutions over $4 billion in real estate investments. As consultant to
Alliance, CBRE provides access to its proprietary model, REIT.Score, that
analyzes the approximately 18,000 properties owned by these 142 companies. Using
proprietary databases and algorithms, CBRE analyzes local market rent, expense,
and occupancy trends, market specific transaction pricing, demographic and
economic trends, and leading indicators of real estate supply such as building
permits. Over 1,000 asset-type specific geographic markets are analyzed and
ranked on a relative scale by CBRE in compiling its REIT.Score database. The
relative attractiveness of these real estate industry companies is similarly
ranked based on the composite rankings of the properties they own. See
"Management of the Funds--Consultant to Alliance with Respect to Investment in
Real Estate Securities" for more information about CBRE.
The universe of property-owning real estate industry firms consists of
approximately 142 companies of sufficient size and quality to merit
consideration for investment by the Fund. Once the universe of real estate
industry companies has been distilled through the market research process,
CBRE's local market presence provides the capability to perform site specific
inspections of key properties. This analysis examines specific location,
condition, and sub-market trends. CBRE's use of locally based real estate
professionals provides Alliance with a window on the operations of the portfolio
companies as information can immediately be put in the context of local market
events. Only those companies whose specific property portfolios reflect the
promise of their general markets will be considered for initial and continued
investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance will make extensive use of CBRE's
network of industry analysts in order to assess trends in tenant industries.
This information is then used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
The short-term investments in which Real Estate Investment Fund may invest are:
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
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The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not so rated, of equivalent credit quality as
determined by Alliance. The Fund expects that it will not retain a debt security
which is downgraded below BBB or Baa or, if unrated, determined by Alliance to
have undergone similar credit quality deterioration, subsequent to purchase by
the Fund.
The Fund may also engage in the following investment practices to the extent
indicated: (i) invest up to 10% of its net assets in rights or warrants; (ii)
invest up to 15% of its net assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund; (iii) lend portfolio
securities equal in value to not more than 25% of total assets; (iv) enter into
repurchase agreements of up to seven days' duration; (v) enter into forward
commitments transactions as long as the Fund's aggregate commitments under such
transactions are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of securities or maintain
a short position but only if at all times when a short position is open not more
than 25% of the Fund's net assets (taken at market value) is held as collateral
for such sales; and (viii) invest in illiquid securities unless, as a result,
more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which generally
provide a stable stream of income with yields that are generally higher than
those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying equity security, although the higher yield tends to make the
convertible security less volatile than the underlying equity security. As with
debt securities, the market value of convertible securities tends to decrease as
interest rates rise and increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields than non-
convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock. Convertible debt securities that are rated Baa or lower by Moody's or BBB
or lower by S&P, Duff & Phelps or Fitch and comparable unrated securities as
determined by Alliance may share some or all of the risks of non-convertible
debt securities with those ratings. For a description of these risks, see "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated Fixed-
Income Securities."
Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio.
Rights and warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Rights are similar to warrants except that
they have a substantially shorter duration. Rights and warrants may be
considered more speculative than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any rights in the assets of the
issuing company. The value of a right or warrant does not necessarily change
with the value of the underlying security, although the value of a right or
warrant may decline because of a decrease in the value of the underlying
security, the passage of time or a change in perception as to the potential of
the underlying security, or any combination thereof. If the market price of the
underlying security is below the exercise price set forth in the warrant on the
expiration date, the warrant will expire worthless. Moreover, a right or warrant
ceases to have value if it is not exercised prior to the expiration date.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by a U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities except with respect to Growth Fund, where investments in
ADRs are deemed to be investments in securities issued by U.S. issuers and those
in GDRs and other types of depositary receipts are deemed to be investments in
the underlying securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community. "Semi-
governmental securities" are securities issued by entities owned by either a
national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the securities. As a result of the pass-through of
prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity would
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indicate. Prepayments occur when the mortgagor on a mortgage prepays the
remaining principal before the mortgage's scheduled maturity date. Because the
prepayment characteristics of the underlying mortgages vary, it is impossible to
predict accurately the realized yield or average life of a particular issue of
pass-through certificates. Prepayments are important because of their effect on
the yield and price of the mortgage-backed securities. During periods of
declining interest rates, prepayments can be expected to accelerate and a Fund
investing in such securities would be required to reinvest the proceeds at the
lower interest rates then available. Conversely, during periods of rising
interest rates, a reduction in prepayments may increase the effective maturity
of the securities, subjecting them to a greater risk of decline in market value
in response to rising interest rates. In addition, prepayments of mortgages
underlying securities purchased at a premium could result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Some adjustable rate securities are backed by
pools of mortgage loans. Although the rate-adjustment feature may reduce sharp
changes in the value of adjustable rate securities, these securities can change
in value based on changes in market interest rates or the issuer's
creditworthiness. Changes in the interest rate on adjustable rate securities may
lag behind changes in prevailing market interest rates. Also, some adjustable
rate securities (or the underlying mortgages) are subject to caps or floors that
limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by a Fund. Furthermore, as with any debt securities, the values
of equity-linked debt securities will generally vary inversely with changes in
interest rates. A Fund's ability to dispose of equity-linked debt securities
will depend on the availability of liquid markets for such securities.
Investment in equity-linked debt securities may be considered to be speculative.
As with other securities, a Fund could lose its entire investment in equity-
linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to a Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate a
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If a Fund does not receive scheduled interest or principal payments on
such indebtedness, the Fund's share price and yield could be adversely affected.
Loans that are fully secured offer a Fund more protection than unsecured loans
in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a
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secured loan would satisfy the borrower's obligation, or that the collateral can
be liquidated. Making loans to borrowers whose creditworthiness is poor may
involve substantial risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries and Greater China countries will also involve a
risk that the governmental entities responsible for the repayment of the debt
may be unable, or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a Fund. For
example, if a loan is foreclosed, a Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of a Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by a Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
a Fund to pay additional cash on demand. These commitments may have the effect
of requiring a Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid. Greater China '97 Fund will not
invest in lower-rated loans and other lower-rated direct debt instruments.
Mortgage-Backed Securities and Associated Risks. Mortgage-Backed Securities
include mortgage pass-through certificates and multiple-class pass-through
securities, such as REMIC pass-through certificates, CMOs and stripped mortgage-
backed securities ("SMBS"), and other types of Mortgage-Backed Securities that
may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate Investment Fund may
invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private lenders. CMOs and
REMIC certificates are issued in multiple classes and the principal of and
interest on the mortgage assets may be allocated among the several classes of
CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC
certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Generally, interest is paid or accrues on all classes
of CMOs or REMIC certificates on a monthly basis. Real Estate Investment Fund
will not invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although Real Estate
Investment Fund does not intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those generally associated with investing in the real estate
industry in general. These unique risks include the failure of a counterparty to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations--Mortgage-Backed
Securities" for a more complete description of the characteristics of Mortgage-
Backed Securities and associated risks.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many individually
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negotiated currency swaps and any assets used to cover currency swaps and most
privately negotiated investments in state enterprises that have not yet
conducted an initial equity offering, (ii) over-the-counter options and assets
used to cover over-the-counter options, and (iii) repurchase agreements not
terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent permitted by
applicable law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities meet liquidity
guidelines established by a Fund's Directors. Investment in non-publicly traded
securities by Growth Fund is restricted to 5% of its total assets (not including
for these purposes Rule 144A securities, to the extent permitted by applicable
law) and is also subject to the 15% restriction on investment in illiquid
securities described above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. Such securities are
unlike securities which are traded in the open market and which can be expected
to be sold immediately if the market is adequate. The sale price of illiquid
securities may be lower or higher than Alliance's most recent estimate of their
fair value. Generally, less public information is available with respect to the
issuers of such securities than with respect to companies whose securities are
traded on an exchange. To the extent that these securities are foreign
securities, there is no law in many of the countries in which a Fund may invest
similar to the Securities Act requiring an issuer to register the sale of
securities with a governmental agency or imposing legal restrictions on resales
of securities, either as to length of time the securities may be held or manner
of resale. However, there may be contractual restrictions on resales of
securities.
Options on Securities. An option gives the purchaser of the option, upon payment
of a premium, the right to deliver to (in the case of a put) or receive from (in
the case of a call) the writer a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by a Fund is
"covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it has written. A
put option written by a Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than that of
the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Greater China '97 Fund,
International Premier Growth Fund and Utility Income Fund each may write call
options for cross-hedging purposes. A Fund would write a call option for cross-
hedging purposes, instead of writing a covered call option, when the premium to
be received from the cross-hedge transaction would exceed that which would be
received from writing a covered call option, while at the same time achieving
the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write uncovered call options. Technology Fund and Global
Small Cap Fund will not write a call option if the premium to be received by the
Fund in doing so would not produce an annualized return of at least 15% of the
then current market value of the securities subject to the option (without
giving effect to commissions, stock transfer taxes and other expenses that are
deducted from premium receipts). Technology Fund, Quasar Fund and Global Small
Cap Fund will not write a call option if, as a result, the aggregate of the
Fund's portfolio securities subject to outstanding call options (valued at the
lower of the option price or market value of such securities) would exceed 15%
of the Fund's total assets or more than 10% of the Fund's assets would be
committed to call options that at the time of sale have a remaining term of more
than 100 days. The aggregate cost of all outstanding options purchased and held
by each of Premier Growth Fund, Technology Fund, Quasar Fund and Global Small
Cap Fund will at no time exceed 10% of the Fund's total assets. Neither
International Fund nor New Europe Fund will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
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Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
Options on futures contracts written or purchased by a Fund will be traded on
U.S. or foreign exchanges or over-the-counter. These investment techniques will
be used only to hedge against anticipated future changes in market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, or in the case of
International Premier Growth Fund 100% of its total assets. Premier Growth Fund
and Growth and Income Fund may not purchase or sell a stock index future if
immediately thereafter more than 30% of its total assets would be hedged by
stock index futures. Premier Growth Fund and Growth and Income Fund may not
purchase or sell a stock index future if, immediately thereafter, the sum of the
amount of margin deposits on the Fund's existing futures positions would exceed
5% of the market value of the Fund's total assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event of
rate movements adverse to a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
foreign currency exchange contracts to minimize the risk to it from adverse
changes in the relationship between the U.S. dollar and other currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date, and is individually negotiated and privately
traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions. Growth
Fund may also purchase and sell foreign currency on a spot basis.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery"
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basis. In some cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring (i.e., a "when, as and if issued"
trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds to be received, in determining its net
asset value. Any unrealized appreciation or depreciation reflected in such
valuation of a "when, as and if issued" security would be canceled in the event
that the required conditions did not occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a when-
issued or forward commitment basis, thereby obtaining the benefit of currently
higher cash yields. However, if Alliance were to forecast incorrectly the
direction of interest rate movements, a Fund might be required to complete such
when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by New Europe Fund,
International Premier Growth Fund, All-Asia Investment Fund, Greater China '97
Fund, Worldwide Privatization Fund, Utility Income Fund or Real Estate
Investment Fund if, as a result, the Fund's aggregate commitments under such
transactions would be more than 30% of the Fund's total assets. In the event the
other party to a forward commitment transaction were to default, a Fund might
lose the opportunity to invest money at favorable rates or to dispose of
securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
International Premier Growth Fund, will enter into a standby commitment with a
remaining term in excess of 45 days. Investments in standby commitments will be
limited so that the aggregate purchase price of the securities subject to the
commitments will not exceed 25% with respect to New Europe Fund and Real Estate
Investment Fund, 50% with respect to International Premier Growth Fund,
Worldwide Privatization Fund, All-Asia Investment Fund and Greater China '97
Fund and 20% with respect to Utility Income Fund, of the Fund's assets taken at
the time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each currency swap will
be accrued on a daily basis. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
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date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund, Greater China '97 Fund and Utility Income
Fund, the exchange commitments can involve payments in the same currency or in
different currencies. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a predetermined interest
rate, to receive payments of interest on a contractually-based principal amount
from the party selling such interest rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on an agreed
principal amount from the party selling the interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on either an asset-
based or liability-based basis, depending upon whether it is hedging its assets
or liabilities. The net amount of the excess, if any, of a Fund's obligations
over its entitlements with respect to each interest rate swap, cap and floor is
accrued daily. A Fund will not enter into an interest rate swap, cap or floor
transaction unless the unsecured senior debt or the claims-paying ability of the
other party thereto is then rated in the highest rating category of at least one
nationally recognized rating organization. Alliance will monitor the
creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Worldwide Privatization Fund, All-Asia
Investment Fund, Greater China '97 Fund and Utility Income Fund each may make
short sales of securities or maintain short positions only for the purpose of
deferring realization of gain or loss for U.S. federal income tax purposes,
provided that at all times when a short position is open the Fund owns an equal
amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund, Greater China
'97 Fund and Real Estate Investment Fund may not make a short sale if as a
result more than 25% of the Fund's net assets would be held as collateral for
short sales. If the price of the security sold short increases between the time
of the short sale and the time a Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund will realize a
capital gain. See "Certain Fundamental Investment Policies." Certain special
federal income tax considerations may apply to short sales entered into by a
Fund. See "Dividends, Distributions and Taxes" in the relevant Fund's Statement
of Additional Information.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund
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any income earned thereon and the Fund may invest any cash collateral in
portfolio securities, thereby earning additional income, or receive an agreed
upon amount of income from a borrower who has delivered equivalent collateral.
Each Fund will have the right to regain record ownership of loaned securities or
equivalent securities in order to exercise ownership rights such as voting
rights, subscription rights and rights to dividends, interest or distributions.
A Fund may pay reasonable finders', administrative and custodial fees in
connection with a loan. A Fund will not lend its portfolio securities to any
officer, director, employee or affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many exchange-
traded futures contracts and options on futures contracts, there are no daily
price fluctuation limits with respect to certain options and forward contracts,
and adverse market movements could therefore continue to an unlimited extent
over a period of time. In addition, the correlation between movements in the
prices of futures contracts, options and forward contracts and movements in the
prices of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option), with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations and the use of certain hedging
techniques may adversely impact the characterization of income to a Fund for
U.S. federal income tax purposes. See "Dividends, Distributions and Taxes" in
the Statement of Additional Information of each Fund that invests in options and
futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may reduce its
position in equity securities and invest without limit in certain types of
short-term, liquid, high grade or high quality (depending on the Fund) debt
securities. These securities may include U.S. Government securities, qualifying
bank deposits, money market instruments, prime commercial paper and other types
of short-term debt securities including notes and bonds. For Funds that may
invest in foreign countries, such securities may also include short-term,
foreign-currency denominated securities of the type mentioned above issued by
foreign governmental entities, companies and supranational organizations. For a
complete description of the types of securities each Fund may invest in while in
a temporary defensive position, please see such Fund's Statement of Additional
Information.
Portfolio Turnover. Portfolio turnover rates for the existing classes of shares
of the Fund are set forth in the tables that begin on page 8. These portfolio
turnover rates are greater than those of most other investment companies,
including those which emphasize capital appreciation as a basic policy. A high
rate of portfolio turnover involves correspondingly greater brokerage and other
expenses than a lower rate, which must be borne by the Fund and its
shareholders. High portfolio turnover also may result in the realization of
substantial net short-term capital gains. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof; (iii)
in oil, gas or other mineral exploration or development programs; or (iv) more
than 5% of its gross assets in securities the disposition of which would be
subject to restrictions under the federal securities laws.
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Growth Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than U.S. Government securities and
repurchase agreements relating thereto), although up to 25% of each Fund's total
assets may be invested without regard to this restriction; or (ii) invest 25% or
more of its total assets in the securities of any one industry.
Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than: (a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase would cause 10% or more of its total assets to be invested in the
securities of such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
International Premier Growth Fund may not: (i) invest 25% or more of its total
assets in securities of issuers conducting their principal business activities
in the same industry, except that this restriction does not apply to U.S.
Government securities; (ii) borrow money or issue senior securities, except that
the Fund may borrow (a) from a bank if immediately after such borrowing there is
asset coverage of at least 300% as defined in the 1940 Act and (b) for temporary
purposes in an amount not exceeding 5% of the value of the total assets of the
Fund; or (iii) pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure permitted borrowings.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the
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Fund's total assets (including the amount borrowed) less liabilities (not
including the amount borrowed) at the time the borrowing is made; outstanding
borrowings in excess of 5% of the value of the Fund's total assets will be
repaid before any investments are made; or (iii) pledge, hypothecate, mortgage
or otherwise encumber its assets, except to secure permitted borrowings. The
exception contained in clause (i)(b) above is subject to the operating policy
regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be deemed
to prohibit the Fund from purchasing the securities of any issuer pursuant to
the exercise of rights distributed to the Fund by the issuer, except that no
such purchase may be made if as a result the Fund will fail to meet the
diversification requirements of the Code and any such acquisition in excess of
the foregoing 15% or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to U.S. Government securities, but
will apply to foreign government securities unless the Commission permits their
exclusion); (iii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the Fund's total assets will be repaid
before any subsequent investments are made; or (iv) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company, or
more than 10% of such value in closed-end investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Greater China '97 Fund may not: (i) invest 25% or more of its assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding 5% of the total assets of the Fund; or (iv) make short
sales of securities or maintain a short position, unless at all times when a
short position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short and unless not more than 5% of the Fund's net assets is
held as collateral for such sales at any one time.
Global Environment Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest more than 15% of the value of
its total assets in the securities of any one issuer or 25% or more of the value
of its total assets in the same industry, except that the Fund will invest more
than 25% of its total assets in Environmental Companies, provided that this
restriction does not apply to U.S. Government securities, but will apply to
foreign government obligations unless the Commission permits their exclusion;
(iii) borrow money or issue senior securities, except that the Fund may borrow
(a) from a bank if immediately after such borrowing there is asset coverage of
at least 300% as defined in the 1940 Act and (b) for temporary purposes in an
amount not exceeding 5% of the value of the total assets of the Fund; (iv)
pledge, hypothecate, mortgage or otherwise encumber its assets, except (a) to
secure permitted borrowings and (b) in connection with initial and variation
margin deposits relating to futures contracts; (v) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company,
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or more than 5% of the value of the Fund's total assets would be invested in
securities of any closed-end investment company or more than 10% of such value
in closed-end investment companies in the aggregate; (vi) make short sales of
securities or maintain a short position, unless at all times when a short
position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short ("short sales against the box"), and unless not more than
5% of the Fund's net assets (taken at market value) is held as collateral for
such sales at any onetime; or (vii) buy or write (i.e., sell) put or call
options, except (a) the Fund may buy foreign currency options or write covered
foreign currency options and options on foreign currency futures and (b) the
Fund may purchase warrants.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own any securities of an
open-end investment company or more than 3% of the total outstanding voting
stock of any closed-end investment company or more than 5% of the value of the
Fund's net assets would be invested in securities of any one or more closed-end
investment companies.
Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S. Government obligations or (ii) own more
than 10% of the outstanding voting securities of any issuer.
Real Estate Investment Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer (other than the
U.S. Government and its agencies or instrumentalities) not greater in value than
5% of the Fund's total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if as a result
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such issuer; (iii)
invest 25% or more of its total assets in the securities of issuers conducting
their principal business activities in any one industry, other than the real
estate industry in which the Fund will invest at least 25% or more of its total
assets, except that this restriction does not apply to U.S. Government
securities; (iv) purchase or sell real estate, except that it may purchase and
sell securities of companies which deal in real estate or interests therein,
including Real Estate Equity Securities; or (v) borrow money except for
temporary or emergency purposes or to meet redemption requests, in an amount not
exceeding 5% of the value of its total assets at the time the borrowing is made.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over
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a number of years, with the government continuing to hold a controlling position
in the enterprise even after the initial equity offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
International Premier Growth Fund, New Europe Fund, All-Asia Investment Fund,
Greater China '97 Fund and Worldwide Privatization Fund and a substantial
portion of the assets of Global Small Cap Fund and Global Environment Fund will
be invested in securities denominated in foreign currencies, and a corresponding
portion of these Funds' revenues will be received in such currencies. Therefore,
the dollar equivalent of their net assets, distributions and income will be
adversely affected by reductions in the value of certain foreign currencies
relative to the U.S. dollar. If the value of the foreign currencies in which a
Fund receives its income falls relative to the U.S. dollar between receipt of
the income and the making of Fund distributions, the Fund may be required to
liquidate securities in order to make distributions if it has insufficient cash
in U.S. dollars to meet distribution requirements that the Fund must satisfy to
qualify as a regulated investment company for federal income tax purposes.
Similarly, if an exchange rate declines between the time a Fund incurs expenses
in U.S. dollars and the time cash expenses are paid, the amount of the currency
required to be converted into U.S. dollars in order to pay expenses in U.S.
dollars could be greater than the equivalent amount of such expenses in the
currency at the time they were incurred. In light of these risks, a Fund may
engage in certain currency hedging transactions, which themselves involve
certain special risks. See "Additional Investment Practices" above.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous terms (including
price) than securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority,
and if a deterioration occurs in a country's balance of payments, the country
could impose temporary restrictions on foreign capital remittances.
A Fund could also be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor the effect of
any such factor or factors on a Fund's investments. Furthermore, transaction
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling--dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit
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from the Exchange Rate Mechanism of the European Monetary System, the value of
the pound sterling fell by almost 20% against the U.S. dollar. The pound
sterling has since recovered due to interest rate cuts throughout Europe and an
upturn in the economy of the United Kingdom. The average exchange rate of the
U.S. dollar to the pound sterling was 1.50 in 1993 and 1.64 in 1997. On October
13, 1998 the U.S. dollar-pound sterling exchange rate was 1.71.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
5,135.5 at the end of 1997, up approximately 25% from the end of 1996. On
October 5, 1998, the FT-SE 100 index closed at 4648.7, the lowest close in the
12-month period prior to that date, after reaching a high of 6179.0 on July 20,
1998. The FT-SE 100 index closed at 4990.1 on October 14, 1998.
In January 1999, the Economic and Monetary Union ("EMU") is scheduled to take
effect. The EMU will establish a common currency for European countries that
meet the eligibility criteria and choose to participate. Although the United
Kingdom meets the eligibility criteria, the government has not taken any action
to join the EMU.
From 1979 until 1997 the Conservative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar, but has since
fallen from its post-World War II high (in 1995) against the U.S. dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1997. On
October 13, 1998, the TOPIX closed at 998.98, down approximately 15% from the
end of 1997. Certain valuation measures, such as price-to-book value and price-
to-cash flow ratios, indicate that the Japanese stock market is near its lowest
level in the last twenty years relative to other world markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan returned to a single-party government led by Ryutaro Hashimoto, a member
of the Liberal Democratic Party ("LDP"). While the LDP does not control a
majority of the seats in the parliament, it is only three seats short of the 251
seats required to attain a majority in the House of Representatives (down from a
12-seat shortfall just after the October 1996 election). The popularity of the
LDP declined, however, due to dissatisfaction with Mr. Hashimoto's leadership.
In the July 1998 House of Councillors election, the LDP's representation fell to
103 seats from 120 seats. As a result of the LDP's defeat, Mr. Hashimoto
resigned as prime minister and leader of the LDP. Mr. Hashimoto was replaced by
Keizo Obuchi. For the past several years, Japan's banking industry has been
weakened by a significant amount of problem loans. Japan's banks also have
significant exposure to the current financial turmoil in other Asian markets.
Following the insolvency of one of Japan's largest banks in November 1997, the
government proposed several plans designed to strengthen the weakened banking
sector. In October 1998, the Japanese parliament approved several new laws that
will make $508 billion in public funds available to increase the capital of
Japanese banks, to guarantee depositors' accounts and to nationalize the weakest
banks. It is unclear whether these new laws will achieve their intended effect.
For further information regarding Japan, see the Statements of Additional
Information for All-Asia Investment Fund and International Fund.
Investment in Greater China Issuers. China, in particular, but Hong Kong and
Taiwan, as well, in significant measure because of their existing and increasing
economic, and now in the case of Hong Kong, direct political ties with China,
may be subject to a greater degree of economic, political and social instability
than is the case in the United States.
China's economy is very much in transition. While the government still controls
production and pricing in major economic sectors, significant steps have been
taken toward capitalism and China's economy has become increasingly market
oriented. China's strong economic growth and ability to attract significant
foreign investment in recent years stem from the economic liberalization
initiated by Deng Xiaoping who assumed
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power in the late 1970s. The economic growth, however, has not been smooth and
has been marked by extremes in many respects of inordinate growth, which has not
been tightly controlled, followed by rigid measures of austerity.
The rapidly and erratic nature of the growth have resulted in inefficiencies and
dislocations, including at times high rates of inflation.
China's economic development has occurred notwithstanding the continuation of
the power of China's Communist Party and China's authoritarian government
control, not only of centrally planned economic decisions, but of many aspects
of the social structure. While a significant portion of China's population has
benefited from China's economic growth, the conditions of many leave much room
for improvement. Notwithstanding restrictions on freedom of expression and the
absence of a free press, and notwithstanding the extreme manner in which past
unrest has been dealt with, the 1989 Tiananmen Square uprising being a recent
reminder, the potential for renewed popular unrest associated with demands for
improved social, political and economic conditions be dismissed.
Following the death of Deng Xiaoping in February 1997, Jiang Zemin became the
leader of China's Communist Party. The transfer of political power has
progressed smoothly and Jiang's popularity and credibility have gradually
increased. Jiang continues to consolidate his power, but as of yet does not
appear to have the same degree of control as did Deng Xiaoping. Jiang has
continued the market-oriented policies of Deng. Currently, China's major
economic challenge centers on reforming or eliminating inefficient state-owned
enterprises without creating an unacceptable level of unemployment. Recent
capitalistic policies have in many respects effectively outdated the Communist
Party and the governmental structure, but both remain entrenched. The Communist
Party still controls access to governmental positions and closely monitors
governmental action. Essentially there exists an inefficient set of parallel
bureaucracies and attendant opportunities for corruption.
In addition to the economic impact of China's internal political uncertainties,
the potential effect of China's actions, not only on China itself, but on Hong
Kong and Taiwan as well, could also be significant.
China is heavily dependent on foreign trade, particularly with the United
States, South Korea, Japan and Germany. Political developments adverse to its
trading partners, as well as political and social repression, could cause the
United States and others to alter their trading policy towards China. For
example, in the United States, the continued extension of most favored nation
trading status to China which is reviewed regularly and was renewed in 1999, is
an issue of significant controversy. Loss of that status would clearly hurt
China's economy by reducing its exports. With much of China's trading activity
being funneled through Hong Kong and with trade through Taiwan becoming
increasingly significant, any sizable reduction in demand for goods from China
would have negative implications for both countries. China is believed to be the
largest investor in Hong Kong and its markets and an economic downturn in China
would be expected to reverberate through Hong Kong's markets as well.
Although China has committed by treaty to preserve Hong Kong's autonomy and its
economic, political and social freedoms for fifty years from the July 1, 1997
transfer of sovereignty from Great Britain to China. Hong Kong is headed by a
chief executive, appointed by the central government of China, whose power is
checked by both the government of China and a Legislative Council. Although Hong
Kong voters voted overwhelmingly for pro-democracy candidates in the recent
election, it remains possible that China could exert its authority so as to
alter the economic structure, political structure or existing social policy of
Hong Kong. Investor and business confidence in Hong Kong can be significantly
affected by such developments, which in turn can affect markets and business
performance. In this connection, it is noted that a substantial portion of the
companies listed on the Hong Kong Stock Exchange are involved in real estate-
related activities.
The securities markets of China, and to a lesser extent Taiwan, are relatively
small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, Greater China '97 Fund may experience greater price
volatility and significantly lower liquidity than a portfolio invested solely in
equity securities of U.S. companies. These markets may be subject to greater
influence by adverse events generally affecting the market, and by large
investors trading significant blocks of securities, than is usual in the U.S.
Securities settlements may in some instances be subject to delays and related
administrative uncertainties.
Foreign investment in the securities markets of China and Taiwan is restricted
or controlled to varying degrees. These restrictions or controls, which apply to
the Greater China '97 Fund, may at times limit or preclude investment in certain
securities and may increase the cost and expenses of the Fund. China and Taiwan
require governmental approval prior to investments by foreign persons or limit
investment by foreign persons to only a specified percentage of an issuer's
outstanding securities or a specific class of securities which may have less
advantageous terms (including price) than securities of the company available
for purchase by nationals. In addition, the repatriation of investment income,
capital or the proceeds of sales of securities from China and Taiwan is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose restrictions on foreign
capital remittances.
Greater China '97 Fund could be adversely affected by delays in, or a refusal to
grant, any required governmental approval for repatriation, as well as by the
application to it of other restrictions on investment. The liquidity of the
Fund's investments in any country in which any of these factors exists could be
affected by any such factor or factors on the Fund's investments.
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The limited liquidity in certain Greater China markets is a factor to be taken
into account in the Fund's valuation of portfolio securities in this category
and may affect the Fund's ability to dispose of securities in order to meet
redemption requests at the price and time it wishes to do so. It is also
anticipated that transaction costs, including brokerage commissions for
transactions both on and off the securities exchanges in Greater China
countries, will be higher than in the U.S.
Issuers of securities in Greater China countries are generally not subject to
the same degree of regulation as are U.S. issuers with respect to such matters
as timely disclosure of information, insider trading rules, restrictions on
market manipulation and shareholder proxy requirements. Reporting, accounting
and auditing standards of Greater China countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in securities of Greater China country issuers
than to investors in securities of U.S. issuers.
Investment in Greater China companies which are in the initial stages of their
development involves greater risk than is customarily associated with securities
of more established companies. The securities of such companies may have
relatively limited marketability and may be subject to more abrupt or erratic
market movements than securities of established companies or broad market
indices.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund, Greater China '97 Fund and Global
Environment Fund may emphasize investment in, smaller, emerging companies.
Investment in such companies involves greater risks than is customarily
associated with securities of more established companies. Companies in the
earlier stages of their development often have products and management personnel
which have not been thoroughly tested by time or the marketplace; their
financial resources may not be as substantial as those of more established
companies. The securities of smaller companies may have relatively limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger companies or broad market indices. The revenue flow of such
companies may be erratic and their results of operations may fluctuate widely
and may also contribute to stock price volatility.
Extreme Governmental Action; Less Protective Laws. In contrast with investing
in the United States, foreign investment may involve in certain situations
greater risk of nationalization, expropriation, confiscatory taxation, currency
blockage or other extreme governmental action which could adversely impact a
Fund's investment. In the event of certain such actions, a Fund could lose its
entire investment in the country involved. In addition, laws in various foreign
countries, including in certain respects each of the Greater China countries,
governing, among other subjects, business organization and practices, securities
and securities trading, bankruptcy and insolvency may provide less protection to
investors such as the Fund than provided under United States laws.
Investing in Environmental Companies by Global Environment Fund. Governmental
regulations or other action can inhibit an Environmental Company's performance,
and it may take years to translate environmental legislation into sales and
profits. Environmental Companies generally face competition in fields often
characterized by relatively short product cycles and competitive pricing
policies. Losses may result from large product development or expansion costs,
unprotected marketing or distribution systems, erratic revenue flows and low
profit margins. Additional risks that Environmental Companies may face include
difficulty in financing the high cost of technological development,
uncertainties due to changing governmental regulation or rapid technological
advances, potential liabilities associated with hazardous components and
operations, and difficult in finding experienced employees.
The Real Estate Industry. Although Real Estate Investment Fund does not invest
directly in real estate, it invests primarily in Real Estate Equity
Securities and has a policy of concentration of its investments in the
real estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates. To the extent that assets underlying the Fund's
investments are concentrated geographically, by property type or in certain
other respects, the Fund may be subject to certain of the foregoing risks to a
greater extent.
In addition, if Real Estate Investment Fund receives rental income or income
from the disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company. See
"Dividends, Distributions and Taxes" in the Fund's Statement of Additional
Information. Investments by the Fund in securities of companies providing
mortgage servicing will be subject to the risks associated with refinancings and
their impact on servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and self-
liquidation. REITs are also subject to the possibilities of failing to qualify
for tax free pass-through of income under the Code and failing to maintain their
exemptions from registration under the 1940 Act.
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REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common Stocks.
Mortgage-Backed Securities. As discussed above, investing in Mortgage-Backed
Securities involves certain unique risks in addition to those risks associated
with investment in the real estate industry in general. These risks include the
failure of a counterparty to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest rates
decline, the value of an investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of an investment in fixed
rate obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in Mortgage-
Backed Securities notwithstanding any direct or indirect governmental or agency
guarantee. When the Fund reinvests amounts representing payments and unscheduled
prepayments of principal, it may receive a rate of interest that is lower than
the rate on existing adjustable rate mortgage pass-through securities. Thus,
Mortgage-Backed Securities, and adjustable rate mortgage pass-through securities
in particular, may be less effective than other types of U.S. Government
securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes. Investors should review
carefully the information discussed under the heading "Dividends, Distributions
and Taxes" and should discuss with their tax advisers the specific tax
consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between five and 25
years in the case of Utility Income Fund and between one year or less and 30
years in the case of all other Funds that invest in such securities. In periods
of increasing interest rates, each of the Funds may, to the extent it holds
mortgage-backed securities, be subject to the risk that the average dollar-
weighted maturity of the Fund's portfolio of debt or other fixed-income
securities may be extended as a result of lower than anticipated prepayment
rates. See "Additional Investment Practices--Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa
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or AAA. Securities rated A are considered by Moody's to
possess adequate factors giving security to principal and interest. S&P, Duff &
Phelps and Fitch consider such securities to have a strong capacity to pay
interest and repay principal. Such securities are more susceptible to adverse
changes in economic conditions and circumstances than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition, lower-
rated securities may be more susceptible to real or perceived adverse economic
conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in lower-
rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of Additional Information for each Fund that invests in lower-rated
securities for a description of the bond ratings of Moody's, S&P, Duff & Phelps
and Fitch.
Certain lower-rated securities in which Growth Fund and Utility Income Fund may
invest may contain call or buy-back features that permit the issuers thereof to
call or repurchase such securities. Such securities may present risks based on
prepayment expectations. If an issuer exercises such a provision, a Fund may
have to replace the called security with a lower yielding security, resulting in
a decreased rate of return to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund, Greater China '97 Fund and Global Environmental Fund
is a "non-diversified" investment company, which means the Fund is not limited
in the proportion of its assets that may be invested in the securities of a
single issuer. However, each Fund intends to conduct its operations so as to
qualify to be taxed as a "regulated investment company" for purposes of the
Code, which will relieve the Fund of any liability for federal income tax to the
extent its earnings are distributed to shareholders. See "Dividends,
Distributions and Taxes" in each Fund's Statement of Additional Information. To
so qualify, among other requirements, the Fund will limit its investments so
that, at the close of each quarter of the taxable year, (i) not more than 25% of
the Fund's total assets will be invested in the securities of a single issuer,
and (ii) with respect to 50% of its total assets, not more than 5% of its total
assets will be invested in the securities of a single issuer and the Fund will
not own more than 10% of the outstanding voting securities of a single issuer. A
Fund's investments in U.S. Government securities and other regulated investment
companies are not subject to these limitations. Because each of Worldwide
Privatization Fund, New Europe Fund, Greater China '97 Fund, Global Environment
Fund and All-Asia Investment Fund is a non-diversified investment company, it
may invest in a smaller number of individual issuers than a diversified
investment
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company, and an investment in such Fund may, under certain circumstances,
present greater risk to an investor than an investment in a diversified
investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
Year 2000 and Euro. Many computer systems and applications in use today process
transactions using two-digit date fields for the year of the transaction, rather
than the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year "1900", which could
result in processing inaccuracies and computer system failures. This is commonly
known as the Year 2000 problem. In addition to the Year 2000 problem, the
European Economic and Monetary Union has established a single currency, the Euro
Currency ("Euro") that will replace the national currency of certain European
countries effective January 1, 1999. Computer systems and applications must be
adapted in order to be able to process Euro sensitive information accurately
beginning in 1999. Should any of the computer systems employed by the Funds'
major service providers fail to process Year 2000 or Euro related information
properly, that could have a significant negative impact on the Funds' operations
and the services that are provided to the Funds' shareholders. In addition, to
the extent that the operations of issuers of securities held by the Funds are
impaired by the Year 2000 problem or the Euro, or prices of securities held by
the Funds' decline as a result of real or perceived problems relating to the
Year 2000 or the Euro, the value of the Funds' shares may be materially
affected.
With respect to the Year 2000, the Funds have been advised that Alliance, each
Fund's investment adviser, Alliance Fund Distributors, Inc. ("AFD"), each Fund's
principal underwriter, and Alliance Fund Services, Inc. ("AFS"), each Fund's
registrar transfer agent and dividend disbursing agent (collectively,
"Alliance") began to address the Year 2000 issue several years ago in connection
with the replacement or upgrading of certain computer systems and applications.
During 1997, Alliance began a formal Year 2000 initiative, which established a
structured and coordinated process to deal with the Year 2000 issue. Alliance
reports that it has completed its assessment of the Year 2000 issues on its
domestic and international computer systems and applications. Currently,
management of Alliance expects that the required modifications for the majority
of its significant systems and applications that will be in use on January 1,
2000, will be completed and tested by the end of 1998. Full integration testing
of these systems and testing of interfaces with third-party suppliers will
continue through 1999. At this time, management of Alliance believes that the
costs associated with resolving this issue will not have a material adverse
effect on its operations or on its ability to provide the level of services it
currently provides to the Funds.
With respect to the Euro, the Funds have been advised that Alliance has
established a project team to assess changes that will be required in connection
with the introduction of the Euro. Alliance reports that its project team has
assessed all systems, including those developed or managed internally, as well
as those provided by vendors, in order to determine the modifications that will
be required to process accurately transactions denominated in Euro after 1998.
At this time, management of Alliance expects that the required modifications for
the introduction of the Euro will be completed and tested before the end of
1998. Management of Alliance believes that the costs associated with resolving
this issue will not have a material adverse effect on its operations or on its
ability to provide the level of services it currently provides to the Funds.
The Funds and Alliance have been advised by the Funds' Custodians that they are
also in the process of reviewing their systems with the same goals. As of the
date of this prospectus, the Funds and Alliance have no reason to believe that
the Custodians will be unable to achieve these goals.
--------------------------------------
Purchase And Sale
--------------------------------------
Of Shares
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HOW TO BUY SHARES
Each Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares of each Fund may be purchased
through your financial representative at net asset value without any initial or
contingent deferred sales charges and are not subject to ongoing distribution
expenses. Advisor Class shares may be purchased and held solely (i) through
accounts established under a fee-based program, sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by AFD,
(ii) through a self-directed defined contribution employee benefit plan (e.g., a
401(k) plan) that has at least 1,000 participants or $25 million in assets,
(iii) by investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Funds, and (iv) through registered
investment advisers or other financial intermediaries who charge a management,
consulting or other fee for their service and who purchase shares through a
broker or agent approved by AFD and clients of such registered investment
advisers or financial intermediaries whose accounts are linked to the master
account of such investment adviser or financial intermediary on the books of
such approved broker or agent. For more detailed information about who may
purchase and hold Advisor Class shares see the Statements of Additional
Information. A shareholder's Advisor Class shares will automatically convert to
Class A shares of the same Fund under certain circumstances.
For a more detailed description of the conversion feature and Class A shares,
see "Conversion Feature."
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Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares of each Fund in which
the program invests in order to be approved by AFD for investment in Advisor
Class shares. Share certificates are issued only upon request. See the
Subscription Application and the Statements of Additional Information for more
information.
The Funds may refuse any order to purchase Advisor Class shares. In this regard,
the Funds reserve the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.
How the Funds Value Their Shares
The net asset value of Advisor Class shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to the Advisor Class by the
outstanding shares of the Advisor Class. Shares are valued each day the Exchange
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Fund's Directors believe accurately reflects fair
market value.
HOW TO SELL SHARES
You may "redeem" (i.e., sell your shares in a Fund to the Fund) on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check or electronic
funds transfer, a Fund will not send proceeds until it is reasonably satisfied
that the check or electronic funds transfer has been collected (which may take
up to 15 days). If you are in doubt about what documents are required by your
fee-based program or employee benefit plan, you should contact your financial
representative.
Selling Shares Through Your Financial Representative
Your financial representative must receive your request before 4:00 p.m. Eastern
time, and your financial representative must transmit your request to the Fund
by 5:00 p.m. Eastern time, for you to receive that day's net asset value. Your
financial representative is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service.
Selling Shares Directly To A Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. Stock power forms are
available from your financial representative, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value. A shareholder who
has completed the appropriate section of the Subscription Application, or the
Shareholder Options form obtained from AFS, can elect to have the proceeds of
his or her redemption sent to his or her bank via an electronic funds transfer.
Proceeds of telephone redemptions also may be sent by check to a shareholder's
address of record. Except for certain omnibus accounts, redemption requests by
electronic funds transfer may not exceed $100,000 and redemption requests by
check may not exceed $50,000 per day. Telephone redemption is not available for
shares held in nominee or "street name" accounts or retirement plan accounts or
shares held by a shareholder who has changed his or her address of record within
the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
AFD from time to time pays additional cash or other incentives to dealers or
agents in connection with the sale of shares of the Funds. Such additional
amounts may be utilized, in whole or in part, in some cases together with other
revenues of such dealers or agents, to provide additional compensation to
registered representatives who sell shares of the Funds. On some occasions, such
cash or other incentives will be conditioned upon the sale of specified minimum
dollar amount of the shares of a Fund and/or other Alliance Mutual Funds during
a specific period of time. Such incentives may take the
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form of payment for attendance at seminars, meals, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with dealer or agent to urban or
resort locations within or outside the United States. Such dealer or agent may
elect to receive cash incentives of equivalent amount in lieu of such payments.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of any Fund for Advisor Class shares
of other Alliance Mutual Funds (including AFD Exchange Reserves, a money market
fund managed by Alliance). Exchanges of shares are made at the net asset value
next determined and without sales or service charges. Exchanges may be made by
telephone or written request. Telephone exchange requests must be received by
AFS by 4:00 p.m. Eastern time on a Fund business day in order to receive that
day's net asset value.
Please read carefully the prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
GENERAL
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale or exchange of Advisor Class shares of a Fund that are different
from those described in this Prospectus. A transaction, service, administrative
or other similar fee may be charged by your broker-dealer, agent, financial
intermediary or other financial representative with respect to the purchase,
sale or exchange of Advisor Class shares made through such financial
representative. Such financial intermediaries may also impose requirements with
respect to the purchase, sale or exchange of shares that are different from, or
in addition to, those imposed by a Fund, including requirements as to the
minimum initial and subsequent investment amounts.
Each Fund offers three classes of shares other than the Advisor Class, which are
Class A, Class B and Class C. All classes of shares of a Fund have a common
investment objective and investment portfolio. Class A shares are offered with
an initial sales charge and pay a distribution services fee. Class B shares have
a contingent deferred sales charge (a "CDSC") and also pay a distribution
services fee. Class C shares have no initial sales charge or CDSC as long as
they are not redeemed within one year of purchase, but pay a distribution
services fee. Because Advisor Class shares have no initial sales charge or CDSC
and pay no distribution services fee, Advisor Class shares are expected to have
different performance from Class A, Class B or Class C shares. You can obtain
more information about Class A, Class B and Class C shares, which are not
offered by this Prospectus, by contacting AFS by telephone at 800-221-5672 or by
contacting your financial representative.
-----------------------------------
Management Of The Funds
-----------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
<TABLE>
Principal occupation
during the past
Fund Employee; year; title five years
- --------------------------------------------------------------------------------
<S> <C> <C>
Alliance Fund Alden M. Stewart since 1997- Associated with
Executive Vice President of Alliance
Alliance Capital Management
Corporation ("ACMC")*
Randall E. Haase since 1997- Associated with
Senior Vice President of ACMC Alliance
Growth Fund Tyler Smith since inception- Associated with
Senior Vice President of ACMC Alliance
Premier Growth Fund Alfred Harrison since inception- Associated with
Vice Chairman of ACMC Alliance
Technology Fund Peter Anastos since 1992- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992- Associated with
Senior Vice President of ACMC Alliance
Quasar Fund Alden M. Stewart since (see above)
1994--
(see above)
Randall E. Haase since (see above)
1994--
(see above)
International Fund Bruce W. Calvert since 1998-- Associated with
Vice Chairman and Chief Alliance
Investment Officer
of ACMC
International Premier Alfred Harrison since 1998-- (see above)
Growth Fund (see above)
Thomas Kamp since 1998-- Associated with
Senior Vice President Alliance
of ACMC
</TABLE>
43
<PAGE>
<TABLE>
Principal occupation
during the past
Fund Employee; year; title five years
- --------------------------------------------------------------------------------
<S> <C> <C>
Worldwide Privatization Mark H. Breedon since inception-- Associated with
Fund Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited **
New Europe Fund Steven Beinhacker since 1997-- Associated with
Vice President of ACMC Alliance
All-Asia Hiroshi Motoki since 1998-- Associated with
Investment Fund Senior Vice President of ACMC Alliance since
and Director of Japanese/Asian 1994; prior
Equity research thereto
associated
with Ford Motor
Company
Greater China Matthew W. S. Lee since 1997-- Associated with
'97 Fund Vice President of ACMC Alliance since
1997; prior
thereto
associated with
National Mutual
Funds
Management (Asia)
since 1994 and
James Capel and
Co. since prior to
1994
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance
Global Environment Linda Bolton Weiser since 1998-- Associated with
Fund Vice President of ACMC Alliance
Balanced Shares Paul Rissman since 1997-- Associated with
Senior Vice President of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- (see above)
(see above)
Growth & Income Paul Rissman since 1994-- (see above)
Fund (see above)
Real Estate Daniel G. Pine since 1996-- Associated with
Investment Fund Senior Vice President Alliance since
of ACMC 1996; prior
thereto, Senior
Vice President of
Desai Capital
Management
David Kruth since 1997-- Associated with
Vice President of ACMC Alliance since
1997; prior
thereto Senior
Vice President of
the Yarmouth
Group
- --------------------------------------------------------------------------------
</TABLE>
* The sole general partner of Alliance.
** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1998 totaling more than $262 billion (of
which approximately $107 billion represented the assets of investment
companies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations and
endowment funds. The 58 registered investment companies managed by Alliance
comprising 123 separate investment portfolios currently have over two million
shareholders. As of June 30, 1998, Alliance was an investment manager of
employee benefit plan assets for 32 of the Fortune 100 companies.
Alliance Capital Management Corporation ("ACMC"), the sole general partner of,
and the owner of a 1% general partnership interest in, Alliance, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies in the United
States, which is a wholly-owned subsidiary of The Equitable Companies
Incorporated, a holding company controlled by AXA-UAP, a French insurance
holding company. Certain information concerning the ownership and control of
Equitable by AXA-UAP is set forth in each Fund's Statement of Additional
Information under "Management of the Funds."
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Premier Growth Fund, Mr. Harrison has ultimate responsibility for the
management of discretionary tax-exempt accounts of institutional clients managed
as described below without significant client-imposed restrictions ("Historical
Portfolios"). These accounts have substantially the same investment objectives
and policies and are managed in accordance with essentially the same investment
strategies and techniques as those for Premier Growth Fund, except for the
ability of Premier Growth Fund to use futures and options as hedging tools and
to invest in warrants. The Historical Portfolios are also not subject to certain
limitations, diversification requirements and other restrictions imposed under
the 1940 Act and the Code to which Premier Growth Fund, as a registered
investment company, is subject and which, if applicable to the Historical
Portfolios, may have adversely affected the performance results of the
Historical Portfolios. See "Investment Objective and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the nineteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios as an employee of Alliance
and cumulatively through September 30, 1998. As of September 30, 1998, the
assets in the Historical Portfolios totaled approximately $12.3 billion and the
average size of an institutional account in the Historical Portfolio was $412
million. Each Historical Portfolio has a nearly identical composition of
investment holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be
44
<PAGE>
payable by Premier Growth Fund, which are higher than the fees imposed on the
Historical Portfolio and will result in a higher expense ratio and lower returns
for Premier Growth Fund. Expenses associated with the distribution of Class A,
Class B and Class C shares of Premier Growth Fund in accordance with the plan
adopted by Premier Growth Fund's Board of Directors pursuant to Rule 12b-1 under
the 1940 Act ("distribution fees") are also excluded. See "Expense Information."
The performance data has also not been adjusted for corporate or individual
taxes, if any, payable by the account owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset-weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The total returns set forth below are
calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median book-to-
price ratio of each of the securities. At each reconstitution, the Russell 1000
constituents are ranked by their book-to-price ratio. Once so ranked, the
breakpoint for the two styles is determined by the median market capitalization
of the Russell 1000. Thus, those securities falling within the top fifty percent
of the cumulative market capitalization (as ranked by descending book-to-price)
become members of the Russell Price-Driven Indices. The Russell 1000 Growth
Index is, accordingly, designed to include those Russell 1000 securities with a
greater-than-average growth orientation. In contrast with the securities in the
Russell Price-Driven Indices, companies in the Growth Index tend to exhibit
higher price-to-book and price-earnings ratios, lower dividend yield and higher
forecasted growth values.
To the extent Premier Growth Fund does not invest in U.S. common stocks or
utilizes investment techniques such as futures or options, the S&P 500 Index and
Russell 1000 Growth Index may not be substantially comparable to Premier Growth
Fund. The S&P 500 Index and Russell 1000 Growth Index are included to illustrate
material economic and market factors that existed during the time period shown.
The S&P 500 Index and Russell 1000 Growth Index do not reflect the deduction of
any fees. If Premier Growth Fund were to purchase a portfolio of securities
substantially identical to the securities comprising the S&P 500 Index or the
Russell 1000 Growth Index, Premier Growth Fund's performance relative to the
index would be reduced by Premier Growth Fund's expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees, transfer agency
costs and other administrative expenses as well as by the impact on Premier
Growth Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the Premier Growth Fund as
measured against certain broad based market indices and against the composite
performance of other open-end growth mutual funds. Investors should not rely on
the following performance data of the Historical Portfolios as an indication of
future performance of Premier Growth Fund. The composite investment performance
for the periods presented may not be indicative of future rates of return. Other
methods of computing investment performance may produce different results, and
the results for different periods may vary.
<TABLE>
<CAPTION>
Schedule of Composite Investment Performance--Historical Portfolios*
Russell Lipper
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
------ --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1/1/98 to
9/30/98*** 9.09% 15.27% 6.04% 9.44% 2.38%
Year ended:
1997*** 27.05% 34.64% 33.36% 30.49% 25.30%
1996*** 18.84 22.06 22.96 23.12 17.48
1995*** 40.66 39.83 37.58 37.19 32.65
1994 (9.78) (4.82) 1.32 2.66 (1.57)
1993 5.35 10.54 10.08 2.90 11.98
1992 -- 12.18 7.62 5.00 7.63
1991 -- 38.91 30.47 41.16 35.20
1990 -- (1.57) (3.10) (0.26) (5.00)
1989 -- 38.80 31.69 35.92 28.60
1988 -- 10.88 16.61 11.27 15.80
1987 -- 8.49 5.25 5.31 1.00
1986 -- 27.40 18.67 15.36 15.90
1985 -- 37.41 31.73 32.85 30.30
1984 -- (3.31) 6.27 (.95) (2.80)
1983 -- 20.80 22.56 15.98 22.30
1982 -- 28.02 21.55 20.46 20.20
1981 -- (1.09) (4.92) (11.31) (8.40)
1980 -- 50.73 32.50 39.57 37.30
1979 -- 30.76 18.61 23.91 27.40
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Russell Lipper
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
------ --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cumulative total
return for
the period
January 1,
1979 to
September 30,
1998 -- 3,542% 2,064% 1,852% 1,613%
</TABLE>
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion. Total returns for Premier Growth Fund are for Class A
Shares with imposition of the maximum 4.25% sales charge.
** Assumes imposition of the maximum advisory fee charged by Alliance for any
Historical Portfolio for the period involved.
*** During this period, the Historical Portfolios differed from Premier Growth
Fund in that Premier Growth Fund invested a portion of its net assets in
warrants on equity securities in which the Historical Portfolios were
unable, by their investment restrictions, to purchase. In lieu of warrants,
the Historical Portfolios acquired the common stock upon which the warrants
were based.
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 1998, and for more than one year assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
<TABLE>
<CAPTION>
Average Annual Total Returns
---------------------------------------------------------------
Premier Russell Lipper
Growth Historical S&P 500 1000 Growth
Fund Portfolios** Index Growth Index Fund Index
-------- ------------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
One year........ 6.21% 13.19% 6.08% 11.11% 3.07%
Three years..... 21.82 24.22 22.60 22.50 16.43
Five years...... 20.23 20.70 19.91 20.80 15.52
Ten years*...... 19.98+ 19.70 17.29 18.07 15.01
Since January 1,
1979.......... -- 19.97 16.84 16.23 15.47
---------------------------------------------------------------
</TABLE>
* Since inception on 9/28/92
ADMINISTRATOR TO ALL-ASIA INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
CONSULTANT TO ALLIANCE WITH RESPECT TO GREATER CHINA COUNTRIES
In connection with its provisions of advisory services to Greater China '97
Fund, Alliance has retained at its expense as a consultant New Alliance, a joint
venture company headquartered in Hong Kong which was formed in 1997 by Alliance
and Sun Hung Kai Properties Limited ("SHKP"). New Alliance provides Alliance
with ongoing, current and comprehensive information and analysis of conditions
and developments in Greater China countries consisting of, but not limited to,
statistical and factual research and assistance with respect to economic,
financial, political, technological and social conditions and trends in Greater
China countries, including information on markets and industries. In addition to
its own staff of professionals, New Alliance has access to the expertise and
personnel of SHKP, one of Hong Kong's preeminent property and business groups.
SHKP is one of the largest enterprises in Hong Kong measured by market
capitalization and has considerable expertise in evaluating business and market
conditions in Hong Kong and the other Greater China countries. Its activities
complementary to property development include insurance and estate management,
and SHKP is diversified as well into telecommunications and infrastructure
projects.
CONSULTANT TO ALLIANCE WITH RESPECT TO INVESTMENT IN REAL ESTATE SECURITIES
Alliance, with respect to investment in real estate securities, has retained as
a consultant CB Richard Ellis, Inc. ("CBRE"), a publicly held company and the
largest real estate services company in the United States, comprised of real
estate brokerage, property and facilities management, and real estate finance
and investment advisory activities. In 1997, CBRE completed 22,100 sale and
lease transactions, managed over 6,600 client properties, created over $5
billion in mortgage originations, and completed over 3,600 appraisal and
consulting assignments. In addition, they advised and managed for institutions
over $4 billion in real estate investments. CBRE will make available to Alliance
the CBRE National Real Estate Index, which gathers, analyzes and publishes
targeted research data for the 66 largest U.S. markets, based on a variety of
public-sector and private-sector sources as well as CBRE's proprietary database
of approximately 80,000 property transactions representing over $500 billion of
investment property. This information provides a substantial component of the
research and data used to create the REIT.Score model. As a consultant, CBRE
provides to Alliance, at Alliance's expense, such in-depth information regarding
the real estate market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-family properties
as Alliance shall from time to time request. CBRE will not furnish advice or
make recommendations regarding the purchase or sale of securities by the Fund
nor will it be responsible for making investment decisions involving Fund
assets.
CBRE is one of the three largest fee-based property management firms in the
United States, the largest commercial real estate lease brokerage firm in the
country, the largest investment property brokerage firm in the country, as well
as one of the largest publishers of real estate research, with approximately
8,000 employees worldwide. CBRE will provide Alliance with exclusive access to
its REIT . Score model which ranks approximately 142 REITs based on the relative
attractiveness of the property markets in which they own real estate. This model
scores the approximately 18,000 individual properties owned by these companies.
REIT . Score is in turn based on CBRE's National Real Estate Index which
gathers, analyzes and publishes targeted research for the 66 largest U.S. real
estate markets based on a variety of public- and private-sector sources as well
as CBRE's proprietary database of 80,000 commercial property transactions
representing over $500 billion of investment property and over 2,500 tracked
properties which report rent and expense data quarterly. CBRE has previously
provided access to its REIT.Score model results primarily to the institutional
market
46
<PAGE>
through subscriptions. The model is no longer provided to any research
publications and Real Estate Investment Fund is currently the only mutual fund
available to retail investors that has access to CBRE's REIT . Score model.
DISTRIBUTION SERVICES AGREEMENTS
Each Fund has entered into a Distribution Services Agreement with AFD with
respect to the Advisor Class shares. The Glass-Steagall Act and other applicable
laws may limit the ability of a bank or other depository institution to become
an underwriter or distributor of securities. However, in the opinion of the
Funds' management, based on the advice of counsel, these laws do not prohibit
such depository institutions from providing services for investment companies
such as the administrative, accounting and other services referred to in the
Agreements. In the event that a change in these laws prevented a bank from
providing such services, it is expected that other service arrangements would be
made and that shareholders would not be adversely affected. The State of Texas
requires that shares of a Fund may be sold in that state only by dealers or
other financial institutions that are registered there as broker-dealers.
--------------------------------
Dividends, Distributions
And Taxes
--------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund having an
aggregate net asset value as of the payment date of such dividend or
distribution equal to the cash amount of such income dividend or distribution.
Election to receive dividends and distributions in cash or shares is made at the
time shares are initially purchased and may be changed at any time prior to the
record date for a particular dividend or distribution. Cash dividends can be
paid by check or, if the shareholder so elects, electronically via the ACH
network. There is no sales or other charge in connection with the reinvestment
of dividends and capital gains distributions.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains. Since REITs pay
distributions based on cash flow, without regard to depreciation and
amortization, it is likely that a portion of the distributions paid to Real
Estate Investment Fund and subsequently distributed to shareholders may be a
nontaxable return of capital. The final determination of the amount of a Fund's
return of capital distributions for the period will be made after the end of
each calendar year.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so. Furthermore, a
shareholder's ability to claim a foreign tax credit or deduction in respect of
foreign taxes paid by a Fund may be subject to certain limitations imposed by
the Code, as a result of which a shareholder may not be permitted to claim a
full credit or deduction for the amount of such taxes.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. Qualification as a regulated investment company relieves that
Fund of federal income taxes on that part of its taxable income including net
capital gain which it pays out to its shareholders. Dividends out of net
ordinary income and distributions of net short-term capital gains are taxable to
the recipient shareholders as ordinary income. In the case of corporate
shareholders, such dividends may be eligible for the dividends-received
deduction, except that the amount eligible for the deduction is limited to the
amount of qualifying dividends received by the Fund. Dividends received from
REITs or from foreign corporations generally do not constitute qualifying
dividends. A corporation's dividends-received deduction generally will be
disallowed unless the corporation holds shares in the Fund at least 46 days
during the 90 day period beginning 45 days before the date on which the
corporation becomes entitled to receive the dividend. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of a Fund is financed with indebtedness.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gain,
regardless of how long a shareholder has held shares in a Fund. Distributions of
net capital gain are not eligible for the dividends-received deduction referred
to above.
Under current federal tax law, the amount of an income dividend or capital gains
distribution declared by a Fund
47
<PAGE>
during October, November or December of a year to shareholders of record as of a
specified date in such a month that is paid during January of the following year
is includable in the prior year's taxable income of shareholders that are
calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to him or her
as described above. If a shareholder held shares six months or less and during
that period received a distribution of net capital gain, any loss realized on
the sale of such shares during such six-month period would be a long-term
capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, generally
will not be taxable to the plan. Distributions from such plans will be taxable
to individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant) any further returns of capital will be taxable as capital gain. See
"Dividends, Distributions and Taxes" in the Statements of Additional
Information. Shareholders will be advised annually as to the tax status of
dividends and capital gains and return of capital distributions. Shareholders
are urged to consult their tax advisors regarding their own tax situation.
Distributions by a Fund may be subject to state and local taxes.
------------------------------
Conversion Feature
------------------------------
CONVERSION TO CLASS A SHARES
Advisor Class shares may be held solely through the fee-based program accounts,
employee benefit plans and registered investment advisory or other financial
intermediary relationships described above under "Purchase and Sale of Shares--
How to Buy Shares," and by investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or the Funds. If (i) a
holder of Advisor Class shares ceases to participate in the fee-based program or
plan, or to be associated with an investment advisor or financial intermediary,
in each case that satisfies the requirements to purchase shares set forth under
"Purchase and Sale of Shares--How to Buy Shares" or (ii) the holder is otherwise
no longer eligible to purchase Advisor Class shares as described in this
Prospectus (each, a "Conversion Event"), then all Advisor Class shares held by
the shareholder will convert automatically and without notice to the
shareholder, other than the notice contained in this Prospectus, to Class A
shares of the Fund during the calendar month following the month in which the
Fund is informed of the occurrence of the Conversion Event. The failure of a
shareholder or a fee-based program to satisfy the minimum investment
requirements to purchase Advisor Class shares will not constitute a Conversion
Event. The conversion would occur on the basis of the relative net asset values
of the two classes and without the imposition of any sales load, fee or other
charge. Class A shares are subject to a distribution fee that may not exceed an
annual rate of .30%. The higher fees mean a higher expense ratio, so Class A
shares pay correspondingly lower dividends and may have a lower net asset value
than Advisor Class shares.
--------------------------------
General Information
--------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance International Premier
Growth Fund (1997), Alliance Worldwide Privatization Fund, Inc. (1994), Alliance
New Europe Fund, Inc. (1990), Alliance All-Asia Investment Fund, Inc. (1994),
Alliance Greater China '97 Fund (1997), Alliance Global Small Cap Fund, Inc.
(1966), Alliance Global Environment Fund, Inc. (1990), Alliance Utility Income
Fund, Inc. (1993), Alliance Growth and Income Fund, Inc. (1932) and Real Estate
Investment Fund, Inc. (1996). Each of the following Funds is either a
Massachusetts business trust or a series of a Massachusetts business trust
organized in the year indicated: Alliance Growth Fund (a series of The Alliance
Portfolios) (1987), and Alliance International Fund (1980). Prior to August 2,
1993, The Alliance Portfolios was known as The Equitable Funds and Growth Fund
was known as The Equitable Growth Fund.
48
<PAGE>
It is anticipated that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal or state law. Shareholders
have available certain procedures for the removal of Directors.
A shareholder in a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares. The Funds are empowered to
establish, without shareholder approval, additional portfolios, which may have
different investment objectives and policies than those of the Fund, and
additional classes of shares within the Funds, if an additional portfolio or
class were established in a Fund, each share of the portfolio or class would
normally be entitled to one vote for all purposes. Generally, shares of each
portfolio and class would vote together as a single class on matters, such as
the election of Directors, that affect each portfolio and class in substantially
the same manner. Advisor Class, Class A, Class B and Class C shares have
identical voting, dividend, liquidation and other rights, except that each class
bears its own transfer agency expenses, each of Class A, Class B and Class C
shares of each Fund bears its own distribution expenses and Class B and Advisor
Class shares convert to Class A shares under certain circumstances. Each class
of shares of each Fund votes separately with respect to matters for which
separate class voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the Directors and, in
liquidation of a Fund, are entitled to receive the net assets of the Fund. Since
this Prospectus sets forth information about all the Funds, it is theoretically
possible that a Fund might be liable for any materially inaccurate or incomplete
disclosure in this Prospectus concerning another Fund. Based on the advice of
counsel, however, the Funds believe that the potential liability of each Fund
with respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a Fund's
organization are discussed in its Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for each class of shares, including Advisor Class shares. Such
advertisements disclose a Fund's average annual compounded total return for the
periods prescribed by the Commission. A Fund's total return for each such period
is computed by finding, through the use of a formula prescribed by the
Commission, the average annual compounded rate of return over the period that
would equate an assumed initial amount invested to the value of the investment
at the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of a Fund are assumed
to have been reinvested when paid and the maximum sales charges applicable to
purchases and redemptions of a Fund's shares are assumed to have been paid.
Balanced Shares, Growth and Income Fund, Real Estate Investment Fund and Utility
Income Fund may also advertise their "yield," which is also computed separately
for each class of shares, including Advisor Class shares. A Fund's yield for any
30-day (or one-month) period is computed by dividing the net investment income
per share earned during such period by the maximum public offering price per
share on the last day of the period, and then annualizing such 30-day (or one-
month) yield in accordance with a formula prescribed by the Commission which
provides for compounding on a semi-annual basis.
Balanced Shares, Utility Income Fund, Real Estate Investment Fund and Growth and
Income Fund may also state in sales literature an "actual distribution rate" for
each class which is computed in the same manner as yield except that actual
income dividends declared per share during the period in question are
substituted for net investment income per share. The actual distribution rate is
computed separately for each class of shares, including Advisor Class shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
49
<PAGE>
- --------------------------------------
Alliance Stock Funds
Subscription Application
- - Advisor Class
- --------------------------------------
The Alliance Fund
Growth Fund
Premier Growth Fund
Technology Fund
Quasar Fund
International Fund
International Premier Growth Fund
Worldwide Privatization Fund
New Europe Fund
All-Asia Investment Fund
Greater China '97 Fund
Global Small Cap Fund
Global Environment Fund
Balanced Shares
Utility Income Fund
Growth & Income Fund
Fund Real Estate Investment Fund
To Open Your New Alliance Account...
Please complete the application and mail it to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration
(Required)
Complete one of the available choices. To ensure proper
tax reporting to the IRS:
. Individuals, Joint Tenants, 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'.
<PAGE>
(2) Write the dollar amount of your initial purchase in the column titled
`Indicate Dollar Amount'.
(3) Check off a distribution option for your dividends.
(4) 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.
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.
- ------------------------------------
For Literature Call: (800) 227-4618
- ------------------------------------
<PAGE>
The Alliance Stock Funds Subscription Application - Advisor Class
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
[_][_][_][_][_][_][_][_][_][_] [_] [_][_][_][_][_][_][_][_][_][_]
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
Social Security Number of Owner to 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
ALLIANCE CAPITAL [LOGO]
80887GEN-TASFApp-Advisor-P1
1
<PAGE>
- -----------------------------------
3. Your Initial Investment
- -----------------------------------
I hereby subscribe for shares of the following Alliance Stock Fund(s) Advisor
Class and elect distribution options as indicated.
Broker/Dealer Use Only: Wire Confirm #
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
- - ----------------------
C Send my distributions in cash to the address I have provided in Section 2.
- - -----------------------------
(Complete Section 4D for direct deposit to your bank account. Complete
Section 4E for payment to a third party).
D Direct my distributions to another Alliance fund. Complete the appropriate
- - ------------------------------------------------
portion of Section 4A to direct your distributions (dividends and capital
gains) to another Alliance Fund.
- ----------- -------------- ---------------------- ------------------------
Make all Indicate three Distributions Options
checks/*/ digit Fund Indicate Dollar Amount /*/Check One/*/
payable to: number ------------------------
Alliance located below --------- -------------
Funds Dividends Capital Gains
- ----------- -------------- ---------------------- --------- -------------
R C D R C D
- ----------------------------
Total Investment
- ----------------------------
/*/ Cash and money orders are not accepted
- -----------------------------------------------------
Alliance Stock Fund Names and Numbers
- -----------------------------------------------------
------------
Advisor
Class
------------
The Alliance Fund 444
Growth Fund 431
- -------- Premier Growth Fund 478
DOMESTIC Technology Fund 482
- -------- Quasar Fund 426
International Fund 440
International Premier Growth 479
Worldwide Privatization Fund 412
- ------ New Europe Fund 462
GLOBAL All-Asia Investment Fund 418
- ------ Greater China '97 Fund 460
Global Small Cap Fund 445
Global Environment Fund 481
- ------ Balanced Shares 496
TOTAL Utility Income Fund 409
RETURN Growth & Income Fund 494
- ------ Real Estate Investment Fund 410
80887GEN-TASFApp-Advisor-P2
2
<PAGE>
4. Your Shareholder Options
A. Automatic Investment Plans (AIP)
[_] Withdraw From My Bank Account Via EFT(*) I authorize Alliance to draw on my
bank account for investment in my fund account(s) as indicated below
(Complete Section 4D also for the bank account you wish to use).
<TABLE>
<S> <C> <C> <C>
1- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_] Frequency:
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency M = monthly
Q = quarterly
A = annually
2- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_]
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
3- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_]
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
(*) Electronic Funds Transfer. Your bank must be a member of the National Automated Clearing House Association (NACHA)
</TABLE>
[_] 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 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.
- --------------------------------------------------------------------------------
80887GEN-TASFApp-Advisor-P3
3
<PAGE>
4. Your Shareholder Options (CONTINUED)
C. Systematic Withdrawal Plans (SWP)
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_]
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_] M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = annually
3- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_]
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Please send my SWP proceeds to:
[_] My Address of Record (via check)
[_] The Payee and address specified in section 4E (via check)(Medallion
Signature Guarantee required)
[_] My checking account-via EFT (complete section 4D) Your bank must be a
member of the National Automated Clearing House Association (NACHA)
in order for you to receive SWP proceeds directly into your bank
account. Otherwise payment will be made by check
D. Bank Information This bank account information will be used for:
[_] Distributions (Section 3) [_] Telephone Transactions
(Section 4B)
[_] Automatic Investments (Section 4A) [_] Withdrawals (Section 4C)
Please Tape a Pre-printed Voided Check Here(*)
103
J. Smith
123 Main Street
ANYTOWN, USA 12345 ____ 19 __
Pay to the
Order of ________________________________________$ _______________
____________________________________________________________Dollars
YOUR BANK
123 STREET
ANYTOWN, USA 12345 VOID
Note ___________________________ _______________________________
:000000000: 103 000000000:765
ABA Routing Number Check Bank Account Number
Number
(*) 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
</TABLE>
[_] Checking Account [_] Savings Account
80887GEN-TASFApp-Advisor-P4
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
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
80887GEN-TASFApp-Advisor-P5
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 for redemptions by check.
[_] 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]
80887GEN-TASFApp-Advisor-P6
6
<PAGE>
[LOGO]
ALLIANCE ALL-ASIA INVESTMENT FUND, INC.
________________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
February 2, 1998
(as amended November 2, 1998)
________________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the current Prospectus for Alliance All-Asia Investment Fund,
Inc. (the "Fund") that offers the Class A, Class B and Class C
shares of the Fund and the current Prospectus for the Fund that
offers the Advisor Class shares of the Fund (the "Advisor Class
Prospectus" and, together with the Prospectus for the Fund that
offers the Class A, Class B and Class C shares of the Fund, the
"Prospectus"). Copies of such Prospectuses may be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone number shown above.
TABLE OF CONTENTS
Page
Description of the Fund...............................
Management of the Fund................................
Expenses of the Fund..................................
Purchase of Shares....................................
Redemption and Repurchase of Shares...................
Shareholder Services..................................
Net Asset Value.......................................
Dividends, Distributions and Taxes....................
Brokerage and Portfolio Transactions..................
General Information...................................
Report of Independent Auditors and Financial
Statements..........................................
Appendix A: Options.................................. A-1
Appendix B: Futures Contracts, Options on Futures ...
Contracts and Options on Foreign .....................
Currencies............................................ B-1
Appendix C: Bond Ratings............................. C-1
Appendix D: Additional Information About Japan....... D-1
Appendix E: Certain Employee Benefit Plans........... E-1
<PAGE>
____________________
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
___________________________________________________________
DESCRIPTION OF THE FUND
___________________________________________________________
Except as otherwise indicated, the investment policies
of the Fund are not "fundamental policies" and may, therefore, be
changed by the Board of Directors without a shareholder vote.
However, the Fund will not change its investment policies without
contemporaneous written notice to its shareholders. The Fund's
investment objective is fundamental and may not be changed
without shareholder approval. There can be, of course, no
assurance that the Fund will achieve its investment objective.
Investment Objective
The Fund is a non-diversified, open-end management
investment company whose investment objective is to seek long-
term capital appreciation. In seeking to achieve its investment
objective, the Fund will invest at least 65% of its total assets
in equity securities issued by Asian companies. The Fund may
invest up to 35% of its total assets in debt securities issued or
guaranteed by Asian companies or by Asian governments, their
agencies or instrumentalities. The Fund may also invest in
equity or debt securities issued by non-Asian issuers provided
that the Fund will invest at least 80% of its total assets in
equity securities issued by Asian companies and Asian debt
securities referred to above. The Fund expects to invest, from
time to time, a significant portion which may be in excess of
50%, of its assets in equity securities of Japanese companies.
For a description of Japan, see Appendix D. Equity securities
are common and preferred stocks, securities convertible into
common and preferred stocks and equity-linked debt securities,
but do not include rights, warrants or options to subscribe for
or purchase common and preferred stocks.
The Fund defines an Asian company to be an entity that
(i) is organized under the laws of an Asian country and conducts
business in an Asian country, (ii) derives 50% or more of its
total revenues from business in Asian countries or (iii) issues
equity or debt securities that are traded principally on a stock
exchange in an Asian country.
For purposes of this Statement of Additional
Information, Asian countries include Australia, the Democratic
Socialist Republic of Sri Lanka ("Sri Lanka"), the Hong Kong
Special Administrative Region ("Hong Kong"), the Islamic Republic
of Pakistan ("Pakistan"), Japan, the Kingdom of Thailand
("Thailand"), Malaysia, Negara Brunei Darussalam ("Brunei"), New
Zealand, the People's Republic of China ("China"), the People's
Republic of Kampuchea ("Cambodia"), the Republic of China
2
<PAGE>
("Taiwan"), the Republic of India ("India"), the Republic of
Indonesia ("Indonesia"), the Republic of Korea ("South Korea"),
the Republic of the Philippines ("the Philippines"), the Republic
of Singapore ("Singapore"), the Socialist Republic of Vietnam
("Vietnam") and the Union of Myanmar ("Myanmar").
How The Fund Pursues Its Objective
Investment in Asian Countries. In the past decade,
Asian countries generally have experienced a high level of real
economic growth due to political and economic changes, including
foreign investment and reduced government intervention in the
economy. Alliance Capital Management L.P., the Fund's investment
adviser (the "Adviser"), believes that certain conditions exist
in Asian countries which create the potential for continued rapid
economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct
investment, rising per capita incomes and consumer demand, a high
savings rate and numerous privatization programs. Asian countries
are also becoming more industrialized and are increasing their
intra-Asian exports while reducing their dependence on Western
export demand. The Adviser believes that these conditions are
important to the long-term economic growth of Asian countries.
As the economics of many Asian countries move through
the "emerging market" stage, thus increasing the supply of goods,
services and capital available to less developed Asian markets
and helping to spur economic growth in those markets, the
potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies, the securities of
which are listed on exchanges in more developed Asian countries,
will be participants in the rapid economic growth of the lesser
developed countries. These companies generally offer the
advantages of more experienced management and more developed
market regulation.
As their economies have grown, the securities markets in
Asian countries have also expanded. New exchanges have been
created and the number of listed companies, annual trading volume
and overall market capitalization have increased significantly.
Additionally, new markets continue to open to foreign
investments. For example, Korea and India have recently relaxed
investment restrictions and Vietnamese direct investments have
recently become available to U.S. investors. The Fund also
offers investors the opportunity to access relatively restricted
markets. The Adviser believes that investment opportunities in
Asian countries will continue to expand.
The Fund will invest in companies believed to possess
rapid growth potential. Thus, the Fund will invest in smaller,
emerging companies, but will also invest in larger, more
3
<PAGE>
established companies in such growing economic sectors as capital
goods, telecommunications and consumer services.
The Fund may maintain not more than 5% of its net assets
in lower-rated securities and lower-rated loans and other lower-
rated direct debt instruments rated below Baa by Moody's
Investors Service, Inc. ("Moody's") and BBB by Standard and
Poor's Ratings Services ("S&P"), or, if not rated, determined by
The Adviser to be of equivalent quality. The Fund will not
purchase a debt security that, at the time of purchase, is rated
below B by Moody's and S&P, or determined by the Adviser to be of
equivalent quality, but may retain a debt security the rating of
which drops below B. See "Certain Risk Considerations--
Securities Ratings" and Appendix C for a description of such
ratings.
Defensive Position. For temporary defensive purposes,
during periods in which conditions in securities markets or other
economic or political conditions warrant, the Fund may reduce its
position in equity securities and increase without limit its
position in short-term, liquid, high-grade debt securities, which
may include securities issued by the U.S. government, its
agencies and instrumentalities ("U.S. Government Securities"),
bank deposits, money market instruments, short-term (for this
purpose, securities with a remaining maturity of one year or
less) debt securities, including notes and bonds, and short-term
foreign currency denominated debt securities rated A or higher by
S&P or Moody's or, if not so rated, of equivalent investment
quality as determined by the Adviser. For this purpose, the Fund
will limit its investments in foreign currency denominated debt
securities to securities that are denominated in currencies in
which the Fund anticipates its subsequent investments will be
denominated.
Subject to its policy of investing at least 65% of its
total assets in equity securities of Asian companies, the Fund
may also at any time temporarily invest funds awaiting
reinvestment or held as reserves for dividends and other
distributions to shareholders in money market instruments
referred to above.
Additional Investment Policies and Practices
Except as otherwise noted, the Fund's investment
policies described below are not designated "fundamental
policies" within the meaning of the Investment Company Act of
1940, as amended (the "1940 Act") and, therefore, may be changed
by the Directors of the Fund without a shareholder vote. However,
the Fund will not change its investment policies without
contemporaneous written notice to shareholders.
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Warrants. The Fund may invest up to 20% of its total
assets in rights or warrants which entitle the holder to buy
equity securities at a specific price for a specific period of
time, but will do so only if the equity securities themselves are
deemed appropriate by the Adviser for inclusion in the Fund's
portfolio. Rights and warrants may be considered more
speculative than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with
respect to the securities which may be purchased nor do they
represent any rights in the assets of the issuing company. Also,
the value of a right or warrant does not necessarily change with
the value of the underlying securities and a right or warrant
ceases to have value if it is not exercised prior to the
expiration date.
Convertible Securities. The Fund may invest up to 25%
of its total assets in convertible securities of issuers whose
common stocks are eligible for purchase by the Fund under the
investment policies described above. Convertible securities
include bonds, debentures, corporate notes and preferred stocks.
Convertible securities are such instruments that are convertible
at a stated exchange rate into common stock. Prior to their
conversion, convertible securities have the same general
characteristics as non-convertible securities which provide a
stable stream of income with generally higher yields than those
of equity securities of the same or similar issuers. The market
value of convertible securities tends to decline as interest
rates increase and, conversely, to increase as interest rates
decline. While convertible securities generally offer lower
interest yields than non-convertible debt securities of similar
quality, they do enable the investor to benefit from increases in
the market price of the underlying common stock.
When the market price of the common stock underlying a
convertible security increases, the price of the convertible
security increasingly reflects the value of the underlying common
stock and may rise accordingly. As the market price of the
underlying common stock declines, the convertible security tends
to trade increasingly on a yield basis, and thus may not
depreciate to the same extent as the underlying common stock.
Convertible securities rank senior to common stocks in an
issuer's capital structure. They are consequently of higher
quality and entail less risk than the issuer's common stock,
although the extent to which such risk is reduced depends in
large measure upon the degree to which the convertible security
sells above its value as a fixed income security.
Depositary Receipts and Securities of Supranational
Entities. The Fund may invest in depositary receipts, securities
of supranational entities denominated in the currency of any
country, securities of multinational companies and "semi-
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governmental securities". Depositary receipts may not
necessarily be denominated in the same currency as the underlying
securities into which they may be converted. In addition, the
issuers of the stock of unsponsored depositary receipts are not
obligated to disclose material information in the United States
and, therefore, there may not be a correlation between such
information and the market value of the depositary receipts.
ADRs are depositary receipts typically issued by a U.S. bank or
trust company that evidence ownership of underlying securities
issued by a foreign corporation. GDRs and other types of
depositary receipts are typically issued by foreign banks or
trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally,
depositary receipts in registered form are designed for use in
the U.S. securities markets and depositary receipts in bearer
form are designed for use in foreign securities markets. The
investments of the Fund in depositary receipts are deemed to be
investments in the underlying securities.
A supranational entity is an entity designated or
supported by the national government of one or more countries to
promote economic reconstruction or development. Examples of
supranational entities include, among others, the World Bank
(International Bank for Reconstruction and Development) and the
European Investment Bank. "Semi-governmental securities," are
securities issued by entities owned by either a national, state
or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith
and credit and general taxing powers.
Equity-Linked Debt Securities. The Fund may, with the
objective of realizing capital appreciation, invest up to 25% of
its net assets in equity-linked debt securities. Equity-linked
debt securities are securities with respect to which the amount
of interest and/or principal that the issuer thereof is obligated
to pay is linked to the performance of a specified index of
equity securities. Such amount may be significantly greater or
less than payment obligations in respect of other types of debt
securities. Adverse changes in equity securities indices and
other adverse changes in the securities markets may reduce
payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt
securities, the values of equity-linked debt securities will
generally vary inversely with changes in interest rates. The
Fund's ability to dispose of equity-linked debt securities will
depend on the availability of liquid markets for such securities.
Investment in equity-linked debt securities may be considered to
be speculative. As with other securities, the Fund could lose
its entire investment in equity-linked debt securities.
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Loans and other Direct Debt Instruments. The Fund may
invest up to 25% of its net assets in loans and other direct debt
instruments. Loans and other direct debt instruments are
interests in amounts owed by a corporate, governmental or other
borrower to another party. They may represent amounts owed to
lenders or lending syndicates (loans and loan participations), to
suppliers of goods or services (trade claims or other
receivables), or to other creditors. Direct debt instruments
involve the risk of loss in case of default or insolvency of the
borrower and may offer less legal protection to the Fund in the
event of fraud or misrepresentation than debt securities. In
addition, loan participations involve a risk of insolvency of the
lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that
obligate the Fund to supply additional cash to the borrower on
demand. Loans and other direct debt instruments are generally
illiquid and may be transferred only through individually
negotiated private transactions.
Purchasers of loans and other forms of direct
indebtedness depend primarily upon the creditworthiness of the
borrower for payment of principal and interest. Direct debt
instruments may not be rated by any nationally recognized rating
service. If the Fund does not receive scheduled interest or
principal payments on such indebtedness, the Fund's share price
and yield could be adversely affected. Loans that are fully
secured offer the Fund more protection than unsecured loans in
the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral
from a secured loan would satisfy the borrower's obligation, or
that the collateral can be liquidated. Indebtedness of borrowers
whose creditworthiness is poor may involve substantial risks, and
may be highly speculative. Borrowers that are in bankruptcy or
restructuring may never pay off their indebtedness, or may pay
only a small fraction of the amount owed. Direct indebtedness of
Asian countries will also involve a risk that the governmental
entities responsible for the repayment of the debt may be unable,
or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a
financial institution's interests with respect to a loan may
involve additional risks to the Fund. For example, if a loan is
foreclosed, the Fund could become part owner of any collateral,
and would bear the costs and liabilities associated with owning
and disposing of the collateral. Direct debt instruments may also
involve a risk of insolvency of the lending bank or other
intermediary.
A loan is often administered by a bank or other
financial institution that acts as agent for all holders. The
agent administers the terms of the loan, as specified on the loan
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<PAGE>
agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower,
it may have to rely on the agent to apply appropriate credit
remedies against a borrower. If assets held by the agent for the
benefit of the Fund were determined to be subject to the claims
of the agent's general creditors, the Fund might incur certain
costs and delays in realizing payment on the loan or loan
participation and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include
letters of credit, revolving credit facilities, or other standby
financing commitments obligating the Fund to pay additional cash
on demand. These commitments may have the effect of requiring
the Fund to increase its investment in a borrower at a time when
it would not otherwise have done so, even if the borrower's
condition makes it unlikely that the amount will ever be repaid.
The Fund will set aside appropriate liquid assets in a segregated
custodial account to cover its potential obligations under
standby financing commitments.
The Fund's investment in lower-rated loans and other
lower-rated direct debt instruments is subject to the Fund's
policy of maintaining not more than 5% of its net assets in
lower-rated securities.
Interest Rate Transactions. The Fund may enter into
interest rate swaps and may purchase or sell interest rate caps
and floors. The use of interest rate swaps is a highly
specialized activity which involves investment techniques and
risks different from those associated with ordinary portfolio
securities transactions. If the Adviser is incorrect in its
forecasts of market values, interest rates and other applicable
factors, the investment performance of the Fund would diminish
compared with what it would have been if these investment
techniques were not used. Moreover, even if the Adviser is
correct in its forecasts, there is a risk that the swap position
may correlate imperfectly with the price of the asset or
liability being hedged.
There is no limit on the amount of interest rate swap
transactions that may be entered into by the Fund. These
transactions do not involve the delivery of securities or other
underlying assets of principal. Accordingly, the risk of loss
with respect to interest rate swaps is limited to the net amount
of interest payments that the Fund is contractually obligated to
make. If the other party to an interest rate swap defaults, the
Fund's risk of loss consists of the net amount of interest
payments that the Fund contractually is entitled to receive. The
Fund may purchase and sell (i.e., write) caps and floors without
limitation, subject to the segregated account requirement
8
<PAGE>
described in the Prospectus under "Description of the Fund--
Additional Investment Policies and Practices--Interest Rate
Transactions."
Options. The Fund may write covered put and call
options and purchase put and call options on securities of the
types in which it is permitted to invest that are traded on U.S.
and foreign securities exchanges and over-the-counter, including
options on market indices. The Fund will only write "covered"
put and call options, unless such options are written for cross-
hedging purposes. There are no specific limitations on the
Fund's writing and purchasing of options.
A put option gives the purchaser of such option, upon
payment of a premium, the right to deliver a specified amount of
a security to the writer of the option on or before a fixed date
at a predetermined price. A call option gives the purchaser of
the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by
the Fund is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or
for additional cash consideration held in a segregated account by
its custodian) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if the Fund
holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call
held (i) is equal to or less than the exercise price of the call
written or (ii) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash and
liquid high-grade debt securities in a segregated account with
its custodian. A put option written by the Fund is "covered" if
the Fund maintains liquid assets with a value equal to the
exercise price in a segregated account with its custodian, or
else holds a put on the same security and in the same principal
amount as the put written where the exercise price of the put
held is equal to or greater than the exercise price of the put
written. The premium paid by the purchaser of an option will
reflect, among other things, the relationship of the exercise
price to the market price and volatility of the underlying
security, the remaining term of the option, supply and demand and
interest rates. It would realize a loss if the price of the
underlying security increased or remained the same or did not
decrease during that period by more than the amount of the
premium. If a put or call option purchased by the Fund were
permitted to expire without being sold or exercised, its premium
would be lost by the Fund.
A call option is for cross-hedging purposes if the Fund
does not own the underlying security but seeks to provide a hedge
9
<PAGE>
against a decline in value in another security which the Fund
owns or has the right to acquire. In such circumstances, the Fund
collateralizes its obligation under the option by maintaining in
a segregated account with the Fund's custodian liquid assets in
an amount not less than the market value of the underlying
security, marked to market daily. The Fund would write a call
option for cross-hedging purposes, instead of writing a covered
call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from
writing a covered call option, while at the same time achieving
the desired hedge.
In purchasing a call option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security increased by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security declined or remained the same or did not
increase during the period by more than the amount of the
premium. In purchasing a put option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security declined by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security increased or remained the same or did not
decrease during that period by more than the amount of the
premium. If a put or call option purchased by the Fund were
permitted to expire without being sold or exercised, its premium
would be lost by the Fund.
If a put option written by the Fund were exercised, the
Fund would be obligated to purchase the underlying security at
the exercise price. If a call option written by the Fund were
exercised, the Fund would be obligated to sell the underlying
security at the exercise price. The risk involved in writing a
call option is that there could be an increase in the market
value of the underlying security caused by declining interest
rates or other factors. If this occurred, the option could be
exercised and the underlying security would then be sold by the
Fund at a lower price than its current market value. The risk
involved in writing a call option is that there could be an
increase in the market value of the underlying security caused by
declining interest rates or other factors. If this occurred, the
option could be exercised and the underlying security would then
be sold by the Fund at a lower price than its current market
value. These risks could be reduced by entering into a closing
transaction prior to the option expiration dates if a liquid
market is available. The Fund retains the premium received from
writing a put or call option whether or not the option is
exercised. For additional information on the use, risk and costs
of options, see Appendix A.
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<PAGE>
The Fund may purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated (i.e., over-the-counter) transactions. The Fund will
effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and
loan institutions) deemed creditworthy by the Adviser, and the
Adviser has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written
by the Fund in negotiated transactions are illiquid and it may
not be possible for the Fund to effect a closing transaction at a
time when the Adviser believes it would be advantageous to do so.
See "--Illiquid Securities."
Options on Market Indices. An option on a securities
index is similar to an option on a security except that, rather
than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder
the right to receive, upon exercises of the option, an amount of
cash if the closing level of the chosen index is greater than (in
the case of a call) or less than (in the case of a put) the
exercise price of the option. There are no specific limitations
on the Fund's purchasing and selling of options on securities
indices.
Futures Contracts and Options on Futures Contracts. The
Fund may enter into contracts for the purchase or sale for future
delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S.
Government Securities, securities issued by foreign government
entities, or common stocks ("futures contracts") and may purchase
and write put and call options to buy or sell futures contracts
("options on futures contracts"). A "sale" of a futures contract
means the acquisition of a contractual obligation to deliver the
securities or foreign currencies called for by the contract at a
specified price on a specified date. A "purchase" of a futures
contract means the incurring of a contractual obligation to
acquire the securities or foreign currencies called for by the
contract at a specified price on a specified date. The purchaser
of a futures contract on an index agrees to take or make delivery
of an amount of cash equal to the difference between a specified
dollar multiple of the value of the index on the expiration date
of the contract ("current contract value") and the price at which
the contract was originally struck. No physical delivery of the
securities underlying the index is made.
Options on futures contracts written or purchased by the
Fund will be traded on U.S. or foreign exchanges or over-the-
counter. These investment techniques will be used only to hedge
against anticipated future changes in market conditions and
interest or exchange rates which otherwise might either adversely
affect the value of the Fund's portfolio securities or adversely
11
<PAGE>
affect the prices of securities which the Fund intends to
purchase at a later date.
The Fund will not enter into any futures contracts or
options on futures contracts if immediately thereafter the
aggregate of the market value of the outstanding futures
contracts of the Fund and the market value of the currencies and
futures contracts subject to outstanding options written by the
Fund would exceed 50% of the market value of the total assets of
the Fund.
The successful use of such instruments draws upon the
Adviser's special skills and experience with respect to such
instruments and usually depends on the Adviser's ability to
forecast interest rate and currency exchange rate movements
correctly. Should interest or exchange rates move in an
unexpected manner, the Fund may not achieve the anticipated
benefits of futures contracts or options on futures contracts or
may realize losses and thus will be in a worse position than if
such strategies had not been used. In addition, the correlation
between movements in the price of futures contracts or options on
futures contracts and movements in the price of the securities
and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses. The Fund's Custodian will
place liquid assets in a segregated account of the Fund having a
value equal to the aggregate amount of the Fund's commitments
under futures contracts.
For additional information on the use, risks and costs
of futures contracts and options on futures contracts, see
Appendix B.
Options on Foreign Currencies. The Fund may purchase
and write put and call options on foreign currencies for the
purpose of protecting against declines in the U.S. Dollar value
of foreign currency-denominated portfolio securities and against
increases in the U.S. Dollar cost of such securities to be
acquired. As in the case of other kinds of options, however, the
writing of an option on a foreign currency constitutes only a
partial hedge, up to the amount of the premium received, and the
Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although,
in the event of rate movements adverse to the Fund's position, it
may forfeit the entire amount of the premium plus related
transaction costs. Options on foreign currencies to be written
or purchased by the Fund are traded on U.S. and foreign exchanges
or over-the-counter. There is no specific percentage limitation
on the Fund's investments in options on foreign currencies. For
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<PAGE>
additional information on the use, risks and costs of options on
foreign currencies, see Appendix B.
Forward Foreign Currency Exchange Contracts. The Fund
may purchase or sell forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund
from adverse changes in the relationship between the U.S. Dollar
and foreign currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a
future date, and is individually negotiated and privately traded
by currency for an agreed price at a future date, and is
individually negotiated and privately traded by currency traders
and their customers. The Fund may enter into a forward contract,
for example, when it enters into a contract for the purchase or
sale of a security denominated in a foreign currency in order to
"lock in" the U.S. Dollar price of the security ("transaction
hedge"). The Fund may not engage in transaction hedges with
respect to the currency of a particular country to an extent
greater than the aggregate amount of the Fund's transactions in
that currency. Additionally, for example, when the Fund believes
that a foreign currency may suffer a substantial decline against
the U.S. Dollar, it may enter into a forward sale contract to
sell an amount of that foreign currency approximating the value
of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S.
Dollar may suffer a substantial decline against a foreign
currency, it may enter into a forward purchase contract to buy
that foreign currency for a fixed dollar amount ("position
hedge"). In this situation the Fund may, in the alternative,
enter into a forward contract to sell a different foreign
currency for a fixed U.S. Dollar amount where the Fund believes
that the U.S. Dollar value of the currency to be sold pursuant to
the forward contract will fall whenever there is a decline in the
U.S. Dollar value of the currency in which portfolio securities
of the Fund are denominated ("cross-hedge"). To the extent
required by applicable law, the Fund's Custodian will place
liquid assets in a segregated account of the Fund having a value
equal to the aggregate amount of the Fund's commitments under
forward contracts entered into with respect to position hedges
and cross-hedges. If the value of the assets placed in a
segregated account declines, additional liquid assets will be
placed in the account on a daily basis so that the value of the
account will equal the amount of the Fund's commitments with
respect to such contracts. As an alternative to maintaining all
or part of the segregated account, the Fund may purchase a call
option permitting the Fund to purchase the amount of foreign
currency being hedged by a forward sale contract at a price no
higher than the forward contract price or the Fund may purchase a
put option permitting the Fund to sell the amount of foreign
currency subject to a forward purchase contract at a price as
high or higher than the forward contract price. Unanticipated
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<PAGE>
changes in currency prices may result in poorer overall
performance for the Fund than if it had not entered into such
contracts. In addition, the Fund may use such other methods of
"cover" as are permitted by applicable law.
While these contracts are not presently regulated by the
Commodity Futures Trading Commission ("CFTC"), the CFTC may in
the future assert authority to regulate forward contracts. In
such event the Fund's ability to utilize forward contracts in the
manner set forth in the Prospectus may be restricted. Forward
contracts will reduce the potential gain from a positive change
in the relationship between the U.S. Dollar and foreign
currencies. Unanticipated changes in currency prices may result
in poorer overall performance for the Fund than if it had not
entered into such contracts. The use of foreign currency forward
contracts will not eliminate fluctuations in the underlying U.S.
Dollar equivalent value of the proceeds of or rates of return on
the Fund's foreign currency-denominated portfolio securities and
the use of such techniques will subject the Fund to certain
risks.
The matching of the increase in value of a forward
contract and the decline in the U.S. Dollar equivalent value of
the foreign-currency denominated asset that is the subject of the
hedge generally will not be precise. In addition, the Fund may
not always be able to enter into foreign currency forward
contracts at attractive prices and this will limit the Fund's
ability to use such contracts to hedge or cross-hedge its assets.
Also, with regard to the Fund's use of cross-hedges, there can be
no assurance that historical correlations between the movement of
certain foreign currencies relative to the U.S. Dollar will
continue. Thus, at any time poor correlation may exist between
movements in the exchange rates of the foreign currencies
underlying the Fund's cross-hedges and the movements in the
exchange rates of the foreign currencies in which the Fund's
assets that are the subject of such cross-hedges are denominated.
For additional information on the use, risks and costs of forward
foreign currency exchange contracts, see Appendix B.
Forward Commitments. The Fund may enter into forward
commitments for the purchase or sale of securities. Such
transactions may include purchases on a "when-issued" basis or
purchases or sales on a "delayed delivery" basis. In some cases,
a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring (i.e., a "when, as
and if issued" trade).
When forward commitment transactions are negotiated, the
price, which generally is expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for the
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<PAGE>
securities take place at a later date. Normally, the settlement
date occurs within two months after the transaction, but delayed
settlements beyond two months may be negotiated. Securities
purchased or sold under a forward commitment are subject to
market fluctuation, and no interest or dividends accrue to the
purchaser prior to the settlement date. At the time the Fund
intends to enter into a forward commitment, it will record the
transaction and thereafter reflect the value of the security
purchased or, if a sale, the proceeds to be received, in
determining its net asset value. Any unrealized appreciation or
depreciation reflected in such valuation of a "when, as and if
issued" security would be canceled in the event that the required
conditions did not occur and the trade was canceled.
The use of forward commitments enables the Fund to
protect against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling
bond prices, the Fund might sell securities in its portfolio on a
forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, the
Fund might sell a security in its portfolio and purchase the same
or a similar security on a when-issued or forward commitment
basis, thereby obtaining the benefit of currently higher cash
yields. However, if the Adviser were to forecast incorrectly the
direction of interest rate movements, the Fund might be required
to complete such when-issued or forward transactions at prices
inferior to the then current market values. No forward
commitments will be made by the Fund if, as a result, the Fund's
aggregate commitments under such transactions would be more than
30% of the then current value of the Fund's total assets.
The Fund's right to receive or deliver a security under
a forward commitment may be sold prior to the settlement date,
but the Fund will enter into forward commitments only with the
intention of actually receiving or delivering the securities, as
the case may be. To facilitate such transactions, the Fund's
custodian will maintain, in a segregated account of the Fund,
liquid assets having value equal to, or greater than, any
commitments to purchase securities on a forward commitment basis
and, with respect to forward commitments to sell portfolio
securities of the Fund, the portfolio securities themselves. If
the Fund, however, chooses to dispose of the right to receive or
deliver a security subject to a forward commitment prior to the
settlement date of the transaction, it may incur a gain or loss.
In the event the other party to a forward commitment transaction
were to default, the Fund might lose the opportunity to invest
money at favorable rates or to dispose of securities at favorable
prices.
Standby Commitment Agreements. The Fund may from time
to time enter into standby commitment agreements. Such
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<PAGE>
agreements commit the Fund, for a stated period of time, to
purchase a stated amount of a security which may be issued and
sold to the Fund at the option of the issuer. The price and
coupon of the security are fixed at the time of the commitment.
At the time of entering into the agreement the Fund is paid a
commitment fee, regardless of whether or not the security
ultimately is issued, which is typically approximately 0.5% of
the aggregate purchase price of the security which the Fund has
committed to purchase. The Fund will enter into such agreements
only for the purpose of investing in the security underlying the
commitment at a yield and price which are considered advantageous
to the Fund and which are unavailable on a firm commitment basis.
The Fund will not enter into a standby commitment with a
remaining term in excess of 45 days and will limit its investment
in such commitments so that the aggregate purchase price of the
securities subject to the commitments will not exceed 50% of its
assets taken at the time of acquisition of such commitment. The
Fund will at all times maintain a segregated account with its
custodian of liquid assets in an aggregate amount equal to the
purchase price of the securities underlying the commitment.
There can be no assurance that the securities subject to
a standby commitment will be issued and the value of the
security, if issued, on the delivery date may be more or less
than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, the
Fund will bear the risk of capital loss in the event the value of
the security declines and may not benefit from an appreciation in
the value of the security during the commitment period if the
issuer decides not to issue and sell the security to the Fund.
The purchase of a security subject to a standby commitment
agreement and the related commitment fee will be recorded on the
date on which the security can reasonably be expected to be
issued and the value of the security will thereafter be reflected
in the calculation of the Fund's net asset value. The cost basis
of the security will be adjusted by the amount of the commitment
fee. In the event the security is not issued, the commitment fee
will be recorded as income on the expiration date of the standby
commitment.
Currency Swaps. The Fund may enter into currency swaps
for hedging purposes. Currency swaps involve the exchange by the
Fund with another party of a series of payments in specified
currencies. Since currency swaps are individually negotiated,
the Fund expects to achieve an acceptable degree of correlation
between its portfolio investments and its currency swaps
positions. A currency swap may involve the delivery at the end
of the exchange period of a substantial amount of one designated
currency in exchange for the other designated currency. Therefore
the entire principal value of a currency swap is subject to the
risk that the other party to the swap will default on its
16
<PAGE>
contractual delivery obligations. The net amount of the excess,
if any, of the Fund's obligations over its entitlements with
respect to each currency swap will be accrued on a daily basis
and an amount of liquid assets having an aggregate value at least
equal to the accrued excess will be maintained in a segregated
accounting by the Fund's custodian. The Fund will not enter into
any currency swap unless the credit quality of the unsecured
senior debt or the claims-paying ability of the other party
thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering
into the transaction. If there is a default by the other party to
such a transaction, the Fund will have contractual remedies
pursuant to the agreements related to the transactions.
Repurchase Agreements. The Fund may enter into
repurchase agreements pertaining to U.S. Government Securities
with member banks of the Federal Reserve System or "primary
dealers" (as designated by the Federal Reserve Bank of New York)
in such securities. There is no percentage restriction on the
Fund's ability to enter into repurchase agreements. Currently,
the Fund intends to enter into repurchase agreements only with
its custodian and such primary dealers. A repurchase agreement
arises when a buyer purchases a security and simultaneously
agrees to resell it to the vendor at an agreed-upon future date,
normally one day or a few days later. The resale price is
greater than the purchase price, reflecting an agreed-upon
interest rate which is effective for the period of time the
buyer's money is invested in the security and which is related to
the current market rate rather than the coupon rate on the
purchased security. This results in a fixed rate of return
insulated from market fluctuations during such period. Such
agreements permit the Fund to keep all of its assets at work
while retaining "overnight" flexibility in pursuit of investments
of a longer-term nature. The Fund requires continual maintenance
by its custodian for its account in the Federal Reserve/Treasury
Book Entry System of collateral in an amount equal to, or in
excess of, the resale price. In the event a vendor defaulted on
its repurchase obligation, the Fund might suffer a loss to the
extent that the proceeds from the sale of the collateral were
less than the repurchase price. In the event of a vendor's
bankruptcy, the Fund might be delayed in, or prevented from,
selling the collateral for its benefit. The Fund's Board of
Directors has established procedures, which are periodically
reviewed by the Board, pursuant to which Alliance monitors the
creditworthiness of the dealers with which the Fund enters into
repurchase agreement transactions.
Illiquid Securities. The Fund will not maintain more
than 15% of its net assets (taken at market value) in illiquid
securities. For this purpose, illiquid securities include, among
others (a) direct placement or other securities which are subject
17
<PAGE>
to legal or contractual restrictions on resale or for which there
is no readily available market (e.g., many individually
negotiated currency swaps and any assets used to cover currency
swaps, most privately negotiated investments in state enterprises
that have not yet conducted initial equity offerings, 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), (b) over-the-counter options and all assets used
to cover over-the-counter options and (c) repurchase agreements
not terminable within seven days.
The Fund may not be able to readily sell illiquid
securities. Such securities are unlike securities which are
traded in the open market and which can be expected to be sold
immediately if the market is adequate. The sale price of
illiquid securities may be lower or higher than the Adviser's
most recent estimate of their fair value. Generally, less public
information is available with respect to the issuers of such
securities than with respect to companies whose securities are
traded on an exchange. Illiquid securities are more likely to be
issued by small businesses and therefore subject to greater
economic, business and market risks than the listed securities of
more well-established companies. Adverse conditions in the
public securities markets may at certain times preclude a public
offering of an issuer's securities. To the extent that the Fund
makes any privately negotiated investments in state enterprises,
such investments are likely to be in securities that are not
readily marketable. It is the intention of the Fund to make such
investments when the Adviser believes there is a reasonable
expectation that the Fund would be able to dispose of its
investment within three years. There is no law in a number of
the countries in which the Fund may invest similar to the U.S.
Securities Act of 1933, as amended (the "Securities Act")
requiring an issuer to register the public sale of securities
with a governmental agency or imposing legal restrictions on
resales of securities, either as to length of time the securities
may be held or manner of resale. However, there may be
contractual restrictions on resale of securities. In addition,
many countries do not have informational disclosure requirements
similar in scope to those required under the U.S. Securities
Exchange Act of 1934. The Adviser will monitor the illiquidity
of such securities under the supervision of the Board of
Directors.
Short Sales. The Fund may make short sales of
securities or maintain a short position only for the purpose of
deferring realization of gain or loss for U.S. federal income tax
purposes, provided that at all times when a short position is
open the Fund owns an equal amount of such securities of the same
issue as, and equal in amount to, the securities sold short. In
addition, the Fund may not make a short sale if as a result more
18
<PAGE>
than 25% of the Fund's net assets (taken at market value) is held
as collateral for short sales at any one time. Pursuant to the
Taxpayer Relief Act of 1997, if the Fund has unrealized gain with
respect to a security and enters into a short sale with respect
to such security, the Fund generally will be deemed to have sold
the appreciated security and thus will recognize gain for tax
purposes. If the price of the security sold short increases
between the time of the short sale and the time the Fund replaces
the borrowed security, the Fund will incur a loss; conversely, if
the price declines, the Fund will realize a capital gain.
Certain special federal income tax considerations may apply to
short sales which are entered into by the Fund. See "Dividends,
Distributions and Taxes--United States Federal Income Taxation of
the Fund--Tax Straddles."
General. The successful use of the foregoing investment
practices draws upon the Adviser's special skills and experience
with respect to such instruments and usually depends on the
Adviser's ability to forecast price movements or currency
exchange rate movements correctly. Should exchange rates move in
an unexpected manner, the Fund may not achieve the anticipated
benefits of futures contracts, options or forward contracts or
may realize losses and thus be in a worse position than if such
strategies had not been used. Unlike many exchange-traded
futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to options on
currencies and forward contracts, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. In addition, the correlation between movements in the
prices of such instruments and movements in the prices of the
securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
The Fund's ability to dispose of its position in futures
contracts, options and forward contracts will depend on the
availability of liquid markets in such instruments. Markets in
options and futures with respect to a number of types of
securities and currencies are relatively new and still
developing, and there is no public market for forward contracts.
It is impossible to predict the amount of trading interest that
may exist in various types of futures contracts, options and
forward contracts. If a secondary market does not exist with
respect to an option purchased or written by the Fund over-the-
counter, it might not be possible to effect a closing transaction
in the option (i.e., dispose of the option) with the result that
(i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may
not be able to sell currencies or portfolio securities covering
an option written by the Fund until the option expires or it
delivers the underlying futures contract or currency upon
exercise. Therefore, no assurance can be given that the Fund
19
<PAGE>
will be able to utilize these instruments effectively for the
purposes set forth above.
Additional Investment Policies
Loans of Portfolio Securities. The Fund may make
secured loans of its portfolio securities to entities with which
it can enter into repurchase agreements, provided that liquid
assets equal to at least 100% of the market value of the
securities loaned are deposited and maintained by the borrower
with the Fund. See "Additional Investment Policies and
Practices--Repurchase Agreements" above. The risks in lending
portfolio securities, as with other 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, the Adviser (subject to review by the Board
of Directors) will consider all relevant facts and circumstances,
including the creditworthiness of the borrower. While securities
are on loan, the borrower will pay the Fund any income earned
thereon and the Fund may invest any cash collateral in portfolio
securities, thereby earning additional income, or receive an
agreed upon amount of income from a borrower who has delivered
equivalent collateral. The Fund will have the right to regain
record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights,
subscription rights and rights to dividends, interest or
distributions. The Fund may pay reasonable finders',
administrative and custodial fees in connection with a loan. The
Fund will not lend portfolio securities in excess of 30% of the
value of its total assets, nor will the Fund lend its portfolio
securities to any officer, director, employee or affiliate of the
Fund or the Adviser. The Board of Directors will monitor the
Fund's lending of portfolio securities.
Future Developments. The Fund may, following written
notice to its shareholders, take advantage of other investment
practices which are not at present contemplated for use by the
Fund or which currently are not available but which may be
developed, to the extent such investment practices are both
consistent with the Fund's investment objective and legally
permissible for the Fund. Such investment practices, if they
arise, may involve risks which exceed those involved in the
activities described above.
Portfolio Turnover. Generally, the Fund's policy with
respect to portfolio turnover is to sell any security whenever,
in the judgment of the Adviser, its appreciation possibilities
have been substantially realized or the business or market
prospects for such security have deteriorated, irrespective of
the length of time that such security has been held. The Adviser
anticipates that the Fund's annual rate of portfolio turnover
20
<PAGE>
will not exceed 150%. A 150% annual turnover rate would occur if
all the securities in the Fund's portfolio were replaced one and
one-half times within a period of one year. The turnover rate has
a direct effect on the transaction costs to be borne by the Fund,
and as portfolio turnover increases it is more likely that the
Fund will realize short-term capital gains. For the fiscal years
ended October 31, 1996 and October 31, 1997, the Fund's portfolio
turnover was 66% and 70%, respectively.
Certain Risk Considerations
Investment in the Fund involves the special risk
considerations described below.
Investment in Asian Countries; Risks of Foreign
Investment. The securities markets of many Asian countries are
relatively small, with the majority of market capitalization and
trading volume concentrated in a limited number of companies
representing a small number of industries. Consequently, the
Fund's investment portfolio may experience greater price
volatility and significantly lower liquidity than a portfolio
invested in equity securities of U.S. companies. These markets
may be subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States.
Securities settlements may in some instances be subject to delays
and related administrative uncertainties. These problems are
particularly severe in India, where settlement is through
physical delivery, and, where currently, a severe shortage of
vault capacity exists among custodial banks, although efforts are
being undertaken to alleviate the shortage.
Foreign investment in the securities markets of certain
Asian countries is restricted or controlled to varying degrees.
These restrictions or controls may at times limit or preclude
investment in certain securities and may increase the cost and
expenses of the Fund. As illustrations, certain countries
require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in
a particular company, or limit the investment by foreign persons
to only a specified percentage of an issuer's outstanding
securities or a specific class of securities of a company which
may have less advantageous terms (including price) than
securities of the company available for purchase by nationals or
impose additional taxes on foreign investors. The national
policies of certain countries may restrict investment
opportunities in issuers deemed sensitive to national interests.
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
21
<PAGE>
a deterioration occurs in a country's balance of payments, the
country could impose temporary restrictions on foreign capital
remittances.
The Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental approval for
repatriation, as well as by the application to it of other
restrictions on investment. Investing in local markets may
require the Fund to adopt special procedures, seek local
governmental approvals or other actions, any of which may involve
additional costs to the Fund. The liquidity of the Fund's
investments in any country in which any of these factors exist
could be affected and the Adviser will monitor the effect of any
such factor or factors on the Fund's investments. Furthermore,
transaction costs including brokerage commissions for
transactions both on and off the securities exchanges in many
Asian countries are generally higher than in the United States.
Issuers of securities in Asian 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 Asian 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. Asian issuers are subject to accounting, auditing
and financial standards and requirements that differ, in some
cases significantly, from those applicable to U.S. issuers. In
particular, the assets and profits appearing on the financial
statements of an Asian issuer may not reflect its financial
position or results of operations in the way they would be
reflected had the financial statements been prepared in
accordance with U.S. generally accepted accounting principles. In
addition, for an issuer that keeps accounting records in local
currency, inflation accounting rules in some of the countries in
which the Fund will invest require, for both tax and accounting
purposes, that certain assets and liabilities be restated on the
issuer's balance sheet in order to express items in terms of
currency of constant purchasing power. Inflation accounting may
indirectly generate losses or profits. Consequently, financial
data may be materially affected by restatements for inflation and
may not accurately reflect the real condition of those issuers
and securities markets. Substantially less information is
publicly available about certain non-U.S. issuers than is
available about U.S. issuers.
The economies of individual Asian countries may differ
favorably or unfavorably from the U.S. economy in such respects
as growth of gross domestic product or gross national product,
22
<PAGE>
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 an Asian country or the Fund's investments in such
country. In the event of expropriation, nationalization or other
confiscation, the Fund could lose its entire investment in the
country involved. In addition, laws in Asian countries governing
business organizations, bankruptcy and insolvency may provide
less protection to security holders such as the Fund than that
provided by U.S. laws.
Investment in smaller, emerging Asian companies involves
greater risk than is customarily associated with securities of
more established companies. The securities of smaller companies
may have relatively limited marketability and may be subject to
more abrupt or erratic market movements than securities of larger
companies or broad market indices.
Currency Considerations. Because substantially all of
the Fund's assets will be invested in securities denominated in
foreign currencies and a corresponding portion of the Fund's
revenues will be received in such currencies, the dollar
equivalent of the Fund's net assets and distributions will be
adversely affected by reductions in the value of certain foreign
currencies relative to the U.S. Dollar. Such changes will also
affect the Fund's income. The Fund will, however, have the
ability to attempt to protect itself against adverse changes in
the values of foreign currencies by engaging in certain of the
investment practices listed above. While the Fund has this
ability, there is no certainty as to whether and to what extent
the Fund will engage in these practices. If the value of the
foreign currencies in which the Fund receives its income falls
relative to the U.S. Dollar between receipt of the income and the
making of Fund distributions, the Fund may be required to
liquidate securities in order to make distributions if the Fund
has insufficient cash in U.S. Dollars to meet distribution
requirements. Similarly, if an exchange rate declines between
the time the Fund incurs expenses in U.S. Dollars and the time
cash expenses are paid, the amount of the currency required to be
converted into U.S. Dollars in order to pay expenses in U.S.
Dollars could be greater than the equivalent amount of such
expenses in the currency at the time they were incurred.
U.S. and Foreign Taxes. Foreign taxes paid by the Fund
may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable
tax laws and interpretations will not change in the future.
Moreover, non-U.S. investors may not be able to credit or deduct
such foreign taxes. Investors should review carefully the
23
<PAGE>
information discussed below under the heading "Dividends,
Distributions and Taxes" and should discuss with their tax
advisers the specific tax consequences of investing in the Fund.
Investments in Lower-Rated Debt Securities. Debt
securities rated below investment grade, i.e., Ba and lower by
Moody's or BB and lower by S&P ("lower-rated securities"), or, if
not rated, determined by the Adviser to be of equivalent quality,
are subject to greater risk of loss of principal and interest
than higher-rated securities and are considered to be
predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal, which may in any case
decline during sustained periods of deteriorating economic
conditions or rising interest rates. They are also generally
considered to be subject to greater market risk than higher-
rated securities in times of deteriorating economic conditions.
In addition, lower-rated securities may be more susceptible to
real or perceived adverse economic and competitive industry
conditions than investment grade securities, although the market
values of securities rated below investment grade and comparable
unrated securities tend to react less to fluctuations in interest
rate levels than do those of higher-rated securities. Debt
securities rated Ba by Moody's or BB by S&P are judged to have
speculative characteristics or to be predominantly speculative
with respect to the issuer's ability to pay interest and repay
principal. Debt securities rated B by Moody's and SEP are judged
to have highly speculative characteristics or to be predominantly
speculative. Such securities may have small assurance of
interest and principal payments. Debt securities having the
lowest ratings for non-subordinated debt instruments assigned by
Moody's or S&P (i.e., rated C by Moody's or CCC and lower by SEP)
are considered to have extremely poor prospects of ever attaining
any real investment standing, to have a current identifiable
vulnerability to default, to 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/or to be in
default or not current in the payment of interest or principal.
Adverse publicity and investor perceptions about lower- rated
securities, whether or not based on fundamental analysis, may
tend to decrease the market value and liquidity of such lower-
rated securities. The Adviser will try to reduce the risk
inherent in investment in lower-rated securities through credit
analysis, diversification and attention to current developments
and trends in interest rates and economic and political
conditions. However, there can be no assurance that losses will
not occur. Since the risk of default is higher for lower-rated
securities, the Adviser's research and credit analysis are a
correspondingly important aspect of its program for managing the
Fund's securities than would be the case if the Fund did not
invest in lower-rated securities. In considering investments for
the Fund, the Adviser will attempt to identify those high-risk,
24
<PAGE>
high-yield securities whose financial condition is adequate to
meet future obligations, has improved or is expected to improve
in the future. The Adviser's analysis focuses on relative values
based on such factors as interest or dividend coverage, asset
coverage earnings prospects and the experience and managerial
strength of the issuer.
Non-rated securities will also be considered for
investment by the Fund when the Adviser believes that the
financial condition of the issuers of such securities, or the
protection afforded by the terms of the securities themselves,
limits the risk to the Fund to a degree comparable to that of
rated securities which are consistent with the Fund's objective
and policies.
Securities Ratings. The ratings of debt securities by
S&P and Moody's are a generally accepted barometer of credit
risk. They are, however, subject to certain limitations from an
investor's standpoint. The rating of an issuer is heavily
weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between
the time a rating is assigned and the time it is updated. In
addition, there may be varying degrees of difference in credit
risk of securities within each rating category. Securities rated
BBB by S&P or Baa by Moody's are considered to be investment
grade. Securities rated BBB by S&P or Baa by Moody's are
considered to have speculative characteristics. Sustained
periods of deteriorating economic conditions or 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. See Appendix C for a description of
Moody's and S&P's bond and commercial paper ratings.
Non-Diversified Status. The Fund is a "non-
diversified" investment company, which means the Fund is not
limited in the proportion of its assets that may be invested in
the securities of a single issuer. However, the Fund intends to
conduct its operations so as to qualify to be taxed as a
"regulated investment company" for purposes of the Internal
Revenue Code of 1986, as amended (the "Code"), which will relieve
the Fund of any liability for federal income tax to the extent
its earnings are distributed to shareholders. See "Dividends,
Distributions and Taxes--U.S. Federal Income Taxes." To so
qualify, among other requirements, the Fund will limit its
investments so that, at the close of each quarter of the taxable
year, (i) not more than 25% of the market value of the Fund's
total assets will be invested in the securities of a single
issuer and (ii) with respect to 50% of the market value of its
total assets, not more than 5% of the market value of its total
assets will be invested in the securities of a single issuer and
the Fund will not own more than 10% of the outstanding voting
25
<PAGE>
securities of a single issuer. Investments in U.S. Government
Securities are not subject to these limitations. Because the
Fund, as a non-diversified investment company, may invest in a
smaller number of individual issuers than a diversified
investment company, an investment in the Fund may, under certain
circumstances, present greater risk to an investor than an
investment in a diversified investment company.
Securities issued or guaranteed by foreign governments
are not treated like U.S. Government Securities for purposes of
the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the
securities of non-governmental issuers.
Certain Fundamental Investment Policies. The following
restrictions, which supplement those set forth in the Fund's
Prospectus, may not be changed without approval by the vote of a
majority of the Fund's outstanding voting securities, which means
the affirmative vote of the holders of (i) 67% or more or the
shares represented at a meeting at which more than 50% of the
outstanding shares are represented, or (ii) more than 50% of the
outstanding shares, whichever is less.
To reduce investment risk, as a matter of fundamental
policy the Fund may not:
(i) invest 25% or more of its total assets in
securities of issuers conducting their principal
business activities in the same industry;
(ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of
redemption requests which might require the
untimely disposition of securities; borrowing in
the aggregate may not exceed 15%, and borrowing for
purposes other than meeting redemptions may not
exceed 5% of the value of the Fund's total assets
(including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the
borrowing is made; outstanding borrowings in excess
of 5% of the value of the Fund's total assets will
be repaid before any investments are made;
(iii) pledge, hypothecate, mortgage or otherwise encumber
its assets, except to secure permitted borrowings;
(iv) make loans except through (i) the purchase of debt
obligations in accordance with its investment
objectives and policies; (ii) the lending of
portfolio securities; or (iii) the use of
repurchase agreements;
26
<PAGE>
(v) participate on a joint or joint and several basis
in any securities trading account;
(vi) invest in companies for the purpose of exercising
control;
(vii) issue any senior security within the meaning of the
1940 Act;
(viii) make short sales of securities or maintain a short
position, unless at all times when a short position
is open an equal amount of such securities or
securities convertible into or exchangeable for,
without payment of any further consideration,
securities of the same issue as, and equal in
amount to, the securities sold short ("short sales
against the box") and unless not more than 25% of
the Fund's net assets (taken at market value) is
held as collateral for such sales at any one time
(it is the Fund's present intention to make such
sales only for the purpose of deferring realization
of gain or loss for federal income tax purposes);
(ix) (a) purchase or sell real estate, except that it
may purchase and sell securities of companies which
deal in real estate or interests therein;
(b) purchase or sell commodities or commodity
contracts including futures contracts (except
foreign currencies, foreign currency options and
futures, options and futures on securities and
securities indices and forward contracts or
contracts for the future acquisition or delivery of
securities and foreign currencies and related
options on futures contracts and similar
contracts); (c) invest in interests in oil, gas, or
other mineral exploration or development programs;
(d) purchase securities on margin, except for such
short-term credits as may be necessary for the
clearance of transactions; and (e) act as an
underwriter of securities, except that the Fund may
acquire restricted securities under circumstances
in which, if such securities were sold, the Fund
might be deemed to be an underwriter for purposes
of the Securities Act;
(x) purchase the securities of any company that has a
record of less than three years of continuous
operation (including that of predecessors) if such
purchase at the time thereof would cause more than
5% of its total assets, taken at current value, to
be in the securities of such companies; or
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<PAGE>
(xi) purchase puts, calls, straddles, spreads, and any
combination thereof if by reason thereof the value
of its aggregate investment in such classes of
securities will exceed 5% of its total assets.
In connection, with the qualification or registration of
the Fund's shares for sale under the securities laws of certain
states the Fund has agreed, in addition to the foregoing
investment restrictions, that it will not invest in warrants
(other than warrants acquired by the Fund as part of a unit or
attached to securities at the time of purchase) if as a result of
such warrants valued at the lower of such cost or market would
exceed 10% of the value of the Fund's assets at the time of
purchase.
___________________________________________________________
MANAGEMENT OF THE FUND
__________________________________________________________
Directors and Officers
The Directors and principal officers of the Fund, their
ages and their principal occupations during the past five years
are set forth below. Each such Director and officer is also a
director, trustee or officer of other registered investment
companies sponsored by the Adviser. Unless otherwise specified,
the address of each of the following persons is 1345 Avenue of
the Americas, New York, New York 10105.
Directors
JOHN D. CARIFA,* 53, Chairman of the Board, is the
President, Chief Operating Officer and a Director of Alliance
Capital Management Corporation ("ACMC"), with which he has been
associated since prior to 1993.
DAVID H. DIEVLER, 69, is an independent consultant. He
was formerly a Senior Vice President of ACMC until December 1994.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 56, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1993.
Previously, he was Director of the National Academy of Design.
His address is 150 White Plains Road, Tarrytown, New York 10591.
____________________
* An "interested person" of the Fund as defined in the 1940
Act.
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<PAGE>
W.H. HENDERSON, 71, joined the Royal Dutch/Shell Group
in 1948 and served in Singapore, Japan, South Africa, Hong Kong
and London. The greater part of his service was in Japan and
between 1969 and 1972 he was Managing Director and Chief
Executive Officer of the Shell Company of Hong Kong Limited.
Mr. Henderson retired from the Royal Dutch/Shell Group in 1974 in
order to establish his own oil and gas consultancy business.
Mr. Henderson is currently a Director of a number of investment
companies. His address is Quarrey House, Charlton Horethorne,
Sherborne, Dorset, DT9 4NY, England.
STIG HOST, 72, is the Chairman and Chief Executive
Officer of International Energy Corp. (oil and gas exploration),
with which he has been associated since prior to 1993. He is
also Chairman and Director of Kriti Exploration, Inc. (oil and
gas exploration and production), Managing Director of Kriti Oil
and Minerals, N.V., Chairman of Kriti Properties and Development
Corporation (real estate), Chairman of International Marine
Sales, Inc. (marine fuels), a Director of Florida Fuels, Inc.
(marine fuels) and President of Alexander Host Foundation. He is
also a Trustee of the Winthrop Focus Funds. His address is 103
Oneida Drive, Greenwich, Connecticut 06830.
ALAN J. STOGA, 47, has been President of Zemi
Investments, L.P., since 1995, President of Zemi Communications,
L.L.C. and its predecessor company since 1996, and a Managing
Director of Kissinger Associates, Inc. until 1995. He has
continued as a member of the Board of Directors of Kissinger
Associates. His address is Kissinger Associates, Inc., 350 Park
Avenue, New York, New York 10022.
Officers
JOHN D. CARIFA, Chairman and President, (see biography
above).
BRUCE W. CALVERT, Senior Vice President, 51, is Vice
Chairman of the Board and Chief Investment Officer of ACMC, with
which he has been associated since prior to 1993.
KARAN TREHAN, Senior Vice President, 45, is a Senior
Vice President of ACMC, with which he has been associated since
prior to 1991. Prior thereto, he was Managing Director of
Potomac Capital since prior to 1993.
KATHLEEN A. CORBET, Senior Vice President, 38, is an
Executive Vice President of ACMC, with which she has been
associated since July, 1993. Prior thereto, she headed Equitable
Capital Management Corporation's Fixed Income Management
Department since prior to 1993.
29
<PAGE>
SAMIR ARORA, Vice President, 36, is a Vice President of
ACMC and Chief Investment Officer -- Indian Operations and
Portfolio Manager, since prior to 1993.
THOMAS BARDONG, Vice President, 53, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1993.
RUSSELL BRODY, Vice President, 31, is a Vice President
and Head Trader of the London desk of ACL with which he has been
associated since July 1997. Prior thereto, he was Head of
European Equity Dealing with Lombard Odier et Cie, London office,
since prior to 1993.
HIROSHI MOTOKI, Vice President, 41, is a Senior Vice
President, a Portfolio Manager and Director of Asian Equities of
ACMC. Prior thereto he was a Japanese Technology/Auto Analyst
for ACMC for with which he has been associated since 1994.
Previously, he was a Senior Analyst for Ford Motors and an
Analyst of Business Development for General Electric since prior
to 1993.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
48, is a Senior Vice President of Alliance Fund Services, Inc.
("AFS"), with which he has been associated since prior to 1993.
EDMUND P. BERGAN. JR., Secretary, 48, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and AFS, with which he has been associated since
prior to 1993.
DOMENICK PUGLIESE, Assistant Secretary, 37, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since May 1995. Previously, he was a Vice
President and Counsel of Concord Financial Holding Corporation
since 1994 and Vice President and Associate General Counsel of
Prudential Securities since prior to 1993.
ANDREW L. GANGOLF, Assistant Secretary, 44, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since December 1994. Prior thereto he was a Vice
President and Assistant Secretary of Delaware Management Company,
Inc. since prior to 1993.
EMILIE D. WRAPP, Assistant Secretary, 42, is a Vice
President and Assistant General Counsel of AFD, with which she
has been associated since prior to 1993.
VINCENT S. NOTO, Controller, 33, is a Vice President of
AFS, with which he has been associated since prior to 1993.
30
<PAGE>
The aggregate compensation to be paid by the Fund to
each of the Directors during the Fund's fiscal year ended
October 31, 1997, the aggregate compensation paid to each of the
Directors during calendar year 1997 by all of the registered
investment companies to which the Adviser provides investment
advisory services (collectively, the "Alliance Fund Complex"),
and the total number of registered investment companies (and
separate investment portfolios within those companies) in the
Alliance Fund Complex with respect to which each of the Directors
serves as a director or trustee, are set forth below. Neither
the Fund nor any other registered investment company in the
Alliance Fund Complex provides compensation in the form of
pensions or retirement benefits to any of its directors or
trustees. Each of the Directors is a director or trustee of one
or more other registered investment companies in the Alliance
Fund Complex.
Total Number Total Number
of Investment Investment
Companies in Portfolios
Total the Alliance within the
Compensation Complex, Funds, Including
From the including the the Fund, as
Aggregate Alliance Fund Fund, as to to which the
Compensation Complex, which Director Director is a
from the Including the is a Director Director or
Name of Director Fund Fund or Trustee Trustee
________________ ____________ _____________ ____________ ______________
John D. Carifa $0 $0 53 118
David H. Dievler $4,475 $188,500 46 83
John H. Dobkin $4,425 $126,500 43 80
W.H. Henderson $4,375 $ 29,750 4 4
Stig Host $4,375 $ 29,750 4 4
Alan Stoga $4,000 $ 29,750 4 4
As of October 9, 1998, the Directors and officers of the
Fund as a group owned less than 1% of any other class of shares
of the Fund.
Adviser
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision of the Fund's Board of Directors (see "Management of
the Fund" in the Prospectus).
31
<PAGE>
The Adviser is a leading international investment
manager supervising client accounts with assets as of June 30,
1998, totaling more than $262 billion (of which more than $107
billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds. The 55 registered investment
companies managed by the Adviser, comprising 120 separate
investment portfolios, currently have more than 3.5 million
shareholders. As of July 31, 1998, the Adviser and its
subsidiaries employed approximately 2,000 employees who operate
out of domestic offices and the offices of subsidiaries in
Bahrain, Bangalore, Cairo, Chennai, Hong Kong, Istanbul,
Johannesburg, London, Luxembourg, Madrid, Moscow, Mumbai, New
Delhi, Paris, Pune, Sao Paolo, Seoul, Singapore, Sydney, Tokyo,
Toronto, Vienna and Warsaw. As of June 30, 1998, the Adviser was
retained as an investment manager for employee benefit plan
assets of 32 of the FORTUNE 100 companies.
ACMC, the sole general partner of, and the owner of a 1%
general partnership interest in the Adviser, is an indirect
wholly-owned subsidiary of the Equitable Life Assurance Society
of the United States ("Equitable"), one of the largest life
insurance companies in the United States and a wholly-owned
subsidiary of the Equitable Companies Incorporated ("ECI"). ECI
is a holding company controlled by AXA-UAP ("AXA") a French
insurance holding company which at March 1, 1998, beneficially
owned approximately 59% of the outstanding voting shares of ECI.
As of June 30, 1998, ACMC, Inc. and Equitable Capital Management
Corporation, each a wholly-owned direct or indirect subsidiary of
Equitable, together with Equitable, owned in the aggregate
approximately 57% of the issued and outstanding units
representing assignments of beneficial ownership of limited
partnership interests in the Adviser.
AXA is a holding company for an international group of
insurance and related financial services companies. AXA's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.
Based on information provided by AXA, as of March 31,
1998, more than 30% of the voting power of AXA was controlled
directly and indirectly by FINAXA, a French holding company. As
of March 31, 1998 approximately 74% of the voting power of FINAXA
was controlled directly and indirectly by four French mutual
32
<PAGE>
insurance companies (the "Mutuelles AXA"), one of which, AXA
Assurances I.A.R.D. Mutuelle, itself controlled directly and
indirectly more than 42% of the voting power of FINAXA. Acting
as a group, the Mutuelles AXA control AXA and FINAXA.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Directors and officers of
the Fund who are affiliated persons of the Adviser. The Adviser
or its affiliates also furnishes the Fund, without charge,
management supervision and assistance and office facilities and
provides persons satisfactory to the Fund's Board of Directors to
serve as the Fund's officers.
As to the obtaining of services other than those
specifically provided to the Fund by the Adviser, the Fund may
employ its own personnel. For such services, it also may utilize
personnel employed by the Adviser or by other subsidiaries of
Equitable. In such event, the services will be provided to the
Fund at cost and the payments specifically approved by the Fund's
Board of Directors. The Fund paid to the Adviser a total of
$32,908 in respect of such services during the fiscal year of the
Fund ended October 31, 1997.
Under the Advisory Agreement, the Fund pays the Adviser
a fee at the annual rate of 1.00% of the value of the average
daily net assets of the Fund. The fee is accrued daily and paid
monthly. For the fiscal period November 28, 1994 (commencement
of operations) through October 31, 1995, the fiscal years ended
October 31, 1996 and October 31, 1997, the Adviser received
Advisory fees of $51,714, $290,315 and $343,746, respectively,
from the Fund. Of that all was waived by the Adviser for the
fiscal period November 28, 1994 through October 31, 1995, $71,729
was waived by the Adviser for the fiscal year ended October 31,
1996 and $42,986 was waived by the Adviser for the fiscal year
ended October 31, 1997.
The Advisory Agreement became effective on October 21,
1994 having been approved by the unanimous vote, cast in person,
of the Fund's Directors, including the Directors who are not
parties to the Advisory Agreement or interested persons as
defined in the 1940 Act of any such party, at a meeting called
for that purpose and held on October 20, 1994, and by the Fund's
initial shareholder on October 20, 1994.
The Advisory Agreement will remain in force for
successive twelve-month periods (computed from each July 1),
provided that such continuance is approved at least annually by a
vote of a majority of the Fund's outstanding voting securities or
by the Fund's Board of Directors, including in either case,
approval by a majority of the Directors who are not parties to
33
<PAGE>
the Advisory Agreement or interested persons of any such party as
defined by the Act. Most recently, the continuance of the
Advisory Agreement until June 30, 1999 was approved by a vote,
cast in person, of the Directors, including a majority of the
Directors who are not parties to the Advisory Agreement or
interested persons of any such party, at a meeting called for
that purpose and held on June 11, 1998.
The Advisory Agreement is terminable without penalty by
a vote of a majority of the Fund's outstanding voting securities
or by a vote of a majority of the Fund's Directors on 60 days'
written notice, or by the Adviser on 60 days' written notice, and
will automatically terminate in the event of its assignment. The
Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the
Adviser, or of reckless disregard of its obligations thereunder,
the Adviser shall not be liable for any action or failure to act
in accordance with its duties thereunder.
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The Adviser
may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients
simultaneously with the Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. It is
the policy of the Adviser to allocate advisory recommendations
and the placing of orders in a manner which is deemed equitable
by the Adviser to the accounts involved, including the Fund.
When two or more of the clients of the Adviser (including the
Fund) are purchasing or selling the same security on a given day
from the same broker-dealer, such transactions may be averaged as
to price.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to The Alliance Fund, Inc., AFD
Exchange Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Capital Reserves, Alliance Global Dollar
Government Fund, Inc., Alliance Global Environment Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Government Reserves, Alliance
Greater China '97 Fund, Inc., Alliance Growth and Income Fund,
Inc., Alliance High Yield Fund, Inc., Alliance Institutional
Funds, Inc., Alliance Institutional Reserves, Inc., Alliance
International Fund, Alliance International Premier Growth Fund,
Inc., Alliance Limited Maturity Government Fund, Inc., Alliance
Money Market Fund, Alliance Mortgage Securities Income Fund,
Inc., Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund II,
34
<PAGE>
Alliance Municipal Trust, Alliance New Europe Fund, Inc.,
Alliance North American Government Income Trust, Inc., Alliance
Premier Growth Fund, Inc., Alliance Quasar Fund, Inc., Alliance
Real Estate Investment Fund, Inc., Alliance/Regent Sector
Opportunity Fund, Inc., Alliance Select Investors Series, Inc.,
Alliance Technology Fund, Inc., Alliance Utility Income Fund,
Inc., Alliance Variable Products Series Fund, Inc., Alliance
Worldwide Privatization Fund, Inc., The Alliance Portfolios and
The Hudson River Trust, all registered open-end investment
companies; and to ACM Government Income Fund, Inc., ACM
Government Securities Fund, Inc., ACM Government Spectrum Fund,
Inc., ACM Government Opportunity Fund, Inc., ACM Managed Dollar
Income Fund, Inc., ACM Managed Income Fund, Inc., ACM Municipal
Securities Income Fund, Inc., Alliance World Dollar Government
Fund, Inc., Alliance World Dollar Government Fund II, Inc., The
Austria Fund, Inc., The Korean Investment Fund, Inc., The
Southern Africa Fund, Inc. and The Spain Fund, Inc., all
registered closed-end investment companies.
Administrator
Alliance Capital Management L.P. has been retained under
an administration agreement (the "Administration Agreement") to
perform administrative services necessary for the operation of
the Fund (in such capacity, the "Administrator").
Pursuant to the Administration Agreement and in
consideration of its administrative fee, the Administrator will
perform or arrange for the performance of the following services
(i) prepare and assemble reports required to be sent to Fund
shareholders and arrange for the printing and dissemination of
such reports to shareholders; (ii) assemble reports required to
be filed with the Securities and Exchange Commission (the
"Commission") and file such completed reports with the
Commission; (iii) arrange for the dissemination to shareholders
of the Fund's proxy materials and oversee the tabulation of
proxies by the Fund's transfer agent; (iv) negotiate the terms
and conditions under which custodian services will be provided to
the Fund and the fees to be paid by the Fund to its custodian in
connection therewith; (v) negotiate the terms and conditions
under which dividend disbursing services will be provided to the
Fund, and the fees to be paid by the Fund in connection
therewith; review the provision of dividend disbursing services
to the Fund; (vi) calculate, or arrange for the calculation of,
the net asset value of the Fund's shares; (vii) determine the
amounts available for distribution as dividends and distributions
to be paid by the Fund to its shareholders; prepare and arrange
for the printing of dividend notices to shareholders; and provide
the Fund's dividend disbursing agent and custodian with such
information as is required for it to effect the payment of
dividends and distributions and to implement the Fund's dividend
35
<PAGE>
reinvestment plan; (viii) assist in providing to the Fund's
independent accountants such information as is necessary for such
accountants to prepare and file the Fund's federal income and
excise tax returns and the Fund's state and local tax returns;
(ix) monitor compliance of the Fund's operations with the 1940
Act and with its investment policies and limitations as currently
in effect; (x) provide accounting and bookkeeping services
(including the maintenance of such accounts, books and records of
the Fund as may be required by Section 31(a) of the 1940 Act and
the rules and regulations thereunder); and (xi) make such reports
and recommendations to the Board as the Board reasonably requests
or deems appropriate.
For the services rendered to the Fund and related
expenses borne by the Administrator, the Fund will pay the
Administrator a monthly fee at the annual rate of .15 of 1% of
the Fund's average daily net assets. For the fiscal period
November 28, 1994 (commencement of operations) through
October 31, 1995, for the fiscal year ended October 31, 1996 and
for the fiscal year ended October 31, 1997, the Administrator
received administration fees of $7,757, $43,547 and $32,908,
respectively.
_______________________________________________________________
EXPENSES OF THE FUND
______________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund to pay distribution services fees to defray expenses
associated with distribution of its Class A, Class B and Class C
shares in accordance with a plan of distribution which is
included in the Agreement and has been duly adopted and approved
in accordance with Rule 12b-1 adopted by the Commission under the
1940 Act (the "Rule 12b-1 Plan").
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge and at the same time to permit the Principal
Underwriter to compensate broker-dealers in connection with the
sale of such shares. In this regard the purpose and function of
the combined contingent deferred sales charge and respective
distribution services fee on the Class B shares and Class C
36
<PAGE>
shares are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and distribution services fee
provides for the financing of the distribution of the relevant
class of the Fund's shares.
Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund on a quarterly basis. Also, the Agreement provides that the
selection and nomination of Directors who are not "interested
persons" of the Fund, as defined in the 1940 Act, are committed
to the discretion of such disinterested Directors then in office.
The Agreement was initially approved by the Directors of the Fund
at a meeting held on October 20, 1994, and by the Fund's initial
shareholder on October 20, 1994.
The Agreement became effective on October 21, 1994 with
respect to Class A shares, Class B shares and Class C shares and
June 20, 1996 with respect to Advisor Class shares. The Agreement
will continue in effect for successive twelve-month periods
(computed from each July 1), provided, however, that such
continuance is specifically approved at least annually by the
Directors of the Fund or by vote of the holders of a majority of
the outstanding voting securities (as defined in the 1940 Act) of
that class, and, in either case, by a majority of the Directors
of the Fund who are not parties to the Agreement or interested
persons, as defined in the 1940 Act, of any such party (other
than as directors of the Fund) and who have no direct or indirect
financial interest in the operation of the Rule 12b-1 Plan or any
agreement related thereto. Most recently, the continuance of the
Agreement until June 30, 1999 was approved by a vote, cast in
person, of the Directors, including a majority of the Directors
who are not parties to the Agreement or interested persons of any
such party, at a meeting called for that purpose and held on
June 11, 1998.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.
All material amendments to the Agreement must be
approved by a vote of the Directors or the holders of the Fund's
outstanding voting securities, voting separately by class, and in
either case, by a majority of the disinterested Directors, cast
in person at a meeting called for the purpose of voting on such
approval; and the Agreement may not be amended in order to
increase materially the costs that the Fund may bear pursuant to
37
<PAGE>
the Agreement without the approval of a majority of the holders
of the outstanding voting shares of the class or classes
affected. The Agreement may be terminated (a) by the Fund
without penalty at any time by a majority vote of the holders of
the outstanding voting securities of the Fund, voting separately
by class or by a majority vote of the Directors who are not
"interested persons" as defined in the 1940 Act, or (b) by the
Principal Underwriter. To terminate the Agreement, any party
must give the other parties 60 days' written notice; to terminate
the Rule 12b-1 Plan only, the Fund need give no notice to the
Principal Underwriter. The Agreement will terminate
automatically in the event of its assignment.
During the Fund's fiscal year ended October 31, 1997,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class A shares, in amounts
aggregating $30,206, which constituted approximately .30% of the
Fund's average daily net assets attributable to the Class A
shares during the period, and the Adviser made payments from its
own resources as described above, aggregating $163,518. Of the
$193,724 paid by the Fund and the Adviser under the Plan, $27,431
was spent on advertising, $1,865 on the printing and mailing of
prospectuses for persons other than current shareholders, $92,916
for compensation to broker-dealers and other financial
intermediaries (including, $53,851 to the Fund's Principal
Underwriter), $7,784 for compensation to sales personnel and,
$68,049 was spent on printing of sales literature, travel,
entertainment, due diligence and other promotional expenses.
During the Fund's fiscal year ended October 31, 1997,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class B shares, in the amounts
aggregating $198,787, which constituted 1.0% of the Fund's
average daily net assets attributable to Class B shares during
the period, and the Adviser made payments from its own resources,
as described above, aggregating $288,218. Of the $487,005 paid
by the Fund and the Adviser under the Plan, $46,802 was spent on
advertising, $4,262 on the printing and mailing of prospectuses
for persons other than current shareholders, $358,807 for
compensation to broker-dealers and other financial intermediaries
(including, $98,348 to the Fund's Principal Underwriter), $7,967
for compensation to sales personnel, $120,204 was spent on
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses and $22,656 on interest
on Class B shares financing. Unreimbursed distribution expenses
incurred during the Fund's fiscal year ended October 31, 1997 and
carried over for reimbursement in future years in respect of the
Class B shares amounted to approximately $1,690,408 or 15.0% of
the net assets represented by the Class B shares of the Fund on
that date.
38
<PAGE>
During the Fund's fiscal year ended October 31, 1997,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class C shares, in amounts
aggregating $30,062, which constituted approximately 1.0%,
annualized, of the Fund's average daily net assets attributable
to Class C shares during the period, and the Adviser made
payments from its own resources, as described above, aggregating
$69,046. Of the $99,108 paid by the Fund and the Adviser under
the Plan, $10,753 was spent on advertising, $1,107 on the
printing and mailing of prospectuses for persons other than
current shareholders, $57,060 for compensation to broker-dealers
and other financial intermediaries (including, $21,215 to the
Fund's Principal Underwriter), $1,724 for compensation to sales
personnel, and $27,055 was spent on printing of sales literature,
travel, entertainment, due diligence and other promotional
expenses. Unreimbursed distribution expenses incurred during the
Fund's fiscal year ended October 31, 1997 and carried over for
reimbursement in future years in respect of the Class C shares
amounted to approximately $162,319 or 9.0% of the net assets
represented by the Class C shares of the Fund on that date.
In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
Transfer Agency Agreement
AFS, an indirect wholly-owned subsidiary of the Adviser,
receives a transfer agency fee per account holder of each of the
Class A shares, Class B shares, Class C shares and Advisor Class
shares of the Fund, plus reimbursement for out-of-pocket
expenses. The transfer agency fee with respect to the Class B
shares and Class C shares is higher than the transfer agency fee
with respect to the Class A and Advisor Class shares, reflecting
the additional costs associated with the Class B and Class C
contingent deferred sales charges. For the fiscal year ended
October 31, 1997, the Fund paid Alliance Fund Services, Inc.
$75,975 for the Transfer Agency Agreement.
39
<PAGE>
_______________________________________________________________
PURCHASE OF SHARES
______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Buy Shares."
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares") without any
initial sales charge and, as long as the shares are held for one
year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset-
based sales charge, in each case as described below. Shares of
the Fund that are offered subject to a sales charge are offered
through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered
into selected agent agreements with the Principal Underwriter
("selected agents"), and (iii) the Principal Underwriter.
Advisor Class shares of the Fund may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, (iii) by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares) or,
(iv) by directors and present or retired full-time employees of
CB Richard Ellis, Inc. Generally, a fee-based program must
charge an asset-based or other similar fee and must invest at
least $250,000 in Advisor Class shares of the Fund in order to be
approved by the Principal Underwriter for investment in Advisor
Class shares.
40
<PAGE>
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares made through such financial
representative. Such financial representative may also impose
requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed
by the Fund, including requirements as to the minimum initial and
subsequent investment amounts. Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares.
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under
"--Class A Shares." On each Fund business day on which a
purchase or redemption order is received by the Fund and trading
in the types of securities in which the Fund invests might
materially affect the value of Fund shares, the per share net
asset value is computed in accordance with the Fund's Articles of
Incorporation and By-Laws as of the next close of regular trading
on the New York Stock Exchange (the "Exchange") (currently
4:00 p.m. Eastern time) by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares
then outstanding. A Fund business day is any day on which the
Exchange is open for trading.
The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected
to be substantially the same. Under certain circumstances,
however, the per share net asset values of the Class B and
Class C shares may be lower than the per share net asset value of
the Class A and Advisor Class shares, as a result of the
differential daily expense accruals of the distribution and
transfer agency fees applicable with respect to those classes of
shares. Even under those circumstances, the per share net asset
values of the four classes eventually will tend to converge
immediately after the payment of dividends, which will differ by
approximately the amount of the expense accrual differential
among the classes.
41
<PAGE>
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchase of shares placed through
selected dealers, agents or financial representatives, as
applicable, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer,
agent or financial representative receives the order prior to the
close of regular trading on the Exchange and transmits it to the
Principal Underwriter prior to 5:00 p.m. Eastern time. The
selected dealer, agent or financial representative, as
applicable, is responsible for transmitting such orders by
5:00 p.m. Eastern time. Certain selected dealers, agents or
financial representatives may enter into operating agreements
permitting them to transmit purchase information to the Principal
Underwriter after 5:00 p.m. Eastern time and receive that day's
net asset value). If the selected dealer, agent or financial
representative fails to do so, the investor's right to that day's
closing price must be settled between the investor and the
selected dealer, agent or financial representative, as
applicable. If the selected dealer, agent or financial
representatives, as applicable, receives the order after the
close of regular trading on the Exchange, the price will be based
on the net asset value determined as of the close of regular
trading on the Exchange on the next day it is open for
trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase orders may not exceed $500,000. Payment for
shares purchased by telephone can be made only by electronic
funds transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
42
<PAGE>
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription. As
a convenience to the subscriber, and to avoid unnecessary expense
to the Fund, stock certificates representing shares of the Fund
are not issued except upon written request to the Fund by the
shareholder or his or her authorized selected dealer or agent.
This facilitates later redemption and relieves the shareholder of
the responsibility for and inconvenience of lost or stolen
certificates. No certificates are issued for fractional shares,
although such shares remain in the shareholder's account on the
books of the Fund.
In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents, in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part to provide
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, cash or other incentives
will be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other Alliance Mutual
Funds, as defined below, during a specific period of time. On
some occasions, such cash or other incentives may take the form
of payment for attendance at seminars, meals, sporting events or
theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel taken by persons
associated with a dealer or agent to urban or resort locations
within or outside the United States. Such dealer or agent may
elect to receive cash incentives of equivalent amount in lieu of
such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B shares and Class C shares
each bear the expense of a higher distribution services fee than
that borne by Class A shares, and Advisor Class shares do not
bear such a fee, (iii) Class B and Class C shares bear higher
transfer agency costs than those borne by Class A and Advisor
Class shares, (iv) each of Class A, B and C shares has exclusive
voting rights with respect to provisions of the Rule 12b-1 Plan
pursuant to which its distribution services fee is paid and other
matters for which separate class voting is appropriate under
applicable law, provided that, if the Fund submits to a vote of
the Class A shareholders, an amendment to the Rule 12b-1 Plan
that would materially increase the amount to be paid thereunder
with respect to the Class A shares, then such amendment will also
be submitted to the Class B shareholders and Advisor Class
43
<PAGE>
shareholders and the Class A shareholders, the Class B
shareholders and Advisor Class shareholders will vote separately
by class and (v) Class B shares and Advisor Class shares are
subject to a conversion feature. Each class has different
exchange privileges and certain different shareholder service
options available.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Alternative Retail Purchase Arrangements -- Class A, Class B
and Class C Shares**
The alternative purchase arrangements available with
respect to Class A, Class B and Class C shares permit an investor
to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their
investment in the Fund, the accumulated distribution services fee
and contingent deferred sales charge on Class B shares prior to
conversion, or the accumulated distribution services fee and
contingent deferred sales charge on Class C shares, would be less
than the initial sales charge and accumulated distribution
services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher
return of Class A shares. Class A shares will normally be more
beneficial than Class B shares to the investor who qualifies for
reduced initial sales charges on Class A shares, as described
below. In this regard, the Principal Underwriter will reject any
order (except orders from certain retirement plans and certain
employee benefit plans) for more than $250,000 for Class B
shares. (See Appendix E for information concerning the
eligibility of certain employee benefit plans to purchase Class B
shares at net asset value without being subject to a contingent
deferred sales charge and the ineligibility of certain such plans
to purchase Class A shares.) Class C shares will normally not be
suitable for the investor who qualifies to purchase Class A
shares at net asset value. For this reason, the Principal
Underwriter will reject any order for more than $1,000,000 for
Class C shares.
____________________
** Advisor Class shares are sold only to investors as
described above in this section under "--General."
44
<PAGE>
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge on Class A shares would have to hold his or
her investment approximately seven years for the Class C
distribution services fee to exceed the initial sales charge plus
the accumulated distribution services fee of Class A shares. In
this example, an investor intending to maintain his or her
investment for a longer period might consider purchasing Class A
shares. This example does not take into account the time value
of money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in net
asset value or the effect of different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
During the Fund's fiscal period November 28, 1994
(commencement of operations) through October 31, 1995 and the
fiscal years ended October 31, 1996 and October 31, 1997, the
aggregate amount of underwriting commissions payable with respect
to shares of the Fund was $129,407, $326,972 and $51,997,
respectively. Of that amount, the Principal Underwriter received
the amount of $3,544, $13,206 and $2,570, respectively,
representing that portion of the sales charges paid on shares of
the Fund sold during the year which was not reallowed to selected
dealers (and was, accordingly, retained by the Principal
Underwriter). During the Fund's fiscal years ended in 1997, 1996
45
<PAGE>
and 1995, the Principal Underwriter received contingent deferred
sales charges of $0, $0 and $0, respectively, on Class A Shares,
$73,693, $9,985 and $4,979, respectively, on Class B shares, and
$1,152, $0 and $0, respectively, on Class C shares.
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
________ ________ ________ ____________
Less than
$100,000 . . . 4.44% 4.25% 4.00%
$100,000 but
less than
$250,000 . . . 3.36 3.25 3.00
250,000 but
less than
$500,000 . . . 2.30 2.25 2.00
500,000 but
less than
$1,000,000*. . . 1.78 1.75 1.50
_________________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, as described below under "--Class B
Shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
46
<PAGE>
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers and agents for selling
Class A shares. With respect to purchases of $1,000,000 or more
made through selected dealers or agents, the Adviser may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
1% of the amount invested to compensate such dealers or agents
for their distribution assistance in connection with such
purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "Class B
Shares--Conversion Feature" and "--Conversion of Advisor Class
Shares to Class A Shares." The Fund receives the entire net
asset value of its Class A shares sold to investors. The
Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above. In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter. A selected
dealer who receives reallowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities
Act.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$100,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund at September 30, 1998.
47
<PAGE>
Net Asset Value per Class A Share at
September 30, 1998 $5.56
Class A Per Share Sales Charge
- 4.25% of offering price (4.50% of
net asset value per share) .25
_____
Class A Per Share Offering Price to
the public $5.81
======
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but be subject in most such cases to a contingent
deferred sales charge) or (ii) a reduced initial sales charge.
The circumstances under which investors may pay a reduced initial
sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
The Alliance Fund, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
48
<PAGE>
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting AFS at the address or the
"For Literature" telephone number shown on the front cover of
this Statement of Additional Information.
49
<PAGE>
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all shares of the Fund
held by the investor and (b) all shares of any
other Alliance Mutual Fund held by the investor;
and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with that
of the investor into a single "purchase" (see
above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the sales charge for the $100,000 purchase
would be at the 2.25% rate applicable to a single $300,000
purchase of shares of the Fund, rather than the 3.25% rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B,
Class C and/or Advisor Class shares) of the Fund or any other
Alliance Mutual Fund. Each purchase of shares under a Statement
of Intention will be made at the public offering price or prices
applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Statement of Intention. At
the investor's option, a Statement of Intention may include
purchases of shares of the Fund or any other Alliance Mutual Fund
made not more than 90 days prior to the date that the investor
signs the Statement of Intention; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
50
<PAGE>
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will be necessary to invest
only a total of $60,000 during the following 13 months in shares
of the Fund or any other Alliance Mutual Fund, to qualify for the
3.25% sales charge on the total amount being invested (the sales
charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
the rate of the sales charge applicable to the actual amount of
the aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting AFS at the address or
telephone numbers shown on the cover of this Statement of
Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
under the schedule of sales charges set forth in this Statement
of Additional Information, to an investment 13 times larger than
such initial purchase. The sales charge applicable to each
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<PAGE>
succeeding monthly purchase will be that normally applicable,
under such schedule, to an investment equal to the sum of (i) the
total purchase previously made during the 13-month period and
(ii) the current month's purchase multiplied by the number of
months (including the current month) remaining in the 13-month
period. Sales charges previously paid during such period will
not be retroactively adjusted on the basis of later purchases.
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that
(i) such reinvestment is made within 120 calendar days after the
redemption or repurchase date and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the redemption or repurchase transaction. Investors
may exercise the reinstatement privilege by written request sent
to the Fund at the address shown on the cover of this Statement
of Additional Information.
Sales at Net Asset Value. The Fund may sell its Class A
shares at net asset value (i.e., without an initial sales charge)
and without any contingent deferred sales charge to certain
categories of investors including:
(i) investment management clients of the Adviser or its
affiliates;
(ii) officers and present or former Directors of the
Fund; present or former directors and trustees of
other investment companies managed by the Adviser;
present or retired full-time employees of the
Adviser, the Principal Underwriter AFS and their
affiliates; officers and directors of ACMC, the
Principal Underwriter, AFS and their affiliates;
officers, directors and present full-time employees
of selected dealers or agents; or the spouse,
sibling, direct ancestor or direct descendant
(collectively, "relatives") of any such person; or
any trust, individual retirement account or
retirement plan account for the benefit of any such
person or relative; or the estate of any such
52
<PAGE>
person or relative, if such shares are purchased
for investment purposes (such shares may not be
resold except to the Fund);
(iii) the Adviser, the Principal Underwriter, AFS and
their affiliates; and certain employee benefit
plans for employees of the Adviser, the Principal
Underwriter, AFS and their affiliates;
(iv) registered investment advisers or other financial
intermediaries who charge a management, consulting
or other fee for their services and who purchase
shares through a broker or agent approved by the
Principal Underwriter and clients of such
registered investment advisers or financial
intermediaries whose accounts are linked to the
master account of such investment adviser or
financial intermediary on the books of such
approved broker or agent;
(v) persons participating in a fee-based program,
sponsored and maintained by a registered broker-
dealer or other financial intermediary and approved
by the Principal Underwriter, pursuant to which
such persons pay an asset-based fee to such broker-
dealer or financial intermediaries, or its
affiliates or agents, for services in the nature of
investment advisory or administrative services;
(vi) persons who establish to the Principal
Underwriter's satisfaction that they are investing
within such time period as may be designated by the
Principal Underwriter, proceeds of redemption of
shares of such other registered investment
companies as may be designated from time to time by
the Principal Underwriter; and
(vii) employer-sponsored qualified pension or profit-
sharing plans (including Section 401(k) plans),
custodial accounts maintained pursuant to
Section 403(b)(7) retirement plans and individual
retirement accounts (including individual
retirement accounts to which simplified employee
pension ("SEP") contributions are made), if such
plans or accounts are established or administered
under programs sponsored by administrators or other
persons that have been approved by the Principal
Underwriter.
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<PAGE>
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
the Class B shares are paid to the Principal Underwriter and are
used by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services
fee enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
To illustrate, assume that an investor purchased 100
Class B shares at $10 per share (at a cost of $1,000) and in the
second year after purchase, the net asset value per share is $12
and, during such time, the investor has acquired 10 additional
Class B shares upon dividend reinvestment. If at such time the
investor makes his or her first redemption of 50 Class B shares
(proceeds of $600), 10 Class B shares will not be subject to
charge because of dividend reinvestment. With respect to the
remaining 40 Class B shares, the charge is applied only to the
original cost of $10 per share and not to the increase in net
asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds will be charged at a rate of 3.0% (the
applicable rate in the second year after purchase as set forth
below).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
54
<PAGE>
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a
Years Since Purchase % of Dollar Amount Subject to Charge
___________________ ____________________________________
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth and thereafter None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Code, of a shareholder, (ii) to the extent that
the redemption represents a minimum required distribution from an
individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2, (iii) that had
been purchased by present or former Directors of the Fund, by the
relative of any such person, by any trust, individual retirement
account or retirement plan account for the benefit of any such
person or relative or by the estate of any such person or
relative, or (iv) pursuant to a systematic withdrawal plan (see
"Shareholder Services--Systematic Withdrawal Plan" below).
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares.
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For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee
enables the Fund to sell Class C shares without either an initial
or contingent deferred sales charge, as long as the shares are
held for one year or more. Class C shares do not convert to any
other class of shares of the Fund and incur higher distribution
services fees and transfer agency costs than Class A shares and
Advisor Class shares, and will thus have a higher expense ratio
and pay correspondingly lower dividends than Class A and Advisor
Class shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
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<PAGE>
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, as described above
under "--Class B Shares."
In determining the contingent deferred sales charge
applicable to a redemption of Class C shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because the
shares have been held beyond the period during which the charge
applies or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge.
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares and Advisor Class shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts and employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--General," and by
investment advisory clients of, and by certain other persons
associated with, the Adviser and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan, or to be associated with the
investment adviser or financial intermediary, in each case, that
satisfies the requirements to purchase shares set forth under
"Purchase of Shares--General" or (ii) the holder is otherwise no
longer eligible to purchase Advisor Class shares as described in
the Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
shares held by the shareholder will convert automatically and
without notice to the shareholder, other than the notice
contained in the Advisor Class Prospectus and this Statement of
Additional Information, to Class A shares of the Fund during the
calendar month following the month in which the Fund is informed
of the occurrence of the Conversion Event. The failure of a
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shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event. The conversion would occur on the
basis of the relative net asset values of the two classes and
without the imposition of any sales load, fee or other charge.
Class A shares currently bear a .30% distribution services fee
and have a higher expense ratio than Advisor Class shares. As a
result, Class A shares may pay correspondingly lower dividends
and have a lower net asset value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law. The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem his Advisor Class shares, which would constitute a taxable
event under federal income tax law.
_______________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund redeem the
shares tendered to it, as described below, at a redemption price
equal to their net asset value as next computed following the
receipt of shares tendered for redemption in proper form. Except
for any contingent deferred sales charge which may be applicable
to Class A, Class B or Class C shares, there is no redemption
charge. Payment of the redemption price will be made within seven
days after the Fund's receipt of such tender for redemption. If
a shareholder is in doubt about what documents are required by
his or her fee-based program or employee benefit plan, the
shareholder should contact his or her financial representative.
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The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission
may by order permit for the protection of security holders of the
Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment received by a shareholder upon
redemption or repurchase of his or her shares, assuming the
shares constitute capital assets in his or her hands, will result
in long-term or short-term capital gains (or loss) depending upon
the shareholder's holding period and basis in respect of the
shares redeemed.
To redeem shares of the Fund for which no stock
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
To redeem shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Fund. The
signature or signatures on the assignment form must be guaranteed
in the manner described above.
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Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer of shares for which no stock certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from AFS. A telephone redemption
request by electronic funds transfer may not exceed $100,000
(except for certain omnibus accounts), and must be made by
4:00 p.m. Eastern time on a Fund business day as defined above.
Proceeds of telephone redemptions will be sent by electronic
funds transfer to a shareholder's designated bank account at a
bank selected by the shareholder that is a member of the
NACHA.
Telephone Redemption By Check. Each Fund shareholder is
eligible to request redemption by check of Fund shares for which
no stock certificates have been issued by telephone at (800) 221-
5672 before 4:00 p.m. Eastern time on a Fund business day in an
amount not exceeding $50,000. Proceeds of such redemptions are
remitted by check to the shareholder's address of record. A
shareholder otherwise eligible for telephone redemption by check
may cancel the privilege by written instruction to AFS, or by
checking the appropriate box on the Subscription Application
found in the Prospectus.
Telephone Redemptions--General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching AFS by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
AFS at the address shown on the cover of this Statement of
Additional Information. The Fund reserves the right to suspend
or terminate its telephone redemption service at any time without
notice. Telephone redemption is not available with respect to
shares (i) for which certificates have been issued, (ii) held in
nominee or "street name" accounts, (iii) held by a shareholder
who has changed his or her address of record within the preceding
30 calendar days or (iv) held in any retirement plan account.
Neither the Fund nor the Adviser, the Principal Underwriter or
AFS will be responsible for the authenticity of telephone
requests for redemptions that the Fund reasonably believes to be
genuine. The Fund will employ reasonable procedures in order to
verify that telephone requests for redemptions are genuine,
including, among others, recording such telephone instructions
and causing written confirmations of the resulting transactions
to be sent to shareholders. If the Fund did not employ such
procedures, it could be liable for losses arising from
unauthorized or fraudulent telephone instructions. Selected
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dealers or agents may charge a commission for handling telephone
requests for redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. Eastern time (certain
selected dealers, agents or financial representatives may enter
into operating agreements permitting them to transmit purchase
information to the Principal Underwriter after 5:00 p.m. Eastern
time and receive that day's net asset value). If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
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the check has cleared, normally up to 15 calendar days following
the purchase date.
_______________________________________________________________
SHAREHOLDER SERVICES
______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set forth
below are applicable to Class A, Class B, Class C and Advisor
Class shares unless otherwise indicated. If you are an Advisor
Class shareholder through an account established under a fee-
based program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing electronic funds transfer
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives
the proceeds from the investor's bank. In electronic form,
drafts can be made on or about a date each month selected by the
shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus. Current shareholders should
contact AFS at the address or telephone numbers shown on the
cover of this Statement of Additional Information to establish an
automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Adviser).
In addition, (i) present officers and full-time employees of the
Adviser, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
employees of the Adviser, the Principal Underwriter, AFS and
their affiliates may on a tax-free basis, exchange Class A shares
of the Fund for Advisor Class shares of the Fund. Exchanges of
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<PAGE>
shares are made at the net asset value next determined and
without sales or service charges. Exchanges may be made by
telephone or written request. Telephone exchange requests must
be received by AFS by 4:00 p.m. Eastern time on a Fund business
day, as defined above, in order to receive that day's net asset
value.
Shares will continue to age without regard to exchanges
for purposes of determining the CDSC, if any, upon redemption
and, in the case of Class B shares, for the purpose of conversion
to Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call AFS at (800) 221-5672 to exchange uncertificated shares.
Except with respect to exchanges of Class A shares of the Fund
for Advisor Class shares of the Fund, exchanges of shares as
described above in this section are taxable transactions for
federal income tax purposes. The exchange service may be
changed, suspended, or terminated on 60 days' written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for federal income tax purposes.
Each Fund shareholder and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless AFS,
receives written instruction to the contrary from the
shareholder, or the shareholder declines the privilege by
checking the appropriate box on the Subscription Application
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found in the Prospectus. Such telephone requests cannot be
accepted with respect to shares then represented by stock
certificates. Shares acquired pursuant to a telephone request
for exchange will be held under the same account registration as
the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone AFS with their account number and other details
of the exchange, at (800) 221-5672 before 4:00 p.m. Eastern time
on a Fund business day as defined above. Telephone requests for
exchanges received before 4:00 p.m. Eastern time on a Fund
business day will be processed as of the close of business on
that day. During periods of drastic economic or market
developments (such as the market break of October 1987) it is
possible that shareholders would have difficulty in reaching AFS
by telephone (although no such difficulty was apparent at any
time in connection with the 1987 market break). If a shareholder
were to experience such difficulty, the shareholder should issue
written instructions to AFS at the address shown on the cover of
this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or AFS will be responsible for the
authenticity of telephone requests for exchanges that the Fund
reasonably believes to be genuine. The Fund will employ
reasonable procedures in order to verify that telephone requests
for exchanges are genuine, including, among others, recording
such telephone instructions and causing written confirmations of
the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers, agents or financial
representatives, as applicable, may charge a commission for
handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
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Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact AFS at the "For Literature"
telephone number on the cover of this Statement of Additional
Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan reaches $1 million
on or before December 15 in any year, all Class B shares or
Class C shares of the Fund held by the plan can be exchanged at
the plan's request, without any sales charge, for Class A shares
of the Fund.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
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403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to AFS as compensation for its services to the retirement plan
accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on the shareholder's Class A, Class B,
Class C or Advisor Class Fund shares be automatically reinvested,
in any amount, without the payment of any sales or service
charges, in shares of the same class of such other Alliance
Mutual Fund(s). Further information can be obtained by
contacting AFS at the address or the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Investors wishing to establish a dividend direction
plan in connection with their initial investment should complete
the appropriate section of the Subscription Application found in
the Prospectus. Current shareholders should contact AFS to
establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.
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Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such payments will be subject to any
taxes applicable to redemptions and, except as discussed below,
any applicable contingent deferred sales charge. Shares acquired
with reinvested dividends and distributions will be liquidated
first to provide such withdrawal payments and thereafter other
shares will be liquidated to the extent necessary, and depending
upon the amount withdrawn, the investor's principal may be
depleted. A systematic withdrawal plan may be terminated at any
time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level. Therefore,
redemptions of shares under the plan may reduce or even liquidate
a shareholder's account and may subject the shareholder to the
Fund's involuntary redemption provisions. See "Redemption and
Repurchase of Shares--General." Purchases of additional shares
concurrently with withdrawals are undesirable because of sales
charges when purchases are made. While an occasional lump-sum
investment may be made by a holder of Class A shares who is
maintaining a systematic withdrawal plan, such investment should
normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting AFS at the address or the "Literature"
telephone number shown on the cover of this Statement of
Additional Information.
CDSC Waiver for Class B and Class C Shares. Under a
systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3%
quarterly of the value at the time of redemption of the Class B
or Class C shares in a shareholder's account may be redeemed free
of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. Redemption of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.
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With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent auditors, Ernst & Young LLP, as
well as a confirmation of each purchase and redemption. By
contacting his or her broker or AFS, a shareholder can arrange
for copies of his or her account statements to be sent to another
person.
______________________________________________________________
NET ASSET VALUE
______________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange (ordinarily 4:00 p.m.
Eastern time) following receipt of a purchase or redemption order
by the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors deems
appropriate or necessary in order to comply with Rule 22c-1 under
the 1940 Act. The Fund's per share net asset value is calculated
by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any weekday on which the Exchange is open
for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
States over-the-counter market) are valued, except as indicated
below, at the last sale price reflected on the consolidated tape
at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each case
on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued
at the mean of the closing bid and asked prices on such day. If
no bid or asked prices are quoted on such day, then the security
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is valued in good faith at fair value by, or in accordance with
procedures established by, the Board of Directors. Readily
marketable securities not listed on the Exchange or on a foreign
securities exchange but listed on other United States national
securities exchanges or traded on The Nasdaq Stock Market, Inc.
are valued in like manner. Portfolio securities traded on the
Exchange and on one or more foreign or other national securities
exchanges, and portfolio securities not traded on the Exchange
but traded on one or more foreign or other national securities
exchanges are valued in accordance with these procedures by
reference to the principal exchange on which the securities are
traded.
Readily marketable securities traded in the over-the-
counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a U.S.
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on The
Nasdaq Stock Market, Inc.), are valued at the mean of the current
bid and asked prices as reported by Nasdaq or, in the case of
securities not quoted by Nasdaq, the National Quotation Bureau or
another comparable sources.
Listed put or call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price, If there are no
quotations available for the day of valuations, the last
available closing settlement price will be used.
U.S. Government Securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
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All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Board of Directors at fair value.
The Board of Directors may suspend the determination of
the Fund's, net asset value (and the offering and sale of
shares), subject to the rules of the Commission and other
governmental rules and regulations, at a time when: (1) the
Exchange is closed, other than customary weekend and holiday
closings, (2) an emergency exists as a result of which it is not
reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets,
or (3) for the protection of shareholders, the Commission by
order permits a suspension of the right of redemption or a
postponement of the date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. Dollars at the mean
of the current bid and asked prices of such currency against the
U.S. Dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
The assets attributable to the Class A shares, Class B
shares, Class C shares and Advisor Class shares will be invested
together in a single portfolio. The net asset value of each
class will be determined separately by subtracting the
liabilities allocated to that class from the assets belonging to
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that class in conformance with the provisions of a plan adopted
by the Fund in accordance with Rule 18f-3 under the 1940 Act.
______________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
______________________________________________________________
United States Federal Income Taxation
Of Dividends and Distributions
General. The Fund intends for each taxable year to
qualify as a "regulated investment company" under sections 851
through 855 of the Code. To so qualify, the Fund must, among
other things, (i) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of
stock, securities or foreign currency, or certain other income
(including, but not limited to, gains from options, futures and
forward contracts) derived with respect to its business of
investing in stock, securities or currency; and (ii) diversify
its holdings so that, at the end of each quarter of its taxable
year, the following two conditions are met: (a) at least 50% of
the value of the Fund's assets is represented by cash, U.S.
Government Securities, securities of other regulated investment
companies and other securities with respect to which the Fund's
investment is limited, in respect of any one issuer, to an amount
not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (b) not more
than 25% of the value of the Fund's assets is invested in
securities of any one issuer (other than U.S. Government
Securities or securities of other regulated investment
companies).
If the Fund qualifies as a regulated investment company
for any taxable year and makes timely distributions to its
shareholders of 90% or more of its net investment income for that
year (calculated without regard to its net capital gain, i.e.,
the excess of its net long-term capital gain over its net short-
term capital loss), it will not be subject to federal income tax
on the portion of its taxable income for the year (including any
net capital gain) that it distributes to shareholders.
The Fund intends to also avoid the 4% federal excise tax
that would otherwise apply to certain undistributed income for a
given calendar year if it makes timely distributions to the
shareholders equal to at least the sum of (i) 98% of its ordinary
income for that year; (ii) 98% of its capital gain net income and
foreign currency gains for the twelve-month period ending on
October 31 of that year; and (iii) any ordinary income or capital
gain net income from the preceding calendar year that was not
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distributed during that year. For this purpose, income or gain
retained by the Fund that is subject to corporate income tax will
be considered to have been distributed by the Fund by year-end.
For federal income and excise tax purposes, dividends declared
and payable to shareholders of record as of a date in October,
November or December of a given year but actually paid during the
immediately following January will be treated as if paid by the
Fund on December 31 of that calendar year, and will be taxable to
these shareholders for the year declared, and not for the year in
which the shareholders actually receive the dividend.
The Fund intends to make timely distributions of the
Fund's taxable income (including any net capital gain) so that
the Fund will not be subject to federal income or excise taxes.
However, exchange control or other regulations on the
repatriation of investment income, capital or the proceeds of
securities sales, if any exist or are enacted in the future, may
limit the Fund's ability to make distributions sufficient in
amount to avoid being subject to one or both of such federal
taxes.
Dividends and Distributions. Dividends of the Fund's
net ordinary income and distributions of any net realized short-
term capital gain are taxable to shareholders as ordinary income.
Distributions of net capital gains are taxable as long-
term capital gain, regardless of how long a shareholder has held
shares in the Fund. Any dividend or distribution received by a
shareholder on shares of the Fund will have the effect of
reducing the net asset value of such shares by the amount of such
dividend or distribution. Furthermore, a dividend or
distribution made shortly after the purchase of such shares by a
shareholder, although in effect a return of capital to that
particular shareholder, would be taxable to him as described
above. Dividends are taxable in the manner discussed regardless
of whether they are paid to the shareholder in cash or are
reinvested in additional shares of the Fund.
After the end of the taxable year, the Fund will notify
shareholders of the federal income tax status of any
distributions made by the Fund to shareholders during such year.
It is the present policy of the Fund to distribute to
shareholders all net investment income and to distribute realized
capital gains, if any, annually. There is no fixed dividend rate
and there can be no assurance that the Fund will pay any
dividends. The amount of any dividend or distribution paid on
shares of the Fund must necessarily depend upon the realization
of income and capital gains from the Fund's investments.
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Sales and Redemptions. Any gain or loss arising from a
sale or redemption of Fund shares generally will be capital gain
or loss except in the case of a dealer or a financial
institution, and will be long-term capital gain or loss if such
shareholder has held such shares for more than one year at the
time of the sale or redemption; otherwise it will be short-term
capital gain or loss. If a shareholder has held shares in the
Fund for six months or less and during that period has received a
distribution of net capital gain, any loss recognized by the
shareholder on the sale of those shares during the six-month
period will be treated as a long-term capital loss to the extent
of the distribution. In determining the holding period of such
shares for this purpose, any period during which a shareholder's
risk of loss is offset by means of options, short sales or
similar transactions is not counted.
Any loss realized by a shareholder on a sale or exchange
of shares of the Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30
days before and ending 30 days after the shares are sold or
exchanged. For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan would constitute a replacement if made
within the period. If disallowed, the loss will be reflected in
an upward adjustment to the basis of the shares acquired.
Foreign Taxes. Income received by the Fund may also be
subject to foreign income taxes, including withholding taxes. The
United States has entered into tax treaties with many foreign
countries which entitle the Fund to a reduced rate of such taxes
or exemption from taxes on such income. It is impossible to
determine the effective rate of foreign tax in advance since the
amount of the Fund's assets to be invested within various
countries is not known. If more than 50% of the value of the
Fund's total assets at the close of its taxable year consists of
stocks or securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal
Revenue Service to pass through to its shareholders the amount of
foreign taxes paid by the Fund. However, there can be no
assurance that the Fund will be able to do so. Pursuant to this
election a shareholder will be required to (i) include in gross
income (in addition to taxable dividends actually received) his
pro-rata share of foreign taxes paid by the Fund, (ii) treat his
pro-rata share of such foreign taxes as having been paid by him,
and (iii) either deduct such pro-rata share of foreign taxes in
computing his taxable income or treat such foreign taxes as a
credit against United States federal income taxes. Shareholders
who are not liable for federal income taxes, such as retirement
plans qualified under section 401 of the Code, will not be
affected by any such pass through of taxes by the Fund. No
deduction for foreign taxes may be claimed by an individual
shareholder who does not itemize deductions. In addition,
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certain shareholders may be subject to rules which limit or
reduce their ability to fully deduct, or claim a credit for,
their pro rata share of the foreign taxes paid by the Fund. A
shareholder's foreign tax credit with respect to a dividend
received from the Fund will be disallowed unless the shareholder
holds shares in the Fund on the ex-dividend date and for at least
15 other days during the 30-day period beginning 15 days prior to
the ex-dividend date. Each shareholder will be notified within
60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will pass through for that year
and, if so, such notification will designate (i) the
shareholder's portion of the foreign taxes paid to each such
country and (ii) the portion of dividends that represents income
derived from sources within each such country.
Backup Withholding. The Fund may be required to
withhold United States federal income tax at the rate of 31% of
all taxable distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer identification
numbers or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to
backup withholding. Corporate shareholders and certain other
shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
amounts so withheld may be credited against a shareholder's
United States federal income tax liability or refunded.
United States Federal Income Taxation of the Fund
The following discussion relates to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.
Passive Foreign Investment Companies. If the Fund owns
shares in a foreign corporation that constitutes a "passive
foreign investment company" (a "PFIC") for federal income tax
purposes and the Fund does not elect to treat the foreign
corporation as a "qualified electing fund" within the meaning of
the Code, the Fund may be subject to United States federal income
taxation on a portion of any "excess distribution" it receives
from the PFIC or any gain it derives from the disposition of such
shares, even if such income is distributed as a taxable dividend
by the Fund to its shareholders. The Fund may also be subject to
additional interest charges in respect of deferred taxes arising
from such distributions or gains. Any tax paid by the Fund as a
result of its ownership of shares in a PFIC will not give rise to
any deduction or credit to the Fund or to any shareholder. A
PFIC means any foreign corporation if, for the taxable year
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involved, either (i) it derives at least 75% of its gross income
from "passive income" (including, but not limited to, interest,
dividends, royalties, rents and annuities), or (ii) on average,
at least 50% of the value (or adjusted tax basis, if elected) of
the assets held by the corporation produce "passive income."
Pursuant to the Taxpayer Relief Act of 1997, the Fund could elect
for taxable years beginning after 1997 to "mark-to-market" stock
in a PFIC. Under such an election, the Fund would include in
income each year an amount equal to the excess, if any, of the
fair market value of the PFIC stock as of the close of the
taxable year over the Fund's adjusted basis in the PFIC stock.
The Fund would be allowed a deduction for the excess, if any, of
the adjusted basis of the PFIC stock over the fair market value
of the PFIC stock as to the close of the taxable year, but only
to the extent of any net mark-to-market gains included by the
Fund for prior taxable years. The Fund's adjusted basis in the
PFIC stock would be adjusted to reflect the amounts included in,
or deducted from, income under this election. Amounts included
in income pursuant to this election, as well as gain realized on
the sale or other disposition of the PFIC stock, would be treated
as ordinary income. The deductible portion of any mark-to-market
loss, as well as loss realized on the sale or other disposition
of the PFIC stock to the extent that such loss does not exceed
the net mark-to-market gains previously included by the Fund,
would be treated as ordinary loss. The Fund generally would not
be subject to the deferred tax and interest charge provisions
discussed above with respect to PFIC stock for which a mark-to-
market election has been made. If the Fund purchases shares in a
PFIC and the Fund does elect to treat the foreign corporation as
a "qualified electing fund" under the Code, the Fund may be
required to include in its income each year a portion of the
ordinary income and net capital gains of the foreign corporation,
even if this income is not distributed to the Fund. Any such
income would be subject to the 90% and calendar year distribution
requirements described above.
Currency Fluctuations--"Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, or from the disposition of a forward contract
denominated in a foreign currency which are attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also
are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "Section 988" gains or losses,
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increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as
ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Because section 988 losses
reduce the amount of ordinary dividends the Fund will be allowed
to distribute for a taxable year, such section 988 losses may
result in all or a portion of prior dividend distributions for
such year being recharacterized as a non-taxable return of
capital to shareholders, rather than as an ordinary dividend,
reducing each shareholder's basis in his Fund shares. If such
distributions exceed such shareholder's basis, such excess will
be treated as a gain from the sale of shares.
Options Futures and Forward Contracts. Certain listed
options, regulated futures contracts, and forward foreign
currency contracts are considered "section 1256 contracts" for
federal income tax purposes. Section 1256 contracts held by the
Fund at the end of each taxable year will be "marked to market"
and treated for federal income tax purposes as though sold for
fair market value on the last business day of such taxable year.
Gain or loss realized by the Fund on section 1256 contracts other
than forward foreign currency contracts will be considered 60%
long-term and 40% short-term capital gain or loss. Gain or loss
realized by the Fund on forward foreign currency contracts
generally will be treated as section 988 gain or loss and will
therefore be characterized as ordinary income or loss and will
increase or decrease the amount of the Fund's net investment
income available to be distributed to shareholders as ordinary
income, as described above. The Fund can elect to exempt its
section 1256 contracts which are part of a "mixed straddle" (as
described below) from the application of section 1256.
The Treasury Department has the authority to issue
regulations that would permit or require the Fund either to
integrate a foreign currency hedging transaction with the
investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a
manner that is consistent with the hedged investment. The
regulations issued under this authority generally should not
apply to the type of hedging transactions in which the Fund
intends to engage.
With respect to equity options or options traded over-
the-counter or on certain foreign exchanges, gain or loss
realized by the Fund upon the lapse or sale of such options held
by the Fund will be either long-term or short-term capital gain
or loss depending upon the Fund's holding period with respect to
such option. However, gain or loss realized upon the lapse or
closing out of such options that are written by the Fund will be
treated as short-term capital gain or loss. In general, if the
Fund exercises an option, or an option that the Fund has written
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is exercised, gain or loss on the option will not be separately
recognized but the premium received or paid will be included in
the calculation of gain or loss upon disposition of the property
underlying the option.
Gain or loss realized by the Fund on the lapse or sale
of put and call options on foreign currencies which are traded
over-the-counter or on certain foreign exchanges will be treated
as section 988 gain or loss and will therefore be characterized
as ordinary income or loss and will increase or decrease the
amount of the Fund's net investment income available to be
distributed to shareholders as ordinary income, as described
above. The amount of such gain or loss shall be determined by
subtracting the amount paid, if any, for or with respect to the
option (including any amount paid by the Fund upon termination of
an option written by the Fund) from the amount received, if any,
for or with respect to the option (including any amount received
by the Fund upon termination of an option held by the Fund). In
general, if the Fund exercises such an option on a foreign
currency, or such an option that the Fund has written is
exercised, gain or loss on the option will be recognized in the
same manner as if the Fund had sold the option (or paid another
person to assume the Fund's obligation to make delivery under the
option) on the date on which the option is exercised, for the
fair market value of the option. The foregoing rules will also
apply to other put and call options which have as their
underlying property foreign currency and which are traded over-
the-counter or on certain foreign exchanges to the extent gain or
loss with respect to such options is attributable to fluctuations
in foreign currency exchange rates.
Tax Straddles. Any option, futures contract, forward
foreign currency contract, currency swap, or other position
entered into or held by the Fund in conjunction with any other
position held by the Fund may constitute a "straddle" for federal
income tax purposes. A straddle of which at least one, but not
all, the positions are section 1256 contracts may constitute a
"mixed straddle". In general, straddles are subject to certain
rules that may affect the character and timing of the Fund's
gains and losses with respect to straddle positions by requiring,
among other things, that (i) loss realized on disposition of one
position of a straddle not be recognized to the extent that the
Fund has unrealized gains with respect to the other position in
such straddle; (ii) the Fund's holding period in straddle
positions be suspended while the straddle exists (possibly
resulting in gain being treated as short-term capital gain rather
than long-term capital gain); (iii) losses recognized with
respect to certain straddle positions which are part of a mixed
straddle and which are non-section 1256 positions be treated as
60% long-term and 40% short-term capital loss; (iv) losses
recognized with respect to certain straddle positions which would
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otherwise constitute short-term capital losses be treated as
long-term capital losses; and (v) the deduction of interest and
carrying charges attributable to certain straddle positions may
be deferred. The Treasury Department is authorized to issue
regulations providing for the proper treatment of a mixed
straddle where at least one position is ordinary and at least one
position is capital. No such regulations have yet been issued.
Various elections are available to the Fund which may mitigate
the effects of the straddle rules, particularly with respect to
mixed straddles. In general, the straddle rules described above
do not apply to any straddles held by the Fund all of the
offsetting positions of which consist of section 1256 contracts.
Taxation of Foreign Stockholders
The foregoing discussion relates only to United States
federal income tax law as it affects shareholders who are United
States citizens or residents or United States corporations. The
effects of federal income tax law on shareholders who are non-
resident alien individuals or foreign corporations may be
substantially different. Foreign investors should therefore
consult their counsel for further information as to the United
States tax consequences of receipt of income from the Fund.
Other Taxation
As noted above, the Fund may be subject to other state
and local taxes.
_______________________________________________________________
BROKERAGE AND PORTFOLIO TRANSACTIONS
______________________________________________________________
The management of the Fund has the responsibility for
allocating its brokerage orders and may direct orders to any
broker. It is the Fund's general policy to seek favorable net
prices and prompt reliable execution in connection with the
purchase or sale of all portfolio securities. In the purchase
and sale of over-the-counter securities, it is the Fund's policy
to use the primary market makers except when a better price can
be obtained by using a broker. The Board of Directors has
approved, as in the best interests of the Fund and the
shareholders, a policy of considering, among other factors, sales
of the Fund's shares as a factor in the selection of broker-
dealers to execute portfolio transactions, subject to best
execution. The Adviser is authorized under the Advisory
Agreement to place brokerage business with such brokers and
dealers. The use of brokers who supply supplemental research and
analysis and other services may result in the payment of higher
commissions than those available from other brokers and dealers
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who provide only the execution of portfolio transactions. In
addition, the supplemental research and analysis and other
services that may be obtained from brokers and dealers through
which brokerage transactions are effected may be useful to the
Adviser in connection with advisory clients other than the Fund.
Investment decisions for the Fund are made independently
from those for other investment companies and other advisory
accounts managed by the Adviser. It may happen, on occasion,
that the same security is held in the portfolio of the Fund and
one or more of such other companies or accounts. Simultaneous
transactions are likely when several funds or accounts are
managed by the same Adviser, particularly when a security is
suitable for the investment objectives of more than one of such
companies or accounts. When two or more companies or accounts
managed by the Adviser are simultaneously engaged in the purchase
or sale of the same security, the transactions are allocated to
the respective companies or accounts both as to amount and price,
in accordance with a method deemed equitable to each company or
account. In some cases this system may adversely affect the
price paid or received by the Fund or the size of the position
obtainable for the Fund.
Allocations are made by the officers of the Fund or of
the Adviser. Purchases and sales of portfolio securities are
determined by the Adviser and are placed with broker-dealers by
the order department of the Adviser.
The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc., and subject
to seeking best execution, the Fund may consider sales of shares
of the Fund or other investment companies managed by the Adviser
as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, and with brokers which may have
their transactions cleared or settled, or both, by the Pershing
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Division of DLJ, for which DLJ may receive a portion of the
brokerage commissions. In such instances, the placement of
orders with such brokers would be consistent with the Fund's
objective of obtaining best execution and would not be dependent
upon the fact that DLJ is an affiliate of the Adviser.
Many of the Fund's portfolio transactions in equity
securities will occur on foreign stock exchanges. Transactions
on stock exchanges involve the payment of brokerage commissions.
On many foreign stock exchanges these commissions are fixed.
Securities traded in foreign over-the-counter markets (including
most fixed-income securities) are purchased from and sold to
dealers acting as principal. Over-the-counter transactions
generally do not involve the payment of a stated commission, but
the price usually includes an undisclosed commission or markup.
The prices of underwritten offerings, however, generally include
a stated underwriter's discount. The Adviser expects to effect
the bulk of its transactions in securities of companies based in
foreign countries through brokers, dealers or underwriters
located in such countries. U.S. Government or other U.S.
securities constituting permissible investments will be purchased
and sold through U.S. brokers, dealers or underwriters.
During the fiscal period November 28, 1994 (commencement
of operations) through October 31, 1995, fiscal years ended
October 31, 1996 and October 31, 1997, the Fund incurred
brokerage commissions amounting in the aggregate to $26,311,
$395,188 and $294,710, respectively. During the fiscal period
November 28, 1994 (commencement of operations) through
October 31, 1995, for the fiscal years ended October 31, 1996 and
October 31, 1997, brokerage commissions amounting in the
aggregate to $-0-, $-0- and $0, respectively, were paid to DLJ
and brokerage commissions amounting in the aggregate to $0,
$4,181 and $7,572, respectively, were paid to brokers utilizing
the Pershing Division of DLJ. During the fiscal year ended in
October 31, 1997, the brokerage commissions paid to DLJ
constituted 0% of the Fund's aggregate brokerage commissions and
the brokerage commissions paid to brokers utilizing the Pershing
Division of DLJ constituted 0% of the Fund's aggregate brokerage
commissions. During the fiscal year ended in October 31, 1997,
of the Fund's aggregate dollar amount of brokerage transactions
involving the payment of commissions, 0% were effected through
DLJ and 0% were effected through brokers utilizing the Pershing
Division of DLJ. During the fiscal year ended October 31, 1997,
transactions in portfolio securities of the Fund aggregating
$59,105,058 with associated brokerage commissions of
approximately $303,157 were allocated to persons or firms
supplying research services to the Fund or the Adviser.
80
<PAGE>
_______________________________________________________________
GENERAL INFORMATION
______________________________________________________________
Capitalization
The authorized capital stock of the Fund currently
consists of 3,000,000,000 shares of Class A Common Stock,
3,000,000,000 shares of Class B Common Stock, 3,000,000,000
shares of Class C Common Stock and 3,000,000,000 shares of
Advisor Class Common Stock, each having a par value of $.001 per
share.
All shares of the Fund, when issued, are fully paid and
non-assessable. The Directors are authorized to reclassify and
issue any unissued shares to any number of additional series and
classes without shareholder approval. Accordingly, the Directors
in the future, for reasons such as the desire to establish one or
more additional portfolios with different investment objectives,
policies or restrictions, may create additional classes or series
of shares. Any issuance of shares of another class or series
would be governed by the 1940 Act and the law of the State of
Maryland. If shares of another series were issued in connection
with the creation of a second portfolio, each share of either
portfolio would normally be entitled to one vote for all
purposes. Generally, shares of both portfolios would vote as a
single series on matters, such as the election of Directors, that
affected both portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of
the Advisory Contract and changes in investment policy, shares of
each portfolio would vote as a separate series.
Procedures for calling a shareholders' meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act will be available to shareholders
of the Fund. The rights of the holders of shares of a series may
not be modified except by the vote of a majority of the
outstanding shares of such series.
The outstanding voting shares of the Fund as of
October 9, 1998 consisted of 628,998 Class A, 1,413,423 Class B,
290,057 Class C and 223,977 Advisor Class shares. To the
knowledge of the Fund, the following persons owned of record or
beneficially 5% or more of the outstanding shares of the Fund as
of October 9, 1998:
81
<PAGE>
No. of
Shares % of
Name and Address of Class Class
Class A
MLPS&S For the Sole 55,890 8.89%
Benefit of Its Customers
Attn. Fund Administration
(97FL3)
4800 Deer Lake Dr. East
2nd Floor
Jacksonville FL 32246-6484
Class B
MLPS&S For the Sole 244,363 17.29%
Benefit of Its Customers
Attn. Fund Administration
(97FL3)
4800 Deer Lake Dr. East
2nd Floor
Jacksonville FL 32246-6484
Class C
Merrill Lynch 32,909 11.36%
Mutual Fund Admin (97 FL5)
4800 Deer Lake Dr. East
2nd Floor
Jacksonville FL 32246-6486
Advisor Class
Alliance Plans Div/F.T.C. 29,247 13.06%
C/F Michael F. Delfino IRA
100 Montrose Station Road
Montrose, NY 10548-1015
Alliance Plans Div/F.T.C. 33,444 14.93%
FBO Maurice S. Mandel Rollover IRA
14 Hillside Avenue
Port Washington, NY 11050-2747
Trust for Profit Sharing Plan 146,225 65.29%
For Employees of Alliance
Capital Mgmt L.P. Plan Y
Attn. Jill Smith 32nd Fl.
1345 Avenue of the Americas
New York, NY 10105-0302
82
<PAGE>
Custodian
Brown Brothers Harriman & Co. ("Brown Brothers"),
40 Wall Street, Boston, Massachusetts 02109, will act as the
Fund's custodian for the assets of the Fund, but plays no part in
deciding the purchase or sale of portfolio securities. Subject
to the supervision of the Fund's Directors, Brown Brothers may
enter into sub-custodial agreements for the holding of the Fund's
foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Agreement, the
Fund has agreed to indemnify the Principal Underwriter, in the
absence of its willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations thereunder, against
certain civil liabilities, including liabilities under the
Securities Act.
Counsel
Legal matters in connection with the issuance of the
shares of Common Stock offered hereby are passed upon by Seward &
Kissel, New York, New York. Seward & Kissel has relied upon the
opinion of Venable, Baetjer and Howard, LLP, Baltimore, Maryland,
for matters relating to Maryland law.
Independent Auditors
Ernst & Young LLP, New York, New York, have been
appointed as independent auditors for the Fund.
Performance Information
From time to time the Fund advertises its "total
return." Computed separately for each class, the Fund's "total
return" is its average annual total return for its most recently
completed one-, five- and ten-year periods (or the period since
the Fund's inception). The Fund's total return for such a period
is computed by finding, through the use of a formula prescribed
by the Commission, the average annual compounded rate of return
over the period that would equate an assumed initial amount
invested to the value of such investment at the end of the
period. For purposes of computing total return, income dividends
and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when paid and the maximum sales
charge applicable to purchases of Fund shares is assumed to have
been paid.
83
<PAGE>
The Fund's average annual compounded total return for
the one-, five- and ten year periods ended April 30, 1998 (or
since inception through that date, as noted) were as follows:
Year Ended 5 Years Ended 10 Years Ended
4/30/98 4/30/98 4/30/98
Class A -28.40% -8.12%* N/A
Class B -28.86% -8.70%* N/A
Class C -28.83% -8.67%* N/A
Advisor Class -38.30% -28.04%* N/A
*Inception Dates: Class A - November 28, 1994
Class B - November 28, 1994
Class C - November 28, 1994
Advisor Class - October 1, 1996
The Fund's total return is computed separately for
Class A, Class B, Class C and Advisor Class shares. The Fund's
total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and
quality of the securities in the Fund's portfolio and the Fund's
expenses. Total return information is useful in reviewing the
Fund's performance but such information may not provide a basis
for comparison with bank deposits or other investments which pay
a fixed yield for a stated period of time. An investor's
principal invested in the Fund is not fixed and will fluctuate in
response to prevailing market conditions.
Advertisements quoting performance ratings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc. and advertisements presenting the historical
record of payments of income dividends by the Fund may also from
time to time be sent to investors or may be placed in newspapers,
magazines such as Barrons, Business Week, Changing Times, Forbes,
Investor's Daily, Money Magazine, The New York Times and The Wall
Street Journal or other media on behalf of the Fund. The Fund is
ranked by Lipper in the category known as "Pacific Region
Funds".
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or to Alliance Fund Services, Inc. at the
address or telephone numbers shown on the front cover of this
Statement of Additional Information. This Statement of
Additional Information does not contain all the information set
forth in the Registration Statement filed by the Fund with the
Commission under the Securities Act. Copies of the Registration
Statement may be obtained at a reasonable charge from the
84
<PAGE>
Commission or may be examined, without charge, at the offices of
the Commission in Washington, D.C.
85
<PAGE>
_______________________________________________________________
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
______________________________________________________________
86
<PAGE>
ALLIANCE ALL-ASIA INVESTMENT FUND
SEMI-ANNUAL REPORT
APRIL 30, 1998
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
APRIL 30, 1998 (UNAUDITED) ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-92.7%
AUSTRALIA-7.8%
Coca-Cola Amatil, Ltd. 380 $ 2,900
Hoyts Cinemas Group 250,000 407,656
Normandy Mining, Ltd. 296,394 330,582
Qantas Airways, Ltd. 127,442 194,510
Tab Corp Holdings, Ltd. 59,750 325,416
Woolworths, Ltd. 71,680 246,857
------------
1,507,921
CHINA-2.8%
Zhejiang Southeast Electric Power Co., Ltd.
(GDR) (a)(b) 33,000 547,800
HONG KONG-27.3%
Cheung Kong Holdings, Ltd. 170,000 1,130,261
Dickson Concepts, Ltd. 285,000 393,687
Guangshen Railway
(ADR) 27,000 264,937
HSBC Holdings, Plc. 43,900 1,252,505
Hutchison Whampoa, Ltd. 104,000 643,119
Smartone Telecom Holdings, Ltd. 12,000 31,526
Sun Hung Kai Properties, Ltd. 166,000 985,799
Television Broadcasting, Ltd. 92,000 235,167
Yanzhou Coal Mining Co., Ltd. Cl. H (a) 1,350,000 357,281
------------
5,294,282
INDIA-7.3%
Hindustan Petroleum 55,300 562,190
Industrial Credit & Inv.
(GDR) (b) 30,600 497,250
Mahanagar Telephone
Nigam, Ltd. (GDR) (a) 8,500 137,063
Videsh Sanchar Nigam, Ltd. 8,900 183,983
(GDR) (b) 3,700 45,325
------------
1,425,811
INDONESIA-3.2%
Gulf Indonesia Resources, Ltd. (a) 13,790 212,021
PT Tambang Timah 500,000 417,188
------------
629,209
JAPAN-36.9%
Advantest Corp. 7,060 474,434
Bank of Tokyo-Mitsubishi 25,200 311,860
Bridgestone Corp. (c) 20,000 456,056
Canon, Inc. 13,000 307,233
Daito Trust Construction Co., Ltd. (c) 33,300 233,583
Daiwa Securities Co., Ltd. 27,000 101,933
Fuji Photo Film 9,000 320,069
Fujitsu, Ltd. 15,000 174,985
Honda Motor Co. (c) 14,000 507,400
Hoya Corp. (c) 13,000 429,931
Japan Tobacco, Inc. 51 364,671
Kao Corp. 10,000 146,859
Kokuyo 3,000 51,420
Nintendo Co. (c) 4,700 430,821
Nippon Electric Glass Co., Ltd. 15,000 169,888
Rohm Co. (c) 3,000 338,417
Sankyo Co., Ltd. 12,000 297,191
Santen Pharmaceutical Co. 13,000 130,550
Shimano, Inc. 6,000 132,739
Sony Corp. (c) 5,000 415,660
Takeda Chemical Industries 6,000 171,247
TDK Corp. (c) 8,000 631,833
Tokai Bank 22,000 128,904
Yamanouchi Pharmaceutical (c) 19,000 449,034
------------
7,176,718
NEW ZEALAND-1.6%
Lion Nathan, Ltd. 113,700 301,906
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
PHILIPPINES-4.4%
Alson's Cement Corp. 49,700 $ 2,476
Belle Corp. (a) 668,000 29,282
Warrants, expiring 10/06/00 (a) 336,400 964
International Container Terminal
Svcs., Inc. (a) 19,687 2,599
Manila Electric Co.
Series B 101,400 287,910
Philippine Long Distance Telephone 20,000 535,492
------------
858,723
SOUTH KOREA-1.4%
S.K. Telecom Co., Ltd. 400 247,834
(ADR) 3,495 25,994
------------
273,828
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
Total Common Stocks & Other Investments
(cost $20,099,159) $ 18,016,198
TIME DEPOSIT-4.6%
UNITED STATES-4.6%
Rabobank
5.44%, 5/01/98
(cost $900,000) $900 900,000
TOTAL INVESTMENTS-97.3%
(cost $20,999,159) 18,916,198
Other assets less liabilities-2.7% 513,741
NET ASSETS-100% $ 19,429,939
(a) Non-income producing security.
(b) Securities are exempt from registration under rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30, 1998,
these securities amounted to $1,090,375 or 5.6% of net assets.
(c) Securities, or a portion thereof, with an aggregate market value of
$3,892,735 have been segregated to collateralize forward exchange currency
contracts.
Glossary of Terms:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED) ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $20,999,159) $ 18,916,198
Cash, at value (cost $295,995) 292,434
Receivable for investment securities sold 1,103,003
Unrealized appreciation of forward exchange currency contracts 234,855
Receivable for capital stock sold 129,303
Deferred organization expenses 62,696
Dividends and interest receivable 59,429
Total assets 20,797,918
LIABILITIES
Payable for investment securities purchased 1,143,400
Payable for capital stock redeemed 38,186
Distribution fee payable 12,476
Advisory fee payable 9,306
Accrued expenses 164,611
Total liabilities 1,367,979
NET ASSETS $ 19,429,939
COMPOSITION OF NET ASSETS
Capital stock, at par $ 2,735
Additional paid-in capital 30,122,439
Accumulated net investment loss (216,191)
Accumulated net realized loss on investments and foreign
currency transactions (8,624,166)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities (1,854,878)
$ 19,429,939
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($4,817,137/
667,851 shares of capital stock issued and outstanding) $7.21
Sales Charge--4.25% of public offering price 0.32
Maximum offering price $7.53
CLASS B SHARES
Net asset value and offering price per share ($11,138,517/
1,580,133 shares of capital stock issued and outstanding) $7.05
CLASS C SHARES
Net asset value and offering price per share ($1,980,605/
280,479 shares of capital stock issued and outstanding) $7.06
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($1,493,680/206,084 shares of capital stock issued and
outstanding) $7.25
See notes to financial statements.
9
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $7,798) $ 143,503
Interest 40,784 $ 184,287
EXPENSES
Advisory fee 97,315
Distribution fee - Class A 7,584
Distribution fee - Class B 55,361
Distribution fee - Class C 9,522
Custodian 85,193
Audit and legal 49,501
Transfer agency 44,530
Registration 36,148
Amortization of organization expenses 20,150
Administrative 14,600
Printing 13,526
Directors' fees 13,500
Miscellaneous 11,259
Total expenses 458,189
Less: expenses waived by the Adviser
(see Note B) (48,660)
Net expenses 409,529
Net investment loss (225,242)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investment transactions (3,577,240)
Net realized loss on foreign currency
transactions (33,277)
Net change in unrealized depreciation of:
Investments 2,808,702
Foreign currency denominated assets and
liabilities 235,514
Net loss on investments and foreign currency
transactions (566,301)
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (791,543)
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment loss $ (225,242) $ (830,892)
Net realized loss on investments and foreign
currency transactions (3,610,517) (5,174,455)
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities 3,044,216 (3,031,796)
Net decrease in net assets from operations (791,543) (9,037,143)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A -0- (362,976)
Class B -0- (710,027)
Class C -0- (103,481)
Advisor Class -0- (5,766)
CAPITAL STOCK TRANSACTIONS
Net decrease (331,211) (9,550,773)
Total decrease (1,122,754) (19,770,166)
NET ASSETS
Beginning of year 20,552,693 40,322,859
End of period (including undistributed net
investment income of $9,051 at
October 31, 1997) $19,429,939 $20,552,693
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED) ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance All-Asia Investment Fund, Inc. (the "Fund") was organized as a
Maryland corporation on September 21, 1994 and is registered under the
Investment Company Act of 1940 as a non-diversified, open-end management
investment company. The Fund offers Class A, Class B, Class C and Advisor Class
shares. Class A shares are sold with an initial sales charge of up to 4.25%.
With respect to purchases of $1,000,000 or more, Class A shares redeemed within
one year of purchase will be subject to a contingent deferred sales charge of
1%. Class B shares are sold with a contingent deferred sales charge which
declines from 4.00% to zero depending on the period of time the shares are
held. Class B shares will automatically convert to Class A shares eight years
after the end of the calendar month of purchase. Class C shares are subject to
a contingent deferred sales charge of 1.00% on redemptions made within the
first year after purchase. Advisor Class shares are sold without an initial or
contingent deferred sales charge and are not subject to ongoing distribution
expenses. Advisor Class shares are offered to investors participating in
fee-based programs and to certain retirement plan accounts. All four classes of
shares have identical voting, dividend, liquidation and other rights, except
that each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. The financial statements have
been prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities in the financial statements and
amounts of income and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of significant
accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sale price or if no sale occurred, at the
mean of the closing bid and asked price on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors. Fixed income securities may be valued on the basis of
prices obtained from a pricing service when such prices are believed to reflect
the fair market value of such securities.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $201,500 have been deferred and are
being amortized on a straight-line basis through October, 1999.
3. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated at the rates
of exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when earned or accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales of investments and forward exchange
currency contracts, the holding of foreign currencies, currency gains or losses
realized between the trade and settlement dates on foreign security
transactions, and the difference between the amounts of dividends, interest and
foreign taxes receivable recorded on the Fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized currency gains and
losses from valuing foreign currency denominated assets and liabilities at
period end exchange rates are reflected as a component of net change in
unrealized appreciation (depreciation) of investments and foreign currency
denominated assets and liabilities.
12
ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
4. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the shares of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisor Class shares have no distribution fees.
6. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts on short-term securities as adjustments
to interest income.
7. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences do not require such
reclassification.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under an investment advisory agreement, the Fund pays Alliance Capital
Management L.P. ("the Adviser") an advisory fee at an annual rate of 1% of the
Fund's average daily net assets. Such fee is accrued daily and paid monthly.
For the period ended April 30, 1998 the Adviser has voluntarily agreed to waive
a portion of its advisory fee. Such waiver amounted to $34,060.
Under the terms of an Administrative Agreement, the Fund pays Alliance Capital
Management L.P. (the "Administrator") a monthly fee equal to the annualized
rate of .15 of 1% of the Fund's average daily net assets. For the period ended
April 30, 1998, the Adviser agreed to waive its fees. Such waiver amounted to
$14,600.
The Administrator provides administrative functions to the Fund as well as
other clerical services. The Administrator also prepares financial and
regulatory reports for the Fund.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $28,475 for the six months ended April 30, 1998.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
$22,511 and $865 in contingent deferred sales charges imposed upon redemptions
by shareholders of Class B, and Class C shares, respectively, for the six
months ended April 30, 1998.
Brokerage commissions paid on investment transactions for the six months ended
April 30, 1998 amounted to $68,438, none of which was paid to brokers utilizing
the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp. ("DLJ"), an affiliate of the Adviser, nor to DLJ directly.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the Fund's average daily net assets attributable to
Class A shares and 1% of the average daily net assets attributable to both
Class B
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
and Class C shares. There is no distribution fee on the Advisor Class shares.
The fees are accrued daily and paid monthly. The Agreement provides that the
Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amounts of
$1,862,972 and $191,395 for Class B and Class C shares respectively. Such costs
may be recovered from the Fund in future periods so long as the Agreement is in
effect. In accordance with the Agreement, there is no provision for recovery of
unreimbursed distribution costs, incurred by the Distributor, beyond the
current fiscal year for Class A shares. The Agreement also provides that the
Adviser may use its own resources to finance the distribution of the Fund's
shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term and U.S.
government obligations) aggregated $9,696,919 and $7,730,033, respectively, for
the six months ended April 30, 1998. There were no purchases or sales of U.S.
government or government agency obligations for the six months ended April 30,
1998.
At April 30, 1998, the cost of investments for federal income tax purposes was
$21,004,783. Accordingly, gross unrealized appreciation of investments was
$902,411 and gross unrealized depreciation of investments was $2,990,996
resulting in net unrealized depreciation of $2,088,585 (excluding foreign
currency transactions).
FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward exchange currency contracts to hedge its exposure
to changes in foreign currency exchange rates on its foreign portfolio
holdings, to hedge certain firm purchase and sale commitments denominated in
foreign currencies and for investment purposes. A forward exchange currency
contract is a commitment to purchase or sell a foreign currency at a future
date at a negotiated forward rate. The gain or loss arising from the difference
between the original contracts and the closing of such contracts is included in
net realized gains or losses on foreign currency transactions.
Fluctuations in the value of forward exchange currency contracts are recorded
for financial reporting purposes as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or other liquid assets in a separate account of the Fund having a value equal
to the aggregate amount of the Fund's commitments under forward exchange
currency contracts entered into with respect to position hedges. Risks may
arise from the potential inability of a counterparty to meet the terms of a
contract and from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar. The face or contract amount, in U.S. dollars, as
reflected in the following table, reflects the total exposure the Fund has in
that particular currency contract.
At April 30, 1998, the Fund had outstanding forward exchange currency
contracts, as follows:
U.S. $
CONTRACT VALUE ON U.S. $
AMOUNT ORIGINATION CURRENT UNREALIZED
(000) DATE VALUE APPRECIATION
--------- ------------ ------------ ------------
FORWARD EXCHANGE
CURRENCY SALE
CONTRACTS
Japanese Yen,
settling 5/8/98 514,000 $4,116,940 $3,882,085 $234,855
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $0.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class. Each class consists of 3,000,000,000 authorized shares.
14
ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
Transactions in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, APRIL 30, 1998 OCTOBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
------------ ------------ -------------- --------------
CLASS A
Shares sold 771,643 774,765 $ 5,757,755 $ 7,493,418
Shares issued in
reinvestment of
distributions -0- 29,448 -0- 321,278
Shares converted
from Class B 6,748 12,185 48,954 128,940
Shares redeemed (895,050) (1,145,077) (6,780,243) (11,393,804)
Net decrease (116,659) (328,679) $ (973,534) $ (3,450,168)
CLASS B
Shares sold 718,859 1,070,451 $ 5,158,209 $ 10,641,169
Shares issued in
reinvestment of
distributions -0- 42,591 -0- 458,704
Shares converted
to Class A (6,897) (12,388) (48,954) (128,940)
Shares redeemed (679,086) (1,735,240) (4,891,686) (17,475,408)
Net increase (decrease) 32,876 (634,586) $ 217,569 $ (6,504,475)
CLASS C
Shares sold 314,981 182,241 $ 2,287,399 $ 1,850,152
Shares issued in
reinvestment of
distributions -0- 8,253 -0- 88,889
Shares redeemed (285,800) (326,841) (2,064,410) (3,438,732)
Net increase (decrease) 29,181 (136,347) $ 222,989 $ (1,499,691)
ADVISOR CLASS
Shares sold 82,228 265,011 $ 600,024 $ 2,733,346
Shares issued in
reinvestment of
distributions -0- 529 -0- 5,766
Shares redeemed (53,154) (91,004) (398,259) (835,551)
Net increase 29,074 174,536 $ 201,765 $ 1,903,561
NOTE F: CONCENTRATION OF RISK
The securities markets of many Asian countries are relatively small, with the
majority of market capitalization and trading volume concentrated in a limited
number of companies representing a small number of industries. Consequently,
the Fund's investment portfolio may experience greater price volatility and
significantly lower liquidity than a portfolio invested in equity securities of
U.S. companies. These markets may be subject to greater influence by adverse
events generally affecting the market, and by large investors trading
significant blocks of securities, than is usual in the United States.
NOTE G: SUBSEQUENT EVENT
On June 11, 1998, the Fund's Board of Directors approved an amendment to the
non-fundamental investment policies of the Fund to permit the Fund to invest
more than 50% of its assets in Japanese equity securities.
15
FINANCIAL HIGHLIGHTS ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
NOVEMBER 28,
SIX MONTHS ENDED YEAR ENDED OCT. 31, 1994(A)
APRIL 30, 1998 ------------------------ TO
(UNAUDITED) 1997 1996 OCT. 31, 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.54 $11.04 $10.45 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b)(c) (.07) (.21) (.21) (.19)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (.26) (2.95) .88 .64
Net increase (decrease) in net asset value
from operations (.33) (3.16) .67 .45
LESS: DISTRIBUTIONS
Distributions from net realized gains on
investments and foreign currency
transactions -0- (.34) (.08) -0-
Net asset value, end of period $ 7.21 $ 7.54 $11.04 $10.45
TOTAL RETURN
Total investment return based on net
asset value (d) (4.38)% (29.61)% 6.43% 4.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,817 $5,916 $12,284 $2,870
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 3.74%(e) 3.45% 3.37% 4.42%(e)
Expenses, before waivers/reimbursements 4.24%(e) 3.57% 3.61% 10.57%(e)
Net investment loss, net of
waivers/reimbursements (1.86)%(e) (1.97)% (1.75)% (1.87)%(e)
Portfolio turnover rate 87% 70% 66% 90%
</TABLE>
See footnote summary on page 19.
16
ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------
NOVEMBER 28,
SIX MONTHS ENDED YEAR ENDED OCT. 31, 1994(A)
APRIL 30, 1998 ------------------------ TO
(UNAUDITED) 1997 1996 OCT. 31, 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.39 $10.90 $10.41 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b)(c) (.09) (.28) (.28) (.25)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (.25) (2.89) .85 .66
Net increase (decrease) in net asset value
from operations (.34) (3.17) .57 .41
LESS: DISTRIBUTIONS
Distributions from net realized gains on
investments and foreign currency
transactions -0- (.34) (.08) -0-
Net asset value, end of period $ 7.05 $ 7.39 $10.90 $10.41
TOTAL RETURN
Total investment return based on net
asset value (d) (4.60)% (30.09)% 5.49% 4.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $11,139 $11,439 $23,784 $5,170
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 4.46%(e) 4.15% 4.07% 5.20%(e)
Expenses, before waivers/reimbursements 4.97%(e) 4.27% 4.33% 11.32%(e)
Net investment loss, net of
waivers/reimbursements (2.56)%(e) (2.67)% (2.44)% (2.64)%(e)
Portfolio turnover rate 87% 70% 66% 90%
</TABLE>
See footnote summary on page 19.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------
NOVEMBER 28,
SIX MONTHS ENDED YEAR ENDED OCT. 31, 1994(A)
APRIL 30, 1998 ------------------------ TO
(UNAUDITED) 1997 1996 OCT. 31, 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.40 $10.91 $10.41 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b)(c) (.09) (.27) (.28) (.35)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (.25) (2.90) .86 .76
Net increase (decrease) in net asset value
from operations (.34) (3.17) .58 .41
LESS: DISTRIBUTIONS
Distributions from net realized gains on
investments and foreign currency
transactions -0- (.34) (.08) -0-
Net asset value, end of period $ 7.06 $ 7.40 $10.91 $10.41
TOTAL RETURN
Total investment return based on net asset
value (d) (4.60)% (30.06)% 5.59% 4.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,981 $1,859 $4,228 $597
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 4.47%(e) 4.15% 4.07% 5.84%(e)
Expenses, before waivers/reimbursements 4.97%(e) 4.27% 4.30% 11.38%(e)
Net investment loss, net of
waivers/reimbursements (2.56)%(e) (2.66)% (2.42)% (3.41)%(e)
Portfolio turnover rate 87% 70% 66% 90%
</TABLE>
See footnote summary on page 19.
18
ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ADVISOR CLASS
-----------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCT. 2, 1996(F)
APRIL 30, 1998 OCT. 31, TO
(UNAUDITED) 1997 OCT. 31, 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 7.56 $11.04 $11.65
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b)(c) (.06) (.15) -0-
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (.25) (2.99) (.61)
Net decrease in net asset value
from operations (.31) (3.14) (.61)
LESS: DISTRIBUTIONS
Distributions from net realized gains on
investments and foreign currency
transactions -0- (.34) -0-
Net asset value, end of period $ 7.25 $ 7.56 $11.04
TOTAL RETURN
Total investment return based on net asset
value (d) (4.10)% (29.42)% (5.24)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,494 $1,338 $27
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 3.53%(e) 3.21% 4.97%(e)
Expenses, before waivers/reimbursements 4.03%(e) 3.43% 5.54%(e)
Net investment loss, net of
waivers/reimbursements (1.66)%(e) (1.51)% 1.63%(e)
Portfolio turnover rate 87% 70% 66%
</TABLE>
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Net of expenses waived by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(e) Annualized.
(f) Commencement of distribution.
19
<PAGE>
ALLIANCE ALL-ASIA INVESTMENT FUND
ANNUAL REPORT
OCTOBER 31, 1997
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-82.8%
AUSTRALIA-7.9%
Coca-Cola Amatil, Ltd. 45,739 $ 344,176
Goldfields, Ltd. 4,176 3,436
Normandy Mining, Ltd. 291,195 317,413
Qantas Airways, Ltd. 124,161 222,656
Tab Corp Holdings, Ltd. 59,750 273,965
WMC, Ltd. 62,963 223,608
Woolworths, Ltd. 71,680 231,377
------------
1,616,631
CHINA-2.2%
China Southern Air Co., Ltd. (a) 252,000 113,264
Zhejiang Southeast Electric
Power Co., Ltd. (GDR) (a)(b) 21,000 349,125
------------
462,389
HONG KONG-13.5%
Cheung Kong Holdings, Ltd. 55,000 384,143
Dickson Concepts, Ltd. 285,000 613,755
First Pacific Co. 450,355 285,422
Guangshen Railway (ADR) 27,000 394,875
HSBC Holdings, Plc. 27,500 620,675
Smartone Telecom Holdings, Ltd. (a) 12,000 26,386
Sun Hung Kai Properties, Ltd. 26,000 191,683
Television Broadcasting, Ltd. 92,000 255,837
------------
2,772,776
INDIA-6.5%
Hindustan Petroleum 31,300 410,823
Industrial Credit & Inv. (GDR) (b) 30,600 454,410
State Bank of India (GDR) (b) 11,500 211,600
Videsh Sanchar Nigam, Ltd. 8,900 207,944
(GDR) (b) 3,700 51,060
------------
1,335,837
INDONESIA-5.9%
Gulf Indonesia Resources, Ltd. (a) 13,790 289,590
PT Indosat 321,500 724,601
PT Semen Cibinong 105,000 13,835
PT Semen Gresik 191,500 185,922
------------
1,213,948
JAPAN-34.5%
Advantest Corp. (c) 4,700 388,414
Bank of Tokyo-Mitsubishi 25,200 328,605
Bridgestone Corp. (c) 20,000 431,894
Canon, Inc. 6,000 145,515
Dai Nippon Printing Co., Ltd. 4,000 79,734
Daito Trust Construction Co., Ltd. 16,900 150,191
Fuji Heavy Industries (c) 60,000 238,704
Fuji Photo Film (c) 1,000 36,213
Fujitsu, Ltd. (c) 30,000 328,904
Honda Motor Co. (c) 14,000 470,930
Hoya Corp. (c) 9,000 312,458
Japan Tobacco, Inc. 31 254,128
Kokuyo 3,000 70,764
Mitsui Marine & Fire Insurance Co. 30,000 176,412
Nintendo Co. (c) 5,400 466,445
Nippon Express Co., Ltd. 6,000 32,292
Nippon Steel Co. 13,000 26,777
Nisshin Steel Co., Ltd. 25,000 42,151
Rohm Co. (c) 4,000 395,349
Santen Pharmaceutical Co. (c) 13,000 229,983
Shimano, Inc. 3,000 61,047
Shiseido Co., Ltd. 11,000 149,834
Sony Corp. (c) 5,000 414,867
Sumitomo Electric Industries 9,000 118,854
Sumitomo Marine & Fire Insurance Co. 6,000 39,967
Sumitomo Realty & Development 20,000 146,013
Taisho Pharmaceutical 18,000 460,465
6
ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
Takeda Chemical Industries 1,000 $ 27,243
TDK Corp. 6,000 497,342
Tokai Bank 5,000 29,153
Yakult Honsha 3,000 24,892
Yamanouchi Pharmaceutical 19,000 467,110
Yamatake Honeywell 4,000 48,173
------------
7,090,823
MALAYSIA-0.2%
Malakoff Berhad 16,180 38,830
NEW ZEALAND-1.6%
Air New Zealand, Ltd. Cl. B 2,545 5,388
Lion Nathan, Ltd. 138,000 333,392
------------
338,780
PHILIPPINES-5.4%
Alson's Cement Corp. 244,500 11,066
Belle Corp. (a) 1,682,000 152,260
International Container Terminal
Svcs., Inc. (a) 19,687 3,898
Manila Electric Co.
Series B 101,400 309,793
Philippine Commercial International Bank 39,000 146,733
Philippine Long Distance Telephone 20,000 495,050
------------
1,118,800
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
SOUTH KOREA-5.1%
Korea Electric Power (ADR) 33,000 $ 270,187
Pohang Iron & Steel Co. (ADR) 8,000 130,000
S.K. Telecom Co., Ltd. (ADR) (a) 116,500 640,750
------------
1,040,937
Total Common Stocks
(cost $21,921,471) 17,029,751
WARRANTS-0.0%
HONG KONG-0.0%
Hysan Development Wts. 4/30/98 (a) 550 19
PHILIPPINES-0.0%
Belle Corp. Wts. 9/11/00 (a) 336,400 38
Total Warrants (cost $0) 57
TIME DEPOSIT-15.6%
UNITED STATES-15.6%
Dresdner Bank
5.65% 11/03/97
(cost $3,200,000) $3,200 3,200,000
TOTAL INVESTMENTS-98.4%
(cost $25,121,471) 20,229,808
Other assets less liabilities-1.6% 322,885
NET ASSETS-100% $ 20,552,693
(a) Non-income producing security.
(b) Securities are exempt from registration under rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31, 1997,
these securities amounted to $1,066,195 or 5.2% of net assets.
(c) Securities, or a portion thereof, with an aggregate market value of
$3,714,161 have been segregated to collateralize forward exchange currency
contracts.
Glossary of Terms:
ADR - American Depositary Receipt.
GDR - Global Depositary Receipt.
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997 ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $25,121,471) $ 20,229,808
Cash, at value (cost $53,804) 53,038
Receivable for capital stock sold 448,429
Deferred organization expenses 82,846
Receivable for investment securities sold 48,180
Dividends and interest receivable 31,663
Total assets 20,893,964
LIABILITIES
Payable for capital stock redeemed 176,072
Distribution fee payable 14,703
Advisory fee payable 13,050
Unrealized depreciation of forward exchange
currency contracts 6,800
Accrued expenses 130,646
Total liabilities 341,271
NET ASSETS $ 20,552,693
COMPOSITION OF NET ASSETS
Capital stock, at par $ 2,760
Additional paid-in capital 30,453,625
Undistributed net investment income 9,051
Accumulated net realized loss on investments and
foreign currency transactions (5,013,649)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities (4,899,094)
$ 20,552,693
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($5,916,072/
784,510 shares of capital stock issued and outstanding) $7.54
Sales charge--4.25% of public offering price .33
Maximum offering price $7.87
CLASS B SHARES
Net asset value and offering price per share ($11,439,303/
1,547,257 shares of capital stock issued and outstanding) $7.39
CLASS C SHARES
Net asset value and offering price per share ($1,859,258/
251,298 shares of capital stock issued and outstanding) $7.40
ADVISOR CLASS SHARES
Net asset value, redemption, and offering price per share
($1,338,060/177,010 shares of capital stock issued
and outstanding) $7.56
See notes to financial statements.
8
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997 ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes
withheld of $54,656) $ 451,266
Interest 60,835 $ 512,101
EXPENSES
Advisory fee 343,746
Distribution fee - Class A 30,206
Distribution fee - Class B 198,787
Distribution fee - Class C 30,062
Custodian 278,666
Transfer agency 112,765
Audit and legal 112,320
Registration 93,345
Amortization of organization expenses 41,409
Printing 37,552
Directors' fees 37,000
Administrative 32,908
Miscellaneous 37,213
Total expenses 1,385,979
Less expenses waived by the
Adviser (see Note B) (42,986)
Net expenses 1,342,993
Net investment loss (830,892)
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investment transactions (4,958,809)
Net realized loss on foreign
currency transactions (215,646)
Net change in unrealized depreciation of:
Investments (3,025,224)
Foreign currency denominated assets and liabilities (6,572)
Net loss on investments and foreign
currency transactions (8,206,251)
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (9,037,143)
See notes to financial statements.
9
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (830,892) $ (646,380)
Net realized gain (loss) on investments and
foreign currency transactions (5,174,455) 1,777,108
Net change in unrealized depreciation of
investments and foreign currency
denominated assets and liabilities (3,031,796) (1,889,917)
Net decrease in net assets from operations (9,037,143) (759,189)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A (362,976) (21,900)
Class B (710,027) (46,814)
Class C (103,481) (5,445)
Advisor Class (5,766) -0-
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (9,550,773) 32,518,713
Total increase (decrease) (19,770,166) 31,685,365
NET ASSETS
Beginning of year 40,322,859 8,637,494
End of year (including undistributed net
investment income of $9,051 at
October 31, 1997) $ 20,552,693 $ 40,322,859
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997 ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance All-Asia Investment Fund, Inc. (the "Fund"), was organized as a
Maryland corporation on September 21, 1994 and is registered under the
Investment Company Act of 1940 as a non-diversified, open-end management
investment company. The Fund offers Class A, Class B, Class C and Advisor Class
shares. Class A shares are sold with an initial sales charge of up to 4.25%.
With respect to purchases of $1,000,000 or more, Class A shares redeemed within
one year of purchase will be subject to a contingent deferred sales charge of
1%. Class B shares are sold with a contingent deferred sales charge which
declines from 4.00% to zero depending on the period of time the shares are
held. Class B shares will automatically convert to Class A shares eight years
after the end of the calendar month of purchase. Class C shares are subject to
a contingent deferred sales charge of 1.00% on redemptions made within the
first year after purchase. Advisor Class shares are sold without an initial or
contingent deferred sales charge and are not subject to ongoing distribution
expenses. Advisor Class shares are offered solely to investors participating in
fee-based programs. All four classes of shares have identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. The following is a summary of significant accounting
policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange for which market
quotations are readily available are valued at the last quoted sales price on
that exchange. Securities listed or traded on certain foreign exchanges whose
operations are similar to the U.S. over-the-counter market are valued at the
price within the limits of the latest available current bid and asked price
deemed best to reflect fair value. Securities which mature in 60 days or less
are valued at amortized cost, which approximates market value, unless this
method does not represent fair value. Securities for which market quotations
are not readily available and restricted securities are valued in good faith at
fair value using methods determined by the Board of Directors.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $201,500 have been deferred and are
being amortized on a straight-line basis through October, 1999.
3. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated at the rates
of exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when earned or accrued.
Net realized loss on foreign currency transactions represents foreign exchange
gains and losses from sales of investments and forward exchange currency
contracts, the holding of foreign currencies, currency gains or losses realized
between the trade and settlement dates on foreign security transactions, and
the difference between the amounts of dividends, interest and foreign taxes
receivable recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net unrealized currency gains and losses from
valuing foreign currency denominated assets and liabilities at period end
exchange rates are reflected as a component of net change in unrealized
appreciation (depreciation) of investments and foreign currency denominated
assets and liabilities.
4. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the shares of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisor Class shares have no distribution fees.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
6. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts on short-term securities as adjustments
to interest income.
7. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences do not require such
reclassification. During the current fiscal year, permanent differences,
primarily due to foreign currency losses, resulted in a net decrease in
additional paid-in capital and corresponding decreases in accumulated net
investment loss and accumulated net realized loss on investments and foreign
currency transactions. This reclassification had no effect on net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under an investment advisory agreement, the Fund pays Alliance Capital
Management L.P. ("the Adviser") an advisory fee at an annual rate of 1% of the
Fund's average daily net assets. Such fee is accrued daily and paid monthly. At
October 31, 1997 the Adviser has voluntarily agreed to waive a portion of its
advisory fee. Such waiver amounted to $42,986 for the year ended October 31,
1997.
Under the terms of an Administrative Agreement, the Fund pays Alliance Capital
Management L.P. (the "Administrator") a monthly fee equal to the annualized
rate of .15 of 1% of the Fund's average daily net assets. Such compensation
amounted to $32,908 for the year ended October 31, 1997.
The Administrator provides administrative functions to the Fund as well as
other clerical services. The Administrator also prepares financial and
regulatory reports for the Fund.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $75,975 for the year ended October 31, 1997.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $2,570 from the sale of Class A shares and $73,693
and $1,152 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B, and Class C shares, respectively, for the year ended
October 31, 1997.
Brokerage commissions paid on investment transactions for the year ended
October 31, 1997 amounted to $294,710, of which $7,572 was paid to a broker
utilizing the services of an affiliate of the Adviser.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the Fund's average daily net assets attributable to
Class A shares and 1% of the average daily net assets attributable to both
Class B and Class C shares. There is no distribution fee on the Advisor Class
shares. The fees are accrued daily and paid monthly. The Agreement provides
that the Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amounts of
$1,690,408 and $162,319 for Class B and Class C shares respectively. Such costs
may be recovered from the Fund in future periods so long as the Agreement is in
effect. In
12
ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
accordance with the Agreement, there is no provision for recovery of
unreimbursed distribution costs, incurred by the Distributor, beyond the
current fiscal year for Class A shares. The Agreement also provides that the
Adviser may use its own resources to finance the distribution of the Fund's
shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term and U.S.
government obligations) aggregated $22,689,736 and $37,806,741, respectively,
for the year ended October 31, 1997. There were no purchases or sales of U.S.
government or government agency obligations for the year ended October 31, 1997.
At October 31, 1997, the cost of investments for federal income tax purposes
was $25,127,096. Accordingly, gross unrealized appreciation of investments was
$707,207 and gross unrealized depreciation of investments was $5,593,245
resulting in net unrealized depreciation of $4,886,038 (excluding foreign
currency transactions).
FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward exchange currency contracts to hedge its exposure
to changes in foreign currency exchange rates on its foreign portfolio
holdings, to hedge certain firm purchase and sale commitments denominated in
foreign currencies and for investment purposes. A forward exchange currency
contract is a commitment to purchase or sell a foreign currency at a future
date at a negotiated forward rate. The gain or loss arising from the difference
between the original contracts and the closing of such contracts is included in
net realized gains or losses on foreign currency transactions.
Fluctuations in the value of forward exchange currency contracts are recorded
for financial reporting purposes as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or other liquid assets in a separate account of the Fund having a value equal
to the aggregate amount of the Fund's commitments under forward exchange
currency contracts entered into with respect to position hedges. Risks may
arise from the potential inability of a counterparty to meet the terms of a
contract and from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar. The face or contract amount, in U.S. dollars, as
reflected in the following table, reflects the total exposure the Fund has in
that particular currency contract.
At October 31, 1997, the Fund had outstanding forward exchange currency
contracts, as follows:
U.S. $
CONTRACT VALUE ON U.S. $
AMOUNT ORIGINATION CURRENT UNREALIZED
(000) DATE VALUE DEPRECIATION
------------ ------------ ------------ ------------
FORWARD EXCHANGE
CURRENCY SALE
CONTRACTS
Japanese Yen,
expiring 2/4/98 437,655 $3,678,422 $3,685,222 $ (6,800)
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $0.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 774,765 1,333,932 $ 7,493,418 $ 15,265,510
Shares issued in
reinvestment of
distributions 29,448 1,703 321,278 18,287
Shares converted
from Class B 12,185 19,434 128,940 233,415
Shares redeemed (1,145,077) (516,471) (11,393,804) (5,861,457)
Net increase
(decrease) (328,679) 838,598 $ (3,450,168) $ 9,655,755
CLASS B
Shares sold 1,070,451 2,645,348 $ 10,641,169 $ 30,130,477
Shares issued in
reinvestment of
distributions 42,591 3,362 458,704 35,910
Shares converted
to Class A (12,388) (19,621) (128,940) (233,415)
Shares redeemed (1,735,240) (944,132) (17,475,408) (10,813,924)
Net increase
(decrease) (634,586) 1,684,957 $ (6,504,475) $ 19,119,048
CLASS C
Shares sold 182,241 679,693 $ 1,850,152 $ 7,727,714
Shares issued in
reinvestment of
distributions 8,253 481 88,889 5,146
Shares redeemed (326,841) (349,835) (3,438,732) (4,016,334)
Net increase
(decrease) (136,347) 330,339 $ (1,499,691) $ 3,716,526
OCT. 2, 1996* OCT. 2, 1996*
TO TO
OCT. 31, 1996 OCT. 31, 1996
------------ --------------
ADVISOR CLASS
Shares sold 265,011 2,474 $ 2,733,346 $ 27,384
Shares issued in
reinvestment of
distributions 529 -0- 5,766 -0-
Shares redeemed (91,004) -0- (835,551) -0-
Net increase 174,536 2,474 $ 1,903,561 $ 27,384
NOTE F: CONCENTRATION OF RISK
The securities markets of many Asian countries are relatively small, with the
majority of market capitalization and trading volume concentrated in a limited
number of companies representing a small number of industries. Consequently,
the Fund's investment portfolio may experience greater price volatility and
significantly lower liquidity than a portfolio invested in equity securities of
U.S. companies. These markets may be subject to greater influence by adverse
events generally affecting the market, and by large investors trading
significant blocks of securities, than is usual in the United States.
* Commencement of distribution
14
FINANCIAL HIGHLIGHTS ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------
YEAR ENDED OCT. 31, NOV. 28,1994(A)
----------------------- TO
1997 1996 OCT. 31, 1995
----------- ---------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period $11.04 $10.45 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b)(c) (.21) (.21) (.19)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (2.95) .88 .64
Net increase (decrease) in net asset
value from operations (3.16) .67 .45
LESS: DISTRIBUTIONS
Distributions from net realized gains
on investments and foreign currency
transactions (.34) (.08) -0-
Net asset value, end of period $ 7.54 $11.04 $10.45
TOTAL RETURN
Total investment return based on
net asset value (d) (29.61)% 6.43% 4.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $5,916 $12,284 $2,870
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 3.45% 3.37% 4.42%(e)
Expenses, before waivers/reimbursements 3.57% 3.61% 10.57%(e)
Net investment loss, net of
waivers/reimbursements (1.97)% (1.75)% (1.87)%(e)
Portfolio turnover rate 70% 66% 90%
Average commission rate (f) $.0248 $.0280 --
</TABLE>
See footnote summary on page 18.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------
YEAR ENDED OCT. 31, NOV. 28,1994(A)
----------------------- TO
1997 1996 OCT. 31, 1995
----------- ---------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.90 $10.41 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b)(c) (.28) (.28) (.25)
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions (2.89) .85 .66
Net increase (decrease) in net asset
value from operations (3.17) .57 .41
LESS: DISTRIBUTIONS
Distributions from net realized gains
on investments and foreign currency
transactions (.34) (.08) -0-
Net asset value, end of period $ 7.39 $10.90 $10.41
TOTAL RETURN
Total investment return based on
net asset value (d) (30.09)% 5.49% 4.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $11,439 $23,784 $5,170
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 4.15% 4.07% 5.20%(e)
Expenses, before waivers/reimbursements 4.27% 4.33% 11.32%(e)
Net investment loss, net of
waivers/reimbursements (2.67)% (2.44)% (2.64)%(e)
Portfolio turnover rate 70% 66% 90%
Average commission rate (f) $.0248 $.0280 --
</TABLE>
See footnote summary on page 18.
16
ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------
YEAR ENDED OCT. 31, NOV. 28,1994(A)
----------------------- TO
1997 1996 OCT. 31, 1995
----------- ---------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.91 $10.41 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b)(c) (.27) (.28) (.35)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (2.90) .86 .76
Net increase (decrease) in net asset
value from operations (3.17) .58 .41
LESS: DISTRIBUTIONS
Distributions from net realized gains
on investments and foreign currency
transactions (.34) (.08) -0-
Net asset value, end of period $ 7.40 $10.91 $10.41
TOTAL RETURN
Total investment return based on
net asset value (d) (30.06)% 5.59% 4.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,859 $4,228 $597
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 4.15% 4.07% 5.84%(e)
Expenses, before waivers/reimbursements 4.27% 4.30% 11.38%(e)
Net investment loss, net of
waivers/reimbursements (2.66)% (2.42)% (3.41)%(e)
Portfolio turnover rate 70% 66% 90%
Average commission rate (f) $.0248 $.0280 --
</TABLE>
See footnote summary on page 18.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
-------------------------------
YEAR ENDED OCT. 2, 1996(G)
OCT. 31, TO
1997 OCT. 31, 1996
-------------- --------------
Net asset value, beginning of period $11.04 $11.65
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (b)(c) (.15) -0-
Net realized and unrealized loss
on investments (2.99) (.61)
Net decrease in net asset value
from operations (3.14) (.61)
LESS: DISTRIBUTIONS
Distributions from net realized gains
on investments and foreign currency
transactions (.34) -0-
Net asset value, end of period $ 7.56 $11.04
TOTAL RETURN
Total investment return based on
net asset value (d) (29.42)% (5.24)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,338 $27
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 3.21% 4.97%(e)
Expenses, before waivers/reimbursements 3.43% 5.54%(e)
Net investment income (loss), net of
waivers/reimbursements (1.51)% 1.63%(e)
Portfolio turnover rate 70% 66%
Average commission rate (f) $.0248 $.0280
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Net of expenses waived by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(e) Annualized.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged. This amount includes commissions paid to foreign
brokers which may materially affect the rate shown. Amounts paid in foreign
currencies have been converted into US dollars using the prevailing exchange
rate on the date of the transaction.
(g) Commencement of distribution.
18
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE ALL-ASIA INVESTMENT FUND
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCE ALL-ASIA INVESTMENT FUND,
INC.
We have audited the accompanying statement of assets and liabilities of
Alliance All-Asia Investment Fund, Inc. (the "Fund"), including the portfolio
of investments, as of October 31, 1997, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance All-Asia Investment Fund, Inc. at October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the indicated periods, in conformity with generally accepted accounting
principles.
New York, New York
December 10, 1997
19
<PAGE>
_______________________________________________________________
APPENDIX A: OPTIONS
_______________________________________________________________
Options
The Fund will only write "covered" put and call options,
unless such options are written for cross-hedging purposes. The
manner in which such options will be deemed "covered" is
described in the Prospectus under the heading "Investment
Objective and Policies--Investment Practices--Options."
The writer of an option may have no control over when
the underlying securities must be sold, in the case of a call
option, or purchased, in the case of a put option, since with
regard to certain options, the writer may be assigned an exercise
notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains
the amount of the premium. This amount, of course, may, in the
case of a covered call option, be offset by a decline in the
market value of the underlying security during the option period.
If a call option is exercised, the writer experiences a profit or
loss from the sale of the underlying security. If a put option
is exercised, the writer must fulfill the obligation to purchase
the underlying security at the exercise price, which will usually
exceed the then market value of the underlying security.
The writer of a listed option that wishes to terminate
its obligation may effect a "closing purchase transaction." This
is accomplished by buying an option of the same series as the
option previously written. The effect of the purchase is that
the writer's position will be cancelled by the clearing
corporation. However, a writer may not effect a closing purchase
transaction after being notified of the exercise of an option.
Likewise, an investor who is the holder of a listed option may
liquidate its position by effecting a "closing sale transaction".
This is accomplished by selling an option of the same series as
the option previously purchased. There is no guarantee that
either a closing purchase or a closing sale transaction can be
effected in any particular situation.
Effecting a closing transaction in the case of a written
call option will permit the Fund to write another call option on
the underlying security with either a different exercise price or
expiration date or both, or in the case of a written put option
will permit the Fund to write another put option to the extent
that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other Fund
A-1
<PAGE>
investments. If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale
of the security.
The Fund will realize a profit from a closing
transaction if the price of the transaction is less than the
premium received from writing the option or is more than the
premium paid to purchase the option; the Fund will realize a loss
from a closing transaction if the price of the transaction is
more than the premium received from writing the option or is less
than the premium paid to purchase the option. Because increases
in the market price of a call option will generally reflect
increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to
be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
An option position may be closed out only where there
exists a secondary market for an option of the same series. If a
secondary market does not exist, it might not be possible to
effect closing transactions in particular options with the result
that the Fund would have to exercise the options in order to
realize any profit. If the Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able
to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. Reasons for the
absence of a liquid secondary market include the following:
(i) there may be insufficient trading interest in certain
options, (ii) restrictions may be imposed by a national
securities exchange ("National Exchange") on opening transactions
or closing transactions or both, (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances may interrupt normal
operations on an National Exchange, (v) the facilities of an
National Exchange or the Options Clearing Corporation may not at
all times be adequate to handle current trading volume, or
(vi) one or more National Exchanges could, for economic or other
reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that
National Exchange (or in that class or series of options) would
cease to exist, although outstanding options on that National
Exchange that had been issued by the Options Clearing Corporation
as a result of trades on that National Exchange would continue to
be exercisable in accordance with their terms.
The Fund may write options in connection with buy-and-
write transactions; that is, the Fund may purchase a security and
then write a call option against that security. The exercise
A-2
<PAGE>
price of the call the Fund determines to write will depend upon
the expected price movement of the underlying security. The
exercise price of a call option may be below ("in-the-money"),
equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option
is written. Buy-and-write transactions using in-the-money call
options may be used when it is expected that the price of the
underlying security will remain flat or decline moderately during
the option period. Buy-and-write transactions using at-the-money
call options may be used when it is expected that the price of
the underlying security will remain fixed or advance moderately
during the option period. Buy-and-write transactions using out-
of-the-money call options may be used when it is expected that
the premiums received from writing the call option plus the
appreciation in the market price of the underlying security up to
the exercise price will be greater than the appreciation in the
price of the underlying security alone. If the call options are
exercised in such transactions, the Fund's maximum gain will be
the premium received by it for writing the option, adjusted
upwards or downwards by the difference between the Fund's
purchase price of the security and the exercise price. If the
options are not exercised and the price of the underlying
security declines, the amount of such decline will be offset in
part, or entirely, by the premium received.
The writing of covered put options is similar in terms
of risk/return characteristics to buy-and-write transactions. If
the market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless
and the Fund's gain will be limited to the premium received. If
the market price of the underlying security declines or otherwise
is below the exercise price, the Fund may elect to close the
position or take delivery of the security at the exercise price
and the Fund's return will be the premium received from the put
option minus the amount by which the market price of the security
is below the exercise price. Out-of-the-money, at-the-money, and
in-the-money put options may be used by the Fund in the same
market environments that call options are used in equivalent buy-
and-write transactions.
The Fund may purchase put options to hedge against a
decline in the value of its portfolio. By using put options in
this way, the Fund will reduce any profit it might otherwise have
realized in the underlying security by the amount of the premium
paid for the put option and by transaction costs. The Fund may
purchase call options to hedge against an increase in the price
of securities that the Fund anticipates purchasing in the future.
The premium paid for the call option plus any transaction costs
will reduce the benefit, if any, realized by the Fund upon
exercise of the option, and, unless the price of the underlying
A-3
<PAGE>
security rises sufficiently, the option may expire worthless to
the Fund.
A-4
<PAGE>
_______________________________________________________________
APPENDIX B: FUTURES CONTRACTS, OPTIONS ON FUTURES CONTRACTS
AND OPTIONS ON FOREIGN CURRENCIES
________________________________________________________________
Futures Contracts
The Fund may enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indices including any
index of U.S. Government Securities, securities issued by foreign
government entities or common stocks. U.S. futures contracts
have been designed by exchanges which have been designated
"contracts markets" by the Commodity Futures Trading Commission
("CFTC"), and must be executed through a futures commission
merchant, or brokerage firm, which is a member of the relevant
contract market. Futures contracts trade on a number of exchange
markets, and, through their clearing corporations, the exchanges
guarantee performance of the contracts as between the clearing
members of the exchange.
At the same time a futures contract is purchased or
sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial
deposit would be approximately 1 1/2% to 5% of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or
increase in the contract's value.
At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different price or
interest rate from that specified in the contract. In some (but
not many) cases, securities called for by a futures contract may
not have been issued when the contract was written.
Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
B-1
<PAGE>
contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.
Stock Index Futures
The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several
risks in connection with the use of stock index futures by the
Fund as a hedging device. One risk arises because of the
imperfect correlation between movements in the price of the stock
index futures and movements in the price of the securities which
are the subject of the hedge. The price of the stock index
futures may move more than or less than the price of the
securities being hedged. If the price of the stock index futures
moves less than the price of the securities which are the subject
of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had
not hedged at all. If the price of the securities being hedged
has moved in a favorable direction, this advantage will be
partially offset by the loss on the index future. If the price
of the future moves more than the price of the stock, the Fund
will experience either a loss or gain on the future which will
not be completely offset by movements in the price of the
securities which are subject to the hedge. To compensate for the
imperfect correlation of movements in the price of securities
being hedged and movements in the price of the stock index
futures, the Fund may buy or sell stock index futures contracts
in a greater dollar amount than the dollar amount of securities
being hedged if the volatility over a particular time period of
the prices of such securities has been greater than the
volatility over such time period of the index, or if otherwise
deemed to be appropriate by the Adviser. Conversely, the Fund
may buy or sell fewer stock index futures contracts if the
volatility over a particular time period of the prices of the
securities being hedged is less than the volatility over such
time period of the stock index, or it is otherwise deemed to be
appropriate by the Adviser. It is also possible that, when the
Fund has sold futures to hedge its portfolio against a decline in
the market, the market may advance and the value of securities
held in the Fund may decline. If this occurred, the Fund would
lose money on the futures and also experience a decline in value
in its portfolio securities. However, over time the value of a
diversified portfolio should tend to move in the same direction
as the market indices upon which the futures are based, although
there may be deviations arising from differences between the
composition of the Fund and the stocks comprising the index.
Where futures are purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest
its cash (or cash equivalents) in stocks (or options) in an
B-2
<PAGE>
orderly fashion, it is possible that the market may decline
instead. If the Fund then concludes not to invest in stock or
options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss
on the futures contract that is not offset by a reduction in the
price of securities purchased.
In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between
movements in the stock index futures and the portion of the
portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to
certain market distortions. Rather than meeting additional
margin deposit requirements, investors may close futures
contracts through offsetting transactions which could distort the
normal relationship between the index and futures markets.
Secondly, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect
correlation between the movements in the stock index and
movements in the price of stock index futures, a correct forecast
of general market trends by the investment adviser may still not
result in a successful hedging transaction over a short time
frame.
Positions in stock index futures may be closed out only
on an exchange or board of trade which provides a secondary
market for such futures. Although the Fund intends to purchase
or sell futures only on exchanges or boards of trade where there
appear to be active secondary markets, there is no assurance that
a liquid secondary market on any exchange or board of trade will
exist for any particular contract or at any particular time. In
such event, it may not be possible to close a futures investment
position, and in the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts have
been used to hedge portfolio securities, such securities will not
be sold until the futures contract can be terminated. In such
circumstances, an increase in the price of the securities, if
any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee
that the price of the securities will in fact correlate with the
price movements in the futures contract and thus provide an
offset on a futures contract.
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Options on Futures Contracts
The Fund intends to purchase and write options on
futures contracts for hedging purposes. The Fund is not a
commodity pool and all transactions in futures contracts and
options on futures contracts engaged in by the Fund must
constitute bona fide hedging or other permissible transactions in
accordance with the rules and regulations promulgated by the
CFTC. The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an
individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which
it is based or the price of the underlying debt securities, it
may or may not be less risky than ownership of the futures
contract or underlying debt securities. As with the purchase of
futures contracts, when the Fund is not fully invested it may
purchase a call option on a futures contract to hedge against
adverse market conditions.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon exercise
of the futures contract or securities comprising an index. If
the futures price at expiration of the option is below the
exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any decline
that may have occurred in the Fund's portfolio holdings. The
writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or
foreign currency which is deliverable upon exercise of the
futures contract or securities comprising an index. If the
futures price at expiration of the option is higher than the
exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any
increase in the price of securities which the Fund intends to
purchase. If a put or call option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by
the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its portfolio
securities and changes in the value of its futures positions, the
Fund's losses from existing options on futures may to some extent
be reduced or increased by changes in the value of portfolio
securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, the Fund may
purchase a put option on a futures contract to hedge the Fund's
portfolio against the risk of rising interest rates.
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The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs. In addition to the correlation
risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.
Options on Foreign Currencies
The Fund may purchase and write options on foreign
currencies for hedging purposes in a manner similar to that in
which futures contracts on foreign currencies, or forward
contracts, will be utilized. For example, a decline in the
dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities,
even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of
portfolio securities, the Fund may purchase put options on the
foreign currency. If the value of the currency does decline, the
Fund will have the right to sell such currency for a fixed amount
in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have
resulted. The purchase of an option on a foreign currency may
constitute an effective hedge against fluctuations in exchange
rates although, in the event of rate movements adverse to the
Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to
be written or purchased by the Fund are traded on U.S. and
foreign exchanges or over-the-counter.
Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to the Fund deriving from
purchases of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Fund could sustain
losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The Fund may write options on foreign currencies for the
same types of hedging purposes. For example, where the Fund
anticipates a decline in the dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange
rates it could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs,
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the option will most likely not be exercised, and the diminution
in value of portfolio securities will be offset by the amount of
the premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction. If
this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at
a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund
also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements
in exchange rates.
The Fund intends to write covered call options on
foreign currencies. A call option written on a foreign currency
by the Fund is "covered" if the Fund owns the underlying foreign
currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a
segregated account by its Custodian) upon conversion or exchange
of other foreign currency held in its portfolio. A call option
is also covered if the Fund has a call on the same foreign
currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less
than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government Securities and
other high-grade liquid debt securities in a segregated account
with its Custodian.
The Fund also intends to write call options on foreign
currencies for cross-hedging purposes. An option that is cross-
hedged is not covered, but is designed to provide a hedge against
a decline in the U.S. dollar value of a security which the Fund
owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the
exchange rate. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
Custodian, cash or other high-grade liquid debt securities in an
amount not less than the value of the underlying foreign currency
in U.S. dollars marked to market daily.
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Additional Risks of Options on Futures Contracts
Forward Contracts and Options on Foreign Currencies
Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts
are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the SEC. To
the contrary, such instruments are traded through financial
institutions acting as market-makers, although foreign currency
options are also traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. Similarly, options
on securities may be traded over-the-counter. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. Although the
purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could
be lost. Moreover, the option writer and a trader of forward
contracts could lose amounts substantially in excess of their
initial investments, due to the margin and collateral
requirements associated with such positions.
Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the SEC, as
are other securities traded on such exchanges. As a result, many
of the protections provided to traders on organized exchanges
will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on
a national securities exchange are cleared and guaranteed by the
Options Clearing Corporation ("OCC"), thereby reducing the risk
of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market,
potentially permitting the Fund to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the
event of adverse market movements.
The purchase and sale of exchange-traded foreign
currency options, however, is subject to the risks of the
availability of a liquid secondary market described above, as
well as the risks regarding adverse market movements, margining
of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects
of other political and economic events. In addition, exchange-
traded options on foreign currencies involve certain risks not
presented by the over-the-counter market. For example, exercise
and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency
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option exercise, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies
may be traded on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other
complex foreign political and economic factors, (ii) lesser
availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during nonbusiness
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
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________________________________________________________________
APPENDIX C: 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 edged." 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 impair 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.
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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.
Unrated: When no rating has been assigned or when 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 not rated 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: Those bonds in the Aa, A, Baa, Ba and B groups
which Moody's believe possess the strongest investment attributes
are designated by the symbols Aa 1, A-1, Baa 1, Ba 1 and B 1.
Standard & Poor's Ratings Services
AAA: Bonds rated AAA have the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated
issues only in small degree.
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A: Bonds rated A have a strong capacity to pay interest
and repay principal although they are somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories.
BBB: Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for bonds
in this category than in higher rated categories.
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are
regarded as having predominantly speculative characteristics with
respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest.
While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.
C1: The rating C1 is reserved for income bonds on which
no interest is being paid.
D: Debt rated D is in payment default. The D rating
category is used when interest payments or principal payments are
not made on the date due even if the applicable grace period has
not expired, unless S&P believes that such payments will be made
during such grace period. The D rating also will be used upon
the filing of a bankruptcy petition if debt service payments are
jeopardized.
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: Indicates that no rating has been requested, that
there is insufficient information on which to base a rating, or
that S&P does not rate a particular type of obligation as a
matter of policy.
Duff & Phelps Long-Term Rating Scale
AAA: Highest credit quality. The risk factors are
negligible.
AA+, AA, AA-: High credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
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A+, A, A-: Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of
economic stress.
BBB+, BBB, BBB-: Below average protection factors but
still considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
BB+, BB, BB-: Below investment grade but deemed likely
to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or
company fortunes. Overall quality may move up or down frequently
within this category.
B+, B, B-: Below investment grade and possessing risk
that obligations will not be met when due. Financial protection
factors will fluctuate widely according to economic cycles,
industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a
higher or lower rating grade.
CCC: Well below investment grade securities.
Considerable uncertainty exists as to timely payment of
principal, interest or preferred dividends. Protection factors
are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company
developments.
DD: Defaulted debt obligations. Issuer failed to meet
scheduled principal and/or interest payments.
Fitch IBCA, Inc. Bond Ratings
AAA: Securities of this rating are regarded as strictly
high-grade, broadly marketable, suitable for investment by
trustees and fiduciary institutions, and liable to but slight
market fluctuation other that through changes in the money rate.
The factor last named is of importance varying with the length of
maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public
utility fields, though some industrial obligations have this
rating. The prime feature of an AAA rating is showing of
earnings several times or many times interest requirements with
such stability of applicable earnings that safety is beyond
reasonable question whatever changes occur in conditions. Other
features may enter in, such as a wide margin of protection
through collateral security or direct lien on specific property
as in the case of high class equipment certificates or bonds that
are first mortgages on valuable real estate. Sinking funds or
voluntary reduction of the debt by call or purchase are often
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factors, while guarantee or assumption by parties other than the
original debtor may also influence the rating.
AA. Securities in this group are of safety virtually
beyond question, and as a class are readily salable while many
are highly active. Their merits are not greatly unlike those of
the AAA class, but a security so rated may be of junior though
strong lien--in many cases directly following an AAA security--
or the margin of safety is less strikingly broad. The issue may
be the obligation of a small company, strongly secured but
influenced as to ratings by the lesser financial power of the
enterprise and more local type of market.
A. A securities are strong investments and in many
cases of highly active market, but are not so heavily protected
as the two upper classes or possibly are of similar security but
less quickly salable. As a class they are more sensitive in
standing and market to material changes in current earnings of
the company. With favoring conditions such securities are likely
to work into a high rating, but in occasional instances changes
cause the rating to be lowered.
BBB. BBB rated bonds are considered to be investment
grade and of satisfactory quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to weaken this ability than bonds with
higher ratings.
Fitch Commercial Paper and
Certificate of Deposit Ratings
Fitch Commercial Paper Ratings are assigned at the
request of an issuer to debt obligations with an original
maturity not in excess of 270 days. The ratings reflect Fitch
current appraisal of the degree of assurance of timely payment of
such debt. Fitch is compensated for this service by an annual
fee paid by the issuer under a contractual agreement which
specifies among other things that ratings may be changed or
withdrawn at any time if, in Fitch's sole judgment, changing
circumstances warrant such action.
Fitch Certificate of Deposit ratings are assigned at the
request of the issuer to deposits with maturities of up to three
years. Ratings apply to uninsured principal and interest and
reflect only those credit characteristics inherent in
certificates of deposit. Such ratings should be considered only
in the context of ratings assigned to certificates of deposit and
not to ratings which may be assigned to non-deposit liabilities.
Ratings for CDs with maturities over three years will be assigned
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bond rating symbols. For definitions refer to page 1 of the
Rating Register.
Fitch commercial paper ratings are grouped into four
categories, two of which are defined below:
Fitch-1 (Highest Grade): Commercial paper assigned this
rating is regarded as having the strongest degree of assurance
for timely payment.
Fitch-2 (Very Good Grade): Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than the strongest issues.
Fitch Investment Note Ratings
Fitch Investment Note Ratings are grouped into four
categories with the indicated symbols. The ratings on notes with
maturities generally up to three years reflect Fitch's current
appraisal of the degree of assurance of timely payment, whatever
the source.
FIN-1 -- Notes assigned this rating are regarded as
having the strongest degree of assurance for timely payment.
FIN-2 -- Notes assigned this rating reflect a degree of
assurance for timely payment only slightly less in degree than
the highest category.
A plus symbol may be used in the three highest
categories to indicate relative standing. The Note Ratings will
usually correspond with Bond Ratings, although certain security
enhancements or market access may mean that notes will not track
bond.
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________________________________________________________________
APPENDIX D: ADDITIONAL INFORMATION ABOUT JAPAN
________________________________________________________________
The information in this section is based on material
obtained by the Fund from various Japanese governmental and other
sources believed to be accurate but has not been independently
verified by the Fund or the Adviser. It is not intended to be a
complete description of Japan, its economy or the consequences of
investing in Japanese securities.
Japan, located in eastern Asia, consists of four main
islands: Hokkaido, Honshu, Kyushu and Shikoku, and many small
islands. Its population is approximately 126 million.
GOVERNMENT
The government of Japan is a representative democracy
whose principal executive is the Prime Minister. Japan's
legislature (known as the Diet) consists of two houses, the House
of Representatives (the lower house) and the House of Councillors
(the upper house).
POLITICS
From 1955 to 1993, Japan's government was controlled by
the Liberal Democratic Party (the "LDP"), the major conservative
party. In August 1993, after a main faction left the LDP over
the issue of political reform, a non-LDP coalition government was
formed consisting of centrist and leftist parties and was headed
by Prime Minister Morihiro Hosokawa. In April 1994, Mr. Hosokawa
resigned due to allegations of personal financial irregularities.
The coalition members thereafter agreed to choose as prime
minister the foreign minister, Tsutomu Hata. As a result of the
formation of a center-right voting bloc, however, the Japan
Socialist Party (the "JSP"), a leftist party, withdrew from the
coalition. Consequently, Mr. Hata's government was a minority
coalition, the first since 1955, and was therefore unstable. In
June 1994, Mr. Hata and his coalition were replaced by a new
coalition made up of the JSP (since renamed the "Social
Democratic Party (the "SDP")), the LDP and the small New Party
Sakigake (the "Sakigake"). This coalition, which surprised many
because of the historic rivalries between the LDP and the SDP,
was led by Tomiichi Murayama, the first Socialist prime minister
in 47 years. Mr. Murayama stepped down in January 1996 and was
succeeded as Prime Minister by Liberal Democrat Ryutaro
Hashimoto. By September 1996, when Prime Minister Hashimoto
called for a general election on October 20, 1996, the stability
of the SDP-LDP-Sakigake coalition had become threatened. Both
the SDP and the Sakigake had lost more than half their seats in
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the lower house of the Diet when a faction of the Sakigake split
off to form the Democratic Party of Japan. Their strength was
further diminished as a result of the October 20, 1996 general
election. Although the LDP was 12 seats short of winning a
majority in the election, it has been able to reduce the margin
to three seats and to achieve enough support from its two former
coalition parties, the SDP and the Sakigake, as well as
independents and other conservatives, to return Japan to a
single-party government for the first time since 1993. Mr.
Hashimoto was reappointed as Prime Minister on November 7, 1996.
The opposition is dominated by the New Frontier Party, which was
established in December 1994 by various opposition groups and
parties.
ECONOMY
The Japanese economy maintained an average annual growth
rate of 2.1% in real GDP terms from 1990 through 1994, compared
with 2.4% for the United States during the same period. In 1995
and 1996, Japan's real GDP growth was 1.4% and 3.6%,
respectively. A growth rate of approximately 2.0% had been
forecast for 1997; however, in September 1997 the government
announced that GDP shrank by 2.9% in the second quarter, the
largest quarterly drop in 25 years. In December 1997 the
government announced that GDP grew by 0.8% in the third quarter.
The current official government estimate is a real GDP growth
rate of 0.1% for the fiscal year that ends in March 1998 and 1.9%
for the fiscal year that ends in March 1999. Inflation has
remained low, 1.3% in 1993, 0.7% in 1994, -0.1% in 1995 and 0.1%
in 1996. It is estimated that inflation for the fiscal year that
ends in March 1998 will be about 2%. Private consumer demand has
slowed due to uncertainty about the economy and higher consumer
taxes that went into effect in 1997. Unemployment is still at
its highest level in forty years and is not expected to fall
appreciably in the foreseeable future.
Japan's post World War II reliance on heavy industries
has shifted to higher technology products assembly and, most
recently, to automobile, electrical and electronic production.
Japan's success in exporting its products has generated sizable
trade surpluses. Japan is in a difficult phase in its relations
with its trading partners that is partly due to the concentration
of Japanese exports in products such as automobiles, machine
tools and semiconductors and the large trade surpluses ensuing
therefrom, recent large and visible Japanese real estate
investments in the United States and an overall trade imbalance
as indicated by Japan's balance of payments. It is probable that
the recent improvement of the United States economy and an
increased competitiveness and success in manufacturing, such as
with the U.S. automobile industry, has had a negative effect on
Japan's growth. Japan's overall trade surplus for 1994 was the
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largest in its history, amounting to almost $145 billion. Exports
totaled $386 billion, up 9.3% from 1993, and imports were $242
billion, up 13.6% from 1993. The current account surplus in 1994
was $130 billion, down 1.5% from from a record high in 1993. By
1996, Japan's overall trade surplus had decreased to $83 billion.
Exports had increased to a total of $400 billion, up 3.6% from
1994, and imports had increased to a total of $317 billion, up
31.0% from 1994. During the first nine months of 1997, the trade
surplus reversed course and increased approximately 37% from the
same period in 1996. This upward trend of the trade surplus is
expected to continue in the near future. Japan remains the
largest creditor nation and a significant donor of foreign aid.
On October 1, 1994, the U.S. and Japan reached an
agreement that may lead to more open Japanese markets with
respect to insurance, glass and medical and telecommunications
equipment. In June 1995, the two countries agreed in principal
to increase Japanese imports of American automobiles and
automotive parts. The final wording of the agreement is
ambiguous, and therefore it is likely that this issue will
continue to be a source of tension between the two countries.
Other current sources of tension between the two countries are
disputes in connection with trade in semiconductors and
photographic supplies, deregulation of the Japanese insurance
market, a dispute over aviation rights and access to Japanese
ports. It is expected that the friction between the United
States and Japan with respect to trade issues will continue for
the foreseeable future.
In response to pressures caused by the slumping Japanese
economy, the fragile financial markets and the appreciating Yen,
the Japanese government, in April and June 1995, announced
emergency economic packages that focused on higher and
accelerated public works spending and increased aid for post-
earthquake reconstruction in the Kobe area. These measures
helped to increase public investment and lead to faster GDP
growth, but failed to produce fundamental changes.
In addition to the government's emergency economic
packages announced in 1995, the Bank of Japan attempted to assist
the financial markets by lowering its official discount rate to a
record low in 1995. However, large amounts of bad debt have
prevented banks from expanding their loan portfolios despite low
discount rates. Japanese banks have suffered several years of
declining profits and many banks have required public funds to
avert insolvency. In June 1995, the Finance Ministry announced
an expansion of deposit insurance and restrictions on rescuing
insolvent banks. In June 1996, six bills designed to address the
large amount of bad debt in the banking system were passed by the
Diet, but the difficulties worsened. On January 12, 1998 the
government estimated that the banking system's bad loans totaled
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$577.5 billion, almost three times more than previous government
estimates.
On December 17, 1997, in the wake of the collapse in the
previous month of one of Japan's 20 largest banks, the government
announced a proposal to strengthen the banks by means of an
infusion of public funds and other measures. In addition, the
imposition of stricter capital requirements and other supervisory
reforms scheduled to go into effect in April 1998 have been
postponed. It is unclear whether these proposals, which are
under consideration by the Diet, would, if implemented, achieve
their intended effect. In addition to bad domestic loans,
Japanese banks also have significant exposure to the current
financial turmoil in other Asian markets. The financial system's
fragility is expected to continue for the foreseeable future.
In November 1996, Prime Minister Hashimoto announced a
set of initiatives to deregulate the financial sector by the year
2001. Known as "Tokyo's Big Bang," the proposed reforms include
changes in tax laws to favor investors, the lowering of barriers
between banking, securities and insurance, abolition of foreign
exchange restrictions and other measures designed to revive
Tokyo's status in the international capital markets and to
stimulate the economy. In June 1997, the government announced a
detailed blueprint for implementing the Big Bang. Legislation to
implement certain reforms has already been approved. These
include a liberalization of foreign exchange restrictions and a
repeal of the ban on holding companies.
For the past several years, a growing budget deficit and
the threat of a budget crisis have resulted in a tightening of
fiscal policy. In March 1997, Prime Minister Hashimoto announced
the first detailed plan for fiscal reform. The plan calls for
the lowering of the budget deficit to below 3% of GDP by Fiscal
Year 2003/2004. In June 1997, specific proposals for spending
cuts were approved by the cabinet and a Fiscal Reform Law,
incorporating the proposals into binding targets, were to have
been presented to the Diet late in 1997. On November 18, 1997,
however, Prime Minister Hashimoto, facing growing pressure to
take steps to revitalize Japan's stagnant economy, announced a
new economic plan, the "Urgent Economic Policy Package Reforming
Japan for the 21st Century," which includes tax cuts and public
spending.
Between 1985 and 1995, the Japanese Yen generally
appreciated against the U.S. Dollar. Between 1990 and 1994 the
Yen's real effective exchange rate appreciated by approximately
36%. On April 19, 1995, the Japanese Yen reached an all time
high of 79.75 against the U.S. Dollar. Since its peak of April
19, 1995, the Yen has generally decreased in value against the
U.S. Dollar. On December 31, 1997, the exchange rate reached a
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low of 130.57 Yen per U.S. Dollar, the lowest the exchange rate
had been in over five years.
JAPANESE STOCK EXCHANGES. Currently, there are eight
stock exchanges in Japan. The Tokyo Stock Exchange (the "TSE"),
the Osaka Securities Exchange and the Nagoya Stock Exchange are
the largest, together accounting for approximately 98.9% of the
share trading volume and for about 98.8% of the overall trading
value of all shares traded on Japanese stock exchanges during the
year ended December 31, 1996. The other stock exchanges are
located in Kyoto, Hiroshima, Fukuoka, Niigata and Sapporo. The
chart below presents annual share trading volume (in millions of
shares) and overall year-end market value (in billions of yen)
information with respect to each of the three major Japanese
stock exchanges for the years 1989 through 1996. Trading volume
and the value of foreign stocks are not included.
All Exchanges TOKYO OSAKA NAGOYA
VOLUME VALUE VOLUME VALUE VOLUME VALUE VOLUME VALUE
________ ______ _____ _____ ______ _____ ______ _____
1989 256,296 386,395 222,599 332,617 25,096 41,679 7,263 10,395
1990 145,837 231,837 123,099 186,667 17,187 35,813 4,323 7,301
1991 107,844 134,160 93,606 110,897 10,998 18,723 2,479 3,586
1992 82,563 80,456 66,408 60,110 12,069 15,575 3,300 3,876
1993 101,173 106,123 86,935 86,889 10,440 14,635 2,780 3,459
1994 105,937 114,622 84,514 87,356 14,904 19,349 4,720 5,780
1995 120,149 115,840 92,034 83,564 21,094 24,719 5,060 5,462
1996 126,496 136,170 101,170 101,893 20,783 27,280 4,104 5,391
Source: The Tokyo Stock Exchange 1994, 1995, 1996 and 1997 Fact Books.
THE TOKYO STOCK EXCHANGE
OVERVIEW OF THE TOKYO STOCK EXCHANGE. The TSE is the
largest of the Japanese stock exchanges and as such is widely
regarded as the principal securities exchange for all of Japan.
In 1996, the TSE accounted for 74.8% of the market value and
79.2% of the share trading volume on all Japanese stock
exchanges. A foreign stock section on the TSE, consisting of
shares of non-Japanese companies, listed 67 non-Japanese
companies at the end of 1996. The market for stock of Japanese
issuers on the TSE is divided into a First Section and a Second
Section. The First Section is generally for larger, established
companies (in existence for five years or more) that meet listing
criteria relating to the size and business condition of the
issuing company, the liquidity of its securities and other
factors pertinent to investor protection. The TSE's Second
Section is for smaller companies and newly listed issuers.
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SECTOR ANALYSIS OF THE FIRST AND SECOND SECTIONS. The
TSE's domestic stocks include a broad cross-section of companies
involved in many different areas of the Japanese economy. At the
end of 1996, the three largest industry sectors, based on market
value, listed on the first section of the TSE were banking, with
100 companies representing 20.0% of all domestic stocks listed on
the TSE; electric appliances, with 129 companies representing
12.5% of all domestic stocks so listed; and transportation
equipment with 60 companies representing 9.6% of all domestic
stocks so listed. No other industry sector represented more than
5% of TSE listed domestic stocks.
MARKET GROWTH OF THE TSE. The First and Second Sections
of the TSE grew in terms of both average daily trading value and
aggregate year-end market value from 1982, when they were l28,320
million yen and 98,090 billion yen, respectively, through the end
of 1989, when they were 1,335,810 million yen and 611,152 billion
yen, respectively. Following the peak in 1989, both average
daily trading value and aggregate year-end market value declined
through 1992 when they were 243,362 million yen and 289,483
billion yen, respectively. In 1993 and 1994, both average daily
trading value and aggregate year-end market value increased and
were 353,208 and 353,666 million yen, respectively, and 324,357
and 358,392 billion yen, respectively. In 1995, average daily
trading value decreased to 335,598 million yen and aggregate
year-end market value increased to 365,716 billion yen. In 1996,
average daily trading volume increased to 412,521 million yen and
aggregate year-end market value decreased to 347,578 billion yen.
MARKET PERFORMANCE OF THE FIRST SECTION. As measured by
the TOPIX, a capitalization-weighted composite index of all
common stocks listed in the First Section, the performance of the
First Section reached a peak of 2,884.80 on December 18, 1989.
Thereafter, the TOPIX declined approximately 45% through
December 29, 1995. On December 30, 1996 the TOPIX closed at
1,470.94, down approximately 7% from the end of 1995. On
December 30, 1997, the TOPIX closed at 1,175.03, down
approximately 20% from the end of 1996.
JAPANESE FOREIGN EXCHANGE CONTROLS
Under Japan's Foreign Exchange and Foreign Trade Control
Law and cabinet orders and ministerial ordinances thereunder (the
"Foreign Exchange Controls"), prior notification to the Minister
of Finance of Japan (the "Minister of Finance") of the
acquisition of shares in a Japanese company from a resident of
Japan (including a corporation) by a non-resident of Japan
(including a corporation) is required unless the acquisition is
made from or through a securities company designated by the
Minister of Finance or if the yen equivalent of the aggregate
purchase price of shares is not more than 100 million Yen. Even
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in these situations, if a foreign investor intends to acquire
shares of a Japanese corporation listed on a Japanese stock
exchange or traded on a Japanese over-the-counter market
(regardless of the person from or through whom the foreign
investor acquires such shares) and as a result of the acquisition
the foreign investor would directly or indirectly hold 10% or
more of the total outstanding shares of that corporation, the
foreign investor must file a report within 15 days from the day
of such acquisition with the Minister of Finance and any other
minister with proper jurisdiction. In instances where the
acquisition concerns national security or meets certain other
conditions specified in the Foreign Exchange Controls, the
foreign investor must file a prior notification with respect to
the proposed acquisition with the Minister of Finance and any
other minister with proper jurisdiction. The ministers may make
a recommendation to modify or prohibit the proposed acquisition
if they consider that the acquisition would impair the safety and
maintenance of public order in Japan or harmfully influence the
smooth operation of the Japanese economy. If the foreign
investor does not accept the recommendation, the ministers may
issue an order modifying or prohibiting the acquisition. In
certain limited and exceptional circumstances, the Foreign
Exchange Controls give the Minister of Finance the power to
require prior approval for any acquisition of shares in a
Japanese company by a non-resident of Japan.
In general, the acquisition of shares by non-resident
shareholders by way of stock splits, as well as the acquisition
of shares of a Japanese company listed on a Japanese stock
exchange by non-residents upon exercise of warrants or conversion
of convertible bonds, are not subject to any of the foregoing
notification or reporting requirements. Under the Foreign
Exchange Controls, dividends paid on share, held by non-residents
of Japan and the proceeds of any sales of shares within Japan
may, in general, be converted into any foreign currency and
remitted abroad.
Certain provisions of the Foreign Exchange Controls are
scheduled to be repealed or liberalized beginning in April 1998,
pursuant to legislation that was approved in May 1997 as part of
the plan to implement the Big Bang.
REGULATION OF THE JAPANESE EQUITIES MARKETS
The principal securities law in Japan is the Securities
and Exchange Law ("SEL") which provides overall regulation for
the issuance of securities in public offerings and private
placements and for secondary market trading. The SEL was amended
in 1988 in order to liberalize the securities market; to regulate
the securities futures, index, and option trade; to add
disclosure regulations; and to reinforce the prevention of
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insider trading. Insider trading provisions are applicable to
debt and equity securities listed on a Japanese stock exchange
and to unlisted debt and equity securities issued by a Japanese
corporation that has securities listed on a Japanese stock
exchange or registered with the Securities Dealers Association
(the "SDA"). In addition, each of the eight stock exchanges in
Japan has its own constitution, regulations governing the sale
and purchase of securities and standing rules for exchange
contracts for the purchase and sale of securities on the
exchange, as well as detailed rules and regulations covering a
variety of matters, including rules and standards for listing and
delisting of securities.
The loss compensation incidents involving preferential
treatment of certain customers by certain Japanese securities
companies, which came to light in 1991, provided the impetus for
amendments to the SEL, which took effect in 1992, as well as two
reform bills passed by the Diet in 1992. The amended SEL now
prohibits securities companies from the operation of
discretionary accounts, loss compensation or provision of
artificial gains in securities transactions, directly or
indirectly, to their customers and making offers or agreements
with respect thereto. Despite these amendments, there have been
certain incidents involving loss compensation. To ensure that
securities are traded at their fair value, the SDA and the TSE
have promulgated certain rules, effective in 1992, which, among
other things, explicitly prohibit any transaction undertaken with
the intent to provide loss compensation of illegal gains
regardless of whether the transaction otherwise technically
complies with the rules. The reform bill passed by the Diet,
which took effect in 1992 and 1993, provides for the
establishment of a new Japanese securities regulator and for a
variety of reforms designed to revitalize the Japanese financial
and capital markets by permitting banks and securities companies
to compete in each other's field of business, subject to various
regulations and restrictions.
Further reforms in the regulation of the securities
markets are anticipated over the next several years as the Big
Bang is implemented.
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____________________________________________________________
APPENDIX E:
CERTAIN EMPLOYEE BENEFIT PLANS
____________________________________________________________
Employee benefit plans described below which are
intended to be tax-qualified under section 401(a) of the Internal
Revenue Code of 1986, as amended ("Tax Qualified Plans"), for
which Merrill Lynch, Pierce, Fenner & Smith Incorporated or an
affiliate thereof ("Merrill Lynch") is recordkeeper (or with
respect to which recordkeeping services are provided pursuant to
certain arrangements as described in paragraph (ii) below)
("Merrill Lynch Plans") are subject to specific requirements as
to the Fund shares which they may purchase. Notwithstanding
anything to the contrary contained elsewhere in this Statement of
Additional Information, the following Merrill Lynch Plans are not
eligible to purchase Class A shares and are eligible to purchase
Class B shares of the Fund at net asset value without being
subject to a contingent deferred sales charge:
(i) Plans for which Merrill Lynch is the recordkeeper on a
daily valuation basis, if when the plan is established
as an active plan on Merrill Lynch's recordkeeping
system:
(a) the plan is one which is not already
investing in shares of mutual funds or
interests in other commingled investment
vehicles of which Merrill Lynch Asset
Management, L.P. is investment adviser or
manager ("MLAM Funds"), and either (A) the
aggregate assets of the plan are less than
$3 million or (B) the total of the sum of
(x) the employees eligible to participate in
the plan and (y) those persons, not
including any such employees, for whom a
plan account having a balance therein is
maintained, is less than 500, each of
(A) and (B) to be determined by Merrill
Lynch in the normal course prior to the date
the plan is established as an active plan on
Merrill Lynch's recordkeeping system (an
"Active Plan"); or
(b) the plan is one which is already investing
in shares of or interests in MLAM Funds and
the assets of the plan have an aggregate
value of less than $5 million, as determined
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by Merrill Lynch as of the date the plan
becomes an Active Plan.
For purposes of applying (a) and (b), there
are to be aggregated all assets of any Tax-
Qualified Plan maintained by the sponsor of
the Merrill Lynch Plan (or any of the
sponsor's affiliates) (determined to be such
by Merrill Lynch) which are being invested
in shares of or interests in MLAM Funds,
Alliance Mutual Funds or other mutual funds
made available pursuant to an agreement
between Merrill Lynch and the principal
underwriter thereof (or one of its
affiliates) and which are being held in a
Merrill Lynch account.
(ii) Plans for which the recordkeeper is not Merrill Lynch,
but which are recordkept on a daily valuation basis by
a recordkeeper with which Merrill Lynch has a
subcontracting or other alliance arrangement for the
performance of recordkeeping services, if the plan is
determined by Merrill Lynch to be so eligible and the
assets of the plan are less than $3 million.
Class B shares of the Fund held by any of the above-
described Merrill Lynch Plans are to be replaced at Merrill
Lynch's direction through conversion, exchange or otherwise by
Class A shares of the Fund on the earlier of the date that the
value of the plan's aggregate assets first equals or exceeds $5
million or the date on which any Class B share of the Fund held
by the plan would convert to a Class A share of the Fund as
described under "Purchase of Shares" and "Redemption and
Repurchase of Shares."
Any Tax Qualified Plan, including any Merrill Lynch
Plan, which does not purchase Class B shares of the Fund without
being subject to a contingent deferred sales charge under the
above criteria is eligible to purchase Class B shares subject to
a contingent deferred sales charge as well as other classes of
shares of the Fund as set forth above under "Purchase of Shares"
and "Redemption and Repurchase of Shares."
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PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits.
(a) Financial Statements
Included in the Registrant's Statement of Additional
Information
Portfolio of Investments - October 31, 1997 and the six
months ended April 30, 1998 (unaudited)
Statements of Assets and Liabilities - October 31, 1997
and the six months ended April 30, 1998 (unaudited)
Statements of Operations - October 31, 1997 and the
six months ended April 30, 1998 (unaudited)
Statements of Changed in Net Assets - years ended
October 31, 1996 and October 31, 1997 and the six
months ended April 30, 1998 (unaudited)
Notes to Financial Statements - October 31, 1996 and
October 31, 1997 and the six months ended April 30,
1998 (unaudited)
Financial Highlights - for the years ended October 31,
1996 and October 31, 1997 and the six months ended
April 30, 1998 (unaudited)
Report of Independent Auditors
All other financial statements or schedules are not
required or the required information is shown in the
Statement of Assets and Liabilities or the notes thereto
(b) Exhibits
(1)(a) Articles of Incorporation of the Registrant -
Incorporated by reference to Exhibit 1 by
Post-Effective Amendment No. 8 of Registrant's
Registration Statement on Form N-1A (File Nos.
33-84270 and 811-8776) filed with the
Securities and Exchange Commission on
November 3, 1997.
(b) Articles Supplementary to the Articles of
Incorporation of the Registrant dated
September 30, 1996 and filed October 1, 1996 -
Incorporated by reference to Exhibit 1 to
Post-Effective Amendment No. 7 of Registrant's
Registration Statement on Form N-1A (File Nos.
33-84270 and 811-8776) filed with the
Securities and Exchange Commission on February
3, 1997.
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(2) By-Laws of the Registrant of the Registrant -
Incorporated by reference to Exhibit 2 to Post-
Effective Amendment No. 8 of Registrant's
Registration Statement on Form N-1A (File Nos. 33-
84270 and 811-8776) filed with the Securities and
Exchange Commission on November 3, 1997.
(3) Not applicable.
(4) Not applicable.
(5) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. - Incorporated by
reference to Exhibit 5 to Post-Effective Amendment
No. 9 of Registrant's Registration Statement on
Form N-1A (File Nos. 33-84270 and 811-8776) filed
with the Securities and Exchange Commission on
February 2, 1998.
(6) (a) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors,
Inc. - Incorporated by reference to Exhibit
6(a) to Post-Effective Amendment No. 9 of
Registrant's Registration Statement on Form N-
1A (File Nos. 33-84270 and 811-8776) filed
with the Securities and Exchange Commission on
February 2, 1998.
(b) Amendment to Distribution Services Agreement
between the Registrant and Alliance Fund
Distributors, Inc. dated June 20, 1996 -
Incorporated by reference to Exhibit 6 to
Post-Effective Amendment No. 6 of Registrant's
Registration Statement on Form N-1A (File Nos.
33-84270 and 811-8776) filed with the
Securities and Exchange Commission on
October 1, 1996.
(c) Form of Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and selected
dealers offering shares of Registrant -
Incorporated by reference to Exhibit 6(c) to
Post-Effective Amendment No. 9 of Registrant's
Registration Statement on Form N-1A (File Nos.
33-84270 and 811-8776) filed with the
Securities and Exchange Commission on February
2, 1998.
(d) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc. and selected
agents making available shares of Registrant -
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Incorporated by reference to Exhibit 6(d) to
Post-Effective Amendment No. 9 of Registrant's
Registration Statement on Form N-1A (File Nos.
33-84270 and 811-8776) filed with the
Securities and Exchange Commission on February
2, 1998.
(7) Not applicable.
(8) Custodian Agreement between the Registrant and
Brown Brothers Harriman & Co. - Incorporated by
reference to Exhibit 8 to Post-Effective Amendment
No. 9 of Registrant's Registration Statement on
Form N-1A (File Nos. 33-84270 and 811-8776) filed
with the Securities and Exchange Commission on
February 2, 1998.
(9) (a) Transfer Agency Agreement between the
Registrant and Alliance Fund Services, Inc. -
Incorporated by reference to Exhibit 9(a) to
Post-Effective Amendment No. 9 of Registrant's
Registration Statement on Form N-1A (File Nos.
33-84270 and 811-8776) filed with the
Securities and Exchange Commission on February
2, 1998.
(b) Administration Agreement between the
Registrant and Alliance Capital Management
L.P. - Incorporated by reference to Exhibit
9(b) to Post-Effective Amendment No. 9 of
Registrant's Registration Statement on Form
N-1A (File Nos. 33-84270 and 811-8776) filed
with the Securities and Exchange Commission on
February 2, 1998.
(10) Opinion and Consent of Seward & Kissel -
Incorporated by reference to Exhibit 10(a) to
Post-Effective Amendment No. 9 of Registrant's
Registration Statement on Form N-1A (File Nos.
33-84270 and 811-8776) filed with the
Securities and Exchange Commission on February
2, 1998.
(11) Consent of Independent Auditors - Filed herewith.
(12) Not applicable.
(13) Not applicable
(14) Not applicable.
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(15) Rule 12b-1 Plan - See Exhibit 6(a) hereto.
(16) Not Applicable.
(17) Financial Data Schedule - Filed herewith.
(18) (a) Rule 18f-3 Plan - Incorporated by reference to
Exhibit 18 to Post-Effective Amendment No. 4
of Registrant's Registration Statement on Form
N-1A (File Nos. 33-84270 and 811-8776) filed
with the Securities and Exchange Commission on
January 31, 1996.
(b) Amended and Restated Rule 18f-3 Plan dated
September 30, 1996 - Incorporated by reference
to Exhibit 18 to Post-Effective Amendment No.
7 of Registrant's Registration Statement on
Form N-1A (File Nos. 33-84270 and 811-8776)
filed with the Securities and Exchange
Commission on February 3, 1997.
Other Exhibit: Powers of Attorney for John D.
Carifa, David H. Dievler, John H. Dobkin, W. H.
Henderson, Stig Host and Alan Stoga - Filed
herewith.
ITEM 25. Persons Controlled by or under Common Control with
Registrant.
None.
ITEM 26. Number of Holders of Securities.
Not applicable.
ITEM 27. Indemnification.
It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum
extent permitted by Section 2-418 of the General
Corporation Law of the State of Maryland and as set
forth in Article EIGHTH of Registrant's Articles of
Incorporation, filed as Exhibit 1 in response to Item
24, Article VII and Article VIII of Registrant's By-
Laws, filed as Exhibit 2 in response to Item 24, and
Section 10 of the proposed Distribution Services
Agreement, filed as Exhibit 6(a) in response to Item 24,
all as set forth below. The liability of the
Registrant's directors and officers is dealt with in
Article EIGHTH of Registrant's Articles of
Incorporation, as set forth below. The Adviser's
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liability for any loss suffered by the Registrant or its
shareholders is set forth in Section 4 of the proposed
Advisory Agreement, filed as Exhibit 5 in response to
Item 24, as set forth below. The Administrator's
liability for any loss suffered by the Registrant or its
shareholders is set forth in Section 6 of Administration
Agreement, filed as Exhibit 9(b) in response to Item 24,
as set forth below.
Section 2-418 of the Maryland General Corporation Law
reads as follows:
"2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS.--(a) In this section the
following words have the meanings indicated.
(1) "Director" means any person who is or was
a director of a corporation and any person who,
while a director of a corporation, is or was
serving at the request of the corporation as a
director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation,
partnership, joint venture, trust, other
enterprise, or employee benefit plan.
(2) "Corporation" includes any domestic or
foreign predecessor entity of a corporation in a
merger, consolidation, or other transaction in
which the predecessor's existence ceased upon
consummation of the transaction.
(3) "Expenses" include attorney's fees.
(4) "Official capacity" means the following:
(i) When used with respect to a
director, the office of director in the
corporation; and
(ii) When used with respect to a person
other than a director as contemplated in subsection
(j), the elective or appointive office in the
corporation held by the officer, or the employment
or agency relationship undertaken by the employee
or agent in behalf of the corporation.
(iii) "Official capacity" does not
include service for any other foreign or domestic
corporation or any partnership, joint venture,
trust, other enterprise, or employee benefit plan.
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(5) "Party" includes a person who was, is, or
is threatened to be made a named defendant or
respondent in a proceeding.
(6) "Proceeding" means any threatened,
pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or
investigative.
(b)(1) A corporation may indemnify any
director made a party to any proceeding by reason
of service in that capacity unless it is
established that:
(i) The act or omission of the director
was material to the matter giving rise to the
proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and
deliberate dishonesty; or
(ii) The director actually received an
improper personal benefit in money, property, or
services; or
(iii) In the case of any criminal
proceeding, the director had reasonable cause to
believe that the act or omission was unlawful.
(2) (i) Indemnification may be against
judgments, penalties, fines, settlements, and
reasonable expenses actually incurred by the
director in connection with the proceeding.
(ii) However, if the proceeding was one
by or in the right of the corporation,
indemnification may not be made in respect of any
proceeding in which the director shall have been
adjudged to be liable to the corporation.
(3) (i) The termination of any proceeding by
judgment, order or settlement does not create a
presumption that the director did not meet the
requisite standard of conduct set forth in this
subsection.
(ii) The termination of any proceeding by
conviction, or a plea of nolo contendere or its
equivalent, or an entry of an order of probation
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prior to judgment, creates a rebuttable presumption
that the director did not meet that standard of
conduct.
(c) A director may not be indemnified under
subsection (b) of this section in respect of any
proceeding charging improper personal benefit to
the director, whether or not involving action in
the director's official capacity, in which the
director was adjudged to be liable on the basis
that personal benefit was improperly received.
(d) Unless limited by the charter:
(1) A director who has been successful, on
the merits or otherwise, in the defense of any
proceeding referred to in subsection (b) of this
section shall be indemnified against reasonable
expenses incurred by the director in connection
with the proceeding.
(2) A court of appropriate jurisdiction upon
application of a director and such notice as the
court shall require, may order indemnification in
the following circumstances:
(i) If it determines a director is
entitled to reimbursement under paragraph (1) of
this subsection, the court shall order
indemnification, in which case the director shall
be entitled to recover the expenses of securing
such reimbursement; or
(ii) If it determines that the director
is fairly and reasonably entitled to
indemnification in view of all the relevant
circumstances, whether or not the director has met
the standards of conduct set forth in subsection
(b) of this section or has been adjudged liable
under the circumstances described in subsection (c)
of this section, the court may order such
indemnification as the court shall deem proper.
However, indemnification with respect to any
proceeding by or in the right of the corporation or
in which liability shall have been adjudged in the
circumstances described in subsection (c) shall be
limited to expenses.
(3) A court of appropriate jurisdiction may
be the same court in which the proceeding involving
the director's liability took place.
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(e)(1) Indemnification under subsection (b)
of this section may not be made by the corporation
unless authorized for a specific proceeding after a
determination has been made that indemnification of
the director is permissible in the circumstances
because the director has met the standard of
conduct set forth in subsection (b) of this
section.
(2) Such determination shall be made:
(i) By the board of directors by a
majority vote of a quorum consisting of directors
not, at the time, parties to the proceeding, or, if
such a quorum cannot be obtained, then by a
majority vote of a committee of the board
consisting solely of two or more directors not, at
the time, parties to such proceeding and who were
duly designated to act in the matter by a majority
vote of the full board in which the designated
directors who are parties may participate;
(ii) By special legal counsel selected by
the board of directors or a committee of the board
by vote as set forth in subparagraph (i) of this
paragraph, or, if the requisite quorum of the full
board cannot be obtained therefor and the committee
cannot be established, by a majority vote of the
full board in which directors who are parties may
participate; or
(iii) By the stockholders.
(3) Authorization of indemnification and
determination as to reasonableness of expenses
shall be made in the same manner as the
determination that indemnification is permissible.
However, if the determination that indemnification
is permissible is made by special legal counsel,
authorization of indemnification and determination
as to reasonableness of expenses shall be made in
the manner specified in subparagraph (ii) of
paragraph (2) of this subsection for selection of
such counsel.
(4) Shares held by directors who are parties
to the proceeding may not be voted on the subject
matter under this subsection.
(f)(1) Reasonable expenses incurred by a
director who is a party to a proceeding may be paid
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<PAGE>
or reimbursed by the corporation in advance of the
final disposition of the proceeding, upon receipt
by the corporation of:
(i) A written affirmation by the director of
the director's good faith belief that the standard
of conduct necessary for indemnification by the
corporation as authorized in this section has been
met; and
(ii) A written undertaking by or on behalf of
the director to repay the amount if it shall
ultimately be determined that the standard of
conduct has not been met.
(2) The undertaking required by subparagraph
(ii) of paragraph (1) of this subsection shall be
an unlimited general obligation of the director but
need not be secured and may be accepted without
reference to financial ability to make the
repayment.
(3) Payments under this subsection shall be
made as provided by the charter, bylaws, or
contract or as specified in subsection (e) of this
section.
(g) The indemnification and advancement of
expenses provided or authorized by this section may
not be deemed exclusive of any other rights, by
indemnification or otherwise, to which a director
may be entitled under the charter, the bylaws, a
resolution of stockholders or directors, an
agreement or otherwise, both as to action in an
official capacity and as to action in another
capacity while holding such office.
(h) This section does not limit the
corporation's power to pay or reimburse expenses
incurred by a director in connection with an
appearance as a witness in a proceeding at a time
when the director has not been made a named
defendant or respondent in the proceeding.
(i) For purposes of this section:
(1) The corporation shall be deemed to have
requested a director to serve an employee benefit
plan where the performance of the director's duties
to the corporation also imposes duties on, or
C-9
<PAGE>
otherwise involves services by, the director to the
plan or participants or beneficiaries of the plan:
(2) Excise taxes assessed on a director with
respect to an employee benefit plan pursuant to
applicable law shall be deemed fines; and
(3) Action taken or omitted by the director
with respect to an employee benefit plan in the
performance of the director's duties for a purpose
reasonably believed by the director to be in the
interest of the participants and beneficiaries of
the plan shall be deemed to be for a purpose which
is not opposed to the best interests of the
corporation.
(j) Unless limited by the charter:
(1) An officer of the corporation shall be
indemnified as and to the extent provided in
subsection (d) of this section for a director and
shall be entitled, to the same extent as a
director, to seek indemnification pursuant to the
provisions of subsection (d);
(2) A corporation may indemnify and advance
expenses to an officer, employee, or agent of the
corporation to the same extent that it may
indemnify directors under this section; and
(3) A corporation, in addition, may indemnify
and advance expenses to an officer, employee, or
agent who is not a director to such further extent,
consistent with law, as may be provided by its
charter, bylaws, general or specific action of its
board of directors or contract.
(k)(1) A corporation may purchase and maintain
insurance on behalf of any person who is or was a
director, officer, employee, or agent of the
corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was
serving at the request, of the corporation as a
director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation,
partnership, joint venture, trust, other
enterprise, or employee benefit plan against any
liability asserted against and incurred by such
person in any such capacity or arising out of such
person's position, whether or not the corporation
C-10
<PAGE>
would have the power to indemnify against liability
under the provisions of this section.
(2) A corporation may provide similar
protection, including a trust fund, letter of
credit, or surety bond, not inconsistent with this
section.
(3) The insurance or similar protection may
be provided by a subsidiary or an affiliate of the
corporation.
(l) Any indemnification of, or advance of
expenses to, a director in accordance with this
section, if arising out of a proceeding by or in
the right of the corporation, shall be reported in
writing to the stockholders with the notice of the
next stockholders' meeting or prior to the
meeting."
Article EIGHTH of the Registrant's Articles of
Incorporation reads as follows:
"(1) To the full extent that limitations on
the liability of directors and officers are
permitted by the Maryland General Corporation Law,
no director or officer of the Corporation shall
have any liability to the Corporation or its
stockholders for damages. This limitation on
liability applies to events occurring at the time a
person serves as a director or officer of the
Corporation whether or not such person is a
director or officer at the time of any proceeding
in which liability is asserted.
"(2) The Corporation shall indemnify and
advance expenses to its currently acting and its
former directors to the full extent that
indemnification of directors is permitted by the
Maryland General Corporation Law. The Corporation
shall indemnify and advance expenses to its
officers to the same extent as its directors and
may do so to such further extent as is consistent
with law. The Board of Directors may by By-Law,
resolution or agreement make further provision for
indemnification of directors, officers, employees
and agents to the full extent permitted by the
Maryland General Corporation Law.
"(3) No provision of this Article shall be
effective to protect or purport to protect any
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<PAGE>
director or officer of the Corporation against any
liability to the Corporation or its stockholders to
which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the
conduct of his office.
"(4) References to the Maryland General
Corporation Law in this Article are to that law as
from time to time amended. No amendment to the
charter of the Corporation shall affect any right
of any person under this Article based on any
event, omission or proceeding prior to the
amendment."
Article VII, Section 7 of the Registrant's By-Laws reads
as follows:
Section 7. Insurance Against Certain Liabilities.
The Corporation shall not bear the cost of insurance
that protects or purports to protect directors and
officers of the Corporation against any liabilities to
the Corporation or its security holders to which any
such director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved
in the conduct of his office.
ARTICLE VIII of the Registrant's By-Laws reads as
follows:
Section 1. Indemnification of Directors and
Officers. The Corporation shall indemnify its directors
to the full extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The
Corporation shall indemnify its officers to the same
extent as its directors and to such further extent as is
consistent with law. The Corporation shall indemnify
its directors and officers who while serving as
directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or
employee benefit plan to the full extent consistent with
law. The indemnification and other rights provided by
this Article shall continue as to a person who has
ceased to be a director or officer and shall inure to
the benefit of the heirs, executors and administrators
of such a person. This Article shall not protect any
such person against any liability to the Corporation or
any stockholder thereof to which such person would
C-12
<PAGE>
otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office ("disabling
conduct").
Section 2. Advances. Any current or former
director or officer of the Corporation seeking
indemnification within the scope of this Article shall
be entitled to advances from the Corporation for payment
of the reasonable expenses incurred by him in connection
with the matter as to which he is seeking
indemnification in the manner and to the full extent
permissible under the Maryland General Corporation Law.
The person seeking indemnification shall provide to the
Corporation a written affirmation of his good faith
belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a
written undertaking to repay any such advance if it
should ultimately be determined that the standard of
conduct has not been met. In addition, at least one of
the following additional conditions shall be met:
(a) the person seeking indemnification shall provide a
security in form and amount acceptable to the
Corporation for his undertaking; (b) the Corporation is
insured against losses arising by reason of the advance;
or (c) a majority of a quorum of directors of the
Corporation who are neither "interested persons" as
defined in Section 2(a)(19) of the Investment Company
Act of 1940, as amended, nor parties to the proceeding
("disinterested non-party directors"), or independent
legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available
to the Corporation at the time the advance is proposed
to be made, that there is reason to believe that the
person seeking indemnification will ultimately be found
to be entitled to indemnification.
Section 3. Procedure. At the request of any
person claiming indemnification under this Article, the
Board of Directors shall determine, or cause to be
determined, in a manner consistent with the Maryland
General Corporation Law, whether the standards required
by this Article have been met. Indemnification shall be
made only following: (a) a final decision on the merits
by a court or other body before whom the proceeding was
brought that the person to be indemnified was not liable
by reason of disabling conduct or (b) in the absence of
such a decision, a reasonable determination, based upon
a review of the facts, that the person to be indemnified
was not liable by reason of disabling conduct by (i) the
vote of a majority of a quorum of disinterested
C-13
<PAGE>
non-party directors or (ii) an independent legal counsel
in a written opinion.
Section 4. Indemnification of Employees and
Agents. Employees and agents who are not officers or
directors of the Corporation may be indemnified, and
reasonable expenses may be advanced to such employees or
agents, as may be provided by action of the Board of
Directors or by contract, subject to any limitations
imposed by the Investment Company Act of 1940.
Section 5. Other Rights. The Board of Directors
may make further provision consistent with law for
indemnification and advance of expenses to directors,
officers, employees and agents by resolution, agreement
or otherwise. The indemnification provided by this
Article shall not be deemed exclusive of any other
right, with respect to indemnification or otherwise, to
which those seeking indemnification may be entitled
under any insurance or other agreement or resolution of
stockholders or disinterested directors or otherwise.
The rights provided to any person by this Article shall
be enforceable against the Corporation by such person
who shall be presumed to have relied upon it in serving
or continuing to serve as a director, officer, employee,
or agent as provided above.
Section 6. Amendments. References in this Article
are to the Maryland General Corporation Law and to the
Investment Company Act of 1940 as from time to time
amended. No amendment of these By-laws shall affect any
right of any person under this Article based on any
event, omission or proceeding prior to the amendment.
The Advisory Agreement to be between the Registrant and
Alliance Capital Management L.P. provides that Alliance
Capital Management L.P. will not be liable under such
agreements for any mistake of judgment or in any event
whatsoever except for lack of good faith and that
nothing therein shall be deemed to protect Alliance
Capital Management L.P. against any liability to the
Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its
duties thereunder, or by reason of reckless disregard of
its duties and obligations thereunder.
The Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc. provides
that the Registrant will indemnify, defend and hold
Alliance Fund Distributors, Inc., and any person who
C-14
<PAGE>
controls it within the meaning of Section 15 of the
Securities Act of 1933 (the "Securities Act"), free and
harmless from and against any and all claims, demands,
liabilities and expenses which Alliance Fund
Distributors, Inc. or any controlling person may incur
arising out of or based upon any alleged untrue
statement of a material fact contained in the
Registrant's Registration Statement, Prospectus or
Statement of Additional Information or arising out of,
or based upon any alleged omission to state a material
fact required to be stated in any one of the foregoing
or necessary to make the statements in any one of the
foregoing not misleading.
The Administration Agreement between the Registrant and
Alliance Capital Management L.P. provides that Alliance
Capital Management L.P. will not be liable for any error
of judgment or mistake of law or for any loss suffered
by the Registrant or its shareholders in connection with
the performance of its duties under the Administration
Agreement, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part
in the performance of its duties or from reckless
disregard by it of its duties under the Administration
Agreement.
The foregoing summaries are qualified by the entire text
of Registrant's Articles of Incorporation and By-Laws,
the Advisory Agreement between Registrant and Alliance
Capital Management L.P., the Distribution Services
Agreement between Registrant and Alliance Fund
Distributors, Inc. and the Administration Agreement
between the Registrant and Alliance Capital Management
L.P. which are filed herewith as Exhibits 1, 2, 5 and
6(a), respectively, in response to Item 24 and each of
which are incorporated by reference herein.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection
C-15
<PAGE>
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the directors who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
trustees"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or
(3) a majority of a quorum of disinterested, non-party
directors of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.
The Registrant participates in a joint
trustees/directors and officers liability insurance
policy issued by the ICI Mutual Insurance Company.
Coverage under this policy has been extended to
directors, trustees and officers of the investment
companies managed by Alliance Capital Management L.P.
Under this policy, outside trustees and directors are
C-16
<PAGE>
covered up to the limits specified for any claim against
them for acts committed in their capacities as trustee
or director. A pro rata share of the premium for this
coverage is charged to each investment company and to
the Adviser.
ITEM 28. Business and Other Connections of Investment Adviser.
The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Fund" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by
reference herein.
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.
ITEM 29. Principal Underwriters.
(a) Alliance Fund Distributors, Inc. is the
Registrant's Principal Underwriter in connection
with the sale of shares of the Registrant.
Alliance Fund Distributors, Inc. also acts as
Principal Underwriter or Distributor for the
following investment companies:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Institutional Funds, Inc.
Alliance Institutional Reserves, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
C-17
<PAGE>
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust,
Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Select Investor Series, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and officers of
Alliance Fund Distributors, Inc., the principal
place of business of which is 1345 Avenue of the
Americas, New York, New York, 10105.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Director and Chairman
John D. Carifa Director
Robert L. Errico Director and
President
Geoffrey L. Hyde Director and Senior
Vice President
Dave H. Williams Director
David Conine Executive Vice
President
Richard K. Saccullo Executive Vice
President
Edmund P. Bergan, Jr. Senior Vice Secretary
President, General
Counsel and
Secretary
C-18
<PAGE>
Richard A. Davies Senior Vice President
Managing Director
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial
Officer
Anne S. Drennan Senior Vice President
& Treasurer
Karen J. Bullot Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Byron M. Davis Senior Vice President
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
Bradley F. Hanson Senior Vice President
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Susan L. Matteson-King Senior Vice President
Daniel D. McGinley Senior Vice President
Ryne A. Nishimi Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Raymond S. Sclafani Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
C-19
<PAGE>
Gerard J. Friscia Vice President &
Controller
Jamie A. Atkinson Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
Casimir F. Bolanowski Vice President
Michael E. Brannan Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
John R. Carl Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
Stephen J. Demetrovits Vice President
John F. Dolan Vice President
John C. Endahl Vice President
Sohaila S. Farsheed Vice President
Shawn C. Gage Vice President
Andrew L. Gangolf Vice President and Assistant
Assistant General Secretary
Counsel
Mark D. Gersten Vice President Treasurer and
Chief
Financial
Officer
Joseph W. Gibson Vice President
John Grambone Vice President
George C. Grant Vice President
Charles M. Greenberg Vice President
C-20
<PAGE>
Alan Halfenger Vice President
William B. Hanigan Vice President
Scott F. Heyer Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Scott Hutton Vice President
Richard D. Keppler Vice President
Gwenn M. Kessler Vice President
Donna M. Lamback Vice President
Henry Michael Lesmeister Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Jerry W. Lynn Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Shawn P. McClain Vice President
Jeffrey P. Mellas Vice President
Thomas F. Monnerat Vice President
Christopher W. Moore Vice President
Timothy S. Mulloy Vice President
Joanna D. Murray Vice President
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
James J. Posch Vice President
C-21
<PAGE>
Domenick Pugliese Vice President and Assistant
Assistant General Secretary
Counsel
Bruce W. Reitz Vice President
Karen C. Satterberg Vice President
John P. Schmidt Vice President
Robert C. Schultz Vice President
Richard J. Sidell Vice President
Teris A. Sinclair Vice President
Scott C. Sipple Vice President
Elizabeth Smith Vice President
Martine H. Stansbery, Jr. Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Thomas J. Vaughn Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
Mark E. Westmoreland Vice President
William C. White Vice President
David E. Willis Vice President
Emilie D. Wrapp Vice President and Assistant
Assistant General Secretary
Counsel
Patrick Look Assistant Vice
President &
Assistant Treasurer
Michael W. Alexander Assistant Vice
President
C-22
<PAGE>
Richard J. Appaluccio Assistant Vice
President
Charles M. Barrett Assistant Vice
President
Robert F. Brendli Assistant Vice
President
Maria L. Carreras Assistant Vice
President
John P. Chase Assistant Vice
President
Russell R. Corby Assistant Vice
President
Jean A. Cronin Assistant Vice
President
John W. Cronin Assistant Vice
President
Terri J. Daly Assistant Vice
President
Ralph A. DiMeglio Assistant Vice
President
Faith C. Deutsch Assistant Vice
President
John E. English Assistant Vice
President
Duff C. Ferguson Assistant Vice
President
James J. Hill Assistant Vice
President
Theresa Iosca Assistant Vice
President
Erik A. Jorgensen Assistant Vice
President
Eric G. Kalender Assistant Vice
President
C-23
<PAGE>
Edward W. Kelly Assistant Vice
President
Michael Laino Assistant Vice
President
Nicholas J. Lapi Assistant Vice
President
Kristine J. Luisi Assistant Vice
President
Kathryn Austin Masters Assistant Vice
President
Richard F. Meier Assistant Vice
President
Mary K. Moore Assistant Vice
President
Richard J. Olszewski Assistant Vice
President
Catherine N. Peterson Assistant Vice
President
Rizwan A. Raja Assistant Vice
President
Carol H. Rappa Assistant Vice
President
Clara Sierra Assistant Vice
President
Gayle S. Stamer Assistant Vice
President
Eileen Stauber Assistant Vice
President
Vincent T. Strangio Assistant Vice
President
Marie R. Vogel Assistant Vice
President
Wesley S. Williams Assistant Vice
President
C-24
<PAGE>
Matthew Witschel Assistant Vice
President
Christopher J. Zingaro Assistant Vice
President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 30. Location of Accounts and Records.
The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules thereunder
are maintained as follows: journals, ledgers,
securities records and other original records are
maintained principally at the offices of Alliance Fund
Services, Inc., 500 Plaza Drive, Secaucus, New Jersey,
07094 and at the offices of Brown Brothers Harriman Co.,
the Registrant's custodian, 40 Water Street, Boston
Massachusetts 02109. All other records so required to
be maintained are maintained at the offices of Alliance
Capital Management L.P., 1345 Avenue of the Americas,
New York, New York, 10105.
ITEM 31. Management Services.
Not applicable.
ITEM 32. Undertakings.
The Registrant undertakes to furnish each person whom
the prospectus is delivered with a copy of the
Registrant's latest report to Shareholders, upon request
and without charge.
C-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in The City of New York
and the State of New York, on the 30th day of October, 1998.
ALLIANCE ALL-ASIA INVESTMENT FUND, INC.
By: /s/John D. Carifa
___________________________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to its Registration Statement
has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title Date
(1) Principal Executive Officer:
/s/John D. Carifa Chairman and October 30, 1998
____________________ President
John D. Carifa
(2) Principal Financial
and Accounting Officer:
/s/ Mark D. Gersten Treasurer and October 30, 1998
____________________ Chief Financial
Mark D. Gersten Officer
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<PAGE>
(3) All of the Directors:
John D. Carifa
David H. Dievler
John H. Dobkin
W.H. Henderson
Stig Host
Alan Stoga
By: /s/Edmund P. Bergan, Jr.
_________________________ Secretary October 30, 1998
Edmund P. Bergan, Jr.
Attorney-in-Fact
C-27
<PAGE>
Index To Exhibits
Page
(11) Consent of Independent Auditors
(17) Financial Data Schedule
Powers of Attorney for John D. Carifa, David H.
Dievler, John H. Dobkin, W. H. Henderson, Stig
Host and Alan Stoga
C-28
00250203.AS8
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights," "Shareholders Services - Statements and
Reports" and "General Information - Independent Auditors" and to
the use of our report dated December 10, 1997 included in this
Registration Statement (Form N-1A Nos. 33-84270 and 811-8776) of
Alliance All-Asia Investment Fund, Inc.
/s/ERNST & YOUNG LLP
New York, New York
October 27, 1998
00250203.AT1
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 1
[NAME] Class A
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] Semi
[FISCAL-YEAR-END] Nov-30-1998
[PERIOD-START] Dec-01-1997
[PERIOD-END] Apr-30-1998
[INVESTMENTS-AT-COST] 20999159
[INVESTMENTS-AT-VALUE] 18916198
[RECEIVABLES] 1526590
[ASSETS-OTHER] 355130
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 20797918
[PAYABLE-FOR-SECURITIES] 1143400
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 224579
[TOTAL-LIABILITIES] 1367979
[SENIOR-EQUITY] 2735
[PAID-IN-CAPITAL-COMMON] 30122439
[SHARES-COMMON-STOCK] 667851
[SHARES-COMMON-PRIOR] 784510
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] (216191)
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] (8624166)
[ACCUM-APPREC-OR-DEPREC] (1854878)
[NET-ASSETS] 19429939
[DIVIDEND-INCOME] 143503
[INTEREST-INCOME] 40784
[OTHER-INCOME] 0
[EXPENSES-NET] 409529
[NET-INVESTMENT-INCOME] (225242)
[REALIZED-GAINS-CURRENT] (3610517)
[APPREC-INCREASE-CURRENT] 3044216
[NET-CHANGE-FROM-OPS] (791543)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 778391
[NUMBER-OF-SHARES-REDEEMED] (895050)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (1122754)
[ACCUMULATED-NII-PRIOR] 9051
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] (5013649)
<PAGE>
[GROSS-ADVISORY-FEES] 97315
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 409529
[AVERAGE-NET-ASSETS] 17740431
[PER-SHARE-NAV-BEGIN] 7.54
[PER-SHARE-NII] (.07)
[PER-SHARE-GAIN-APPREC] (.26)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] .00
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 7.21
[EXPENSE-RATIO] 3.74
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250203.AS4
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 1
[NAME] Class B
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] Semi
[FISCAL-YEAR-END] Nov-30-1998
[PERIOD-START] Dec-01-1997
[PERIOD-END] Apr-30-1998
[INVESTMENTS-AT-COST] 20999159
[INVESTMENTS-AT-VALUE] 18916198
[RECEIVABLES] 1526590
[ASSETS-OTHER] 355130
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 20797918
[PAYABLE-FOR-SECURITIES] 1143400
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 224579
[TOTAL-LIABILITIES] 1367979
[SENIOR-EQUITY] 2735
[PAID-IN-CAPITAL-COMMON] 30122439
[SHARES-COMMON-STOCK] 1580133
[SHARES-COMMON-PRIOR] 1547257
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] (216191)
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] (8624166)
[ACCUM-APPREC-OR-DEPREC] (1854878)
[NET-ASSETS] 19429939
[DIVIDEND-INCOME] 143503
[INTEREST-INCOME] 40784
[OTHER-INCOME] 0
[EXPENSES-NET] 409529
[NET-INVESTMENT-INCOME] (225242)
[REALIZED-GAINS-CURRENT] (3610517)
[APPREC-INCREASE-CURRENT] 3044216
[NET-CHANGE-FROM-OPS] (791543)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 718859
[NUMBER-OF-SHARES-REDEEMED] (685983)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (1122754)
[ACCUMULATED-NII-PRIOR] 9051
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] (5013649)
<PAGE>
[GROSS-ADVISORY-FEES] 97315
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 409529
[AVERAGE-NET-ASSETS] 17740431
[PER-SHARE-NAV-BEGIN] 7.39
[PER-SHARE-NII] (0.09)
[PER-SHARE-GAIN-APPREC] (.25)
[PER-SHARE-DIVIDEND] .00
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] .00
[PER-SHARE-NAV-END] 7.05
[EXPENSE-RATIO] 4.46
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250203.AS5
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 1
[NAME] Class C
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] Semi
[FISCAL-YEAR-END] Nov-30-1998
[PERIOD-START] Dec-01-1997
[PERIOD-END] Apr-30-98
[INVESTMENTS-AT-COST] 20999159
[INVESTMENTS-AT-VALUE] 18916198
[RECEIVABLES] 1526590
[ASSETS-OTHER] 355130
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 20797918
[PAYABLE-FOR-SECURITIES] 1143400
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 224579
[TOTAL-LIABILITIES] 1367979
[SENIOR-EQUITY] 2735
[PAID-IN-CAPITAL-COMMON] 30122439
[SHARES-COMMON-STOCK] 280479
[SHARES-COMMON-PRIOR] 251298
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] (216191)
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] (8624166)
[ACCUM-APPREC-OR-DEPREC] (1854878)
[NET-ASSETS] 19429939
[DIVIDEND-INCOME] 143503
[INTEREST-INCOME] 40784
[OTHER-INCOME] 0
[EXPENSES-NET] 409529
[NET-INVESTMENT-INCOME] (225242)
[REALIZED-GAINS-CURRENT] (3610517)
[APPREC-INCREASE-CURRENT] 3044216
[NET-CHANGE-FROM-OPS] (791543)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 314981
[NUMBER-OF-SHARES-REDEEMED] (285800)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (1122754)
[ACCUMULATED-NII-PRIOR] 9051
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] (5013649)
<PAGE>
[GROSS-ADVISORY-FEES] 97315
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 409529
[AVERAGE-NET-ASSETS] 11740431
[PER-SHARE-NAV-BEGIN] 7.40
[PER-SHARE-NII] (.09)
[PER-SHARE-GAIN-APPREC] (.25)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] .00
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 7.06
[EXPENSE-RATIO] 4.47
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250203.AS6
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 1
[NAME] Class AD
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] Semi
[FISCAL-YEAR-END] Nov-30-1998
[PERIOD-START] Dec-01-1997
[PERIOD-END] Apr-30-1998
[INVESTMENTS-AT-COST] 20999159
[INVESTMENTS-AT-VALUE] 18916198
[RECEIVABLES] 1526590
[ASSETS-OTHER] 355130
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 20797918
[PAYABLE-FOR-SECURITIES] 1143400
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 224579
[TOTAL-LIABILITIES] 1367979
[SENIOR-EQUITY] 2735
[PAID-IN-CAPITAL-COMMON] 30122439
[SHARES-COMMON-STOCK] 206084
[SHARES-COMMON-PRIOR] 177010
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] (216191)
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] (8624166)
[ACCUM-APPREC-OR-DEPREC] (1854878)
[NET-ASSETS] 19429939
[DIVIDEND-INCOME] 143503
[INTEREST-INCOME] 40784
[OTHER-INCOME] 0
[EXPENSES-NET] 409529
[NET-INVESTMENT-INCOME] (225242)
[REALIZED-GAINS-CURRENT] (3610517)
[APPREC-INCREASE-CURRENT] 3044216
[NET-CHANGE-FROM-OPS] (791543)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 82228
[NUMBER-OF-SHARES-REDEEMED] (53154)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (1122754)
[ACCUMULATED-NII-PRIOR] 9051
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] (5013649)
<PAGE>
[GROSS-ADVISORY-FEES] 97315
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 409529
[AVERAGE-NET-ASSETS] 17740431
[PER-SHARE-NAV-BEGIN] 7.56
[PER-SHARE-NII] (.06)
[PER-SHARE-GAIN-APPREC] (.25)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] .00
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 7.25
[EXPENSE-RATIO] 3.53
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250203.AS7
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance All-Asia Investment Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Capital
Reserves, Alliance Global Dollar Government Fund, Inc., Alliance
Global Environment Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Global Strategic Income Trust, Inc., Alliance
Government Reserves, Alliance Greater China '97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance High Yield Fund,
Inc., Alliance Income Builder Fund, Inc., Alliance Institutional
Funds, Inc., Alliance Institutional Reserves, Inc., Alliance
International Fund, Alliance International Premier Growth Fund,
Inc., Alliance Limited Maturity Government Fund, Inc., Alliance
Money Market Fund, Alliance Mortgage Securities Income Fund,
Inc., Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund II,
<PAGE>
Alliance Municipal Trust, Alliance New Europe Fund, Inc.,
Alliance North American Government Income Trust, Inc., Alliance
Premier Growth Fund, Inc., Alliance Quasar Fund, Inc., Alliance
Real Estate Investment Fund, Inc., Alliance/Regent Sector
Opportunity Fund, Inc., Alliance Select Series, Inc., Alliance
Short-Term Multi-Market Trust, Inc., Alliance Technology Fund,
Inc., Alliance Utility Income Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance World Income Trust, Inc.,
Alliance Worldwide Privatization Fund, Inc., The Alliance Fund,
Inc., The Alliance Portfolios, and The Hudson River Trust, and
filing the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ John D. Carifa
______________________________
John D. Carifa
Dated: October 8, 1998
2
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance All-Asia Investment Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Global Dollar
Government Fund, Inc., Alliance Global Environment Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Greater China '97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance High Yield Fund,
Inc., Alliance Income Builder Fund, Inc., Alliance Institutional
Funds, Inc., Alliance Institutional Reserves, Inc., Alliance
International Fund, Alliance International Premier Growth Fund,
Inc., Alliance Limited Maturity Government Fund, Inc., Alliance
Mortgage Securities Income Fund, Inc., Alliance Multi-Market
Strategy Trust, Inc., Alliance Municipal Income Fund, Inc.,
Alliance Municipal Income Fund II, Alliance New Europe Fund,
Inc., Alliance North American Government Income Trust, Inc.,
3
<PAGE>
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund, Inc.,
Alliance Real Estate Investment Fund, Inc., Alliance/Regent
Sector Opportunity Fund, Inc., Alliance Select Series, Inc.,
Alliance Short-Term Multi-Market Trust, Inc., Alliance Technology
Fund, Inc., Alliance Utility Income Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance World Income Trust, Inc.,
Alliance Worldwide Privatization Fund, Inc., and The Alliance
Fund, Inc. and filing the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ David H. Dievler
_______________________________
David H. Dievler
Dated: October 8, 1998
4
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance All-Asia Investment Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Global Dollar
Government Fund, Inc., Alliance Global Environment Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Growth and Income Fund, Inc.,
Alliance High Yield Fund, Inc., Alliance Income Builder Fund,
Inc., Alliance Institutional Funds, Inc., Alliance Institutional
Reserves, Inc., Alliance International Fund, Alliance
International Premier Growth Fund, Inc., Alliance Limited
Maturity Government Fund, Inc., Alliance Mortgage Securities
Income Fund, Inc., Alliance Multi-Market Strategy Trust, Inc.,
Alliance Municipal Income Fund, Inc., Alliance Municipal Income
Fund II, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
5
<PAGE>
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance/Regent Sector Opportunity Fund, Inc.,
Alliance Select Series, Inc., Alliance Short-Term Multi-Market
Trust, Inc., Alliance Utility Income Fund, Inc., Alliance
Variable Products Series Fund, Inc., Alliance World Income Trust,
Inc., Alliance Worldwide Privatization Fund, Inc., The Alliance
Fund, Inc., and filing the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ John H. Dobkin
_______________________________
John H. Dobkin
Dated: October 8, 1998
6
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of Alliance All-Asia Investment
Fund, Inc., Alliance Global Environment Fund, Inc., Alliance
International Fund and Alliance New Europe Fund, Inc., and filing
the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ William H. Henderson
_______________________________
William H. Henderson
Dated: October 8, 1998
7
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of Alliance All-Asia Investment
Fund, Inc., Alliance Global Environment Fund, Inc., Alliance
International Fund and Alliance New Europe Fund, Inc., and filing
the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ Stig Host
_______________________________
Stig Host
Dated: October 8, 1998
8
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of Alliance All-Asia Investment
Fund, Inc., Alliance Global Environment Fund, Inc., Alliance
International Fund and Alliance New Europe Fund, Inc., and filing
the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ Alan Stoga
_______________________________
Alan Stoga
Dated: October 8, 1998
9
00250086.AU1
